€4 billion in cuts -- too little, too late!

Louisc

I just want to thank the op for articulating very well the situation we are in with the figures which apply

Clearly the government did not go nearly far enough to tackle the difficult situation we are in.
I think they needed to cut social welfare levels to what we can afford, it would be painful, but cuts of 6% dont even scratch the surface of the problem. They needed to be cut by 50% in my view.

Our public servants are still by far the highest paid public servants in Europe, it's a crazy situation.
I was hoping for something like 30% cuts to public sector pay......it would cause a few strikes, but in the long term it would make a better future for our children.

We need a stronger government. Michael O'Leary said he'd cut government spending by 20 million in one year, I wish we had a leader like him who would balance the books.

And one thing for sure, our economy is not going to grow to levels where it was previously, our economy was propped up by a temporary building boom which is not likely to happen again in our generation.

seclachi

I think the worst is yet to come, everybody is predicting interest rates are set to rise, having a huge mortgage may turn into even more of a nightmare.

People are going to have to get real, there are going to be more cuts, the country`s budget is in an awful state and its going to take years to fix it. The unions can strike all they want, but they can`t get blood out of a stone.

P. Breathnach

Sand wrote: »

@P. Breathnach

Are you saying the size of the cuts in taxation ( which accompanied increased economic activity and revenue, as youd expect ) outstripped the ridiculous growth in spending on social welfare and the public sector?

The fiscal issue is not down to tax cuts. It is down to a program of tax cuts allied to a massive, politically motivated spending binge based on unsustainable revenue derived from a property bubble encouraged by state policy. This massive spending binge was justified on socialist grounds, not right wing grounds - the deposing of evil right wing McCreevy, the emergence of The Last Socialist in Ireland, and the constant harping from Labour and the Trade Unions to spend, spend, spend.

If McCreevy had been retained we could have expected a far greater degree of restraint on spending (there still would have been an increase, McCreevy *is* a politician - benchmarking was a disastrous policy that cost the state 1 billion and first emerged on McCreevys watch) than we saw on Cowens shift.

To an extent, I accept that view of things. But I think you do not give sufficient weight to the importance of the PD element in all of this: the tax-cutting targets were paramount in their programme, and any ambition to cool an overheating economy by budgeting for a surplus was sacrificed to that objective. Perhaps the best thing McCreevy did (and I am not a great fan of his) was the creation of the NPRF, which sequestered some surplus funds.

I don't think the excessive current spending -- and I agree that there was excess -- was driven by socialist thinking. I put it down to populism. I don't see any sign of coherent principle in the decisions that were made. I think that there was also a view that if the money was not spent on something, then the PDs and those of similar mindset to them would have pressed for more tax cuts, even though the public wish for reduction in taxation had been largely satisfied. It became a use-it-or-lose-it situation. So the populists in FF, led by Bertie, used it to buy popularity.

The problem is one of perspective then: No one advocating cuts on spending is unaware of the deflationary aspect of such cuts.

Come on! It seems obvious to me that quite a few people in this forum are completely oblivious to any such argument.

But they are very aware that this spending is being funded by borrowing, borrowing that needs to be serviced. And the longer this borrowing continues, the greater and greater portions of revenue must be sucked out of the state and sent abroad to service that debt. Too say nothing of how much of public sector wages are heading north to shop, acting as an economic boost to the UK, not to us.

It's not only public sector wages that are getting spent in NI. It's a bit unfair to characterise cross-border shopping in this way.

Some may think - well, not my probem. My kids, or their grand kids will just have to work harder. But I'm worth it.

But we need to take responsibility and recognise that we cannot live on our national credit card - we need to cut spending ASAP. It wont be easy, but choking off economic growth and public services by diverting as much as a third of all revenue we can reasonably expect to raise to servicing debt each year has its own economic impact.

We have been here before. The parental generation of many of the participants in this forum (whose mean age seems to me to be about 30) brought us through bad economic times. Sure, it would have been better if they didn't have to, but it's not a new type of problem. I agree that we should reduce spending ASAP; I also think that we should contribute more taxes to the exchequer ASAP. The question is deciding what ASAP means. I think it should be a small number of years, but more than one or two.

Cut now, or suffer more later. Personally, given that choice, I prefer to cut now. There will be deflation, but its the lesser of two evils. Especially given we are only talking about returning to 2001-2003 living standards, not the 1840s - though given the reactions to the budget from the usual parasites you wouldnt know that.

I agree that the average drop in living standards need not be too drastic. What is happening now is a noisy process of negotiation about how we distribute that average drop. That takes a bit of time.

It comes down to how much of a national debt you want to pass down to future Irish to service.

True. And what sort of economy we pass on to them, and what sort of society. It might be the better choice to pass on some debt, a functioning economy, and some social cohesion.

Permabear

This post has been deleted.

Sand

@P. Breathnach

Re: The influence of the PDs:
I think their influence can be overstated. Lets be clear - they definitely had a huge impact on Irish politics in that they voiced the equivalent of economic common sense - liberalism - to a greater or lesser degree in an era where political power was shared between populist governments and trade unionists who were convinced that the economy needed to be taxed until it stopped moving. By the time of the last election, even Labour had travelled so far that it was promising a PDesque programme of tax cuts!

However, they have always been a minority in government. They have never been a major electoral force, which is perhaps unsurprising in a country where Bertie Ahern was and is such a successful politician.

Their influence was exercised through their luck in finding McCreevy in Finance, an idealogical fellow traveller, who whilst being a Fianna Failer was convinced of the same basic economic common sense and was to boot a radical in the truest sense. McCreevy was as close as we will get to Michael O Leary running Ireland. And he was hated for it. Here was the trade unionists, Irish Times and Labour Partys worst nightmare - a Finance minister informed by a liberal economic mindset and worst of all: it was working!

When McCreevy was given the heave ho as Bertie grew terrified at the idea of Fianna Fail being identified with economic common sense, PD influence took a massive nose dive. They reverted to being a small, relatively unimportant party - and increasingly lost their radical streak as they brought on board the likes of Parlon and Grealish. About their only value to FF was their use as a mudguard, and Harneys curious urge to take on the Health ministry which was and is political suicide. Like the Greens, they managed to rationalise their support for what was against their own radical base - the Greens like the perks of power, and so did the PDs in the end.

Re: The increase on spending - I agree it was populist in its motivation. But it was justified on socialist grounds, and its got the same basic root as socialism: someone, somewhere, owes me and I dont care where the money comes from.

In and of itself, theres nothing especially wrong with a high tax, high spending model, so long as it delivers incredible services to justify the high spending. Id argue against it, but its an option.

There is nothing wrong with a low tax, low spending model, so long as it delivers acceptable services. Id favour this, others might disagree. But its an option. Id imagine the PDs would favour this basic concept over the above.

What you cant do is run a low tax, high spending model which delivers unacceptable services. This has been the Irish model for the past while. This is the feckless, spendthrift model - attempting to paint it as the PD model when the PDs were increasingly carried along in the wake of the Bertie-Cowen government is not helpful.

Come on! It seems obvious to me that quite a few people in this forum are completely oblivious to any such argument.

No really, Im well aware that cutting back on government spending when the government is spending like a drunken sailor will have an impact on the economy. Seriously.

The thing is that I, and others, think the consequences of borrowing just grow and grow and grow and whilst I consider the cutbacks will be painful, I think it will be less painful to cut now as opposed to trying to service more and more and more debt with higher and higher costs as markets wonder more and more if we are going to be able to pay them back and demand higher and higher risk premiums. If they loan to us at all.

There is a real fear of debt defaults coming down the tracks in a few years. The sooner we get our debt under control, the more chance we have of surviving a massive crisis in the future where the markets get as jittery about the states as they did about the banks 18 months ago.

Who is going to bail the state out after all?

We do need to do some work on the tax revenue side of things: Clearly, the best fix is to start pulling people back into the tax net, perhaps allied to a reduction in tax rates to encourage economic activity. We are in a slump: and just jacking up taxes might make David Begg and co feel better, but it is ultimately self destructive to discourage economic activity. We also need to start pulling back the social welfare: its grown to such a level that its actually a valid lifestyle option if you are fully aware of your privledges under the system and exploit them.

We need to look at bankruptcy laws, we need to do a cost/benefit analysis of various tax breaks and taxs levied - apparently it costs more to administer the collection of some taxes that is raised by them. The Trade Unions have said they wont help with reform, which is utterly stupid - the more we save from doing things smarter, the less the government will have to save through crude measures like paycuts.

We have been here before.

Thats the real shame of it. All those sacrifices made in the late 80s and early 90s. The reward of the 90s, and here we are again - right back to the 80s.

P. Breathnach

donegalfella wrote: »

This post has been deleted.

No. I am willing to argue that FF/PD coalitions had a significant right-wing component.

We don't have a moderate exchequer deficit. We have an enormous deficit. But in any case, my point stands—you cannot indefinitely keep spending more than you take in. You can propose running a surplus in some years and a deficit in others, but on the average you have to aim for a balanced budget. Apologies that that makes me sound like a right-wing zealot.

I didn't say we had a moderate deficit. I said that, averaged over time, moderate deficits are sustainable; while I pay less attention to economic discussions than I did a few years ago, I think it is still accepted by many theorists that long-run moderate deficits can stimulate growth.

Well, that's where we part company. The inanity and ineptitude of our government has been nothing short of astonishing. They have destroyed our economy with their fiscal recklessness. Why would you trust them now?

Because they are in thrall to the ECB.

Define "great hardship and social discontent," please. In today's papers, you have public servants reacting to a 5 percent pay cut as if they'd been anally raped with a red-hot poker. You have women claiming that returning child benefit to 2006 levels (when the cost of living was in many respects higher than it is now) is "catapulting children into poverty."

Hyperbole is part of political discourse. You are indulging in a bit of it yourself, with your imagery.

The problem in this country is the predictably opportunistic set of reactions than follow any cut to anything. On RTÉ One after Lenihan's speech yesterday, I was just waiting for someone to announce that FF were "declaring war on the children." True enough, some Shinner came out with that line within 10 minutes. It really wouldn't have mattered if Lenihan had cut child benefit by €16 or €116. The reaction would have been the same.

Sure. And if taxes were increased, you would have a largely different set of people mouthing off in just as intemperate a manner. It's the way we do things in this country. I don't like it, but I have learned not to take it too seriously.

But the longer we dither, and the longer we continue borrowing €400 million a week, the more difficult it will be to retrench—because the larger the national debt will be. That's the advantage of the short, sharp shock approach. Get it over with, let people adjust to the new reality and get on with things.

I think we won't agree on that point.

K-9

The PD's are irrelevant to this depression though.

There is no taxes to cut, unlike the mid to late 80's. I don't think many are advocating cutting taxes, indeed most realise tax increases are needed, just in a gradual way.

In the 80's we had 65% taxes at the top rate and the lowest rate was 35%, from memory.

We are faced with a vastly more difficult problem than the 80's.

hinault

K-9 wrote: »

The PD's are irrelevant to this depression though.

There is no taxes to cut, unlike the mid to late 80's. I don't think many are advocating cutting taxes, indeed most realise tax increases are needed, just in a gradual way.

In the 80's we had 65% taxes at the top rate and the lowest rate was 35%, from memory.

We are faced with a vastly more difficult problem than the 80's.

Correct 65% was the top rate of tax in 1986 : I remember it well.

I am not sure that things today are as bad as the 1980's though.
There is much more industry and enterprise here and while we are in difficult straits at present, we can resolve this entire mess if we apply ourselves.

baubl

K-9 wrote: »

The PD's are irrelevant to this depression though.

There is no taxes to cut, unlike the mid to late 80's. I don't think many are advocating cutting taxes, indeed most realise tax increases are needed, just in a gradual way.

In the 80's we had 65% taxes at the top rate and the lowest rate was 35%, from memory.

We are faced with a vastly more difficult problem than the 80's.

I do realise the subject we are on
BUT
Neither FF or the Greens should come near my door next general election, there will be a roasting
I blame these for the state we are in
making promises
rising childrens allowances, dole, freebies to get votes
now they know they made a mistake, they will find that was the wrong way to go

Permabear

This post has been deleted.

Rookster

Raising taxes was not an option because those on average industrial wage with at least 2 kids would have been better off on social welfare. Brian Lenihan knew this.

frman

Rookster wrote: »

Raising taxes was not an option because those on average industrial wage with at least 2 kids would have been better off on social welfare. Brian Lenihan knew this.

At the moment, all private sector workers feel that the budget was a good one. Didn't affect them too much, so that is grand.

If he had raised taxes, it would have had the side-effect of p1ssing private sector workers off. That would lead to the situation whereby both private and public workers would be complaining. That would be far from ideal.

It suits the Govt to have private sector and public sector split right now, as they will need the support of the private sector to lessen the impact of strike action by the public sector. The Govt. also needs the majority of the general public on their side when they move to reform the public service as a whole.

Stark

The National pensions framework bill has still to be published so any private sector workers contributing to their own pensions could be hit yet.

Also, the increments that most public servants will receive this year will go a good way towards cancelling out the 5% pay reduction. Most private sector companies are still in real pay freeze mode.

P. Breathnach

donegalfella wrote: »

This post has been deleted.

It was a bit more than that: there were agreed programmes for government that involved tax reductions. And there was a government culture of freeing up markets. I suspect that you approve of free markets, but I have reservations about them because (1) the economic cycle happens spontaneously, and good government strategy can even out the humps and hollows and (2) untrammeled markets have a potential for getting out of control and doing things like creating bubbles. The freedom given to the banking/finance sector in recent years was a major contributor to the property bubble. I know it is popular to blame the regulator, and I do hold him somewhat responsible, but he was taking a line that was mapped out for him by the government. It was an instance of one of those things that is difficult to nail down, the political sentiment of the time.

That strategy only works when coupled with low government spending. It worked okay in the 1990s, when government spending was modest compared to what it is now. It appeared to work in the 2000s, despite the rampant spending, only because we plugged the gap first with a stamp duty windfall

Yes, the government participated fully in the bubble, and that was foolish beyond description. It actually gave itself an incentive to avoid dealing with an emerging problem.

and then by borrowing half a billion euro a week.

I don't think that was policy, but consequence.

Now we are left in a position of total incoherence, trying to fund a big-spending social democratic regime with a relatively liberal taxation regime.

True. And people have become habituated to low taxes and a high level of social provision. It's a genie that we need to get back into the bottle. I don't think, however, that the solution is solely to be found on the spending side. We need also to pay more for what we expect to get.

I believe that tax cutting was continued beyond the point that was necessary to satisfy the electorate. Nobody loves paying tax, but there is some degree of acceptance of the need to finance state activities. But, as with pay, when you give people something it can be more difficult to take it back.

Don't read more into what I say than I mean. I also believe that we need to tackle spending. That is why I have no fundamental objection to the cuts in public service pay and social welfare payments. I also believe that there are spending programmes that can be eliminated and others that can be pruned. I am sure that efficiency savings are also possible, but I think that some commentators overstate them.

If you don't take seriously people's "mouthing off," why are you going on about "social unrest"?

I don't take mouthing off seriously in the sense that I am not necessarily frightened of it. Very often it is therapy. But there is a point, difficult to identify, where a tendency to complain can become something more worrying.

As I've said, there will be a predictable display of "social unrest" outside the Dáil anytime the government cuts anything—but these people are largely chancers.

I don't count that as social unrest.

People in this country privately do understand the need for cuts,

preferably to be borne by somebody else.

but everybody knows that we have a spineless, malleable government. Everyone thinks, "Maybe if I scream and shout loudly enough, the cuts will fall on somebody else's head, not mine."

I agree. But the alternative government on offer looks to me to be no better.

Ever since the downturn began, the government's attitude has been:

1) We can't significantly cut social welfare, because that would be politically unpopular, and we might not get re-elected.
2) We can't significantly downsize the public sector, or cut public-sector pay and pensions, because that would be politically unpopular, and we might not get re-elected.
3) We can't significantly tax the bottom 50 percent of earners, because that would be politically unpopular, and we might not get re-elected.

So we're left with:

4) We can stealthily borrow half a billion euro a week and hope nobody really notices.

Option 4 is the ticking time bomb, though. As Sand notes, it simply shifts the burden onto future generations. As the father of a month-old-baby girl, I do not want my daughter working to pay off the umpteen billions that were borrowed in 2008–13 to keep the teachers, Guards, and welfare recipients on incomes that are far beyond the OECD average.

That's a bit of a caricature (although, like good caricature, it has some foundation in reality).

The bubble burst; exchequer revenues collapsed; option 4 kicked in pretty well by default. The government has now embarked cautiously on a programme of reducing expenditure and increasing revenue.

[I didn't notice any announcement of the birth of your daughter. Congratulations, and may she give you much joy.]

SkepticOne

SkepticOne wrote: »

This is a good point. The cuts won't directly get us out of recession. In fact, they will have the effect of making the recession worse in the short term, but that doesn't mean they aren't necessary.

Unfortunately, we've gone well beyond the point where the government can stimulate the economy back into activity so we've ride the roller-coaster all the way down before it comes back up.

P. Breathnach wrote: »

You cannot cut your way out of a recession.

Well actually:
Expansionary Fiscal Contraction

You can, and we did it before

john_d_baptist

donegalfella wrote: »

This post has been deleted.

And it wont really matter when people start to realise because we know the game is up anyway, re-election is not an option.. all we can do now is try and comply with our ECB paymasters, be seen to enforce tougher ecconomic measures, and hold out with our fingers crossed for a job in Brussels... it will be a policy of every man for himself in FF very shortly, an entertaining spectacle :pac:

Permabear

This post has been deleted.

P. Breathnach

Deleted User wrote: »

Well actually:
Expansionary Fiscal Contraction

You can, and we did it before

Thank you for the suggestion. I followed some of the links, and refine my claim to: you cannot cut your way out of this recession.

I do not abandon my earlier claim, as it seems that EFC is not accepted as a new truth by everybody. But it's a technical matter, and not germane to this discussion.

ei.sdraob

P. Breathnach wrote: »

Thank you for the suggestion. I followed some of the links, and refine my claim to: you cannot cut your way out of this recession.

I do not abandon my earlier claim, as it seems that EFC is not accepted as a new truth by everybody. But it's a technical matter, and not germane to this discussion.

yes you can cut your way out of recession/depression

heres a textbook example from the Austrian camp of economics, the "forgotten" Depression of 1920s

http://mises.org/daily/3788

some points:
* they were on gold standard then, the euro is practically a modern day equivalent
* striking similarities

The economic situation in 1920 was grim. By that year unemployment had jumped from 4 percent to nearly 12 percent, and GNP declined 17 percent.

here is how it was approached

Instead of "fiscal stimulus," Harding cut the government's budget nearly in half between 1920 and 1922. The rest of Harding's approach was equally laissez-faire. Tax rates were slashed for all income groups. The national debt was reduced by one-third.

and result

By the late summer of 1921, signs of recovery were already visible. The following year, unemployment was back down to 6.7 percent and it was only 2.4 percent by 1923.

this is very interesting

It is instructive to compare the American response in this period to that of Japan. In 1920, the Japanese government introduced the fundamentals of a planned economy, with the aim of keeping prices artificially high. According to economist Benjamin Anderson,

The great banks, the concentrated industries, and the government got together, destroyed the freedom of the markets, arrested the decline in commodity prices, and held the Japanese price level high above the receding world level for seven years. During these years Japan endured chronic industrial stagnation and at the end, in 1927, she had a banking crisis of such severity that many great branch bank systems went down, as well as many industries. It was a stupid policy. In the effort to avert losses on inventory representing one year's production, Japan lost seven years.[3]
The United States, by contrast, allowed its economy to readjust. "In 1920–21," writes Anderson,

we took our losses, we readjusted our financial structure, we endured our depression, and in August 1921 we started up again.… The rally in business production and employment that started in August 1921 was soundly based on a drastic cleaning up of credit weakness, a drastic reduction in the costs of production, and on the free play of private enterprise. It was not based on governmental policy designed to make business good.
The federal government did not do what Keynesian economists ever since have urged it to do: run unbalanced budgets and prime the pump through increased expenditures. Rather, there prevailed the old-fashioned view that government should keep taxation and spending low and reduce the public debt

that was in US, like McCarthy said on Primetime the other night
"the biggest mistake of the 80s in Ireland was not making the cuts earlier"

the result of the 80s was the great export led boom of the 90s, a real boom, not the fake variety we had in 00s

P. Breathnach

ei.sdraob wrote: »

yes you can cut your way out of recession/depression

heres a textbook example from the Austrian camp of economics, the "forgotten" Depression of 1920s

http://mises.org/daily/3788...

Did you notice the centrality of tax cuts in this analysis? My point is that expenditure cuts are not, on their own, a basis for recovery. Let's face it: tax cuts are not on the agenda.

I am not using this as a conclusive case against expenditure cuts, because it is obvious that we simply cannot afford our present levels of spending. What I am arguing is that the cuts should imposed at a suitable rate, not all in one go. I am inclined to believe that €4bn this year is about the right level.

ei.sdraob

P. Breathnach wrote: »

Did you notice the centrality of tax cuts in this analysis? My point is that expenditure cuts are not, on their own, a basis for recovery. Let's face it: tax cuts are not on the agenda.

I am not using this as a conclusive case against expenditure cuts, because it is obvious that we simply cannot afford our present levels of spending. What I am arguing is that the cuts should imposed at a suitable rate, not all in one go. I am inclined to believe that €4bn this year is about the right level.

we cant really cut taxes since they are already "lowish" in comparison

so that leaves costs, which by all standards went a bit overboard

jmayo

ei.sdraob wrote: »

we cant really cut taxes since they are already "lowish" in comparison

so that leaves costs, which by all standards went a bit overboard

And here we are back to my point about cutting electricity costs with immediate affect.
Electricity costs hit everyone, public, private, business and residential.

We have ridiculous situation in this country where some of our costs of input are sky high.
What does the government do ?
Yet again they do nothing since we set up another quango to oversee it.

The Commission for Energy Regulation was setup in 1999.
Here is the list of officers with commissioner and chairman.

http://www.cer.ie/en/about-us-staff-profiles.aspx

And what does the state owned power generation operator do ?
Oh they up workers pay whilst everyone else is either taking pay freezes, pay cuts or redundancy. :rolleyes:

Of course get ready for the reposts about them being private entity and how they contribute to the exchequer :rolleyes:

ei.sdraob

jmayo wrote: »

And here we are back to my point about cutting electricity costs with immediate affect.
Electricity costs hit everyone, public, private, business and residential.

We have ridiculous situation in this country where some of our costs of input are sky high.
What does the government do ?
Yet again they do nothing since we set up another quango to oversee it.

The Commission for Energy Regulation was setup in 1999.
Here is the list of officers with commissioner and chairman.

http://www.cer.ie/en/about-us-staff-profiles.aspx

And what does the state owned power generation operator do ?
Oh they up workers pay whilst everyone else is either taking pay freezes, pay cuts or redundancy. :rolleyes:

Of course get ready for the reposts about them being private entity and how they contribute to the exchequer :rolleyes:

ESB are semistate

the rises are due to unions (surprise) wanting a bite of the profits

they want to lower prices since fuel costs went down but are not allowed by state regulator, since it will "hurt" competition

make what you want of it

P. Breathnach

ei.sdraob wrote: »

ESB are semistate

the rises are due to unions (surprise) wanting a bite of the profits

Can you back that up?

they want to lower prices since fuel costs went down but are not allowed by state regulator, since it will "hurt" competition

So much for free markets!

Stark

P. Breathnach wrote: »

Can you back that up?

What do you mean? The pay rises that the ESB workers received were negotiated by the unions under social partnership. It's common knowledge.

P. Breathnach

Stark wrote: »

What do you mean? The pay rises that the ESB workers received were negotiated by the unions under social partnership. It's common knowledge.

That's a different point.

ei.sdraob

P. Breathnach wrote: »

Can you back that up?

a) ESB being semi-state?

well half is owned by government, 5% by staff, rest by investors

once again anything the government touches turns to ****


b) union pushing for pay rises?
see here > http://www.rte.ie/news/2009/0210/esb.html

P. Breathnach wrote: »

So much for free markets!

the regulator is an independent state agency. there is no free market as energy market is heavily regulated (it does need some regulation so we dont endup in an Enron situation, but not the mess that exists now) with the results we see

"if it were truly a free market and ESB was a private company they would leave the country for the continent where theres a larger and more profitable market"

the above sentence is a typical quote from employees within company

|

P. Breathnach

ei.sdraob wrote: »

a) ESB being semi-state?

well half is owned by government, 5% by staff, rest by investors

So you can't back up a claim that the unios are pushing for high profits.

once again anything the government touches turns to ****

That's a statement of general prejudice, not a relevant comment on your claim that unions want a bite of ESB profits.

b) union pushing for pay rises?
see here > http://www.rte.ie/news/2009/0210/esb.html

A pay rise is not a bite of the profits. It works the other way: pay rises reduce profits.

the regulator is an independent state agency. there is no free market as energy market is heavily regulated (it does need some regulation so we dont endup in an Enron situation, but not the mess that exists now) with the results we see

"if it were truly a free market and ESB was a private company they would leave the country for the continent where theres a larger and more profitable market"

the above sentence is a typical quote from employees within company

|

Methinks you misunderstood the tenor of my comment. We have an artificial competitive market.

recedite

ei.sdraob wrote: »

ESB are semistate

the rises are due to unions (surprise) wanting a bite of the profits

There's a misunderstanding going on in this discussion; the post refers to pay rises not electricity price rises.
The tragedy of that farcical episode was that the rises were agreed during the boom but implemented much later during the recession. Even though the unions must have realised it was ridiculous, they were obliged to claim their legal entitlements.

alejandro1977

P. Breathnach wrote: »

Did you notice the centrality of tax cuts in this analysis? My point is that expenditure cuts are not, on their own, a basis for recovery. Let's face it: tax cuts are not on the agenda.

I am not using this as a conclusive case against expenditure cuts, because it is obvious that we simply cannot afford our present levels of spending. What I am arguing is that the cuts should imposed at a suitable rate, not all in one go. I am inclined to believe that €4bn this year is about the right level.

From today's Financial Times editorial:
http://www.ft.com/cms/s/0/c8dc757c-e5c0-11de-b5d7-00144feab49a.html

Ireland is an ultra-open economy. Compared with its neighbours in the UK, domestic demand is unimportant. Competitiveness is what matters. Being bound into the eurozone and unable to devalue its currency, the only way to give its goods an advantage is to cut wages in nominal terms, as Mr Lenihan has done.

This sums up a lot of what many private sector people think of the argument put forward by Begg et al regarding a supposed deflationary spiral.

I might add that I've always been a saver and now even more so as it's clear that my income will be slashed not from pay cuts but from tax rises. You cannot ignore the current and future changes in spending patterns as a result of anticipated changes in take home pay while at the same time bleating about pay cuts taking money out of the economy. Moreover, as the cost of Gov borrowing increases the higher our Debt to GDP ratio is - this is an additional Gov expense without any benefit to the Irish Economy.