How about paying the Anglo bondholders with a €1.4 billion house?

Wicklow artist Frank Buckley has constructed a house made from shredded banknotes originally worth €1.4 billion.  Each two inch by six inch brick contains around €50,000.

 

Given that a very large chunk of the banks over-lending went to developers to build property, it seems only fitting that someone has literally constructed a house out of defunct money.  Though the next logic step seems to be to set fire to it and hope that the troika will dose it with water then lend us some replacement bricks.  Or perhaps we can persuade Mr Buckley to donate it to the nation so that we can pay back the Anglo bondholders?  Most art sells for way more than the worth of the original materials used to create it, so by that logic the Anglo bondholders would be getting much more returned to them than their original €1.4 billion investment.  And they get a house  into the bargain.  Sounds like a viable plan to me.

Rob Kitchin

 

Review of The Eighty Five Billion Euro Man by Donal Conaty (Y Books, 2011)

Ireland is bankrupt and the IMF team headed by Ajai Chopra has flown to the country to negotiate the terms of the bailout. Amongst their number is an Irish-American who is a more than a little bemused by his ancestors approach to finance and public service. He is given the task of shadowing the head of the Department of Finance, Dermot Mulhearn, during the negotiations and is then left in place to monitor progress when the rest of the IMF team leave town. Mulhearn’s priority seems to be to maintain a certain kind of lifestyle for the civil service and to protect his various perks and assets such as investments in apartments, hotels and a room full of voting machines, rather than to broker the best deal he can for the country. The politicians on the other hand seem totally clueless, dancing the last waltz as the walls come crumbling down around them. Instead it is left to the Eighty Five Billion Euro Man from the IMF to go through the books and to try and get civil servants and politicians used to the high life to change their ways. Mulhearn and his cronies however have a touch of the Sir Humphries about them and they’re not about to simply lie down and roll over.

Based on the @IMFDublinDiary Twitter feed and stories in The Mire, The Eighty Five Billion Euro Man is a satire/farce, starting with the IMF’s first visit to Dublin and ending just a few weeks after Enda Kenny took office as Taoiseach. It covers a whole range of different events and parodies both the civil service and leading politicians. The story is told mainly through dialogue heavy scenes that work well to capture some of the absurdities, ironies and tragedies of the bailout and subsequent political shenanigans. There is a lot to like about the novel. Some of the scenes are very amusing and the caricatures of some politicians are particularly well done, for example, Brian Cowen, Mary Coughlan, Brian Lenihan, Michael Noonan and Joan Burton. However, the plot is a little uneven, with the tail end of the book, in the lead up to the election and afterwards, notably weaker (partially because it starts to stray too far from the situation it seeks to satirise – especially Mulhearn running for election). The level of satire also varies a little and whilst it is very amusing at times it’s never quite as biting or cutting as it could be, and it doesn’t have the sophisticated wit and cleverness of a political satire like Yes, Minister. Given the in-jokes, I’m also not sure how easy it would be for someone unfamiliar with Ireland to follow some of the scenes. That all said, The Eighty Five Billion Euro Man is a recommended read for anyone who is interested in the crash in Ireland and the government response. It’s an amusing read and provides a counterpoint to the dry journalistic accounts that have dominated the shelves to date.

Rob Kitchin

 

Housing affordability in Ireland

Finfacts have a short article up today discussing the Demographica International Housing Affordability Survey for 2011.  The survey compares 325 urban housing markets in eight countries.  The five locations reported in Ireland are Dublin, Limerick, Galway, Cork and Waterford.  The survey uses a median multiple to determine housing affordability, basically dividing median house price with median gross (before tax) household income.   A median multiplier score less than 3 is considered affordable; between 3.1-4 is moderately unaffordable 4.1-5.0 is seriously unaffordable; 5.1 and over is severely unaffordable.  The report concludes that Ireland’s housing market is either affordable (Galway and Waterford) or moderately unaffordable (Dublin, Cork and Limerick) and that house prices have almost fallen to normal affordability nationwide (see table below).  On their data and this measure as Finfacts note: ‘For the first time, Ireland has no seriously unaffordable and no severely unaffordable markets.’

Ireland housing affordability

It is clear that Irish house prices have fallen dramatically over the past four years, decreasing by 46% nationally and 54% in Dublin according to the CSO.  There is no doubt then that houses are becoming more affordable in comparison to median household income (which has not fallen to the same degree).  Nevertheless in the case of Irish data, it would be really useful to be able to see the exact source of the median house price data used given the absence of detailed property price register and various estimates of present house prices (DECLG, CSO and Daft.ie are listed at the end of the report).  DECLG reports that average new houses for Q4 2010 (the last reported data) as €238,551 and for secondhand houses as €349,393; for Q4 2011 Daft.ie has average asking prices as 159K for the inner city, 211K for north city, 217K for south city; €215K for north Dublin county; €177K for west Dublin county; and €322K for south Dublin county – all but two areas are above the median Demographica house price of €178,000 for Dublin as a whole.  These sources though seem to be using averages rather than medians.  The household income seems to tally with SILC data for 2010, though that provides a national snapshot and is not disaggregated to cities.

The extent to which Dublin, Cork, Galway, Limerick and Waterford are now considered affordable, or indeed some of the most affordable cities outside of the US in the 8 countries surveyed, might seem fanciful to many.  There’s no doubt that housing has, however, become a lot more affordable in recent years given the extensive drop in prices, and Demographica’s data reflects this.  The data suggest though that there is still a little way for prices to fall before all areas become classed as ‘affordable’, but that an idealised bottom may not be too far off (assuming median incomes hold up and that Demographica’s data is a true reflection of median house prices).  The extent to which the wider public agrees with such sentiment and how access to credit, weak demand and oversupply plays out will probably determine where prices level off.

Rob Kitchin

 

International Economic Geography Conference, 30 January

As part of its fortieth anniversary celebrations, the Department of Geography at NUI Maynooth is organising a one-day economic geography conference on Networks and Flows in Economic Space. National and international academics will present papers on export flows, spin-off networks, innovation networks, finance networks, multinational global production networks and regional development. The keynote speaker is Henry Wai-Chung Yeung, Professor of Economic Geography at the National University of Singapore.

Free Registration at: geography.department@nuim.ie
Conference details and list of speakers here.
For further information, contact: chris.vanegeraat@nuim.ie

 

All-Island Accessibility Mapping Tool

A new accessibility mapping tool has been developed by the All-Island Research Observatory (AIRO) and the International Centre for Local and Regional Development (ICLRD) as part of the Cross-Border Spatial Planning Development and Training Network (CroSPlaN), an EU INTERREG IVA-funded programme administered by the Special EU Programmes Body.  Operated in association with the Centre for Cross Border Studies as part of the Ireland-Northern Ireland Cross-Border Co-operation Observatory (INICCO), CroSPlaN is a three-year programme of research, training and workshops in Northern Ireland and the Southern border counties.

The data generated by the AIRO mapping tool will provide a unique insight into the cross-border distribution of facilities and services. A key aim of the new mapping tool is to make evidence of the distribution of services more accessible, and to support evidence-based decisions in terms of planning and development. For policy makers, local authorities, businesses and communities seeking to make urban and rural environments desirable places to live and work, access to such tools are critical to planning, funding, implementing and monitoring new schemes and initiatives.

The All-Island Accessibility Mapping Tool provides an analysis of access to settlements and key service infrastructure such as transport, education and health facilities across Ireland. Accessibility scores to a range of services have been developed for every residential address point on the island (approx 2.7m) based on average drive-time speeds (average speed on NAVTEC road network plus 10% urban area congestion charge). For the purposes of the mapping tool the accessibility scores have been averaged at the most detailed spatial statistical unit available – Small Areas for the Republic of Ireland (approx 18k) and Output Areas for Northern Ireland (approx 5k), see Figure 1 and 2.

Figure 1: Average access score in Small Areas

 

 

 

 

 

 

Figure 2: Access to International Airports

 

 

 

 

 

 

 

 

 

 

 

The online accessibility mapping tool, developed using ArcGIS Viewer for Flex from ESRI, allows users to select from a variety of maps and query the accessibility score at the small areas level. Accessibility scores have been developed for the following services to date:

• Gateways, Gateways and Hubs
• Settlements > 50,000, Settlements > 20,000, Settlements> 10,000, Settlements > 5,000 and Settlements > 1,500
• Education: Primary and Secondary Schools
• Health: Full 24hr Emergency Hospitals, Full 24hr and Partial Emergency Hospitals, GPs, Pharmacies and Dentists
• Train Stations, International and All International and Regional Airports
• Emergency Services: Fire Stations, Garda/PSNI Stations 

Note: Origin datasets have been generated from a variety of sources such as NISRA/NINIS, HSE, Dept of Education, DubLinked/NTA etc

Brief overview of results

In general, average travel times to services in Northern Ireland are lower than the Republic of Ireland. Travel times to the nearest education services such as Primary and Secondary schools are roughly comparable whereas there is a noticeable difference in travel times to the nearest health services. Local health services and facilities such as GPs, Dentists and Pharmacies are marginally more accessible in Northern Ireland. However, access to more strategic health services such as emergency hospitals are quite different with average access to a 24 hour Full Emergency Hospital at 16 minutes in Northern Ireland and 21 minutes in the Republic of Ireland. There are of course regional differences across the island with services being most accessible in cities and urban areas where average access is less than 10 minutes; Local Authorities such as Cork City, Belfast, Dublin City, Galway City, Waterford City, Dún-Laoighre Rathdown, Castlereagh, South Dublin and Coleraine fall within this category. On the other end of the scale, the average access is in excess of 35 minutes; with Local Authorities such as Monaghan, Omagh, Tipperary North, Leitrim, Clare and Roscommon amongst the worst.

Access the All-Island Accessibility Mapping Tool

To get access to this free and interactive mapping tool and explore the different results please click the following link: http://airomaps.nuim.ie/airoaccessmap

To aid an analysis of the accessibility results at local authority level we have also developed an interactive data visualisation tool, the results of this can be viewed on the AIRO site at the following link: Click here

Justin Gleeson

 

Banning the boom

I’ve been meaning to share/comment on this letter to the Irish Times for a few days.  Basically it makes a case to stop calling the Celtic Tiger years ‘the boom’ and instead refer to it as a bubble.

“A chara, – May I ask your paper to stop referring to the years of unsustainable high house prices as the “boom”?  In the past few days alone this word has appeared several times in your paper.  “The habit acquired in the boom years . . .”, Conor Pope (Magazine, December 31st). “Lots of people took Spanish or French during the boom” (CC, Magazine, December 31st). “Boom-era debts take toll on big-name builders”, Barry O’Halloran (Business, December 30th). “The Elliott group . . . was one of the prolific players during the property boom”, Simon Carswell (Business, December 30th). “In 2007, Ireland’s long property boom ended”, Dan O’Brien (Business Review, 2011, December 30th).

The word “boom” infers there was economic soundness which lead to success.  In reality, a mass pyramid scheme has burdened thousands of people with unmanageable debts and meant that we have lost economic sovereignty because no-one else will lend us money on the international markets.

Perhaps as a New Year’s resolution your excellent writers could desist from using the word “boom” and henceforth refer to this infamous period by just using the more accurate word “bubble”? – Is mise,

ALEX STAVELEY”

Language is important because it creates perception and frames how something is discussed and understood. Referring to the Celtic Tiger years as a boom does, as Alex Staveley argues, suggest that this was a sustainable, well managed period of economic growth that would slow to a lower level of growth at some point; not that it was growth fuelled by massive debt that led to a huge reversal of fortunes and a deep recession and bailout.  To be fair, prior to 2001, Ireland was experiencing rapid economic growth based on exports.  After that, GDP growth was driven by borrowing money on the international money markets, property development and speculation.  It’s most definitely a bubble from this point on as history has demonstrated with its popping.  Boom suggests it is a period we aspire to return to; bubble reveals it for what it really was.

Rob Kitchin

 

The Self-Preservation Society or …

A news item on RTE reveals that the Construction Industry Federation has managed to wangle a meeting with the IMF/EU/ECB Troika today.  “Arriving for the meeting CIF Director General Tom Parlon said they would be setting out the contribution the construction industry could make to the economic recovery.”  A case of the Self-Preservation Society (as in the song from the Italian Job, interesting also about a bank raid) for developers and those who own construction businesses (and we’re talking the bosses here, CIF want a radical reduction in wages and terms and conditions for construction workers to increase competitiveness) or a real and vital contribution to helping Ireland recover?

Sometimes it’s difficult not to automatically rail against the CIF given that its members were a vital part of the country going bust, but in this case there is something here worthy of attention.  Whilst we do not need any housing or offices or retail parks or hotels any time soon, investment in new public infrastructures such as green energy, next generation telecomms, public transport, hospitals, schools, etc. through capital expenditure would have the benefits of creating work whilst investing in developments that would attract inward investment and stimulate growth.  The difficulty is that generating the finance for capital expenditure would necessitate further cuts elsewhere in government spend given that wider austerity measures mean that the markets are adverse to extending the state credit for such stimulus measures.

I think therefore it’s unlikely that the Troika will see anything differently after meeting the CIF.  They will agree that in principle capital spending would be good, but it must be created by further austerity elsewhere; in other words it is up to Ireland to work out how to do this within its existing arrangements, rather than through a re-jigging of the Troika terms.  That is likely to be politically inpalatable to the government.  We’ll see.

Rob Kitchin

 

IDA Ireland End of Year Statement and Irish Regions

Good news from the IDA front this January. Their End of Year Statement 2011 suggests we may have turned the corner in terms of net job gains in the IDA supported sector. Over 13,000 new jobs were created (up 20 per cent on 2010) and only 7,000 existing jobs were lost (down 27 per cent on 2010). As a result, employment in IDA supported companies expanded by over 6,000, the first (and substantial) yearly net job gain since 2007. This augurs well for the target of 62,000 new jobs in the period 2010-2014 as expressed in the IDA’s Horizon 2020 strategy. With over 22,000 new jobs in the pocket, about 13,000 new jobs for the final three years might just do the trick. Unfortunately, even these robust results are not going to make a serious dent into Ireland’s unemployment figures. An average net gain of 6,000 for the remaining 2012-2014 period of the strategy pales into insignificance in the light of the 435,000 people on the live register in December 2011.

Less positive, from the perspective of some of Ireland’s regions, is the regional distribution of the new investments. Newspaper reports for 2011 already suggested that a large part of the new IDA supported investments is concentrated in Dublin, Cork and Galway. This is now confirmed, with 72 per cent of investments located in the Greater Dublin Area and Cork alone (up from 63% in 2010). For a more detailed picture of all the regions we need to wait for the annual report. This does not compare well with the Horizon 2020 target of 50% of investments located outside Dublin and Cork. Foreign direct investment displays a growing preference for the largest urban centres of Ireland. This raises serious questions in relation to the effectiveness and practicality of the current National Spatial Strategy and the notion of balanced regional development.

Table 1:  Investment statistics IDA supported companies

	2009	2010	2011
Total No. of jobs created	4615	9075	13068
Total No. of Jobs lost	18028	9545	6950
Net increase in jobs	-13413	-470	6118
Total No. of investments secured	125	126	148
% of investments locating outside Dublin & Cork	n.d.	37	28

 

Source: IDA End of Year Statement 2011; selected IDA Annual Reports.

 

Chris van Egeraat

 

Conference on Irish Economic Policy, January 27th

As announced on the Irish Economy blog.  Conference registration is free and anyone can attend.

Details of the fourth in the series of conferences on the Irish economy are below. Further details of talks will be posted here in advance.

Conference on Irish Economic Policy

Dublin

January 27^th

Clarion Hotel IFSC

On January 27th 2012, the Geary Institute will run an event on the future of Irish economy policy in Dublin. An era of unprecedented growth followed by a dramatic economic collapse is giving way to several years of sluggish growth. The main theme of the conference will be the development of more intelligent economic policy that enables substantial development even in the context of a tightened fiscal and monetary environment. The conference will take place over the course of the full day, with parallel sessions addressing employment, innovation, education and related themes. The conference aims to provide a forum for new ideas on the conduct of Irish economic policy, including the extent to which academic economics and related disciplines can make a bigger contribution to the conduct of economic policy in Ireland, and the extent to which policy can be designed more effectively.  The conference organisers are Liam Delaney, Colm Harmon and Stephen Kinsella. Please email to register attendance: emma.barron@ucd.ie There is no registration charge.

9.00 – 9.15	Registration and Opening
9.15-10.45	Unemployment		Housing
	Chair: Minister Joan Burton David Bell (Stirling) P O’Connell/S McGuiness (ESRI) Aedin Doris (Maynooth)		Chair: Stephen Kinsella (UL) Ronan Lyons (Oxford) Michelle Norris (UCD) Rob Kitchin (NUIM)
10.45-11.15	Coffee
11.15-12.45	Economics and Evaluation		Demography
	Chair: Donal De Butleir Robert Watt (D. PER) Colm Harmon (UCD) Third Speaker TBC		Chair: Kevin Denny (UCD) Orla Doyle (UCD) Alan Barrett (ESRI) Brendan Walsh (UCD)
12.45-2.00	Lunch
2.00-3.30	Fiscal Policy		Competition and Sectoral Policy
	Chair: Dan O’Brien Philip Lane (TCD) John McHale (NUIG) Seamus Coffey(UCC)		Chair: Cathal Guiomard Richard Tol, (Sussex) John Fingleton (Office of Fair Trading) Doug Andrew (former London airport regulator)
3.30 – 4pm	Coffee
4pm-5.30pm	Banking and Euro
	Chair: Constantin Gurdgiev (TCD) Brian Lucey (TCD) Colm McCarthy (UCD) Frank Barry (TCD)

Rob Kitchin

 

Review of Anglo Republic by Simon Carswell

In 2006 Ireland was riding on the back of the Celtic Tiger phenomena. The country was booming. The sky was full of cranes, unemployment was the lowest in Europe, everyone seemed to be driving a new car, and shopping trips to New York seemed normal. Fast forward to the end of 2011 and the country is in a very different place. One of the biggest banking busts globally led to the country being bailed out by the troika of IMF-ECB-EU and the effective loss of economic sovereignty. Unlike most of the rest of the global financial crisis that started to unfold in 2007, Ireland’s economic crisis was not tied to the packaging and reselling of complex financial derivatives linked to sub-prime loans in the US. Rather it was a good, old fashioned property bubble grossly inflated by access to global inter-bank lending, very poor financial regulation, tax incentives, laissez faire planning, and greed. Ireland’s banks, hungry for profit and growth, started to believe the rhetoric of developers hungry for capital to buy land and build property, and lent out massive sums of money. Risk assessment, due diligence and basic market analysis were pushed to one side. The result was huge profits, high stock price, massive lending way in-excess of deposit books, and enormous over-exposure to property. As the global financial crisis started to bite, the Irish banks and their lending came under scrutiny. Large institutional shareholders, investors and depositors started to get nervous. Share price dropped, money flowed out of the country, and investors wanted repaying. A run on the Irish banks seemed likely. The Irish government stepped in with a bank guarantee scheme, offering a national guarantee to all deposits and investments (to the tune of €440 billion). Next followed a calamitous set of decision-making that ultimately led to recapitalisation and nationalisation of the banks, the formation of NAMA, effectively a state bad bank, and the country being bankrupted. Bankrupted being the right word, since by tying the state to the Irish banks through the guarantee, the country was wedded to their dwindling fortunes.

Anglo Republic tells this tale through a forensic examination of Anglo Irish Bank. Anglo was the financial darling of the Celtic Tiger years. It grew from a small investment bank to become the third largest bank in the state. Each year it posted record profits and its share price grew accordingly. And more than any other bank its growth was tied to the property sector. Analysts were flabbergasted at its performance. Rather than questioning its business practices, they instead invested. Here was a bank that had seemingly found a magic formula. As Simon Carswell’s book reveals, however, it’s success was built on poor foundations and dodgy practices. Anglo was dependent on persistent high growth in the Irish economy to keep its house of cards upright. As soon as the economy started to slow, it started to fail. And it started using all kinds of tricks to keep the cards in place, including shifting money on and off the books when accounts were being audited and lending money to borrowers to buy shares to keep the share price up. If things were bad in the bank, things weren’t much different outside with the financial regulator, Central Bank and Department of Finance all working to keep a dying entity alive. Anglo was viewed by the Irish government as a systemic risk to the state and could not simply wound down. Its balance sheet was equivalent to 60% of Irish GDP (Lehman Brothers was 7% of US GDP), and represented a fifth of the banking sector. Globally, no bank that represented such a large proportion of a country’s banking balance sheet had failed before. All told, an entire year’s worth of tax receipts were pumped into Anglo and promptly written down, never to be seen again. When Carswell chose the subtitle, ‘Inside the Bank that Broke Ireland’, he was being literal.

Anglo Republic is a fascinating read for anyone interested in the present Irish crisis and how it unfolded from a wider banking perspective and within a single financial institution. Carswell has amassed amount of information on the company and how it operated, included access into board meetings, email between key players and dozens of interviews. He does a very good job at putting a shape to all this information, producing a compelling narrative that details what went on in and outside the bank. Crucially he manages to weave the main characters, their motivations and actions, into the story to lift the book up out of a rather dry history. Sean FitzPatrick, David Drumm, Sean Quinn, Pat Neary and Brian Lenihan all figure prominently. What is particularly interested is the ways in which FitzPatrick, Drumm and Quinn schemed to try and save themselves and their personal fortunes whilst trying to keep a sinking ship afloat. Where the book is a little thin is with respect to wider analysis and judgement. Carswell describes in great detail Anglo’s rise and fall, but does little to explain it; he shies away from commenting on the legalities and moralities of actions taken; and he fails to state how he thinks the system needs to changed to stop such a situation arising again. Overall, a book heavy on factual narrative that provides a very useful descriptive analysis of a banking and state failure. It’s also a book that should perhaps come with a health warning: ‘likely to make your blood boil’.

Rob Kitchin