Bank Guarantee Order Signed by Minister for Finance

On Friday, 24th October 2008 The Minister for Finance Brian Lenihan has signed an order confirming the six main Irish owned banks will be covered by the State’s deposit guarantee scheme.

Irish Banks: AIB, Anglo Irish Bank, Bank of Ireland, EBS Building Society, Irish Life & Permanentand Irish Nationwide are the banks designated by Minister for Finance for inclusion in this arrangement. Outside banks: Ulster Bank, First Active, Halifax Bank of Scotland, IIB Bank and Postbank will be included in the guarantee.

Under the terms of the arrangement, if any institution defaults, the Minister for Finance ‘will pay to the relevant creditor, on demand, an amount equal to the unpaid covered liabilities’.

The institutions concerned will pay a quarterly charge to the Exchequer in return for the guarantee. The scheme will last until September 2010.

Minister Lenihan stated that the conditions accompanying the guarantee under the Scheme ‘will ensure that balance sheet growth is measured and in accordance with prudent banking practice, that risk is properly measured and managed and the interest of taxpayers are safeguarded’.

The Minister went on to say he expects to make further orders shortly for the other banks eligible to avail of the Scheme.

A growing list of countries have been affected by the global financial crisis. These include: Iceland, Hungary, Pakistan, Ukraine, Serbia and Belarus which are all in discussions with the International Monetary Fund (IMF). Capital has also flowed out of countries such as South Africa, South Korea and Argentina which yesterday announced it was nationalising its pension funds.

Source:

http://www.rte.ie/news/2008/1024/economy.html

NRA has Cost-Overruns of €16 Billion According to Tarawatch

Tarawatch has stated that the National Roads Authority (NRA) has a €16 billion cost-overrun. It said it will lodge a complaint against the NRA with the Comptroller and Auditor General (C&AG).

“The C&AG has primary responsibility for ensuring value for money in public spending,” TaraWatch spokesman Vincent Salafia said.  “It should not allow one penny to be spent until there has been cost-benefit analysis and Strategic Environmental Assessment (SEA) on every single road plan.  “It is illegal and disgraceful for the Construction Industry Federation (CIF) to now negotiate more cost-plus, rather than fixed-price contracts, and a continuation of business as usual.  This is a reference to the

Mr Parlon used his insider knowledge to get €150m of building contracts approved which do not contain new “better value for money” provisions, documents obtained by the Irish Independent under the Freedom of Information Act reveal.

The former minister of state, who now earns €250,000 a year as director general of the Construction Industry Federation (CIF), got an agreement from Finance Minister Brian Lenihan to go ahead with 50 key projects under old-style ‘costs plus’ contracts.

This is despite the fact that the projects should have been carried out under new fixed-price contracts, which were brought in to achieve better value for money for taxpayers.

These contracts were introduced last year in a bid to curb massive overspending on key road and infrastructure projects. Under the old ‘costs plus’ model, builders could add on extra bills on top of the agreed contract if they ran into problems during construction.

According to the documents obtained from the Department of Finance, Mr Parlon sent a strongly worded letter to Mr Lenihan last May warning him of the “expense and disruption” that builders would face if the water service contracts were changed from ‘costs plus’ to ‘fixed price’ ones.

“I cannot overstress the importance of this matter to the industry,” he said. Mr Parlon denied his lobbying had resulted in builders benefiting at the expense of the taxpayer – who is now left exposed to the potential of cost overruns in the projects.

He told the Irish Independent that it had not been the fault of builders that local authorities had persisted in using old-style contracts instead of fixed-price contracts.

“Our members tendered at substantial expense and then all of a sudden a circular went out from the Department of Finance and it became apparent they would be knocked on the head. It would have taken 12 to 15 months to re-tender and it was just common sense,” he said.

Mr Parlon said that the CIF had not been threatening the Government when it warned that not using old-style contracts would lead to “public disquiet”, but had only been pointing out the inevitable reaction from local councillors “They are bread-and-butter issues for them and you would obviously have that. We chose to do this very discreetly, we contacted the minister and alerted him to what was happening,” he said.

A spokesman for Mr Lenihan said he had made his decision so the projects, some of which had been in the pipeline for years, would not be delayed. He stated that the Government was “still committed” to using fixed-price contracts.

It is to be noted that claims that cost-overruns are a feature of past contracts is a regular PR device. In 2005, the former Taoiseach, Bertie Ahern stated in the Dail that cost control in some road construction projects in the past had not been ‘up to the mark’. Mr Ahern went on to state that changes in the contract procedures operated by the National Roads Authority now meant that projects were coming in on time and under cost. He said that these problems related to a time before structures had been put in place to cope with a rapidly expanding road building programme.

TaraWatch wants the C&AG to freeze all public spending on NRA projects under the National Development Plan, until a cost-benefit analysis has been carried out.

The C&AG has expressed concerns before about the spending controls on roads projects.  In 2002 the NRA was summoned before the Public Accounts Committee to explain a massive €6.6 billion overrun. By 2004, the overrun had gone up to €10 billion.  In 2005, PAC chairman Michael Noonan said the interim report would support Prime Time’s claims (‘The Money Pit‘ Monday, 9 May 2005), that 30 road projects originally cost at €6 billion would end up costing the taxpayer €18 billion.

TaraWatch said an engineer’s report it commissioned, and submitted to the Department of Finance on Friday, shows how the M3 motorway will cost the taxpayer an additional €1.8 billion, and will be responsible for €320 million in emissions penalties.

Sources:

http://www.tarawatch.org/?p=766

http://www.independent.ie/national-news/parlon-wins-uturn-with-euro150m-deal–for-builders-1490719.html

http://www.irishexaminer.com/irishexaminer/pages/story.aspx-qqqg=ireland-qqqm=ireland-qqqa=ireland-qqqid=74657-qqqx=1.asp

http://www.irishtrucker.com/news/2005/may/1105056.asp

http://www.irishtrucker.com/news/2004/july/1607042.asp

http://archives.tcm.ie/irishexaminer/2004/07/16/story293193129.asp

http://www.rte.ie/news/2005/0510/infrastructure.html

http://www.rte.ie/news/2005/0509/primetime.html

Government to Extend Deposit / Debt Guarantee to Foreign Banks

The Government’s guarantee scheme is to be extended to four foreign-owned banking groups with “significant” operations in the State, the Minister for Finance Brian Lenihan said today.

In a statement the Minister said Ulster Bank and First Active; Bank of Scotland and its retail banking arm Halifax; IIB Bank and Postbank are eligible for the scheme.

Lenihan stated that the legislative details of how the scheme will operate were in the “advanced stages of drafting” and would come before the Dáil “as quickly as possible”. “Clearly, there will be some additional limitations and safeguards in relation to these operations to ensure that the support provided relates to liabilities arising from their position within the national economy, rather than to their wider group”.

 Mr Lenihan further stated that the Government would continue to “protect the security and stability of its financial system and is convinced of the determination of our partners to do the same.”

 

Source:

David Labanyi,

Irish Times, 9th October 2008

http://www.irishtimes.com/newspaper/breaking/2008/1009/breaking37.htm

Tarawatch state that NRA spin on M3 is Designed to Influence Budgetary Spending on Roads’

 

Read the rest of the article at:

PRESS RELEASE -TARAWATCH.org -12 September 2008

‘M3 Misinformation Designed to Improperly Influence Budgetary Spending on Roads’

http://www.tarawatch.org/?p=749 

Sources:

http://www.tarawatch.org/?p=749

http://www.herald.ie/national-news/motorway-a-year-ahead-of-schedule-despite-tara-row-1474369.html

http://www.irishtimes.com/newspaper/ireland/2008/0912/1221138436542.html

Ex-TD Joe Higgins on the Government’s Bank Guarantee “Scheme”

“After years of nurturing the property bubble, which allowed the speculators, property developers, and the banks to make mega-profits that saddled hundreds of thousands of working people with huge mortgages, the Fianna Fail/ Green Party government now rewards the institutions responsible for the property crash, with guarantees of up to €500 billion of taxpayers’ funds. 

No such guarantees were given to the 70,000 workers who have lost their jobs, in recent times. Why did the government not step in, to save the 250 jobs at Cappoquin Chickens, or the 320 jobs at Tyco?”

 

Read the Rest of the Article at:

http://www.socialistworld.net/eng/2008/10/02irelaa.html

ISEQ Index down 10% Yesterday as Markets Fall across the Globe

 

Markets in America, here in Ireland, and across Europe have plummeted yesterday. In Dublin the ISEQ has dropped by almost 10%, with shares in all of the major Irish banks seeing significant drops today.

The UK’s leading shares have slumped almost 8% in the FTSE’s biggest ever one-day points-fall.

The value of New York’s Dow Jones Index has plummeted by 800 points, with a slight recovery by the end of the day. The Dow ended down just short of 370 points.

The index fell to 9,525.32, the index hit its lowest level during a session since Oct. 24, 2003, when it touched 9,497.72. Other indexes also cut losses in the final hour.

The Standard & Poor’s 500 SPX index, after falling to its lowest point since Sept. 12, 2003, ended with a loss of 3.6%. The Nasdaq composite COMP ended down 4% after falling to its lowest point since Aug. 28, 2003 during the session. Treasurys rallied, lowering the corresponding yields as investors sought safety in government debt. Gold rallied for the same reason. Oil has fallen in price. The dollar jumped versus the euro and fell against the yen.

Investors are realizing that the $700 billion U.S. bank bailout was not a cure-all, said Dan Genter, president and CEO at RNC Genter Capital Management. The package involves the Treasury buying bad debt directly from banks in order to get them to start lending to each other again.

A measure of investor fear surged, with the CBOE Volatility index, the VIX, at a 19-year high. Underlining the broad scope of the market malaise, Germany negotiated a $69 billion deal Sunday for commercial lender Hypo Real Estate AG. Europe’s second-largest economy also guaranteed all private bank accounts.

French BNP Paribas said it would buy 75% of troubled Fortis’ Belgium bank after a government bailout failed to reassure investors.

European Union banks are in the process of devising a broader rescue strategy, although they have indicated that it would be on a smaller scale than what was seen in the United States.

Global markets have tumbled, with Asian and European stocks posting big losses. Russia’s main market was shut down twice before closing with a loss of 20%.

Sources:

http://www.independent.ie/breaking-news/national-news/iseq-index-down-10-today-as-world-markets-plummet-1491566.html 

http://money.cnn.com/2008/10/06/markets/markets_newyork/

Take-over of Cappoquin Chickens Highlights Grave Problems for Irish Agriculture

Cappoquin Chickens has been sold to British-based company Derby Poultry Processors.

The workers are going to be offered new terms and conditions, which are inferior to their current arrangements.

In a statement Cappoquin Chickens stated:

‘This sale will safeguard the future of the facility..‘The new structure will require a period of re-organisation, which will result in continued employment for the majority of the existing employees.. ‘Cappoquin Poultry Limited will now engage in a period of gradual growth to re-establish market share.’

The company said it intends to source a new hatchery following the sale of its hatchery in recent weeks. The west Waterford poultry processor announced two weeks ago that it was to close at the end of this month with the loss of 200 jobs after it was put into liquidation. 

In June 2008, the High Court placed Cappoquin Chickens, into interim examinership. The court was told that the statement of affairs of Michael D O’Connor, Sons & Company, trading as Cappoquin Chickens, shows a deficit of €806,000 on a going concern basis and a winding up basis deficit totalling €7 million.

In its petition to the High Court, Cappoquin Chickens cited several factors behind its recent problems, including the 2006 bird flu outbreak, the increase in foodstuff costs and low cost imports from Asia and South America.

 

 

Sources:

http://www.rte.ie/news/2008/1003/cappoquin.html

Severe Cost-Cutting Measures for Aer Lingus

The Board of Aer Lingus has formally agreed to proceed with the company’s cost-cutting plans. The decision was made at a meeting of the board on Friday.

 Aer Lingus stated that the Board was committed to delivering the cost savings as a matter of urgency because of the the extremely challenging revenue environment. The Board will outline its cost-cutting plan to Aer Lingus unions early next week. The company has been considering several methods to achieve “savings” since it announced a revew of its operations.

One of the proposals under consideration is the outsourcing of 1,300 ground-handling staff, this could involve contracting a US-based cabin crew company to operate its transatlantic flights. The unions are opposed to this prospect.

SIPTU said the statement by Aer Lingus was not unexpected. The union is due to meet company representatives on Monday, after which it will have a further meeting with shop stewards.

In August the company posted an operating loss of €22.3m for the first six months of 2008, compared with an operating profit of €2.6m in 2007. 

Sources:

http://www.rte.ie/news/2008/1003/aerlingus.html

http://www.sbpost.ie/breakingnews/business/mhqlsnsneyid/

Government has Nationalised Major Bank’s Debts

 

The Government has announced that the state will safeguard all deposits, bonds and debts in six banks and building societies for 2 years following a share sell-off on Monday.

The legislation to guarantee deposits and debts in Irish banks was debated for over 24 hours in the Dáil and Seanad, and will come into immediate effect.
The €400 billion package covers Allied Irish, Bank of Ireland, Anglo Irish Bank, Irish Life and Permanent, Irish Nationwide Building Society, and the Educational Building Society. British depositors with accounts in their UK branches will be covered, as will savers at the UK’s Post Office whose deposits are run by Bank of Ireland.

The Department of Finance said it was still considering whether the scheme could be extended to subsidiaries of Irish banks in the UK; it was awaiting a ruling by Ireland’s financial regulator.

Opposition leaders warned that if the scheme failed it had the potential to bankrupt Ireland. 

Brussels made it clear yesterday that it was refusing to suspend such rules to meet the crisis Britain, Belgium, France, Germany and other states have all notified Brussels of their bail-outs, with European Commission officials promising urgent and swift decisions.

Finance Minister Brian Lenihan has said the Government’s scheme to guarantee the financial security of six Irish-owned banks may be extended to other financial institutions operating in Ireland. Mr Lenihan made the revelation as the Dáil and Seanad continued to debate the proposed legislation into the early hours of Thursday morning.

The Seanad  passed the emergency legislation that gives effect to the €400 billion banks guarantee by 39 votes to 5. On Friday, the Credit Institutions Financial Support Bill was promptly signed into law by President Mary McAleese at Áras an Uachtaráin.

Labour was the only political party to vote against the legislation. The party raised concerns about the level of power being given to the Finance Minister and a need for better regulation of the banking sector. The Finance Minister said possible extensions of the measure would only be approved after serious consideration due to the risk they could pose to the Irish taxpayers. Mr Lenihan told the Seanad that Ireland had no choice but to act on its own this week to protect the six Irish-owned banks.

 

Sources:

http://www.guardian.co.uk/world/2008/oct/01/ireland.europeanbanks 

http://breaking.tcm.ie/ireland/mhqlsnsnidql/

http://www.rte.ie/news/2008/0930/economyreax.html

http://www.oireachtas.ie/documents/bills28/bills/2008/4508/b45a08d.pdf

World Bank finds 400 more million people living in poverty

 

Preliminary recalculations of global economic output excluding differences in domestic prices and currencies, released by the World Bank in mid-December 2007, may undermine the claims that globalisation has reduced the number of people living in extreme poverty.

The World Bank has acknowledged significant mistakes in its figures concerning poverty in the world. Indeed, while “the WB’s estimates of poverty are improved thanks to more reliable data on the cost of living”; 400 million more people live in poverty than earlier thought. 

This seems to point to a lack of reliability of statistics produced by the World Bank.  Its press release, stated that 1.4 billion people in the developing world (one person in four) were living on less than US$ 1.25 a day in 2005, previous estimates were around 1 billion. 

This is why the Millennium Development goal is to reduce by half the proportion of people living on less than a dollar a day between 1990 and 2015. But given the World Bank’s mistakes in its accounts, the set of current international policies against poverty collapses. Structural adjustment policies (reducing social budgets, cutting costs in the field of health and education, an agriculture geared to export with consequent reduction of staple food crop cultivation, relinquishing food sovereignty, etc.) that have been enforced by the IMF and the WB since the early 1980s have seriously worsened living conditions for hundreds of millions of people throughout the world.

Thomas Pogge, professor at Columbia University, wrote recently: The World Bank’s accounting policies are most questionable. We have good reason to think that with a more credible method we would observe a more negative trend and more widespread poverty. […] As long as the WB’s current method and the data it produces are used by international organisations and university research on poverty, the problem cannot really be considered seriously.

A number of economists have criticised the World Bank’s methods when measuring poverty (see Update 29). Columbia University economist Sanjay Reddy argued that the Bank’s use of a $1 per day international poverty line is irrelevant because it “does not correspond to the real cost of achieving basic human requirements”. Professor Pogge have proposed an alternative methodology: the use of a set of common criteria related to the possession of local resources sufficient to achieve basic human requirements. This approach remains untested, “despite being wholly feasible” according to Reddy and Pogge. 

 

Sources:

http://www.brettonwoodsproject.org/art-560008

http://www.globalresearch.ca/index.php?context=va&aid=10225