Inside the world of business

Ireland could be left to count cost of new rules

IT WOULD be close to the final humiliation for Ireland if the rules of the European Financial Stability Facility (EFSF) were now changed to allow states access its funds without going down the bailout route.

Two ideas are being touted, although all concerned are at pains to stress they are only ideas at this stage. One would see the EFSF itself buy member state debt directly and the other would be for the EFSF to provide short-term credit to countries that do not need a full-blown bailout package.

Ireland would have been a candidate for both these options.

The signals coming from Brussels indicate that no move in either direction is likely in the short term, but the fact that they are being talked about at all is significant. Likewise the concept of eurobonds, which have been ruled out by the Germans.

All these options can be expected to be on the table as the crisis enters its next iteration in the new year, with the some €560 billion of euro zone sovereign debt due to be refinanced.

While any moves may be too late to save Ireland’s blushes the presumption is that we can avail of any new facilities that might come into being. If the comments of the architects of the EU-IMF deal are to be taken at face value nothing would please them more than for Ireland to return to the market.

Tiger set to roar again - probably

FIRST THE bad news. The Centre for Economics and Business Research (Cebr) in the UK has forecast that Irish consumer spending will have fallen by 18 per cent from its 2007 peak by 2011. This, according to Cebr’s chief executive Douglas McWilliams is a bigger decline than that faced by the UK in the second World War.

The good news is that we are unlikely to need ration cards as Mr McWilliams – a former chief economic adviser to the CBI and chief economist for IBM UK – is extraordinary bullish about Ireland from 2011 out.

“Because of the huge boost to Irish competitiveness from lower wages, combined with the likelihood of a falling euro and strong economic growth in Germany and other parts of Northern Europe, a ‘Celtic Tiger Mark Two’ era could start as early as 2012 with economic growth above 6 per cent for at least four years,” he suggests.

The icing on the cake is that buoyant tax revenues could wipe out the Budget deficit by 2013 and rather than sell off the banks the Government should hold its nerve, he argues .

But before Brian Cowen picks up the phone to give Olli Rehn the good news he should take note of McWilliam’s caveat that “much depends on how the other euro zone countries sort out their problems. If they don’t then Ireland is likely to get caught in the backwash initially, although the underlying economy is likely to be strengthened by the basically solid competitive position.”

It would seem that in every imaginable way our fate is in the hands of our European partners.

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