Category: TIME CAPSULE

YOU TOO COULD BE A TARGET
It was a long winter, colder than usual, and with an almost daily litany of growing economic woe. It was a winter during which we had glaring confirmation that, among bankers at least, “business ethics” is an oxymoron. It was a winter in which we learned a new meaning for “bed and breakfast”. It was also a winter in which we learned some at least of the reasons why our electricity is the most expensive in Europe.
But all winters come to an end and this has been no exception. Fittingly, St Patrick’s Day saw the weather pick up and with it the mood of the nation. President Obama’s observation “Is feidir linn”, delivered in the presence of the Taoiseach, might, hopefully,  herald a change. For morale, as FDR was acutely aware, is vital when seeking to turn around the fortunes of a nation. And, right now Ireland could do with a morale boost
There have been some nuggets of good news. The exploits of the victorious Irish Rugby team for one. A brave world boxing champion for another. We have high hopes of the soccer team qualifying for the World Cup Finals (with memories of the last morale boost during hard times). We now have a super song with a good chance of  winning the Eurovision Song Contest, provided voting is not along ethnic lines (last year there was national embarrassment at our entry – a turkey with a song to match!)
However, the economic situation remains dire. The emergency budget announced in early April has helped concentrate minds  The sheer scale of the deterioration in the country’s fortunes is awesome with the gap between what the government is committed to spending and its revenue from taxes now apparent to all. Correction is likely to prove a long haul. Public expenditure surged during the Celtic Tiger years. It wasn’t all squandered. Much went towards improving social services and payments to the less well off, including the elderly.  An ambitious programme to improve roads and the rest of the physical infrastructure was launched. . Unfortunately now the money has run out and we have been left with a realisation that, in the last few years, as a nation, we spent or committed  large amounts of money for which there is now no revenue to cover. Government expenditure covers public sector pay and pensions, social welfare expenditure and spending on everything else. The books can be balanced only by cutting this expenditure, or borrowing , or both.
We share with the USA and Britain the problem of what to do with the banks, and, also, what to do with the bankers, who, in Ireland as elsewhere, have paid themselves salaries and bonuses that beggar belief and who show  brazen indifference when asked for justification. One gentleman drew down enormous loans (in excess of $100 million) from the bank of which he was Chairman,  hiding them from shareholders through the device of repaying  them with matching loans from  a compliant bank just before the annual accounts were prepared so nothing would show on the balance sheet; this was repeated over seven years! Another caused public mirth when he confessed that he too would have to take a pay cut and in 2009 would have to try to exist on less than $2,500,000!
VWe have added a new meaning to the term “bed and breakfast”; in banking terms it means shifting millions between financial institutions for brief periods – even overnight. Meanwhile small businesses are being refused loans for vital working capital. There is a growing feeling that the two or three major banks may have to be taken in to public ownership, to join the one already there. The bank saga is ongoing, with investigations still underway and new tighter regulations promised.
We have also received some insights into how our electricity prices have risen from the lowest to the most expensive in Europe within a decade, seriously affecting our industrial competitiveness not to mention hitting everyone’s pocket. It has now emerged that the state owned Irish electricity company ESB (a near monopoly) has been forbidden to reduce its charges, in order to encourage other suppliers to enter the market. The theory is that “competitors“ would be attracted to enter the market by the  profits on offer!. With this has come the further revelation that the average ESB employee earns $100,000 per year!
The current public mood is one of resignation combined with anger. Spiralling unemployment and the enforced adoption by many of  short time working and pay cuts has fed into this. As in the US and Britain, the bankers are the chief scapegoats but the sense of national hangover – “we all share some of the blame“- requires that everyone must now share some of the pain. There is less agreement on how this is to be done but a highly vocal lobby has emerged demanding a pound of flesh from selected targets. Public sector employees, media figures and tax exiles (now branded in some quarters as “tax fugitives”) have already been targeted, not always consistently.

With assured employment and generous pensions, those employed in the public sector were obvious targets. The first move has been to levy gross pay for “pension contributions”; can a further levy on “job security” be far behind?  What price a pay cut on top? Elsewhere the national broadcaster, RTE, faced with declining advertising revenue, has imposed pay cuts of 10% on its employees, and, after a sustained and vocal public pressure campaign, cajoled its highest paid celebrities, who are on contract, to accept similar cuts.
Those who have exploited – quite legally – tax avoidance measures by becoming “non-resident” in Ireland for tax purposes are the object of particular opprobrium. Some voices, not just on the left,  have castigated them as “tax fugitives” and even suggested that henceforth citizenship should be in some way linked to paying taxes to the Irish state. Among those targeted in this regard are rock superstars U2, with some particularly nasty criticism directed at lead singer Bono, who has been accused of hypocrisy in terms of his championing of the cause of aid to the Third World.
Certainly we have been more than generous with our tax laws on residence, with 183 days per year the criterion and, until recently, a “Cinderella rule”-under which departures before midnight were excluded from the count. These arrangements have an obvious attraction for the rich and their accountants and may partly explain why the number of “tax exiles” has been climbing though even penal taxation of all those involved would at best only marginally improve our finances.
What is most interesting about this, of course, is floating the idea of linking Irish citizenship with possible tax obligations. This is new and it must probably await a report due midsummer from a commission examining taxation before it is given any substance. Moreover, it is not aimed at the great Irish overseas family, but rather at those Irish, identifiably functioning in Ireland, who are  perceived to be using technicalities to dodge paying  their fair share of taxes. U2 are a target (among others).  You too are all right!

IRISH NEUTRALITY

Ireland is not a member of NATO, nor is membership likely. Yet few things can be calculated to raise blood pressure (and voices) more at the dinner table or over some drinks than the subject of Irish neutrality. In the campaign on the Lisbon referendum just ending the issue has again loomed large. No one can seriously get worked up over the proposed changes in qualified majority voting, or the alleged threat of legalised abortion, or even over the prospect of a future ukase from Brussels on our company taxation rate. But mention European Defence and the spectres conjured up include conscription into a European army, involvement in foreign wars and the loss of our international “nice guy” image. In vain have the “Yes” side pointed out that Lisbon threatens none of this. Debates on neutrality generate much heat without corresponding light!

The intellectual justification for Irish neutrality can be summarised briefly. Our history of centuries-long subjugation to English rule involved us, involuntarily, in British military and colonial ventures worldwide. Independence finally gave us an opportunity to gain distance and determine our own policy. Most famously we asserted our neutrality during World War Two (described in Ireland as “The Emergency”). We were fortunate in that we were not attacked or invaded, like the Netherlands or the Baltic States. Ireland’s geographical location and island status were vital factors in maintaining our neutrality, as was the fact that we were not in the way of the major belligerents or their war plans.

Whatever moral doubts we had about not fighting the Nazis could be assuaged by the presence, on the allied side, of the equally monstrous tyranny of Stalin’s regime. The response of De Valera to Churchill’s intemperate outburst over Irish neutrality in 1945 is recalled with pride (his signing the book of condolences for Hitler’s death generates embarrassed silence). Post 1945, staying out of NATO was justified, at first semantically, by the issue of Partition, and later, after Stalin’s death, by an expressed wish to stay outside the military alliances of the Cold War. With the collapse of the Soviet Union the case for joining a military alliance further diminished.

To avoid charges of isolationism, Ireland could point instead to a long standing support for collective security; starting with her involvement with the League of Nations and proceeding through to the United Nations. Ireland’s high-profile involvement in UN Peacekeeping operations – a source of national pride – could be cited. Irish soldiers have died in such operations from the Congo in 1960 onwards – the first Irish troops to die overseas for Ireland and in the cause of the UN. Ireland was seen as one of a small number of reliable UN members which could always be counted upon to step up to the plate when troops were needed. And being militarily neutral was felt to increase Ireland’s acceptability for involvement in sensitive UN peacekeeping operations.

Military neutrality enjoys wide popular support, at least according to opinion polls. This is perfectly understandable. No one likes or wants war. Avoiding the horrors of World War Two was a plus. Our UN peacekeeping record another plus. Not having a colonial past or the moral ambiguities of involvement in questionable military ventures are other positives, qualifying Ireland for a potential “honest broker” role. All in all, neutrality sits well with public self-perception of Ireland as non-aggressive, anti-colonialist, progressive and supportive of assisting the Third World. Brownie points are awardedsubjectively) for the moral superiority associated with being neutral.

Neutrality has again become a live issue as the world has proved to be less secure in the post Cold War era. There have been moves within the European Union (which contains three other non-NATO countries) to develop a common defence and security policy. These moves were given impetus and some degree of urgency by the wars in Croatia and Bosnia, where meddling by the EC as it then was, was accompanied by total impotence militarily when faced with the forces unleashed, and where peace was achieved eventually only through US intervention. The high watermark of these moves, as set out in the Lisbon Treaty, proposes mutual assistance (of whatever form) where a member state is attacked, and a vague commitment to improve national military capability.

These moves have galvanised Ireland’s neutrality lobby, which sees them, despite Government denials, as the first steps on a slippery slope. This against a background of daily television reports from Iraq and Afghanistan. Indeed the Iraq fiasco has focussed attention also on the use of Shannon Airport by the US military as a troop stopover. The government has held firm against demands that this use be ended as it contravenes “Irish neutrality”.

Any attempt at debate on neutrality rapidly turns into a dialogue of the deaf. The suggestion that Ireland should do its bit to cooperate, in the context of membership of a Union which has served Ireland well, has had a mixed reception. Ditto with the argument that, if we are seriously neutral we should develop our defence capabilities like other neutrals (Sweden, Finland, Switzerland) so that we could give our neutrality a practical status. Indeed this argument is neatly sidestepped by a variant of the “nice guy” theme – who would want to attack Ireland, so why spend money on defence?

Ireland’s get out of jail card, action by and through the UN, has lost much of its lustre in the face of the manifest failures of the UN in Bosnia and Rwanda in the 1990‘s. Whether sufficient force could have been marshalled by the UN in time to prevent the genocide in Rwanda is debateable. What is a fact is that the Srebrenica massacre took place within a so-called “UN Safe Haven” which proved anything but. While the UN “is all we have”, as a leading Irish left wing politician put it to me, its shortcomings have become more apparent with the end of the Cold War paralysis.

The fact that a veto-wielding Permanent Member of the Security Council can thwart international action when its interests or those of a client state are at risk has become more evident in recent years. So also the difficulty of organising effective action against a regime practicing internal repression. “Collective action” and sanctions are difficult to enforce and often the regime remains untouched while the ordinary populace suffers (consider the sanctions against Iraq after the first Gulf War). We have become sadder, if not wiser, at world events this decade.

The nature of the debate within the EU on defence, and the mixed enthusiasm for involvement in NATO’s mission in Afghanistan among those EU states involved, means that it is likely to be some time before EU policy in this area has developed. Ireland’s military neutrality, in all practical senses, is not under threat. Only an attack could change this. One is reminded of the story that in 1940 Queen Juliana telephoned Churchill to tell him that Holland (neutral during the First World War) was under attack from Germany and asked what he was going to do about it. What indeed!

$500 MILLION PLUS
JFK remarked during the Cuba Crisis that it was the week he earned his salary.
It is now clear that the months between now and the end of the year will be when the Taoiseach earns his.  They promise to be the defining period of his political life. There are two tasks at least to be got right, plus God knows what may emerge from the long grass. It is probably fifty years since Ireland had need of the resolute leadership now required.
The issues looming are the Lisbon referendum and the 2010 Budget. Both will happen. What is essential is that both issues are approached in the proper manner, and prioritised, and got right. Nothing must distract from tackling these prime objectives. The extent of the furore in recent weeks on the recommendations by the McCarthy Report (“An Bord Snip”) for possible cuts in public spending give an indication of how difficult  the task ahead will be.  The McCarthy report has raised the debate to a new level of reality, by highlighting the fact that, to maintain government spending and benefits at current levels, involves borrowing more than $500 million each week. Whatever else happens, this is not sustainable and cannot go on. This figure and this fact seems to be getting through and displacing the collective denial of recent months.
The McCarthy Report has effectively established the framework for the December Budget. It has provided the Government, and the public, with a menu of possible cuts. Once the target savings figure has been identified (probably in the range of $5 billion), the budget can be fashioned by selecting from the cuts menu, supplemented with some possible extra taxation and levies (though here the scope is limited). All cuts are unpopular and some more unpopular than others. While politics is the art of the possible the government can justifiably ask its critics which cuts they favour if the current economic situation is to be addressed. In the end some cuts will have to prove less unpalatable than others.
But first there is Lisbon. What is unclear is whether and how the McCarthy report will factor into the Lisbon issue. The second referendum has been fixed for 2 October. This permits just a month of hard campaigning after the holidays. Polls currently suggest that sufficient of the electorate have come to their senses to deliver a positive result this time around. But the electorate can be fickle, moods (and votes) have changed in the last days before polling and it is essential that defeat is not snatched from the jaws of victory. The referendum must be won from the front by taking the initiative and by putting the No lobby, who are already re-hashing old arguments, on the defensive early on.
The campaign should be kept simple.  An early TV and radio Address to the Nation by the Taoiseach–sadly lacking last time—should stress the dangers of another rejection and  explain the assistance our European partners and the European Central Bank have been to Ireland over the past year. There should be major emphasis on what we will most definitely lose by voting no again.  Ireland will certainly lose Money, Power and Influence – to take up a theme cleverly exploited by the No lobby in the past. There is no percentage, and no votes, in being defensive. Significant assurances have been secured from our EU partners on the five major issues championed by the anti lobby; realistically there is nothing more to be achieved.
Ministerial speeches during the campaign should aim to get the same basic simple message across. Any literature produced should point up the relevant treaty articles and the assurances secured, in an accurate light. While there is no winning on any issue concerning Irish neutrality, points could be scored, and hard questions asked, of the opposition, about what to do about another Bosnia, should the UN fail again.   Other points which may appear relevant, such as what Europe has given us in decades past, will convince only the already committed and should be avoided as distracting from the core issue. Ditto with the issues surrounding McCarthy, beyond pointing up his major theme that borrowing $500 million per week is unsustainable and that the economic crisis would not be helped by a no vote.
The December Budget is critical for the country. The majority of economic advice is that taxation has reached its limits, hence the relevance of McCarthy.  However, the issue is muddied by the fact that a report by the Commission on Taxation, due in early September, is expected to recommend a property tax and other charges (including a possible levy on cell phone text messages, to yield up to $500 million in a year!).  Those demanding that the “rich” pay (and who therefore oppose any welfare cuts) look to this report. Even granting an immediate property tax averaging $1000 per house, and other rumoured charges, billions would still be needed.  Again, there is no quick fix. The folly of eroding the tax base during the tiger years becomes ever more apparent.
The Budget promises to be painful, controversial and politically fraught. The fact that the debate has shifted post McCarthy should help in the run up to December. It is essential that this budget does not unravel like last year’s over issues such as removal of medical cards, or the churlish paring away of relatively inexpensive programmes directed at those in special need, when a broad brush approach could have found the savings elsewhere and at less political cost. McCarthy serves up options here. There is no time before the Budget to consider adequately suggestions for new taxes (unless these are simple and transparent).  Debate on a property tax could result in a quagmire since any property tax would have to be paid from and by the same pool of punters who are paying all the taxes at present! Wrangling over an equitable arrangement could be divisive and a major distraction.
So what should the Budget contain?  On the revenue raising side I see some scope. The tax bands should be narrowed; the entry threshold lowered, spreading the pain, and the rates increased by 2% each. There is scope also for some modest increases in excise duties. On the expenditure side cuts can be anticipated in Health and Education (worth more in 2011 than 2010). Child benefit is a no-brainer; there is simply no money to sustain the current universal levels of benefit, maintained by borrowing. They should be cut (taxing or means testing is too imprecise and will not necessarily show up as an immediate saving).
Cutting other welfare payments, many of which have increased substantially in real terms since 2002, is politically unpalatable but may prove unavoidable. 3% overall seems bearable, with some tweaking. But in equity there must also be balancing savings in the public sector pay bill. Job security in this economic climate is a prize and a privilege. There will be complaints but I can see no real hardship in the introduction of a 5% solidarity levy on state employees in permanent, pensionable employment.
Bon Chance Taoiseach!

NOT A NATION OF IMMIGRANTS – YET
Where can you find a table which ranks the USA third behind Brazil and India? Where is the largest community of Lithuanians outside Lithuania? In what country did 310,000 Poles register in the five years to May this year, twenty five times the number of the previous five years?
The April 2006 census in Ireland (the republic) was for many, an eye-opener. Not only did it show the population of four and a quarter million at its highest point for well over a century,  but it revealed that a quarter million had not been born in Ireland, Britain or the USA. While the British remained the largest group of non-citizens (the same is still true of the Irish in Britain), there were now 63,000 Poles, 24,000 Lithuanians and 16,000 Nigerians.
Everyone had been aware that immigrants had been arriving since around the turn of the Millennium, particularly after May 2004, when Poland and other countries joined the European Union, but, until the census, the extent had not been grasped. The census also revealed that there were far more Africans (40,500) in Ireland than Irish Travellers (22,360) and that the number of Muslims in the republic (32,500) equalled the number of Presbyterians and Methodists combined!
And now? Getting an accurate handle on the numbers three years on is difficult. A census is a snap shot at a moment in time. In between there are annual census estimates, but these are just estimates. That for April 2008 showed a further increase in population to 4,422,000, indicating continued high levels of immigration. . A further census estimate is due to be published later this year and is awaited with interest. It is expected to show immigration slowing down , as the  economy declines and may also indicate  that many of the recent arrivals have left again. But large numbers have stayed and put down roots, while newcomers continue to arrive in considerable numbers. A sea-change is taking place in the ethnic make up of the island’s population, on a scale not seen for at least 400 years.
Estimates of immigration levels and the pace of arrivals are derived from a number of sources. Most important are the statistics for Personal Public Service (PPS) numbers issued, together with the records for work permits issued and the statistics on the numbers claiming political asylum. While there is overlapping and duplication and no way of counting those leaving the system, these figures between them provide a reasonably accurate picture of developments on the immigration front. They show Ireland evolving from a virtually homogenous society in 1990 to one today with a percentage of non-nationals among the highest in Europe.
Everyone, Irish and otherwise, requires a PPS number if wishing to deal with Irish government departments and public service providers. . It is unique to each individual and can be considered as the rough equivalent of a social security number. Children born in Ireland are now allocated one; new arrivals must apply, and, it would appear, most do, soon after arriving. Work permits are not required for citizens from other EU countries apart from Romania and Bulgaria, but are required for non-citizens coming from third countries, including the USA. Finally, Ireland, like other European countries has received its share of asylum applicants since the mid-nineties, mainly from desperately poor third world countries in Africa and elsewhere.
The main reason for the influx was, of course, the Celtic Tiger and the employment and prosperity it created. Economic migrants in earnest began to arrive from 1999 onwards, lured by a country with full employment in the throes of a boom. The number of work permits issued to third country nationals rose from 6000 in 1999 to 36,000 in 2001 and to 47,000 in 2003. After May 2004, with work permits no longer required from the new EU citizens, the numbers issued began to decline. Yet even in 2007 23,604 were issued, testimony to the continuing strength of the Irish economy. In 2008, as the economy imploded, 13,567 were issued.
May 1 2004, EU Enlargement day, was the watershed. . Most existing EU countries imposed temporary restrictions (for up to seven years) on the entry of workers from the ten new member states. Ireland did not. Perhaps the government, flush with economic success and aware of labour shortages, applied the argument that any restrictions had a sell-by date and were not worth the candle. The government however can hardly have anticipated the extent of the influx which followed.
In the five years to this May more than 450,000 PPS numbers were issued to citizens of six Central European countries alone, more than the number issued to Irish citizens. Most notably 310,000 were issued to Poles, together with 64,000 to Lithuanians, 38,000 to Slovaks and 32,000 to Latvians. While many of the early arrivals are assumed to have left again, and anecdotal evidence points to many of the Poles who worked in construction moving on, others continue to arrive. Despite the economic situation, Poles are continuing to arrive at 400 a week,  the others at 250 a week.
The picture is far from complete with the 2004 Ten. There has been continued substantial inflows from Britain and indeed from other “older” EU states. In addition, 22,000 Romanians have registered since Romania joined the EU in 2007 adding to the 13,000 who had registered since 2000! 8000 US citizens have registered since 2007, considerably less than the nearly 12,000 Brazilians (arriving at 300 a month) or the10,000 Indians, but more than the Australians (4200), the Nigerians (3500), the Canadians (2400) and the South Africans (2500).  Almost 6000 have registered from the island of Mauritius since 2005! Nor do these figures take into account those in the shadows, for Ireland has its own share of undocumented, whose numbers can only be guessed at.
Migrants of a different sort were asylum seekers, who arrived  in considerable numbers after 1996, when 1179 applications were made. The annual number rose steadily before peaking at 11,634 in 2002. Most of the early applicants came from Nigeria, Romania and Moldova in that order. Asylum applications are now currently averaging roughly 4000 annually. While Nigeria still leads the way, significant numbers of claimants are now coming from Iraq, China Sudan and Pakistan. Many with children born in Ireland have been permitted to stay, and a factor in the decline in numbers applying, apart from a European-wide tightening up of controls on access, could be that children born to asylum seekers after 2004 do not qualify for automatic Irish citizenship.
Demographically and ethnically then, Ireland is changing. In 2006 there were over 52,000 non-Irish children under the age of 14, 6% of the total age group, with up to 30,000 of these non English speaking. Other countries have had to face the issues raised, and the problems posed, of assimilation, of integration, or of simply coping with new arrivals. Now it is Ireland’s turn. It was complained of mediaeval arrivals from England that in time they became “more Irish than the Irish themselves”. Could this happen again?  The numbers then were minute. Could History be repeated with the current sizeable and diverse inflow?

END

6/27/09

GETTING THE TOOTHPASTE BACK IN THE TUBE
Last month the Government received a mauling in the European Parliament elections and in the national local elections. The main opposition party, Fine Gael, passed out Fianna Fail for the first time, not just in the opinion polls but in terms of actual election results. A variety of left wing candidates were also successful. It was too bad for the victors that the election results meant next to nothing in terms of national political power.
It is hardly surprising that an electorate still seeking scapegoats took it out on the government. From never having it so good, the pendulum has now swung the other way, with a vengeance. However, and particularly regarding the surge in support for left wing candidates, it is difficult to avoid concluding that a sense of denial about economic reality continues to pervade much of Irish public opinion. It is all very well to castigate the government for economic mismanagement in years past. But that will not get the country out of the current economic hole. There is no magic bullet. There is an abiding reality to be faced and that is that very unpalatable measures cannot be avoided. Moreover, those who shout loudest about no cuts in government expenditure, particularly in the welfare area, have short memories. It remains to be seen whether the election results were more than a mid term protest.
Save in one respect Ireland is not unique. Other European countries also have their current economic travails, particularly some of the newer member states and that was reflected in the results for the European Parliament elsewhere. Generally, and predictably, the bigger the national economic difficulties the worse the result for the government concerned. In Britain, Ireland’s most important trading partner, the Labour government was punished savagely. Britain, remember, has banks and bankers every much as venal as those in Ireland and has committed to borrowing even more prodigiously than Ireland. It has also joined the USA in adopting a policy of printing money, the end result of which is uncertain.

I have just returned from Spain, which presents an interesting economic case-study with some striking similarities with Ireland. Both countries have seen a lengthy building-based economic boom end with precipitate speed, accompanied by a sharp rise in unemployment (Spain’s, at 19%, is far higher than Ireland’s). Both have woes with developers, and are suffering the worst economic contraction in 50 years. In Spain’s case also, the huge tourist industry (60 million visitors annually) has been suffering the double whammy of the European-wide recession and the appreciation in the value of the Euro. The (socialist) Spanish government predictably also took a beating in the European elections.
Where Spain and Britain differ from Ireland is that their tax revenues have not collapsed. They have been reduced, true, as the recession has made itself felt, but they have not gone into meltdown. There is money in the pot, or credit to be used, to help stimulate economic activity. In Spain 280,000 extra jobs have been created by an $11 billion government stimulus package for public spending by town and city halls this year. Britain had enough in the tank to attempt to lower taxes as an economic stimulus in its last budget.
Contrast Spain with Ireland. Irish government revenues have collapsed. The government is currently borrowing roughly $100 million per day just to keep going. A series of emergency budgets, incorporating levies (i.e. extra taxes) have been introduced in an attempt to stabilise government finances. These now appear to be having an effect, though the jury is still out. Economic activity seems to be picking up, but at a jarringly lower level. Jobs continue to disappear, with all that that entails in terms of individual hardship and family misery. Crucially, the building sector remains at a standstill Crucially also banking activity, where not stalled, is functioning only at a low level. Credit for small businesses remains at a premium or simply not available. And the government has already signaled harsh budgets to come for at least the next two years, with higher taxes, new taxes and severe cuts in spending in order to carry on the task of getting the public finances under control.
The Celtic Tiger years were good years. There was unparalleled prosperity in the community as a whole. More jobs meant more tax revenues. The government had large tax surpluses, and used them! Existing government debt was greatly reduced. An ambitious programme of infrastructural development, particularly on roads, was started. Spending on health and education and to combat social exclusion increased dramatically. There were significant real increases in payments to the elderly, the unemployed, single parents. Children’s allowances were hiked to unheard of levels; a family with four children receives $1000 per month from the state. Our social welfare payments climbed to become among the best in Europe. The Irish minimum wage is the second highest in Europe. An old or unemployed Irish person receives payments more than double those in Britain.
Prompted by Europe, numerous new government regulatory agencies were established. An ambitious expansion in existing programmes was instituted, increasing the numbers on the public payroll considerably. More nurses, more teachers, more police. These and other popular measures required extra staff, which costs!  Annual expenditure on Development Cooperation increased from around $500 million to $I billion over a five year period and was targeted to go higher, making Ireland the world’s sixth most generous donor to the world’s poor. A Pension Fund was established, to provide for the coming rainy day when current revenues could not cope (up to now the percentage of elderly in Ireland has been uniquely low as a consequence of emigration). And, to encourage saving, the government spent some billions topping up a national regular savings scheme by 25%.
All this spending was done to cheering and applause from a public which revelled in the new found prosperity. Woe betide the few who counselled caution. Equally popular was the fateful, and fatal, accompanying policy of slashing direct taxes, which saw the basic rate cut from 30 to 20% in a decade, and increased exemptions from tax, which saw 38% of those working paying no tax at all. The cuts were made possible by buoyant tax revenues from the almost million new jobs created and the surging receipts from stamp duty and capital gains – the taxes on property sales. Without the tax cuts, the property collapse and the recession might have been manageable. As the property taxes melted away, the reduced tax base was cruelly exposed, which is where we are now.
Remedying matters will be like trying to put toothpaste back in the tube. Restoring taxes to the levels of 2000 will be deeply unpopular. But it will not be sufficient. Expenditure also will have to be cut, and cut dramatically, and that will mean real pain. For starters the government has signalled cancellation of the Christmas bonus welfare payment. It is meanwhile channeling billions from the Pension Fund to prop up a deeply unpopular bank. Either issue could be its Waterloo. Should it fall, the future looks bleak. There will be no more denial should the IMF arrive.

END

6/13/09

ARE YOU IRISH?

 Are you Irish? Of course you are! You would hardly be reading this magazine if you were not. But just how Irish are you and what does being “Irish” mean to you?  Were you born in Ireland?  Were your parents born in Ireland? Were any of your grandparents? Are you an F.B.I. (Like John McEnroe) ?   Are you married to or adopted by  somebody Irish ?  Perhaps your Irish links go back further to ancestors who left Ireland in the wake of the Great Famine and who worked hard and prospered in the USA of the 19^thCentury ?  You might also be descended from the Scots-Irish of an earlier period?

Ireland’s recent prosperity and opening up has broadened the concept of being Irish. We have increasing numbers of immigrants, not of Irish origin, but living in  Ireland, paying  Irish taxes and becoming naturalised citizens; their children will be Irish. So also will children born in Ireland to parents who arrived fleeing political or religious persecution or just seeking a better life. These categories are ones that Irish Americans will be familiar with but they are novel for Ireland. In any event, if you are one of these you are also part of the worldwide Irish family.

For there are many  types of “Irish” out there. Should we be surprised? We have around 6 million living on the island and somewhat over one million of Irish birth living elsewhere, chiefly in Britain and the USA. Around this core there are the Irish Abroad. There are no accurate figures on the numbers who left Ireland over the last two centuries alone but their descendents run into tens of millions. US immigration figures show that over four and a quarter million Irish arrived in the century to 1920 (80%, incidentally before Ellis Island was even opened) By 2006 the US Census reported that the numbers claiming Irish descent were over 30 million, and Irish-Americans were the US’ second largest ethnic group.

Elsewhere, during the last century, at least one and a half million Irish emigrated to Britain, where census estimates are that roughly 10% of the population are of Irish origin or descent (I have more first cousins in England than in Ireland). Indeed the Irish are still the largest foreign community in Britain!  Australia, Canada, South Africa and Argentina all have large communities of Irish descent. With the possible exception of North  Korea the Irish are to be found everywhere. In Bishkek, capital of Kyrgyzstan, in the farthest reaches of Central Asia, the first voice I heard in the hotel elevator after my arrival some years ago belonged to an Irishman from Navan, living and working there.

History is festooned with links between Ireland and her exiles and the role of the Irish overseas in developments in Ireland has been at times vital.  Cromwell roundly cursed the Irish overseas for their role in his major military setback in Ireland, Clonmel, in 1650.Some of the patriots deported to Australia after 1848 travelled later to Canada and the USA and obviously many families ended up in more than one location (indeed there is a story – presumably apocryphal – that Buffalo Bill was related to the legendary Australian outlaw, Ned Kelly, as a result of two sisters emigrating to different continents).

Nineteenth Century Irish nationalism was fertilised and nourished by emigrants. Could an independent Ireland have emerged without the support of  the Irish in America ?  In recent years also the role of Irish in America in support of the peace process in Northern Ireland was very considerable. Over generations Irish communities overseas have offered hospitality and a helping hand to successive generations of Irish obliged to emigrate. Money sent home from emigrants kept the country going in hard times. Investment by and through  the Irish overseas helped employment in Ireland.

The worldwide Irish family numbers at least 50 million  (some would say 80 million). The family analogy is a  good one and merits teasing out. Why not do so? Take five or ten to  reflect on where you stand on being Irish. Clearly you relate to Ireland – the Motherland – but is it confined to a feeling of bonhomie around St. Patrick’s Day? The chances are it’s something more than just pleasant sentiment (everybody empathises with St. Paddy’s Day) but actually defining what may be difficult. Now may be a good time to begin.  Probably the intensity of your sentiments depends on  the closeness of your links. Those born in Ireland, or the next generation, are more likely to feel strong affinity than somebody whose ancestors left Ireland in the 1850s. Have you traced your ancestors? Or are you close enough to the Motherland to count as an Irish citizen?

There are practical advantages to being an Irish citizen (automatically if you or a parent were born in Ireland; possible otherwise, through a grandparent, marriage or residence). There is no restriction on dual citizenship. An Irish passport can be more acceptable – and safer – in certain situations and countries. It also allows the holder to stay and work in any country of the European Union. Citizenship, which does not carry Irish tax obligations (these are governed by residence rather than nationality)  could have tax advantages, in the hands of a smart accountant. Be careful, however; to make it worthwhile the exercise might involve compromising your existing citizenship or some of the rights it carries; so hire a lawyer first.  Finally, there is no half-way house; every Irish citizen has the same rights.

The downside of this is that most of the Irish family, particularly Irish Americans, cannot qualify, since their Irish roots go back too far. There’s no half-way house here also; there’s nothing if you don’t satisfy the rules, and Ireland has no system of official recognition for services rendered. This is fine and egalitarian as befits a republic, but for many this is unsatisfactory ( for example, we cannot honour Ted Kennedy or others of his generation). Much service has been done Ireland and the Irish by her extended family – and they know it. While there is talk of introducing an honours system within a few years  the first beneficiaries if and when it happens are likely to be citizens. So don’t hold your breath.

There are many, this writer included, who would like to see more official recognition for the worldwide Irish family. Among them is David McWilliams, the young Irish economist,  who has advanced the insightful concept of the Mothership – Ireland – as a fruitful starting point for relations between Ireland and Irish communities elsewhere. He has argued that an interaction between Ireland and her diaspora could have a major and beneficial impact, “creating a  global network with the homeland at the fulcrum”. He has suggested Israel and the worldwide Jewish community as a possible model. This may be  stretching things, but it serves to make the point that our own kith and kin should receive special consideration. And this has particular resonance today,  with Ireland exposed to a much changed Europe amid a worsening economic situation. The idea merits and should receive serious consideration.  I will return to it.

END

5/4/09

LOOMING LISBON
Pity Bryan Cowen. Last June Ireland voted to reject the Lisbon Treaty to reform the European Union by 53% to 47%,  the only member state to have done so. The government has proposed holding a second referendum later this year. Another defeat would be incalculable in terms of our loss of influence, standing and friends in Europe at a time when we need the EU more than ever.  This is one vote the Taoiseach cannot afford to lose.
Ireland joined what has evolved into the European Union in 1973. As an institution the European Union is far from perfect. It is complex.  It has evolved from an initial six countries to the current membership of twenty seven. It is unique. Most of the countries of Europe, including traditional enemies, have come together to form a multinational community of nations.  The EU has developed a common currency, the Euro. A European Parliament has powers of approval of the EU budget.
However, it is not a United States of Europe. Countries retain their sovereignty in most areas, including taxation, and national governments continue to function . Areas where countries have agreed to pool sovereignty are administered by a supranational body called the Commission. Decision making and debate occurs in the Council of Ministers, with countries voting according to a formula based on size and population. The EU is continuing to evolve and to develop policies to meet the challenges its members face today. Its institutions badly need streamlining and overhauling, hence the Lisbon Treaty.
Arguably, the current financial and economic crisis in Ireland will pass, particularly in the context of an international  recovery. Public spending can be brought under control, through higher taxes (sooner rather than later), cuts in government spending across the board as well as a (regrettable but necessary) pruning or postponement of much of the capital projects planned for the next five years. There will be much pain but it can be done.
The effort could all be wasted, however, by another No vote on Lisbon.  A somewhat similar situation occurred in 2001, when the Nice Treaty referendum – essential for the major enlargement of the EU – was unexpectedly defeated in a very low turnout (34%). .The issue was put again and carried comfortably by 63% to 37% the following year, based on some assurances and guarantees given to Ireland by her partners. However, ominously, the number voting No actually increased second time around.
Winning a new referendum is going to be an uphill struggle The turnout last June was  53%, considerably higher than in Nice Two, with many more voting No and fewer voting Yes. This has removed the 2001 argument  that a low turnout in some way justified a re-run, given the issues and the feeling that the electorate took its eye off the ball. Next time also there will be no moral pressure (a vote for enlargement) and no tangible economic benefit from voting Yes.  Ireland’s recent prosperity and the entry of a slew of poorer countries has ensured there will be no more European monies flowing into Ireland.
Even the massed support of most of the Irish establishment for a Yes vote will give Brian Cowen little comfort.. Current opinion polls are showing a Yes majority , but we have been here before. In the run up to last June, and again in 2001, there appeared to be a comfortable majority in favour. An inept campaign, almost as bad as that of 2001, contributed to last June’s defeat. The government was wrong footed from the start by  the Treaty’s opponents, who, well marshalled and well financed, seized the initiative early on and never lost it. Will this time will be different?
The benefits Ireland has derived from EU membership have been immense. Economically Europe has provided markets for our exports, subsidised our farmers and provided billions to develop our infrastructure. Our success in attracting US and other foreign investment, with the attendant jobs  and prosperity, would not have been possible without Europe. Politically Europe has given Ireland an independent and respected voice at the European table. and has provided valuable assistance in resolving the Northern Ireland problem.
Ireland has enhanced her identity in Europe. When Ireland joined the then EC in 1973, our living standards were half those of our partners; 35 years on we have caught up. The changes in Irish society have been profound and positive. Ireland’s population has increased, emigration ended and an enhanced national self-confidence has emerged. Within the EU Ireland has been perceived as a success and a role model for the new poorer members. Every opinion poll shows a large majority in favour of EU membership.
Why then the No vote?  One major pointer was that much of the electorate felt ill informed about what Lisbon would mean, and were frustrated by the size, complexity and basic unreadability of the treaty document .The No Lobby attacked this opaqueness effectively, with their most articulate spokesman calling for a constitution like that of the USA as he theatrically binned the Lisbon Treaty document. There were  also complaints that Ireland would lose out in terms of influence under the new voting arrangements in the EU’s governing body – the Council (true, but how could Ireland expect to hold its share when other countries were also making compromises to absorb more equitably the new members?).
The proposal in the draft treaty that Ireland, again like every other member state, would lose its designated member on a smaller EU Commission, (one of the unique European institutions) for five years out of fifteen, excited particular opposition and became almost totemic. Other issues causing disquiet included fears that Ireland might have to give up its favourable low rate of company taxation, which had brought much inward investment, and  that its military neutrality might be compromised.
Another factor, difficult to quantify, was a degree of public disillusionment , a sense that the good times associated with EU membership were over and that those at the top were out of touch.  The worsening economic situation (grasped by the public before the politicians), the huge influx and impact of foreign workers (from nil to 10% of the workforce in less than a decade), the drying up of European money,  and doubts about where the EU was heading in future (with further expansion planned into the Balkans), all contributed to this unease. The failure of the Yes side to address these issues adequately together with the unchallenged assertion that a No vote would have no repercussions for Ireland invited the negative outcome.
Since then the Government, with some assistance from Europe, has attempted an “Operation Stable Door”. The Irish Commissioner has been salvaged.  Solemn and “legally binding” assurances or declarations on some of the other problematic issues for Ireland have been promised by our partners. The Government can point to these as evidence that Europe has come to meet us to justify putting the issue to the people again. With the economy in freefall our need for friends in Europe, which constitutes our comfort blanket, has never been greater. Whether the voters will agree remains to be seen. There is a dangerous argument gaining currency that Europe will have to bend to our wishes, that the other 26 can do nothing without us. These are Interesting Times. I would not bet the family silver on that outcome!
END

2/28/09

THE SHAMROCK TSUNAMI
This time two years ago I was a Euro-Millionaire. Not a multi-millionaire, but, for someone who started out with nothing, it was an achievement. And, in Ireland there were thousands like me, ordinary people whose net worth was in excess of one million euro. It was, of course, all based on the prevailing price levels of property in Ireland.  A fairly modest house, with a small plot, which would sell in a Chicago suburb for half a million dollars at most, was retailing in Dublin and other Irish cities for at least twice that. In the swankier suburbs houses were sold for much more.
The rest of the economy was in synch. The stock market had never been higher, there were jobs in abundance and 10% of the work force were “New Irish” – immigrants, mostly from Eastern Europe,  who had come to Ireland to work.  Ireland was riding high, with, on paper, on of the highest per capita incomes in the world. The Celtic Tiger was roaring. . We believed the rhetoric, our hubris knew no bounds. Like Icarus we flew higher and higher. The unique and temporary set of circumstances which had combined to create our prosperity was regarded as something immutable and that prosperity itself as our manifest destiny. Life was good. Irish people, on an unprecedented scale,  were enjoying North American standards of living, with rising social benefits to boot. Our infrastructure, long the butt of visitors’ jokes, was being modernised  The population had reached levels not seen for over a century and the demographics were promising, with the youngest population and the fewest old people in Western Europe.
True there were excesses. Those with money were not afraid to show it.  In 2006 Ireland, apparently, had the highest per capita private ownership of  helicopters in the world (who makes these calculations?); “EVERYONE owns a helicopter”, one multi – millionaire businessman remarked to me. Even among those who didn’t, purchases of Mercedes, Beamers and high-end SUVs were sufficiently common to make it appear the roads were choked with them. But the prosperity had trickled down , and spread out. Altogether, in the three years 2005-2007, 671,000 fresh automobiles were registered, one for every five people in the country aged fifteen and up .  The purchase of holiday homes and investment properties in Ireland and in locations like Bulgaria, Turkey and elsewhere became commonplace, not just for the wealthy but for many others, cashing in on the equity in their houses.
But that was then and this is now. “All changed, changed utterly!“   I am still probably a dollar millionaire – just – chiefly because of the decline of the dollar against the euro and also assuming I could find someone willing to buy my house. House prices are down by 25%, at a very conservative estimate, and continuing to fall.  $100,000 randomly invested in Irish shares two years ago would now be worth around $25,000, with bank shares having fallen even more spectacularly. Unemployment has soared by 80% in the last year to a record level of 327,861. The optimists hope for a figure of 400,000 by year’s end;  the pessimists fear half a million or more. Many of the Eastern Europeans have returned home. The Celtic Tiger has collapsed, and the Irish economy is imploding . Dismay is giving way to panic as yesterday’s bad news is overtaken by today’s even worse developments.
The slide began with the building industry. At first it was classic economics: oversupply, unsold units, price cuts and then job cuts. The stock market faltered, then began to fall. Questions were raised about the health of the banks, particularly after the sub-prime crisis hit the US. More jobs went, at first domestic and then, as the crisis gathered pace, some of the large multinationals on which we prided ourselves began to “rationalise”, to downsize their Irish operations and to relocate in lower cost locations. Dell, the fulcrum for much of the economy around Limerick, is to move its manufacturing operation to Poland. The knock-on effects on its local suppliers have already begun. Other companies are expected to follow suit or to  scale back.
An Irish icon, Waterford Glass, ceased operations at the end of January. Currency movements have priced our exports out of our largest market, Britain. Our competitiveness has been eroded, with labour and energy costs in particular too high. Negative equity and simple inability to pay mortgages through lost jobs has begun to  stalk the middle classes. The Celtic Tiger has been swept away by the Shamrock Tsunami!.
How bad is it? How bad will it get? Yes there is a recession in the USA and elsewhere, which is going to require careful (and lucky) management to prevent it developing into something worse. But in Ireland the perception – at least as important as the reality – is that ours is worse. For if the USA has caught a cold, Ireland has caught pneumonia. A joke circulating in Dublin – indignantly rejected by the Government – is that the only differences between Ireland and Iceland (in the grip of an economic meltdown) are one letter and six months. The talk now is not of the recession of the 1980s but of the calamitous 1950s, when hope appeared to disappear and when many families, including my own, left the country.
There is  very little room for manoeuvre. Tax revenues have collapsed. Government spending was expanded considerably in the Tiger years, financed largely by revenues from the building boom. This year the Government will have to borrow 20% of what it spends. This is unsustainable and a start has to be made by raising taxes or cutting spending or both. The problem is that the public is in denial about the extent of what needs to be done. There is a mood of public frustration and scapegoats are sought, whether the bankers, the public sector or the higher paid. Given that 38% of the workforce pay no income tax and that the top 20% pay 75% of all income tax, the scope for squeezing the rich seems limited on that front.
A levy is to be imposed on public sector workers, whose employment is guaranteed. This appears only the first step. Property taxes, hitherto a political no – no, and a strict means-testing of some benefits appears next, together with hikes in direct taxes, sooner rather than later. The problem is that, even if these prove sufficient to balance the books, there will be nothing with which to stimulate the economy. A lengthy period of adjustment and starkly lower living standards looms with nothing guaranteed.
There is no consensus on a solution. The government has tried unsuccessfully to achieve one, involving  the main interest groups. More bad news in the coming months may concentrate minds or at least provoke an informed debate. The traditional safety valve of emigration seems not an option and the whole means and pace of recovery, when our comparative advantages have gone, is problematic. There is brave talk that, when the world economy begins an upturn, Ireland will be well poised and equipped to avail of it. Hopefully this will prove the case, but it is likely to be an Ireland much changed from the giddy heights of the recent past.
END
2/9/09