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Posts tagged ‘ESRI’

The Cost of Working in Ireland

The Working Paper entitled  The Cost of Working In Ireland PDF

was removed from the ESRI website yesterday because senior ESRI researchers, who are experts in this area, concluded that the analysis it contains is seriously flawed.

This was the sole reason for withdrawing the Working Paper. Any suggestion that the paper was withdrawn because of pressure, of any sort, from government, or any other source, is entirely unfounded.

Professor Richard Tol, now at the University of Sussex, is the senior author of the Working Paper.

We are aware that Professor Tol is now in possession of a revised draft of the paper which indicates that the percentage of people with children who would be better off on social welfare than working is not 44 percent but less than 10 percent.

Professor Tol did not follow ESRI procedures when submitting the Working Paper, which is how it came to be posted on the website.

In the light of this episode, procedures for the release of working papers on the ESRI website will be revised to ensure that a similar situation does not arise in the future.

Ends

ESRI Press Office, 353 1 8632000; press@esri.ie. 
The Economic and Social Research Institute, Whitaker Square, Sir John Rogerson’s Quay, Dublin 2.
Telephone: +353 1 8632000; Fax +353 1 8632100; email: admin@esri.ie; web site: www.esri.ie;

Comment:

I saw this but did you see the clams from Brendan Howlin that the Crock Park was delivering savings but Finfacts was of a different opinion! the news is ” manipulated” to give the right impression  why do you think O Reilly has such a large slice of the Irish news media ?He is doing his real masters bidding and putting the “right spin” on the so called news ! The over staffed and vastly overpaid  Irish civil service(when compaired to the German service) is the elephant in the room! The less welloff who cannot defend themselves and dont have the corrupt Unions to back them, will be forced to pay the extra taxes needed to pay for the borrowings needed to prop up Spain and the cuts needed to adhear to the conditions of the so called stability pact.What a disaster!

We have gutless gombeen puppets running the country who are in the pay of the faceless moneymen.Common sence is nowhere to be found and its so depressing the Irish public doent even want to stand up for themselves.Even when they can see the blatent doubbel standards in the treatment of the euro member countries.We have become third class citizens within europe!

Gone are the notions of equal independent naions trading withen a common trading area withen Europe! “Deutscheland uber alles” seems to be the onely game in town!

ESRI has been getting its forecasts wrong for years

This article is the latest instalment from David mc Williams
I would be inclined to agree with him on what he says about the ESRI and their
latest announcements on the economic outlook .Frankly I couldn’t be bothered to even give them the time of the day. With a history like theirs I wonder why they get such attention from the Media !

By David McWilliams

In Irish economic circles, you tend to take much more stick from having been right than having been wrong. Those economists who got it wrong in the boom and believed the hype about the soft landing, such as the ESRI, still manage to grab front-page headlines. In contrast, those who called it right are put under constant scrutiny and are still being dismissed by the establishment as cranks, celebrities or, at best, lucky opportunists.

The “insiders” rally round each other even when they are wrong and the “outsiders” are denigrated. In the economics world, for what it’s worth, the outsiders’ crime — the crime of being right — is particularly dangerous precisely because it exposes the limitations of the insiders. This type of insider/outsider prototype is commonplace in Ireland.

Yesterday, we saw more of this type of behaviour where the establishment insiders carry on with their forecasts despite their appalling records:

Full article at source: http://www.davidmcwilliams.ie/2011/09/07/esri-has-been-getting-its-forecasts-wrong-for-years?utm_source=WebsiteSubscribers&utm_campaign=3431032834-Weekly_Roundup_10_August_2011&utm_medium=email

Irish mortgage market is flat-lining

By Namawinelake

This morning the Irish Banking Federation (IBF), which represents more than 95% of mortgage lending in the State, released mortgage lending date for quarter one of 2011 – the data is here and the press release is here. The figures paint a picture of a property market that is seizing up. Superlatives come in abundance : €577m was advanced during the quarter which is 96.91% down from the peak in Q3, 2006; the average investment mortgage is now €144,000 which is 56% down from peak and indeed 24% down from the previous quarter which is indicative of fire sales or tightening in lending criteria; just 15 mortgages a day were advanced to First Time Buyers (FTBs) during the quarter. The numbers are pretty bad. Of course the stress test and bank restructuring announcements were made at the end of March 2011 so any positive effects of these announcements will not be captured in the figures released today.
As for the outlook, there is a commitment by the incoming government to ensure there is €10bn of new lending per annum in the economy over the next three years and NAMA has flown a kite that it may part-fund purchases of property from its portfolio. The economy remains decidedly weak though the ESRI broke ranks last week and suggested GDP might grow by 2% in 2011. The Allsop/Space auction on 15th April, 2011 laid bare the extent of the decline in Irish property prices with achieved results suggesting we were (unscientifically) 60% off peak actual prices. Generally falling wages, stagnant population due to emigration and the market-distorting effects of NAMA, restraint on repossessions and bank foreclosure sales are all making for a dysfunctional market at present and it is hard to see any significant recovery in lending figures in quarter two.
The IBF numbers are significant though in their implication on the rental market. If potential buyers are sitting on their funds or are unable to get loans, then renting is really the only alternative which might strengthen demand and stabilise prices. Recent data from DAFT.ie and the CSO suggests that rent levels are stabilising.
And here are the numbers. First up, loan volumes (that is, number of new mortgages advanced) – RIL means Residential Investment Loan.

Next up, the value of new lending

And lastly the average of each loan advanced. You CAN’T equate this with average house price because we don’t know the proportion of the purchase price accounted for by the mortgage (was 100% and more during the peak, is typically 70-92% now).

Commenting on the data this morning, IBF Chief Executive, Pat Farrell, stated: “The economic situation remains challenging and prudence remains the order of the day.  For customers that means manageable borrowing and for financial institutions it means prudent lending.”

Source:http://wp.me/pNlCf-1pz

Comment:

There is no reason for anybody to take out loans and commit themselves to years of misery especially when we don’t know what new taxes the government are going to invent .baring in mind we expect to have a new property tax and new water charges imposed on all of the hapless homeowners in the country .Perhaps they will introduce a new window tax and what about a shower tax ,maybe even a new tea tax !

Morgan Kelly: Right or Wrong???

Morgan Kelly‘s article in the Irish Times on Saturday last, was responsible for stirring up a hornets’ nest in Irish politics and in the zest pit that is the Irish financial world. Here is a summary of the main points he made of which I wholeheartedly agree with. Coming from an ordinary private citizen’s perspective I cannot understand how we the downtrodden taxpayers can still tolerate morons in Government and their stooges running the various financial institutions that have so miserable failed us and our nation state. Some of the people now uttering their pearls of wisdom to us were in fact cheerleaders of the disastrous policies and still enjoy lottery salaries whilst the rest of us struggle to put bread on the table .Until there pampered leaches start to feel the pain the ordinary citizens feel will they understand that the time for waffling is over and we must tackle the high prices for the basic needs like high ESB prices ,Petrol prices , and the various taxes that they now seem to be advocating to pay back debts we the people have nothing to do with ! We must default on this debt to do otherwise is just prolonging the inevitable, you don’t need to have a PHD to suss this one out ! 

– The bank guarantee of September 2008 was a mistake, but a much bigger one was failing to reverse it when it became clear that the bank losses were insupportable.

Patrick Honohan gave “an extraordinary interview” to Bloomberg on 28 May last year, giving assurances that “the two big banks, fixed by the end of the year. I think it’s quite good news the banks are floating away from dependence on the State and will be free standing”. Riiiiight…

– Honohan’s miscalculation of the bank losses is the costliest mistake ever made by an Irish person.

– With Ireland’s reserve fund enough to keep us funded until this summer, Brian Lenihan was in a strong negotiating position when he initially refused to countenance an EU/IMF bail-out last November – but that position was blown out of the water by Honohan’s admission on Morning Ireland on 18 November that Ireland would need a bailout of “tens of billions”.

– The IMF proposed reductions of €20bn on unguaranteed bonds totalling €30bn and Lenihan apparently told the IMF team: “You are Ireland’s salvation.”

– However, the pesky Yanks vetoed such reductions – US treasury secretary Timothy Geithner, the man who sanctioned €13bn of payments from State-owned AIG to Goldman Sachs, “believes that bankers take priority over taxpayers”.

– The EU/ECB were also insistent on all debts being repaid in full. The IMF wanted major haircuts. The Irish negotiating team sided with the EU/ECB – prompting one IMF staffer to describe the Irish as “displaying strong elements of Stockholm Syndrome”.

– The bailout was on a par with the Bank of England insisting that Northern Rock be rescued by Newcastle City Council.

– “The sole purpose of the Irish bailout was to frighten the Spanish into line with a vivid demonstration that EU rescues are not for the faint-hearted … The ECB is keeping its fingers crossed that Spain pulls through by itself, encouraged by the example made of the Irish.”

– “Irish insolvency is now less a matter of economics than of arithmetic … The predictions for Ireland’s debt by 2014 range from €220bn to €250bn, but either way we are talking of a Government debt that is more than €120,000 per worker.” (To which we add: So, like, around 27 years of total income tax from someone earning the annual industrial average…)

– Ireland’s two main banks were “run by faintly dim former rugby players” – so nobody thought they could run up enough debts to bring down a continent.

– The European Central Bank sees its main task as placating the editors of German tabloids.

– Ireland, and Europe’s other small crisis countries, will eventually be forced into some sort of bankruptcy – which would be a disaster for us. Creditors could sell debt to so-called ‘vulture funds’, which could have “national assets such as aircraft impounded in the hope that they can make a sufficient nuisance of themselves to be bought off”.
 

Compiled by LAURA SLATTERY and SUZANNE LYNCH

A compelling case for default and swift balancing of the national budget or a lethal injection for our economy and citizens? Twelve economists discuss 

SEÁN BARRETT 

Senior lecturer in economics Trinity College Dublin 

IRELAND’S CHANGE from a full employment economy and solvency to 14 per cent unemployment and a bailout invites a contrarian response so well led by Morgan Kelly. Widespread institutional failure caused the twin crises in banking and the public finances. These then spread their contagion over the entire economy.

Regulatory capture and institutional malaise have dominated our responses to date. We need the provocative advice of Morgan Kelly to walk away from the bank crisis and tackle the public finances quickly rather than over several years.

With so many of the institutions and personnel who caused the twin crises largely exempt from its consequences, and likely to remain exempt, we need Kelly to remind them and us how much they have harmed this country.

Under “measures to prevent a recurrence” Kelly merits the tag of “required reading”.

ALAN McQUAID 

Chief economist Bloxham Stockbrokers 

THE UNDERLYING theme of the Morgan Kelly article, apart from criticising individuals, is not saying anything new. What Joe Durkan and the ESRI are talking about is similar, in a way, to Kelly – they’re both talking about speeding up the budget correction. Enda Kenny has dismissed the idea and I’d be with Kenny on this. The economy is too fragile.

The [Kelly/Durkan] argument is that it’s the ECB’s problem: a lot of the money was lent to us by European banks that should have known better. I wouldn’t disagree with that. I think the ECB has to do a lot more before this crisis is over.

These are unprecedented times and my gut feeling is that I don’t think anybody did anything deliberately to mess the State up, I think it was all in good faith. It does look like it was the wrong thing to do. Patrick Honohan is obviously in a difficult position given he is on the ECB. I’m not sure anyone could have done any better.

RAY KINSELLA 

Economist UCD Michael Smurfit Graduate School of Business 

IRELAND SHOULD withdraw from the euro zone and inform the next finance council of its decision. This will require pegging either to the UK’s sterling, our largest trading partner, or to the “Deutsche” euro. Either way it will involve devaluation.

The transmission of the effects across the economy will involve negative, as well as positive, consequences. What can be said with near certainty is that it is the least worst option.

Domestic economic indicators and financial market data point to a terminal lack of credibility in the terms, scope and time-frame set out in the bailout. There is simply no way back from prevailing Irish bond yields and associated CBF spreads.

The recent euro zone policies have flown in the face of the markets’ dispassionate analysis of the adjustment policies imposed on the Irish economy. The EU’s €750 billion “shock and awe” initiative cobbled together in May 2010 singularly failed to firewall the periphery from contagion.

Recent proposals for a stabilisation mechanism by 2013(!) defy belief.

PAUL SWEENEY 

Chief economist Irish Congress of Trade Unions 

MORGAN KELLY’S article hit a real chord. He said it as it is. But his solutions would lead to chaos and impoverishment. He is correct about the immense stupidity of the bank guarantee and of the government continuing to repay these socialised private debts.

His most dangerous solution is to “bring the budget into balance immediately”.

This would mean that the deflationary path currently being pursued by government – where one quarter of domestic demand was wiped out in just three years – would look positively benign. It would eviscerate the economy and wipe out too many businesses and citizens. Besides, few governments run balanced budgets.

This idea smacks of that most dangerous tendency in academic economics – to deliver prescriptions with little thought as to their impact on people. Fine in theory, appalling in practice. Interestingly, in its latest report, it is a weakness to which the ESRI has also succumbed as it does a volte face on previous recommendations and demands huge and immediate cuts.

Kelly is right on “disengaging from the banks” but it has to be done with EU agreement. Call it a “managed default”.

TOM O’CONNOR 

Lecturer in economics and public policy Cork Institute of Technology 

I BELIEVE Morgan Kelly is correct in his assertion that Patrick Honohan was badly mistaken in going public on November 18th last, stating the Ireland would need a bailout. He is also totally correct that the bailout cannot be repaid and will have to be abandoned. Bondholder haircuts were rejected by the ECB also and the Irish negotiating team essentially rolled over for the ECB team subsequently.

The selfish motivations of the US and ECB, who were not concerned at all with the economic interest of Ireland, should alert policymakers immediately that the deal was never well intentioned and should never have been agreed.

Kelly’s solutions are not the ones I would favour, however. His assertion that we eliminate an €18 billion Government deficit immediately is neither possible nor socially acceptable.

I do think that his way of dealing with the banks and the ECB is somewhat ingenious: the Government leaves the bailout and leaves the banks by default to be supported by the ECB, who ultimately will have to swap their debt for share capital. The ECB picks up the €160 billion tab. However, this could create huge uncertainty and frighten international investors.

BRIAN LUCEY 

Associate professor in finance Trinity College Dublin 

PATRICK HONOHAN couldn’t change the guarantee – that’s a political decision. I’d be amazed if he didn’t argue strenuously for some change. In his previous existence, he had argued that we should be cautious with guarantees. Clearly, he lost the argument.

I don’t think Honohan could have said anything much more than what he said – he is constrained by his position. It’s important to remember that he is not the representative for Ireland on the ECB, he’s the representative from Ireland.

I do think the Government could do well to accelerate balancing the budget. But I would lean more towards the ESRI than Kelly .

I think it’s absolutely clear we have got to make our move very quickly. I don’t know why we are waiting. I’d be astonished if the governments of Greece, Portugal and Ireland weren’t working together in their common interest.

It’s very easy for politicians to be dismissive of articles by academics, but they should prove or dismiss those analyses on their own logic. What we really need to do is dig into the views of the Department of Finance.

FERGAL O’BRIEN 

Chief economist Ibec 

WE WOULD agree with some of what Morgan Kelly says and disagree with some of it. Overall there is considerable merit in doing a relatively fast fiscal balance. The quicker we do it, the stronger position we will be in in terms of our debt management options.

But it is not an exact science and, obviously, it cannot be done in a year.

Doing it in a single year would be far too brutal; there would be far too much damage to the economy and it would be far too much of a social challenge.

I think there’s no question but for Ireland to remain an attractive location for investment, we must work within the loan arrangements that are in place. If we isolate ourselves, we will be undermined. Europe hasn’t yet fully acknowledged the interconnectedness of sovereign and banking debt.

As it does so over the next few years, it will work in our favour.

There is a big difference between being a player with full information and being an observer and having partial information. There are certain people who have much more information than the rest of us.

STEPHEN KINSELLA 

Lecturer in economics University of Limerick 

MORGAN KELLY is a true social scientist. He takes data, looks at the economic and political realities in the economy, and makes a judgement which he communicates clearly. He has been spot on in his analysis to date, and while I was initially sceptical of his views, I’m now converted to the notion that Ireland has nothing but drastic options left to it.

I’ve tried to cost Kelly’s latest plan myself, and it isn’t pretty. Kelly’s views should be engaged with by policymakers, not because they are always right, but because they represent a challenge to the status quo that we need in a policy space filled with sycophants.

MOORE McDOWELL 

Senior lecturer University College Dublin 

MORGAN KELLY is definitely not a master of understatement and let’s just say his colourful way of expressing himself doesn’t do him any favours. Nonetheless I agree with about 80 per cent of what he says. He rightly says the decision to introduce the guarantee in 2008 was the wrong decision. But it’s very unfair to accuse Patrick Honohan of making the “costliest mistake ever made by an Irish person”. Messrs Cowen and Lenihan did that.

What Kelly is saying is that, while we have failed to burn the bondholders – the horse has bolted, as it were – we should now burn the ECB. The key problem in Kelly’s argument is the conclusion he reaches. Putting the entire budget deficit right this year would involve a 30 per cent cut in Government spending, which equates to 10-12 per cent of GDP. The effect that would have on aggregate demand and employment would be colossal.

Kelly’s figure of €250 billion in national debt is very much in the top-range estimates. Even the most pessimistic commentators say €230 billion. However, the question of whether the national debt is sustainable is the key issue.

TONY FOLEY 

Senior lecturer in economics Dublin City University 

I DO not agree that we are heading for economic ruin, although one could argue that large decline in GNP, 15 per cent unemployment and the likelihood that it will be 2017 or so before 2007 levels of economic activity will be resumed is already economic ruin.

I agree the Central Bank got its assessment of the scale of the bank bailout wrong and we only seemed to face reality when the EU-IMF required the involvement of the independent Blackrock assessment. Maybe if we had known much earlier the final scale, we would have had a stronger basis for an alternative approach.

In 2013, we will still be unacceptable to financial markets and there will have to be “Bailout Two” or a continuation of paying interest without repaying capital, with whatever additional money is needed to pay market bonds that are due. You could call this a default but it would be an agreed restructuring with the EU and IMF.

I do not agree we can walk away from the banks and presume the ECB will continue to operate them for our benefit as the new owners. It would be nice if the ECB did so.

JOHN McHALE 

Professor of economics NUI Galway – Speaking on RTÉ’s Morning Ireland , May 9th: 

CERTAINLY, EARLY in the crisis Morgan Kelly was very much ahead of everybody else in seeing it coming and I think his early analysis was incredibly valuable.

But I think in his recent articles, and particularly this one, he is really going off in the wrong direction.

I think he has been quite unfair to Patrick Honohan. Honohan wasn’t the one that gave the original blanket guarantee, but he inherited it.

Morgan puts a lot of emphasis on protecting Ireland’s reputation and says we shouldn’t default to protect that reputation, but reneging on the guarantee, which is what he calls on Patrick [Honohan] to have done, would have been reneging on a sovereign obligation and it would have done incredible reputational damage, and it would have really created a hornet’s nest of legal issues, so I think it’s just completely wrong to put the problems that have resulted from the guarantee on Patrick’s shoulders.

The proposals that Morgan Kelly is putting forward, which are essentially to wash our hands of the banking system and also to cut our borrowing to zero immediately, would actually have devastating effects for the economy.

It would essentially destroy the banking system, and would not only require cuts of about a third in public spending but it would put us into another very deep recession.

JOE DURKAN 

Economist Economic and Social Research Institute – Speaking on RTÉ’s Morning Ireland , May 11th: 

IF WE went bust, then banks in Europe would go bust. That means we are interdependent, and if that interdependence exists, then the right thing to do is to take an interdependent approach to it, which really means doing it at euro level.

Like everything else, you need to do it quickly, because the truth of the matter is while the debt is sustainable in a purely technical sense, it is by no means optimal.

If they don’t help us, then it impacts on others and there’s a possibility that we could just fail.

If you look at what’s happening in the other countries, it is stop-gap measures you have all the time, and I don’t think we need stop-gap measures, I think we need something new and innovative.

I don’t agree with debt figure of €250 billion. The most I can see is five to six years’ time is €195 billion, maybe €200 billion.

The second thing is, he had a point about when the debt goes over 100 per cent, you’re in trouble. In fact, that’s not strictly true.

Technically, we know that it’s possible. The real issue is whether you can get a primary budget surplus, which is your budget surplus excluding your interest payments, above a certain level. It’s a purely technical relationship, that the real interest rate minus the real growth rate times your debt-GDP ratio has to be less than your primary budget deficit.

WHAT THEY SAID: KELLY’S ARTICLE, HONOHAN’S RESPONSE 

Quotes from Morgan Kelly’s original article published in The Irish Times last Saturday: 

“With the Irish Government on track to owe a quarter of a trillion euro by 2014, a prolonged and chaotic national bankruptcy is becoming inevitable . . . While most people would trace our ruin to to the bank guarantee of September 2008, the real error was in sticking with the guarantee long after it had become clear that the bank losses were insupportable . . .

“The ideal time to have reversed the bank guarantee was a few months later when Patrick Honohan was appointed governor of the Central Bank and assumed de facto control of Irish economic policy . . . Honohan’s miscalculation of the bank losses has turned out to be the costliest mistake ever made by an Irish person . . .

“National survival requires that Ireland walk away from the bailout. This in turn requires the Government to do two things: disengage from the banks, and bring its budget into balance immediately.”

Excerpts from Central Bank governor Patrick Honohan’s response to the article on RTÉ radio last Sunday: 

“I took a lot of legal advice on this. There was no way of the Government walking away from that very formal guarantee, endorsed by the Oireachtas. The Government would have been treated as a bankrupt right away . . . The fact that we did not have precise numbers did not affect the honouring of the guarantee . . . All it would have done would have been to bring forward and accelerate the EU-IMF programme probably to May or June of last year . . .

“Everything was done by me and by colleagues on behalf of Ireland . . . It was not a final solution. I would regard it as a holding operation, something to offer a window of time in which to get what could be sorted out within our own competence in Ireland . . . It’s not the end of the story. Negotiations, discussions will continue with Europe for a long time to come as we know there are already discussions about the interest rate and so forth.”

source:http://irelandjailbreak.wordpress.com/

In the year 2009 Morgan Kelly wrote this report on the

“The Irish Credit Bubble” link here The Irish Credit Bubble

Related articles:

WITH THE Irish Government on track to owe a quarter of a trillion euro by 2014, a prolonged and chaotic national bankruptcy is becoming inevitable. By the time the dust settles, Ireland’s last remaining asset, its reputation as a safe place from which to conduct business, will have been destroyed.read full article here http://www.marketoracle.co.uk/Article28018.html

article by By Christopher M. Quigley
B.Sc., M.M.I.I. Grad., M.A.

NAMA provides progress update and claims PTSB/ESRI index is not realistic

By namawinelake

The NAMA chairman (for the time being), Frank Daly, delivered an interesting progress update today to the Licensed Vintners Association (Dublin bar owners and operators). At some eight pages in length, the speech continued quite a number of snippets including (1) NAMA has now absorbed €72.3bn of loans at nominal value in return for NAMA bonds of €30.5bn. This is up €1.1bn at nominal value from the February, 2011 update and up €0.3bn in terms of NAMA bonds which indicates that the latest AIB mini-tranche of €1.1bn of loans was acquired for €0.3bn or a 73% haircut, which is considerably more than the final estimate for AIB’s overall loans of 60%. NAMA has not provided a detailed update on tranches acquired since 23rd August, 2010. It is noteworthy that such a significant tranche of AIB loans attracted a 73% haircut. (2) NAMA is directly managing the top 175 developers representing €61bn of loans at par value which means that the banks/Capita are managing the remaining 675 debtors representing €21bn of lending at par value. (3) NAMA may acquire another €3.5bn of loans at par value, presumably representing Paddy McKillen’s €2.1bn of loans and €1.4bn of other objectors’ loans. (4) “The Agency has already concluded its review of business plans from the largest 30 debtors which account for approximately €27 billion (40% of portfolio) of acquired loans.” This seems not to have moved for three months. (5) Agreement in the form of Memoranda of Understanding has “been completed with eleven debtors” and “agreement is at a final stage with six more” and there are still negotiations with another eleven. In order for there to be an agreement NAMA has said that there will be three documents (1) Memorandum of Understanding (2) Heads of Terms and (3) Final Agreement and these documents will need be signed by (1) NAMA and (2) the developer and (3) potentially the developer’s wife. It is not clear if any agreement has seen all three documents signed by all three parties. (6) NAMA has appointed receivers in 41 cases so far. These may have been appointed by the banks under NAMA’s direction. It appears that NAMA has appointed receivers in two cases itself, presumably referring to Bernard McNamara and Liam Carroll. (7) NAMA has acquired loans which are secured by 83 hotels in Ireland – 30 in Dublin, 24 in Leinster (ex Dublin), 17 in Munster, 9 in Connaught and 3 hotels in Ulster. Three of these 83 hotels are closed and more are likely to close if they cannot demonstrate their viability (8) NAMA thinks that the residential market had already dropped by 50% in November 2009 even though PTSB/ESRI said at that time less than 35%. Given NAMA’s position in the market, this is quite startling and frankly means that the ESRI has questions to answer if NAMA is correct. The ESRI is a partly government-sponsored body though presumably the PTSB index is produced on a commercial basis. Doubts in the accuracy of the house price series have been expressed on here several times because of the seemingly small sample sizes.

source:URL: http://wp.me/pNlCf-1bC

Permanent TSB/ESRI House Price Index

 Quarter 4 2010 figures

Figures published for Quarter 4 2010
 
·         Average national house price declines by 3.5% in Quarter 4 2010
·         Average national house prices now at Quarter 2 2002 levels
·         38% decrease since peak at the end of 2006
 
Tuesday 18th January 2011 .  While the rate of decline in average house prices in Ireland rose in the final quarter of 2010 compared to the previous quarter, the rate of decline for the year as a whole [2010] was significantly less than what was seen in 2009 according to the latest edition of the permanent tsb/ESRI House Price Index.
 
According to the index, average national house prices in Ireland fell by 3.5% in the 4th Quarter of 2010 [October, November & December] according to the permanent tsb / ESRI House Price Index Quarterly Review published today.  This compares to a reduction in Quarter 3 2010 of 1.3%.
 
The reduction in average national house prices for the full year 2010 was 10.8%.  This compares to a fall of 18.5% in 2009 and a year on year decline of 14.8% to Quarter 3 2010. 
 
The average price for a house nationally in Quarter 4, 2010 was EUR 191,776, compared with EUR 215,086 in Quarter 4 2009 and EUR 311,078 at the peak.  National prices have fallen 38% since the price peak at the end of 2006.
 
Dublin V Rest of Country
Dublin house prices fell by 0.6% in the 4th Quarter of 2010. This compares to a reduction in 3rd Quarter 2010 of 1.2% and a reduction of 3.5% in 2nd Quarter 2010.
 
The reduction in 2010 for Dublin houses was 15.1%. This compares to a fall of 23.4% in 2009 and a year on year decline of 21.0% to Quarter 3 2010.  The average price for a Dublin house in Quarter 4 2010 was EUR 237,480, compared with EUR 238,986 in Quarter 3 2010.
 
House prices Outside Dublin fell by 2.9% in the Quarter 4 of 2010. This compares to a reduction in Quarter 3 2010 of 1.2% and a reduction of 0.8% in Quarter 2 2010.
 
The reduction in 2010 was 8.1%. This compares to a 15.6% decline in 2009 and a year on year decline of 11.2% to Quarter 3 2010.  The average price for a house Outside Dublin in Quarter 4 2010 was EUR 174,570, compared with EUR 179,721 in Quarter 3 2010.
 
Commenting on the figures Niall O’ Grady, General Manager with permanent tsb said “With low transaction volumes, continuing price declines and a sluggish economy, the outlook is for a very subdued property and mortgage market in 2011”.
 
Editors Notes
The permanent tsb/ESRI house price index is based on the agreed sale price and is calculated using data from mortgage drawdowns.

 

Xls Download Table
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source : http://www.esri.ie/irish_economy/permanent_tsbesri_house_p/

“no-one outside the country is taking them seriously any more”.

ESRI

Image via Wikipedia

by Adrian Kelleher

In the heady days of 2005 with the economy roaring along and homeowners basking in the glow of ever-rising house prices, one institution went against the current and sounded a note of caution. In its Medium Term Review No. 10, regarded as a landmark publication, the ESRI (Economic and Social Research Institute) warned that “there are considerable dangers in the current situation: in particular the very high level of dependence on the building industry”. Nor were the risks purely domestic. “Global economic imbalances that, if anything, are growing in magnitude” also threatened.

These statements would seem to bear out the claim by the ESRI’s Professor John FitzGerald that the subsequent crisis was “well flagged”. Upon examination, ESRI proves to have been anything but consistent in its warnings, however. Having started out with a clear perception of the dangers and articulating it plainly, by the time the next Review came out in May 2008 the ESRI had somehow reversed its position.

The 2008 Medium-Term Review (No 11), which FitzGerald co-wrote, exhibited even more hysteria than the most cynical of the vested interests that tacitly conspired to lead the country up the primrose path. Projecting GNP growth at “an average of around 3¾ a year” between 2008 and 2015, the authors claimed their “analysis suggests that, even if the current downturn were to be more severe than anticipated, the economy would eventually recover more vigorously to realise the medium-term growth rate”. The ESRI reassured the public that “the Irish economy is resilient” and “the fundamentals of the Irish economy are sound”.

Even if “a severe liquidity crisis in the US” occurred, it stated in the most pessimistic scenario examined, “the US recession would not do long-term damage to the Irish economy. In the medium term, when the global economy recovered, the rate of growth in Ireland would accelerate…” Average growth of at least 3% was predicted for the period.

The government seized on the review as proof that everything was fine. Brian Lenihan said that “in contrast to the prevailing mood of pessimism, the ESRI shares my view… The key message that we can take from the Review is that Ireland’s economy is flexible and resilient”.

Even Vincent Browne penned several columns, advocating generous public expenditure, based on this prognosis.  The vested interests of the property market were also enthusiastic. Dan McLaughlin of Bank of Ireland took the Review as evidence that 2008 represented what he called the bottom of the cycle. Marian Finnegan of Sherry FitzGerald called it “a very robust forecast by either historical or international standards”. By “taking the steps necessary to ensure that we reap rewards in the future”, she wrote in the Irish Times, home buyers could look forward to “an evolution to a mature, resolute economy with a dynamic housing market”. The number of people lured into the property market by the Review was probably substantial given the ESRI’s stature at the time.

One of the co-authors of the 2008 Review, Professor Richard Tol, has admitted the ESRI knew “that the financial regulator was asleep and that some banks were cooking the books”; he says that fear of legal repercussions caused it to keep these facts from the public. While legal action might have resulted from criticism of named banks, voicing concerns about the financial services regulator or about the sector generally would have had no such repercussions. According to Tol, the ESRI was “aware of some of the risks and constantly warned the relevant people — most of that was in private and, in public, in coded language”.

John FitzGerald also acknowledges “that very real concerns were being discussed in private” relating to the financial industry. Rather than legal concerns, he says that “it was felt to be difficult to air them in public without having undertaken the necessary background research”.

ESRI director, Professor Frances Ruane, denies the institute knew of wrongdoing, saying “there was never any formal discussion in the ESRI about the fact that the banks were cooking the books. We were concerned but I think John’s description of it is what we would have been discussing internally … In any country people would be more blunt speaking directly to officials than they would in public discourse. There’s nothing unusual about that”.

While accepting that the 2008 Review was “far too optimistic”, Ruane defends its assertion that Ireland had sound fundamentals, saying “there’s an awful lot of business in this country that’s going on very well at the moment and when you’re talking about the economic fundamentals that’s what you”re talking about”.

Given the warnings between 2005 and the summer of 2007, why did alarm fade out to be replaced by optimism? “The 2005 [Review] focused a lot on the construction bubble”, Ruane told Village, “and there’s a sense in which that was long recognised; and things don’t get repeated when they’re long recognised”.

There was more than a failure to repeat prior warnings, however. Rather, the warnings were progressively replaced by reassurances. Instead of remaining silent on house prices, the 2008 Review forecast that price growth would average 3% per annum in the 2010-2015 period. Price growth for 2005-2010 was predicted to average 3.2% at a time when prices had already fallen by more than 10% from their peak.

Likewise, in January 2008, Ruane wrote that “to the extent that the recent changes in stamp duty are seen as reducing uncertainty, they should lead to increased confidence. Economic growth rates will be lower than in previous years but not low relative to the rest of the EU, and taken with the growth in the population seeking housing should have a positive effect on demand. […] The ESRI anticipates that house prices will stabilise during 2008”.

Regarding the financial crisis, Ruane says that “what [the 2008 review] did not do is connect the long-recognised construction bubble [and] a massive financial effect that would be massively damaging to the economy”. However the effects of the disappearance of hundreds of billions of euro of property wealth would not have disappeared even had they not struck the banks (or, ultimately, the state).  Someone would still have seen their wealth vanish. The international financial crisis was likewise largely a second-order effect of the US property crash, as well as those of Spain and Ireland etc., rather than a purely distinct phenomenon.

The failure to link the bubble to its financial effects was an international one, according to Ruane, one macroeconomists are striving to correct. The consequences of this oversight were nonetheless much greater in Ireland than elsewhere because the finance industry was vastly bigger here than almost anywhere else.

The figures are stupefying. Writing in the Irish Times, Jim Stewart of TCD reported that 2008 alone saw the eye-watering sum of €1,656Bn in foreign money flow into the IFSC alone. Many of the institutions involved generated no employment whatsoever:  the median employee total of 46 firms he studied was zero!

The political consequences of what Stewart refers to as “the several ‘tax-haven’- type features of the Irish economy” could not be avoided forever.  The crippling losses suffered by German banks operating in the IFSC  – including Depfa Bank of which Ruane was a director, until her appointment to the ESRI in Dec 2006, and which forced its German parent Hypo Real Estate into a €102bn German government bailout – poisoned public opinion there against Ireland.  The ultimate consequence of the perception of Ireland as a freebooting nation, siphoning wealth from the rest of the EU was the Deauville agreement between Angela Merkel and Nicolas Sarkozy about which Ireland was not consulted – which directly triggered the nation’s final collapse.

No less disturbing than the drift into boosterism in the ESRI’s forecasts are the political activities of Richard Tol in the climate field, activities that blur uncomfortably and insidiously into his research work.

Tol has engaged in a long-term collaboration with Bjørn Lomborg, himself the subject of a detailed critique by Howard Friel titled ‘The Lomborg Deception’ and categorised by its publisher, Yale University Press, under the subject-heading of “Fraud in Science”.

Lomborg operates the Copenhagen Consensus Center (CCC) which, in spite of its title, has served solely as a vehicle for the political views of its leader. The Copenhagen Consensus projects involve Lomborg hand-picking researchers, with Tol a favourite, to engage in rigged research projects which Lomborg further distorts beyond the point of fraud to oppose any reduction in fossil fuel use.

For the 2008 project, Tol co-wrote a paper along with Gary Yohe of Wesleyan University and two researchers from the Electric Power Research Institute, a US trade association. The two climate change proposals were ranked against numerous development and human welfare issues and came in 29th and 30th out of 30.

Long-term Lomborg critic Kåre Fog took Tol, whose FUND computer-model was the basis for the simulation, to task about the study. Tol admitted that the study used a discount rate that fell gradually from 5% whereas all the competing proposals used a 3% rate. Tol excused himself by saying that re-writing the model to use the 3% discount rate was too difficult and that the other proposals should have used his rate,  even though the project specifications dictated 3% and he has at other times successfully employed FUND with other rates. This inherent bias caused the bottom ranking.

Fog’s criticisms did not end there. Tol claims his research showed a net benefit from global warming until mid-century, after which the effects turn sharply negative. For this purpose, welfare effects were calculated in local economy terms, with deaths for example being costed at a certain multiple of local per-capita GDP. Thus a single European saved from winter influenza, probable – in actuarial terms – to be elderly and infirm, outweighed not one but many Africans dying – likely in the prime of life – due to global warming.

Subsequently, Lomborg and Yohe had a spectacular falling out. In a bruising exchange in the pages of the Guardian, Yohe accused Lomborg of “misrepresenting our findings thanks to a highly selective memory”. The exchange was temporarily concluded by a joint article where Lomborg and Yohe agreed that the reason CCC climate proposals “failed the cost-benefit test … could be traced to faulty design”. Given that the designs were Lomborg’s own, this was a humiliating admission.

Tol, who refers to those concerned about what he calls the “new religion of climate change” with labels like “fanatics” and “adherents of the Church of Gaia”, was not only conspicuous by his silence during the exchange, unlike Yohe he went back to Copenhagen for more in 2009. Lomborg and Tol continue to make media appearances together and Lomborg cites Tol’s work in every article he writes.

When controversies about the Climate Research Unit and IPCC head Rajendra Pachauri’s TERI foundation arose in the media, Tol was quick to paint each in the darkest terms on the scantiest of evidence.

While empirically-based criticism is central to science, Tol has shown no zeal in his dealings with Lomborg or with Ian Plimer, another scientific fraud alongside whom Tol acts as scientific advisor for the Global Warming Policy Foundation, a secretive pressure group opposed to fossil-fuel restrictions. Plimer often simply reverses the conclusions of papers cited when it suits his purposes, a fact he didn’t deny when it was put to him three times on ABC television. Astrophysicist Michael Ashley described his book Heaven and Earth as “scientifically worthless” in The Australian.

“I think Richard expresses his own views on climate change”, Frances Ruane says of these activities, which she doesn’t regard as incompatible with his role at ESRI. “The researchers within the institute are responsible for the intellectual and academic integrity of what they say and produce”.

The ESRI’s aggressive lobbying in favour of the Poolbeg incinerator, in spite of Covanta’s contract with Dublin City Council remaining secret from democratic oversight and High Court criticism of DCC’s attempted destruction of the private waste-collection industry, nonetheless takes on a new light in the face of these facts, as does Tol’s opposition to the promotion of wind energy.  Tol’s ready facilitation of Lomborg’s systematic falsification of science cannot but draw the ESRI into disrepute. Academic freedom grants him licence but doesn’t explain the decision to recruit him in the first place.

The ESRI’s uncomfortable position between government and industry, both of which it relies upon for funding, leave its environmental studies particularly vulnerable to bias. In each narrow case examined, the costs to business will be direct and obvious but the benefits, which accrue more broadly to society, will be difficult to assess. ESRI cannot integrate the environmental with the ‘Economic and Social’ of its title while it continues to serve two masters – business and government.

Given the fact that ESRI continued to predict  there would be no recession even after it had started, particularly baffling is the finding of a recent ‘National and International’ Peer Review 2010, commissioned by ESRI itself, that “stakeholders” regard it as achieving “a gold standard” in its research.

At a time when colossal risks were being taken in the IFSC and by Irish banks, the ESRI’s concerns were for labour-market reforms and privatisation – breaking rightwards ideologically on each issue. Both the institute and its peer reviewers are prisoners of the same theories in this regard, and shared preconceptions are unlikely to lead to new insights. Privatisation of public utilities and financial-market liberalisation have theoretical advantages from a neo-liberal perspective. Not so neat theoretically but certainly real, as the financial crash, the Eircom privatisation and the Enron-driven US energy market fiasco demonstrated, are the severe practical problems each entails.

The neo-liberal consensus that dominates policy-making globally and of which the ESRI is part, has simply waved away fears that the financial collapse may signify a fundamental problem. By contrast in the wake of the Wall Street crash, between Roosevelt’s election in 1932 and Reagan’s in 1980, both right and left shared a perception that markets were potentially dangerous to economic welfare if allowed free rein. In basing its forecasts on the wildly inaccurate consensus view of the world economy ESRI drew on exactly the same narrow segment of opinion it occupies itself, just as it did when choosing the peer review that endorsed it.

It’s therefore unsurprising the peer review offers no clue as to the origins of the grossly inaccurate MTR 2008-2015, instead congratulating the institute on its “enviable reputation”. TCD economist Kevin O’Rourke struck a different note when he wrote in the Sunday Business Post that “no-one outside the country is taking them seriously any more”.

source :http://www.villagemagazine.ie/index.php/2011/01/our-deluded-esri/

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