Friday, 27 May 2011



My wife, Finola made an interesting speech last week to the Iona Institute, an Irish Think Tank that focuses on family policy.  She drew attention to the increase in unemployment in Ireland and to the fact that  this has fallen disproportionately on  men and boys, a  phenomenon that does not seem to appear in other  European countries.
I believe the  longterm social consequences of this will be severe, particularly the way it will affect families and the upbringing of future generations.  
Here is what she said;

“I would like to raise today a very important social issue whose consequences will be felt for years to come and which remarkably has attracted no attention from the media, academics or Politicians in this country.
The weight of this recession both in Ireland and the United States has fallen most heavily upon men. In the United States men have suffered roughly three quarters of the 8 million job losses since the beginning of 2008.  There, male dominated industries ( construction, manufacturing) have been badly hit while health care and education – which employ women, have held up relatively well.
In Ireland, the male unemployment figure is 17.8%, whereas it is 10.9% for women.  This figure is in sharp contrast to all other European countries, where the rates of unemployment are roughly equal. It is also in contrast to the situation in Ireland in 2007, when male and female unemployment rates were virtually the same.  This difference is found among all age groups .  Of the under 25 year olds who are unemployed in Ireland 233,000 are male and 123,000 are female.
Unemployment is difficult for both men and women. For men, whose self identified role in society is defined by what they do outside the home, unemployment is particularly traumatic. Various studies have described the erosion of their identities, the isolation of being jobless and the indignities of downward mobility. Then there is the financial and emotional strain which can corrode family life.
Men seem to be more vulnerable than women in how unemployment affects them.  This gender imbalance in the unemployment figures in this country provides a profound challenge to marriage. Kathryn Edin, a professor of Public Policy at Harvard and an expert in family life, was quoted recently in The Atlantic as saying that marital relationships, where men are jobless, are often filled with conflict. Even today, she says men’s identities are far more defined by their work than women’s and both men and women become extremely uncomfortable when men’s work goes away.

Bradford Wilcox, the director of the National Marriage Project at the University of Virginia, put it starkly when he said “ If men can’t make a contribution financially, they don’t have much to offer”
In case one might think that there is a lower female unemployment rate in this country because girls are emigrating more, emigration from Ireland among males is about 30% higher than among women.
Some may argue that this is due to the fact that Irish men suffer disproportionally from the construction industry collapse. Spain has also had a similar construction industry collapse, and the gender difference in unemployment there is not like that in Ireland at all.
What conclusions can we draw from this?
The first is that the Irish Educational system has done a much better job preparing young women for the job market, than it has young men.
I suggest that we need a serious study of why Irish education is failing young men, and what we can do about it. Clearly the problem is different here to that in all other EU countries.  We should look at what is good about the educational experience of girls in Ireland, and see if it can be adapted for boys too.
I think also that the gender studies departments of our universities and regulatory bodies ought to  turn their attention to this Irish problem.  Gender studies need a new focus.
I suggest also that Irish men and boys also have to ask themselves some hard questions.
Are they making the right subject and career choices?
Are they prepared to think differently about their ideal job?
Can they learn something from the relative success of women?
Finally, I am calling on the National Economic and  Social Council to initiate a study to find out why unemployment is so severely affecting men in this country.
We must be willing to discuss this issue on the basis of its practical effect on family life, in the here and now, rather than on the basis of some ideological principle about equality.
The resources going into Gender Studies should perhaps be devoted as much to the number of men on the dole as to the number of women in boardrooms.”

I would welcome inputs on how this problem might be analysed

Monday, 23 May 2011

Modern European Economy

The International Monetary Fund (IMF) is a body that has more experience than any other, in dealing with countries in financial difficulty. Commentators at home and abroad will have been paying close attention to what it said last week about Ireland’s management of its problems.
Last week Mr Chopra of the IMF endorsed unequivocally the actions of the new Government here in its implementation of the IMF/EU financial programme.
He praised the Governments sense of “ownership“of the programme, and its “decisive approach” on the banking situation. This approach had “doubled existing buffers against possible losses through 2013 and beyond”. I would add that Irish banks are now better capitalised than the banks of most other EU countries, including especially some of the bigger EU countries.
Mr Chopra said Ireland was doing all it could to “get ahead of problems”. Any adverse developments there had been had been due to external developments. The European Commission also noted last week that Ireland’s performance was “on track”.
Mr Chopra reminded his listeners that an increase in Ireland corporation tax rate was not part of the agreed EU/IMF programme because , as he put it, such an increase would not be “consistent with the overall goal of the programme in sustaining growth”.
I am confident his words will have caught the attention of the French Minister for Finance, Christine Lagarde who, as an EU Finance Minister, endorsed the EU/IMF programme in the first place. She will also have noted that Irish corporation tax receipts had “overperformed”, in the IMF’s words, and are thus contributing more, not less, than expected to Ireland’s loan repayment capacity.
On the question of interest rates on loans, he reminded his listeners that the IMF applies a uniform interest rate to states borrowing from it. It did NOT vary rates to borrowing states to suit the political demands of contributing states.
He also told all of us in the European Union that we need to reassure the markets by putting in place
“the right amount of finance, on the right terms, for the right duration”
to support states in the eurozone who may get into difficulty. That is the only way to convince markets that there will be no defaults. As far as Ireland is concerned, those who may have been alarmed by Professor Morgan Kelly’s article in the “Irish Times” should read the response in the same paper by Dr Anthony Leddin and Professor Brendan Walsh .
Those who talk lightly of default and restructuring by Greece should pay attention to what that would do to Greek banks. It would destroy the collateral that those Greek banks use to borrow from the ECB, and this would lead to an overnight loss of confidence in those banks, with disastrous and sudden consequences for Greek savers, and for its entire economy. Remember that Greek banks, businesses and Government would still need to borrow NEW money after any restructuring, “reprofiling”, default that might take place, and they would find it much more difficult than before to borrow that new money. If Greece was like Ireland, and was more dependent on foreign investment than it is, that problem would be even more severe.
The sort of changes Greece is going through are very painful indeed, but just as things can get better, they can also get much much worse, if the wrong decisions are made either by Greece itself, or by populist politicians in other European countries who somehow pretend that they can allow their neighbours to sink below the waves, with no consequences for themselves.
The truth of the modern European economy is that we are all tied together, and we can either keep one another afloat, or drag one another down.
In a recent article, the highly respected German magazine, Der Spiegel , said that “communal feeling in the EU is crumbling” and that the Government was “not even trying “ to put that right.
I note also that a far right party, opposed to more help for Greece, did well in a recent Austrian election. Austrian electors should remember that, even in the 1930s Europe was so tied together, that when an Austrian Bank, Credit Anstalt, collapsed in 1931, it led to a rash of bank collapses all over Europe. If that was possible in the much less interdependent Europe of the 1930s, it is even more likely today. EU help today to several central European EU members is critically important to the health of the Austrian banks.
European electorates everywhere need to recognise that time will be needed to rectify the deep and unstable imbalances that grew up in our economies since 2000, under the temporary anaesthetic of artificially cheap imports, and artificially low interest rates. That is why Me Chopra’s advice about the EU putting in place the “right amount of financing, on the right terms, for the right duration” is so wise.
The EU leadership needs to develop a convincing narrative that explains, in everyday language, why we are doing what we are doing, why it will take time, and how the actions we are taking now, will eventually lead to a European economy that is much more secure than the bloated and bogus prosperity that we experienced from 2000 to 2007. Telling a convincing story about the future is a vital part of political leadership, and we need such leadership in the European Union, now more than ever before.
I believe that the EU will have to move closer together politically, if we are to survive economically. The politics of this is just as important as the economics. People in all EU countries, rich and poor, need to feel a sense of ownership of the European Union.
The creation of the EU in the 1950s was a first in world history, a completely voluntary pooling of sovereignty by states that had recently been at war with one another. It was an outstanding example of political engineering, as well as of visionary imagination.
EU’s leaders today need to apply the same combination, of imagination and practical political engineering, to developing communal feeling among the member states of the euro, and to sustaining its democratic legitimacy of the euro, as they are giving to its economic underpinning.
This is only the first crisis we will have. There will be many more. We need political institutions in the EU that are strong enough, democratic enough, decisive enough, and inclusive enough, to face anything the future may throw at them. That is the enduring lesson we must take away from this crisis.

Keynote address by John Bruton, President of the IFSC, at the European Insurance Forum in the RDS Concert Hall at 8.30 am on Monday 23rd May .

Thursday, 19 May 2011

Tribute to Dr Garret FitzGerald

Garret FitzGerald will stand out as a man who changed Ireland.
He changed our attitudes to the Northern question, helping us to see it as a matter of people and their allegiance and how these can best be respected, and no longer simple as a matter of territorial claim and counterclaim.
He changed attitudes to Europe, seeing that Ireland could do best in Europe, if it contributed creatively to goals and ambitions of other members, and to achieving closer Union, rather than focussing exclusively on our own needs and what we could extract from common funds. Fluent in French and Spanish, he was enthusiastic about all the good things we shared with our fellow Europeans.
He also had a new and optimistic approach to economics. He believed that, if problems were researched and analysed properly, they could be solved by public and private sectors working together in a planned way.
As a journalist, he continued to enlighten, entertain, and sometimes challenge his readers right up to the end of his life.
He was always interested in the opinions of people younger than himself, but did not conceal his own convictions,
I first got to know Garret FitzGerald when I was one of his students in UCD. Garret lectured us on his great interest, economic statistics. He convinced all of us that the available statistics were a greatly underused resource for those who wanted to understand what was going on in the Irish Economy.
Around that time I also joined the Fine Gael party as a member in Dunboyne and of the Students Branch. That also brought me into contact with Garret, who had recently been elected as a Fine Gael Senator. The mother of one of my closet’s friends, David Clarke, was a close relative of Garret’s late wife, Joan, so I got to know Garret socially, as well as through politics and his academic work.
What struck me most forcibly at that time was his relentless enthusiasm and optimism. He was often criticised for speaking too fast, and writing sentences that were to long. But these supposed faults were really just an indication of a man who felt that there was so much to do, and so little time in which to do it.
As a student of economics, I also found his regular articles in the “Irish Times” to be very helpful in relating the insights of economics to the practically problems of the day.
Another thing that struck me was his tremendous enthusiasm for Ireland in taking its place in what was to become the European Union. He was active in committees studying the preparedness, or lack of preparedness, of different sectors of our economy for the stiff competition they would face in a free trade area with Britain, and with the rest of Europe.
He strongly supported the work of the then Government, and of the Fine Gael leaders of the time, James Dillon and Liam Cosgrave, in pursuit of Ireland’s application to join the then European Common Market.
He also had a very good understanding of the way the politics of a United Europe would work for a small country, like Ireland. I remember in him telling me many times that Ireland could do best in Europe if it was able to identify its interest with the interests of Europe as a whole. Ireland needed to use its ingenuity to find a way of formulating what it wanted, as part of a proposal that met a wider need. In the same spirit, he strongly supported the central role of the European Commission, as the body that could find a synthesis of the interests of all members, and he was opposed to Inter – Governmental deals, which tended to serve only the big countries.
Garret was a very successful Minister for External Affairs in the Coalition Government led by Liam Cosgrave. He energised the Irish Foreign Service and collaborated closely with Liam Cosgrave in framing the Sunningdale Agreement. This agreement, negotiated back in 1973, provided the template for the eventual settlement reached in 1998 in the Good Friday Agreement. It is such a pity that so many had to die before the Sunningdale model was finally accepted by the entire spectrum of Unionism and Nationalism in both parts of Ireland.

Garret FitzGerald became the leader of Fine Gael in the aftermath of the 1977 Election. The party had lost numerous seats and was facing the prospect of a long and demoralising period in opposition. It is entirely characteristic of Garret FitzGerald that he was not prepared to settle fatalistically for that. Few displayed as much energy as Garret FitzGerald did in reviving the fortunes of the Fine Gael party in the period between 1977 and 1979. It was due almost entirely to his leadership that the party was able to score very good results in 1979 local and European Elections. This set the scene for Fine Gael’s success in the 1981 General Election.

I became the Minister for Finance in the Government that Garret formed after that Election. We faced a truly awful financial situation. We were able, with the support of Labour Ministers, to prepare, introduce and pass a supplementary budget within barely one month of taking office. This speed was critical in maintaining Ireland’s worthiness.
Subsequently we introduced, again with the full agreement of both parties in Government, a Budget for 1982, in January of that year. The Government did not have a majority in the Dail and had no permanent pacts with independent Deputies. So we knew that there was a high risk that the Budget might not pass the Dail. The choice was clear, we could either do what we believed was necessary, whatever the electoral consequence, or temporise and sink slowly under our problems. Without hesitation, Garret chose the former course and the measures in that budget were largely implemented by the subsequent Government.
The Anglo Irish Agreement, which he negotiated with the support of Peter Barry and Dick Spring, was a crucial milestone on the road toward a more constructive relationship between Nationalism and Unionism on the island.
In Government in the 1980s, we faced the need to check public spending growth. He was always insistent on maintaining spending on education because of its lasting benefit, and I think this priority was crucial in laying the ground for growth in the 1990s.
One of the highlights of my time in Washington as Ambassador, was when Garret, and his grand daughter came to dine. He kept the guests, Irish, British and American, magnificently entertained with a constant stream of anecdote, opinion and self caricature,
Ireland , and the world, have lost a great citizen.
Finola and I extend our deepest sympathy to John, Mary and Mark and their families at this very sad time

Sunday, 15 May 2011



Wolfgang Munchau wrote in the “Financial Times” last week that the problems of the eurozone show that
“A monetary union without a political union is simply not viable”
This sort of statement is being made with increasing frequency by economists, none of whom seem to go much further is explaining what they really mean, and why. The statement is left hanging there, as if it was so obvious that it needs no further elaboration.
There are genuine problems, which prompt writes to say that the eurozone needs a political union to solve them. But he problem in the Eurozone is just a smaller version of the problems of the world economy.

We have had one set of countries(the hoarders) who have been cutting costs, exporting aggressively, saving the profits, and then lending the money on to another set of countries (the spendthrifts) who have been spending the money, building up property bubbles and paying themselves improved wages.
On a global scale, China and Japan are the hoarders, and the United States and Britain have been the spendthrifts.

Within the Eurozone, Germany, the Netherlands and Austria have been the hoarders, and Greece, Ireland, Spain Portugal and some others have been the spendthrifts.
For the economy to rebalance, the spendthrifts have to become hoarders, and the hoarders spendthrifts. If there were no spendthrifts, the hoarders would never have been able to sell their exports. So we all depend on one another in the end.

The questions Wolfgang Munchau and others, who say the euro can only work if there is a political union, need to answer are

1.) Who should be in the political union? All the existing eurozone states, or only some of them?

2.) If the Eurozone becomes a political union, what do we do with the existing European Union , which contains a number of countries who will refuse to join a political union or the euro eg. Britain?

3.) What should be the content of the political union? A common tax would obviously be part of it, but what taxes would be European and what taxes would remain national?

4.) How would a political union turn spendthrifts into hoarders and vice versa? What powers would it use to achieve this, and with whose authority?

5.) How much tax would have to go to the centre and how could it be spent to mitigate the problems now being experienced without creating a permanent dependency of some states on others?
The experience of federations like Canada and the United States does not suggest that an enlarged Federal Budget automatically leads to convergence between poorer and richer regions. Mississippi and Newfoundland are still as poor, relative to the rest of the US and Canada respectively, as they ever were.

6.) How would one make a political union democratic? Would the President of the political union be directly elected or would the eurozone parliament elect the Government?
A political union that lacked real democratic legitimacy would not work. But as we saw with the Lisbon Treaty, getting agreement on that will not be easy.

7.) Given that these questions will not be answered quickly, what do we do in the meantime to save the spendthrifts from their folly in borrowing all this money, and the hoarders from their folly in lending it?

I fear that talk of a political union is really a bit of a distraction. We need a set of practical proposals, that will be accepted as fair by both hoarders and spendthrifts. Maybe these proposals need some form of democratic legitimation by a single eurozone wide referendum. A risky strategy perhaps, but we are living in times when the risks of doing nothing are getting higher all the time.

Sunday, 8 May 2011


Professor Morgan Kelly of UCD has published an article in the Irish Times of 7 May which, like his previous interventions, has sparked a lively debate about Irish economic policy. He has a lot of credibility because he foresaw the bursting of the Irish housing bubble before the bust happened.

Now, he is advocating a two pronged strategy

1)    That Ireland  walk away from the  EU/IMF deal (a notion that is, of course, attracting a lot of favourable media  comment)

2)   That , in order to be able  to pay its way in the absence of funds from the EU/IMF , Ireland should immediately  eliminate its  budget deficit ( a  drastic notion that, equally predictably,  is being ignored in the  same media comment). While I favour speeding up the adjustment, doing it all in one year would be impossibly disruptive.

He claims that a strategy along these lines is needed because otherwise he thinks our debts are unsustainable. He bases this on pessimistic growth assumptions, which may or may not transpire. And he argues that a slow  messy bankruptcy would destroy an Irish  economy that depends so much on international trust. Better, he argues, to do the whole job immediately.
There are a number of elements missing in Professor Kelly’s analysis.

He does not consider the impact of what he is doing on other countries, and how they might react.

If Ireland were to walk away from the EU/IMF deal, that will leave the European Central Bank itself with a huge shortfall. In fact the ECB would be broke. It would have to go to the member states to look for more capital. Emulating Irelands example,  they would probably refuse,  and then the euro itself would collapse.

Ireland would then have to launch a new currency of its  own in the same  year that it  was having to  cut wages by 40% and increase tax revenues to meet Professor Kelly’s other requirement of balancing  its budget in one year.

Ireland would also presumably, because it would be reneging on freely contracted debts to an EU institution and to other EU members, find itself excluded from the benefits of EU membership. For Ireland, the Common Agricultural Policy would disappear overnight, as might our access to EU markets for other products.

Professor Kelly, who is an economic historian, should look up what happened when we last walked away from international financial obligations. We refused to pay land annuities over to the UK in the 1930s, and found some of our critical exports excluded from the UK market, with devastating effects in what came to be remembered as the “Economic War”.

That is not to say that the EU should not be challenged. The EU/IMF programme may indeed be too optimistic. There is a lack of joined up thinking on economic policy in the EU.  The EU institutions may be too nervous about burden sharing by private bondholders. There is a selfish nationalism  about  some of the stands being taken by our EU  partners.   But then there is a selfish nationalism about some of our own attitudes too. We all have domestic political constituencies and media to appease

Ireland may not be as influential as would like to be in the EU. But at least we are still in the EU, and we have some influence still.  We can use that influence to move the EU towards a more credible long term strategy  that allows  countries like Ireland time to  restore their  finances, and allows surplus countries like Germany time to   rebalance their economies  towards consumption.

But trying to that overnight, by holding a gun to everyone else’s head as well as to our own as the Professor urges, seems to me to be needlessly reckless. Professor Kelly argues that we need to do something like this to keep our international credibility. I am afraid the course he advocates would  destroy our international credibility instantly.

Al banking, all money, is based on mutual confidence.

Why else do we accept a scrap of paper, with no inherent value itself, as worth 100 euros or 500 euros or whatever other number is written on it?

Why else to we hand over our saving to banks on the promise that the money will be there when we need it?

It is all about trust. Without trust, the entire modern economy, built up over three centuries, would disappear.....overnight.

Breaking trust with our European and international neighbours would undermine the future of our own economy, and the economy of those to whom we sell,  and  that is why I  do not think Professor  Kelly’s article  offers  good advice at all.