Friday, April 11, 2008

It's a Boffo! It's Biffo!*

Thursday's Irish Times (pages 1, 7, 8 , 16 and the lead of the letters column on page 17) did more than full homage to the enstoolment of Brian Cowan as the leader of Fianna Fáil.

Malcolm sensed in it something odd, even unpleasant: a deep-felt wish to be past the Ahern years and into something cleaner, more decent, more honourable. Less of the "cute, wee hoor" and more of (as Mark Hennessy's Analysis column started):

a new public face: softly-spoken, gentle, statesmanlike, but quietly tough.

That piece continues with another fair evaluation:

Though he has been left a united party by Ahern, Cowan faces major troubles on the economy, unemployment, the Lisbon Treaty and, crucially, the sclerotic public services.

In passing, Malcolm wryly wonders whether a Dublin-based journalist would recognise a "disunited" Fianna Fáil. It is, after all, and consciously so more of a successor to its revolutionary origins than a political party on the British or American patterns. There is a strong, even bone-headed loyalty to the Leader of the Army of Destiny, through thick and thin.

As usual, Martyn Turner (Malcolm's favourite political cartoonist) said it all neatly and succinctly (see above).

Cowan's fate is not entirely in his and his Party's hands. The glory years of celtic tigerdom may have passed for good.

As a context, “Charlemagne”, the regular comment column on Europe, in today’s issue of the Economist should be essential reading. It runs (with its apposite graphic) under the heading:

Danger ahead for the mighty euro

Typical points (all cut-and-pasted plagiarisms):

  • the outlook for the euro area seems to be deteriorating a lot faster than the optimists had expected.
  • inflation has picked up to 3.5%—the highest in the euro’s nine-year existence. Troubles in the region’s two biggest export markets—recession in America and slowdown in Britain—are starting to bite.
  • A weaker dollar is driving an American export boom; a stronger euro is likely to have the opposite effect in Europe. Mr Almunia ["the engaging European economics commissioner"] says the euro is “overvalued” and adds that, although the impact has been moderate so far, “we are at the limits, if not beyond them.” It is a delusion to suppose that euro-area exports can continue to barrel on regardless of their cost.
  • Europe may have avoided the American subprime mess, but in several countries house prices have been even bubblier than in America. They are already falling in Spain and Ireland, and, beyond the euro zone, are starting to do so in Britain. A property bust may not produce an American-style mortgage meltdown, but it will surely topple economies heavily dependent on construction (which accounts for 15% or more of Spanish and Irish GDP, for example).

Hidden in that article are two further comments that are particularly relevant to Ireland:

  • some countries have adapted a lot better to the discipline of the euro than others. Germany and the Netherlands have cut labour costs and introduced enough reforms to make their economies more competitive. France, Spain and especially Italy have done less—and are suffering more, from both the euro's rise and the global slowdown.
  • To qualify for the euro in the late 1990s, countries such as Italy and Spain had to make swingeing fiscal and structural adjustments. Yet by shielding weaker countries from a currency crisis, the euro now relieves much of the pressure on them to keep up reforms. In fact, these are more essential than ever now that countries have lost the option of devaluing their currencies to regain competitiveness and offset relatively slow productivity growth.

"Charlemagne" has a conclusion to this well-argued and finely-written piece:

the euro is about to show the world that it is not yet an optimal currency area — and the demonstration may not be a pretty one.

To which, in the context of Ireland, must be added:

  • Yesterday’s Irish Times front page news about unemployment: now 200,000, up 12,000 in the last month alone (that's the cost of a booming economy based on construction for the residential market).
  • Nor should we lightly pass over today’s front page side-bar item about Unions getting restless about 5% inflation.

Yes: Euro-area inflation at 3.5%, but in the RoI at 5%. Growth down to 1.8% and that's with all fingers crossed. No control over interest ECB rates: only two clubs left in the golf-bag: taxation and public expenditure (those "sclerotic public services").

Welcome to the dog-house, Mr Cowan: it’ll be you they blame.

*Pity if the "Biffo" tag sticks. It is, as is well-known, an acronym for "big ignorant fucker from Offaly".

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1 comment:

Anonymous said...

Reading the Spanish press, I expect that the economic forecast for Spain is worse than for Ireland. No longer can this place spend like drunken sailors and then devalue out of debt. Spain already has the the worst per capita current account and trade balance in the OECD and getting worse. With the collapse of the property bubble and soaring inflation, the prognosis for the next 3-4 years is very grim.

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