A dish best served cold
Mar. 14th, 2011 02:02 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
peterbirksMerkel and Sarkozy got their long-awaited revenge on Ireland on Friday. Well, by "long-awaited", I actually mean "only since last November". For it was then that Ireland had to finance a rescue package for its effectively insolvent banking sector.
At the time the then PM Brian Cowen had the French and German leaders somewhat over a barrel. Sarkozy and Merkel wanted Ireland to raise its 12.5% Corporation Tax rate, a rate that the pair (rightly) believed had tempted some companies to move their tax domicile to Ireland and their headquarters to Dublin.
Cowen stood firm. "No surrender", he said (or perhaps, "ourselves alone!") and the bailout came through, mainly because Merkel and Sarkozy didn't really want to see what would happen if a bailout did not go through.
But an irritation remained. Cowen had accepted what I thought at the time were rather tough terms. The 5.8% rate on €85bn was, in simple terms, about €1,200 interest a year for every man, woman and child in the Republic. Protesters claimed (also rightly) that this was unsustainable. It needed to be renegotiated.
Enter Enda Kenny, a product of the regional politics that dominates Ireland and in this case part of the County Mayo mafia. Mayo is perhaps the county that has benefited most from the Celtic Tiger. An area that not 30 years ago was not far from a money-less economy had turned into one where you couldn't move for BMWs and the houses were going for near Surrey prices.
Kenny promised to renegotiate the terms of the interest on the bailout, and on Friday headed out to Brussels for a long meeting.
Seven hours later he came out, having suffered what must have been the most humiliating meeting of his life. Not only had Germany and France refused to relax the terms of Ireland's loan. That in itself would have been bad enough. But they had simultaneously agreed to relax the terms for Greece. They cut the rate to be paid from about 5% to about 4%, and extended the terms of the loan to 7 and a half years from three years..
Sarkozy, not one to miss a "don't fuck with me, pal" moment, then went on to say: "Greece has made major efforts, just look at the size of their privatization program. But you can’t ask others to contribute for you, when you won’t make an effort on your tax receipts.”
Kenny's major reaction was to head into what looks to me to be a serious state of denial. He claimed that new stress testing of Ireland's banks would show that Ireland shouldn't be paying such a high rate, and that a full summit on March 24-25 would agree with this. He seems to have completely missed the fact that Ireland could have the safest banks in the world and the highest capital reserves -- it wouldn't make any difference to Merkel and Sarkozy agreeing to soften the terms. They would rather say "if you are such a good bet, try borrowing the money from somewhere else and see how far it gets you".
++++++++++
There was a heart-rending tragedy in Japan had one moment on TV over the weekend that pushed up my admiration for the Japanese people by a factor of 10 or more. A husband and a father searches for his missing wife. The pain and worry that he is going through (for a wife, if truth be told, who was almost certainly dead) is etched into his face. The rescue centre he walks through is quiet. He knocks on a door and speaks to an old woman. She says, no, she isn't here, have you tried downstairs. The man says, quietly and politely, yes, he has. He thanks the woman and he steps back. He bows formally. He goes home, to wait. It said more about the Japanese character than any words could, and was unbearably moving. No screams of emotion, no masses of crowds fighting each other for rice as it's distributed from aid lorries (trying to get a bit more than they really need so they can sell the extra on at a profit). In other words, nothing like most other parts of Asia and most of Africa. This was an area that had been devastated to a degree almost beyond our understanding. And still they remained calm, focused, determined. It was impressive.
____________
At the time the then PM Brian Cowen had the French and German leaders somewhat over a barrel. Sarkozy and Merkel wanted Ireland to raise its 12.5% Corporation Tax rate, a rate that the pair (rightly) believed had tempted some companies to move their tax domicile to Ireland and their headquarters to Dublin.
Cowen stood firm. "No surrender", he said (or perhaps, "ourselves alone!") and the bailout came through, mainly because Merkel and Sarkozy didn't really want to see what would happen if a bailout did not go through.
But an irritation remained. Cowen had accepted what I thought at the time were rather tough terms. The 5.8% rate on €85bn was, in simple terms, about €1,200 interest a year for every man, woman and child in the Republic. Protesters claimed (also rightly) that this was unsustainable. It needed to be renegotiated.
Enter Enda Kenny, a product of the regional politics that dominates Ireland and in this case part of the County Mayo mafia. Mayo is perhaps the county that has benefited most from the Celtic Tiger. An area that not 30 years ago was not far from a money-less economy had turned into one where you couldn't move for BMWs and the houses were going for near Surrey prices.
Kenny promised to renegotiate the terms of the interest on the bailout, and on Friday headed out to Brussels for a long meeting.
Seven hours later he came out, having suffered what must have been the most humiliating meeting of his life. Not only had Germany and France refused to relax the terms of Ireland's loan. That in itself would have been bad enough. But they had simultaneously agreed to relax the terms for Greece. They cut the rate to be paid from about 5% to about 4%, and extended the terms of the loan to 7 and a half years from three years..
Sarkozy, not one to miss a "don't fuck with me, pal" moment, then went on to say: "Greece has made major efforts, just look at the size of their privatization program. But you can’t ask others to contribute for you, when you won’t make an effort on your tax receipts.”
Kenny's major reaction was to head into what looks to me to be a serious state of denial. He claimed that new stress testing of Ireland's banks would show that Ireland shouldn't be paying such a high rate, and that a full summit on March 24-25 would agree with this. He seems to have completely missed the fact that Ireland could have the safest banks in the world and the highest capital reserves -- it wouldn't make any difference to Merkel and Sarkozy agreeing to soften the terms. They would rather say "if you are such a good bet, try borrowing the money from somewhere else and see how far it gets you".
++++++++++
There was a heart-rending tragedy in Japan had one moment on TV over the weekend that pushed up my admiration for the Japanese people by a factor of 10 or more. A husband and a father searches for his missing wife. The pain and worry that he is going through (for a wife, if truth be told, who was almost certainly dead) is etched into his face. The rescue centre he walks through is quiet. He knocks on a door and speaks to an old woman. She says, no, she isn't here, have you tried downstairs. The man says, quietly and politely, yes, he has. He thanks the woman and he steps back. He bows formally. He goes home, to wait. It said more about the Japanese character than any words could, and was unbearably moving. No screams of emotion, no masses of crowds fighting each other for rice as it's distributed from aid lorries (trying to get a bit more than they really need so they can sell the extra on at a profit). In other words, nothing like most other parts of Asia and most of Africa. This was an area that had been devastated to a degree almost beyond our understanding. And still they remained calm, focused, determined. It was impressive.
____________
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Mayo Mafia !!
Date: 2011-03-15 11:24 am (UTC)Mayo did not have as much power in government in the past 13 years as many other counties e.g. Michael Lowry, the Independent TD from Tipperary who extracted huge benefits for his constituency. Unfortunately there were many many areas where the house prices were exorbitant and the BMWs everywhere, not just Mayo.
Can I ask you where you actually pulled this inaccurate info from ?
Secondly, I fear you are right regarding Merkel and Sarkozy and their stance regarding the bailout and corporation tax. However, do you recall that Ireland rejected the Lisbon treaty which was our right, but then they came back with Lisbon 2 which amongst other things stipulated that the corporation rate tax would not be touched. And now a short time later......
I'm not going to argue that our low rate has not helped us but my point is that I thought agreements were binding.
Your assertion that Ireland is not making "an effort on our tax receipts” whereas Greece is making huge efforts is shocking. Have you looked at our most recent budget ? The take home pay of both myself and my wife has been seriously hit. Our new tax rates are crucifying. I'd love to see the Greeks' reaction to those kind of tax cuts.
The overall thrust of your article is correct i.e. Merkel and Sarkozy have us by the balls, but you should flesh out the article with more accurate details.
Keep writing - always enjoyable.
Regards
Kevin
Re: Mayo Mafia !!
Date: 2011-03-15 01:49 pm (UTC)When I say that Mayo benefited most from the Celtic Tiger, what I mean is that it started from the lowest base. I think that you would agree that it was probably the most backward part of Ireland (economically)right the way through the 1960s and 1970s. In absolute terms the major beneficiary was almost certainly Dublin. But this raises the question of the valuation of "extra" money. Who benefits most, someone with a pound who you give a hundred grand, or someone with a hundred grand who you give nine hundred grand?
As you say, .
My statement was that it had turned into an area "where you couldn't move for BMWs and houses were going for near Surrey prices".
So you seem to be saying that what I wrote was true, but that it was happening in other places as well. Well, yes, I concede that. I just felt that Mayo benefited the most because it started from the lowest GDP base. I certainly wouldn't deny that there are other Irish politicians who have made sure that there own regions have "done ok". Mayo isn't an exception, and neither is Kenny.
As for my sources. That's easy. One is John, who was working at a house in Co Roscommon in 2002 when I visited there. He originaly came from Mayo. He described the situation in the land when he was a youngster. It ran roughly along the lines of "we never went hungry, but no-one ever had any money".
My second source is based on my own long drive through Mayo in 2007, at the height of the madness. I was stunned at the price of property and also at the vast numbers of, yes, BMWs. That was why I made that comment. (If you want to check the archives, it would be late January 2007).
So, I really don't see how what I wrote can be defined as "nonsense" when you seem to agree that it was true! Your only point of difference seems to be that I singled out Mayo as "different" from the rest of Ireland. I only mentioned Mayo (indeed, I thought of mentioning Cowan's old stamping ground instead, but chose Mayo because I had actually been there in the past few years).
++++++++
It was not me who asserted that Ireland was not making an effort. As you would know from my previous writings on the sunject, I think Ireland has been shafted by its own political system and cronyism that goes back to Charles Haughey in my memory and probably beyond. The Irish people are having to pay the price for their politicians' stupidity, which is ridiculous. Read my paragraph again:
I make no comment on the truth of this at all, but that's because, as you observe, my main thrust here is about Merkel or Sarkozy and what happens when the little fish try to mess with France and Germany. If I was writing about Ireland and the reality of its people's efforts, I would have pointed out that I don't agree with this statement, but, and here's the important thing, I think, I have already written on this in the past and expressed my admiration for the way the Irish people have come to terms with the situation. I can't make every piece a homily to the brave stoicism of the Irish people in facing up to the fact that the party is over.
Indeed, the whole piece above isn't really about Ireland; it's about not fucking with the EU leadership, because they will get you back, somehow. Hell, if you've been in the euro this long and you still think that any treaty is worth more than the paper it is written on... Binding? Come on. This is the land of realpolitik, not honour. The big boys win and the small boys lose. Them's the rules and if Ireland (or the UK, for that matter) thought otherwise when it went into the EU (plus, in Ireland's case, the eurozone), then they were plain wrong.
Re: Mayo Mafia !!
Date: 2011-03-15 01:49 pm (UTC)These pieces aren't meant to be read on a par with Gapper in the FT. I dash them off in little more than half an hour, because that's all the time that I have. If I was writing to my own professional standard, I'd be selling the material!
But, if it keeps you entertained, I'm happy!
PJ
Re: Mayo Mafia !!
Date: 2011-03-15 04:59 pm (UTC)Also, we KNEW when Lisbon 2 was drafted that they were just fucking with us and that we were going to get screwed one way or the other. We knew the big boys didn't give a sh!t about us but we tried to believe ! I knew when I used the word 'binding' that you would shake your head at my naivety.
Anyway, you're right, I don't disagree with the general thrust of your article.
Cultural Differences
Date: 2011-03-16 07:53 pm (UTC)On a further point though, you might argue that in Japan, even with the awfulness of the tsunami wreckage the survivors could be pretty sure they wouldnt actually starve and that even if things are in short supply then it wont be too long before further goods arrive, so that is a further reason not to panic. In other poorer or remote parts of the world you might well be thinking this is my only or last chance and if I dont get something I (or the family) might well have had it. Also to pick up on your point, it might be not so much that they wish to profit from getting extra, but their real fear is to avoid being at the mercy of someone else trying to profit.
What would we do ? Lord of the Flies and all that...All-in-all I'm sure what we see from Africa, Pakistan and Haiti is sanitised by the TV world. And as a final thought why do they need to send so many news "anchors" to these spots ? Enjoy your evening. Richard.
Re: Cultural Differences
Date: 2011-03-17 12:39 pm (UTC)But, as you say, there might be an attitude amongst the recipients of the aid or the queuers that "things will be all right, eventually", while in Haiti when the aid truck arrives it's more a case of "I'm going to make sure I get what I can before a corrupt official nicks it".
But that's where the prisoners' dilemma comes in. If the Japanese can get round it, surely someone in, say, Haiti, or Bangladesh, shoould be able to build such a situation of mutual trust? In the prisoner's dilemma, it's nobody's "fault", and yet when there is trust, you do better than when there is no trust.
What would I do? It is, of course, a proper question and one which I have thought about. I consider myself an oddly moral person. I obey laws because I think they are right, not because I fear the penalty if I get caught. Scrambling over the backs of others to get at food in a time of crisis when I was hungry? I can't imagine myself doing it, but perhaps I would. I just hope I wouldn't.
As for the news anchors. Yes, it's stupid. I've yet to see a justification for it from the BBC beyond vague homilies about "people on the ground". But that's from an era gone by. It has no logical justification today.
PJ
Revenge of James
Date: 2011-03-20 05:17 pm (UTC)County Meath is the one to go for. It has the sort of insane wealth that one typically only associates with tiny little alpine enclaves that might be Italian, might be Swiss, but nobody gives a fuck. Really. Almost the entire county is an unalloyed joy -- the sort of pleasure-trip out of Dublin that Londoners can only dream of (OK, us Brummies also) -- and Trim is just superb. But you look at all those identikit €500,000 bungalows, and you ask yourself, "Fianna Fail or dodgy accountant? Either way, they ain't freakin' old enough for this shit. And three Mercedes?"
I'll grant you Mayo as a good example, however. Your knowledge of the Japanese is shockingly poor, isn't it?
As usual, I am stunned by your perspicacity on the Merkel/Sarkozy thing. Well, not stunned, really, and it's not exactly perspicacity. It's quite astonishing that nobody else has noticed this particular little game of political spite though, isn't it?
What's even more interesting is that Angie and Nikki appear to be on totally different sides vis-a-vis Libya ... with Denmark in the middle. Never trust these shady, quiet, Scandinavian types. It will lead to a world of hurt, I tell you.
It's all jolly good (and pointlessly self-harming) fun. Lobster Quadrille, anybody?
Damn.
Date: 2011-03-20 05:22 pm (UTC)no subject
Date: 2011-03-20 05:38 pm (UTC)Maybe all long-standing political parties die this way?
The Strange Death Of We Alone.
When you are living on tick, beware the tock. Hemingway said that. Or was it Noddy?
no subject
Date: 2011-03-21 08:58 pm (UTC)PJ
And All I Really Wanted To Say Was...
Date: 2011-03-20 05:45 pm (UTC)One interesting little snippet, from where I forget, is that the 12.5% Corporate Tax in Ireland is actually feeble when you compare it to the French equivalent. I haven't looked it up (that's your job), and the headline rate is obviously higher, but when you factor in all the state subsidies ... well ...
Not that M Bruni would take this sort of irrelevant shit into consideration when there's a stiletto at hand and a juicy exposed back in front of him.
Re: And All I Really Wanted To Say Was...
Date: 2011-03-21 09:01 pm (UTC)Switzerland's Corporation Tax system is slightly worse, but some companies (my own employers included ) decided to go there rather than Ireland because they felt that, in the long run, Switzerland was probably a safer bet.
Re: And All I Really Wanted To Say Was...
Date: 2011-03-21 09:03 pm (UTC)Actually working out any real French rate of tax is beyond me. Ask Geoff.
PJ
Argh.
Date: 2011-03-20 05:48 pm (UTC)It never ceases to amaze me that people can come up with this bollocks, and not even blink while they're doing it.
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