Inside the world of business
Is our technology policy a little cloudy?
MINISTER FOR Education Ruairí Quinn is to make a big announcement today on cloud computing in association with Cork Institute of Technology and the computer storage giant EMC.
Links between industry, government and education in this burgeoning area of the technology sector are to be welcomed. Only yesterday Marketo, a hotly tipped Silicon Valley company that provides cloud-based marketing and sales management software, said it was creating 125 jobs in Dublin.
The Government has become fond of quoting a Goodbody stockbrokers report, paid for by Microsoft, which suggest Ireland’s cloud computing industry could generate sales of €9.5 billion by 2014 and employ 8,600 people.
Such is its enthusiasm for this model of delivering technology over the internet that Minister for Enterprise, Jobs and Innovation Richard Bruton went on something of a solo run earlier this month to announce a new applied research centre for cloud computing. The State will provide €5 million for the initiative which department officials confirmed is still at an early stage of development but is expected to open by year end.
A cynical observer might say that cloud computing is rapidly becoming the equivalent of the previous regime’s “smart economy”: a fig leaf that is rolled out periodically to show the politicians are supporting technology and innovation. Firms like Google and Microsoft are spending billions of dollars annually on RD which puts Bruton’s €5 million in perspective.
A far more efficient use of resources would be to ape the US federal government policy of “Cloud First” where agencies have to first consider secure cloud alternatives before being new software or services. The public finances are a mess but Government is still spending on technology.
Diverting that spend to the cloud would have far more economic impact than press releases and policy documents.
Visa spending draws Europe’s dividing line
SOME €1 in every €8 spent in Europe is put on a Visa card, which makes its payment trend data a viable snapshot of consumer sentiment. The first-quarter picture was a pretty, if fractured, one for Visa, with spending on its cards rising 2.6 per cent year-on-year, according to its latest spending barometer.
While Visa card spending in Ireland, Greece and Portugal unsurprisingly retreated over the period, business is booming in Germany and in the Baltic states.
The 2.6 per cent growth figure has been adjusted to negate the effects of new Visa card issues, shifts in payment preferences and inflation. Unadjusted, some €232 billion was spent on its cards in the first quarter, a rise of 14.5 per cent on the same period a year earlier. Other large EU economies such as France, Italy, Spain and Britain all registered relatively modest rates of increase compared to Germany, where rising employment levels and all-round economic performance has been toasted by retailers.
It’s not necessarily a credit bubble, either, as 70 per cent of Visa spending in Europe is on debit cards. The Visa spending patterns were described as “continuing evidence of a two-speed Europe” by Paul Smith, senior economist at business index specialists Markit, which analysed the data for Visa.
That’s a phrase we’ve heard a lot of over the past year, when even Germany has seemed surprised by the extent of its own economic expansion.
The problem this poses for those setting monetary policy at the European Central Bank, and those who have to live with its decisions, hasn’t gone away. An unexpected easing in inflation in Germany in May means the prospect of a rate hike at the June meeting of the ECB governing council next week has faded. But for countries on the wrong side of the economic dividing line, anxious to avoid strangulation by rising interest rates, this is a stay of execution, not a pardon.
Few contradictions to Varadkar’s truths
WITH IRISH two-year bonds hitting 12.5 per cent on Friday, the Minister for Transport was only stating the obvious when he told a Sunday newspaper that Ireland would not be returning to the bond market anytime soon. Given the current crisis that is gripping the euro it is very hard to see these yields decline to a level whereby the State will raise significant sums of money in the bond markets in 2012.
The second truth spoken by Leo Varadkar – that Ireland may well have to enter the successor to the European Financial Stability Fund in 2013 is equally self-evident. One clear read across for Ireland from what is happening in Greece is that if, come the middle of 2012, the International Monetary Fund does not see Ireland returning to the bond market they will want to know what the plan B is before they advance any more funds. The plan B is more help from Europe.
It is interesting to note that very little of what was said yesterday by Minister for Finance Michael Noonan and the governor of the Central Bank Patrick Honohan contradicts what Mr Varadkar said. The two men are sticking rigidly to the official line that the EU-IMF programme on which Ireland is currently embarked will work and Ireland will return to the markets in time to stave off having to extend the bailout. This undoubtedly remains a possibility but it might be stretching things to claim it is a probability. But it is enough for Mr Varadkar to be branded a Cassandra.
Arguably Mr Noonan and Mr Honohan have little choice at this stage but to toe the line, but they should guard against the twin dangers of being in denial and misleading the public.
Today
The Central Bank publishes figures for private sector credit for the year to the end of April.
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