tony's blog

Monday, November 22, 2010

Irish blogging - we're all doomed!

So what is the true state of affairs with Ireland? A week ago we were being assured that they had no need of European support and here we are now with a near certainty of a €90bn bail-out. So what’s changed?

Well I guess nothing except that a week ago the Irish Government were still trying to avoid European help at a country level and were trying instead to point the bail-out directly towards the banks. That way they would have been angling to avoid European interference with fiscal and political policy. But now this looks to be in jeopardy.

The Irish have fought so hard over the years to gain independence and with the lure of wealth and phenomenal economic growth; Ireland just took what was available from Europe and got behind the roaring success that became known as the ‘Celtic Tiger’. Who can blame them? So much did this extend to their thinking about the future that even when the Euro was suggested they didn’t hesitate – they were happy to join the band of successful European brothers which left the UK outside and looking a little isolated.

I suppose I’ve always had reservations about the Euro. How can you have monetary union if you don’t at some point also have control over fiscal and political policy on a centralised basis? What about the ‘one-size fits all’ monetary policy that would treat France and Germany the same way as much smaller and more fragile, less developed economies – which it now turns out includes Ireland? Well I guess we’ll just have to wait and see.

So will there be a bail-out of Ireland? I guess the answer is yes but I fear that until the European review has been completed we just won’t know if €90bn is enough. Are they hiding the true state of their situation and what if they need more? Once Ireland is sorted Spain and Portugal will likely need support and their economies are on a different scale entirely. Where will it stop?

I fear that we still have a long way to go in this but although the stock market has rallied on the back of Irish news this morning (but has since fallen back) I still feel profoundly uneasy. The future of the Euro is far from assured right now.

In the words of Private Frazer from Dad’s Army it feels like we are all doomed!

Tuesday, November 16, 2010

A concern for us all

On the face of it, the Bank of England presented a pretty positive growth outlook albeit inflation remaining above target for the next year. And I believe Mervyn King was right to talk about the fragility of the economy and how the world economy faces ‘difficult and dangerous’ times particularly if the G20 continue to focus on protectionist issues rather than Global concerns.

So far so in agreement.

Where I have major concerns is around Mr King’s comments on employment and how this will pan out in the near future. He states that he believes the private sector could provide enough extra jobs to offer to those made redundant. He says: ‘It is clearly feasible and not at all unreasonable to see a shift in employment between the public and private sector’.

Well I just can’t see this happening. Looking at the facts, we already have a record number of people forced into part time jobs (1.13m according to the latest figures from the ONS). Added to this statistic is the rise in the long term unemployed to its highest level for 13 years. If this is what the situation is like now, you have to ask yourself how things are going to be when the austerity measures kick in and the real hurt begins.  Research by PWC suggests that spending cuts will trigger a wave of redundancies in public sector organisations and the private sector businesses that relied on contracts in the state sector. The report suggests that nearly 1m extra face unemployment due to public service cuts. To think that the private sector can pick up the slack just doesn’t seem to be feasible in the short to medium term.

Of course I wouldn’t mind being proved wrong…