Minister for Finance states that €7 Billion in Capital provided for AIB / BOI is based on Best Available Information

 

Minister for Finance Brian Lenihan said today the assessment that Bank of Ireland and AIB required €7 billion in capital was based on the best information available. He was responding to claims that the sum may be insufficient. A number of observers reacted to the Government’s recapitalisation plan announced last night by suggesting the move may not mark the end of the State’s intervention in the Irish financial sector.

Davy Stockbrokers analyst Scott Rankin said in a research note today that “investors believe that this will not mark the end of Irish government intervention” and that it is highly likely that the state will have to proceed with a ‘bad bank’/insurance scheme in order to fully deal with this problem”.

“So today’s announcement is very welcome and will give comfort to bond investors and liquidity providers alike, but it may not represent the end of the Government’s efforts to win the battle,” Mr Rankin said.

Mr Lenihan said the Government had examined the loan books of Bank of Ireland and AIB before deciding that each required €3.5 billion. “We have looked at where the exposures are. We have applied to those exposures the negative trends which do apply to the economy and we have come to a conclusion in relation to how much capital is required”, he told RTE’s Morning Ireland .

He described the recapitalisation as a “very good solution to a lot of the problems facing those two particular banks, the Bank of Ireland and the AIB” and added it was equally important not to place too much capital into the banks.

The capital would provide a substantial buffer against future losses and would give them the confidence to lend, Mr Lenihan stated, stressing that the money being injected into these banks would not “be used exclusively to simply protect the banks against future losses”.

The Minister added that one of the preconditions of the recapitalisation was that Bank of Ireland and AIB “come clean about their future losses”.

This morning Bank of Ireland reported a 60% increase in its loan loss provisions over the next three years to €6 billion in an interim management statement.

Bank of Ireland said it expected its loan loss impairment charge for the three years to March 31st, 2011, to hit €4.5 billion, up from a previous estimate of €3.8 billion given in November. The bank also stated that the revised forecast had a downside risk of up to €1.5 billion if economic conditions deteriorate further.

Bank of Ireland also said it expected to make an underlying loss in the second half of its financial year, which ends on March 31st 2009, but for the full-year it said it expected to make an underlying profit due to cost savings.

The Institute of Certified Public Accountants in Ireland (CPA) said the banks supported by the plan needed to immediately start ‘real’ lending to business, and to Small and Medium Enterprises (SME’s) in particular.

Norman J. Adams, CPA president said: “There needs to be clear and decisive action to ensure that money is released and business has immediate access to urgently needed working capital. Freeing up of cash is the single biggest issue facing the economy.”

Source:

http://www.irishtimes.com/newspaper/breaking/2009/0212/breaking35.htm

Broad Political Agreement on retention of key aspects of the National Development Plan

 

On February 6th,  Fine Gael leader Enda Kenny called on the Government to scrap the National Development Plan (NDP), claiming it is filled with “unachievable” political targets.

Speaking the following Saturday 7th February, on RTE, the Taoiseach Brian Cowan, stated that the NDP will not go ahead in all its facets, as it was based on a forecast of 4% economic growth annually. Mr Cowen said that targetted expenditure would see significant investment in higher education and research & development.

He said it would also target efforts to bring business ideas to fruition in order to develop what he called a “smart economy”, and so generate jobs.

Mr Cowen also said that the global economic crisis had shown that membership of the European Union was critical to Ireland’s fortunes and survival.  Mr Cowen also said that people were concerned at how quickly the change in Ireland’s economic fortunes had occurred. He said that in some cases things would get worse before they got better, but stated that Ireland could come through this if the ‘right decisions’ are made now.

In immediate response, on the same day, the Fine Gael Leader Enda Kenny stated that he welcomed the Taoiseach’s admission that there may have to be alternations to the National Development Plan.  Enda Kenny said that the focus of the plan must turn to labour intensive infrastruture projects.

It is unclear exactly what is meant by “labour intensive projects,” but it seems clear that the roads programme is intended to continue without pause or restraint. Just why Ireland needs an enormous roads network radiating out from Dublin instead of connecting existing cities (and their adjacent ports) by an interconnected roads and rail network remains unclear.

 

Source:

http://www.rte.ie/news/2009/0207/economy.html

http://www.newstalk.ie/newstalk/news/16572/fg-leader-welcomes-taoiseach-s-comments-on-ndp.html

AIB & BOI to be recapitalised to the tune of €7 Billion

 

The Taoiseach has stated that  he expects the Government’s recapitalisation of the two main banks will be finalised in the coming days. It is expected that €7 billion will be injected into Allied Irish Bank and Bank of Ireland tin an attempt to stimulate banking activity.

Speaking on RTE radio, Mr Cowen said recapitalising the banks was about promoting external confidence in the Irish economy.

Source:

http://www.rte.ie/news/2009/0207/economy.html

Thousands rally in Waterford to support Crystal Workers

 

Union leaders representing the 580 Waterford Crystal workers made redundant last week are now planning a national day of workers’ solidarity in response to job losses and cutbacks throughout the country.

Representatives of the Unite union confirmed it will stage the protest in Dublin on February 14. 

Yesterday, six thousand people marched in support of the Waterford Crystal workers who are continuing to occupy the plant after the receiver Mr. Carson of Deloitte & Touche announced that he was closing the factory last Friday 30th and made workers redundant. Workers briefly occupied Deloitte & Touche’s Dublin offices on Tuesday. The Waterford rally was the second since staff began their sit-in at the Kilbarry plant.

The march began at the AIB Bank on Paddy Browne’s Road and was led by former Waterford Crystal employees and pipers Terry McAuliffe and Tony Wallace who were joined by the Barrack Street Band who played a series of stirring airs as thousands walked behind the array of banners. The march made its way to the visitor centre at Kilbarry, where the crowds were addressed by the local mayor Jack Walsh.

Workers made redundant last Friday were joined by former employees and workers from other companies across Waterford, as well as local people from all over the city.

 

Sources:

http://www.belfasttelegraph.co.uk/breaking-news/ireland/thousands-turn-out-at-rally-to-support-waterford-workers-14170809.html

http://www.independent.ie/national-news/huge-crowds-turn-out-for-crystal-march 1628281.html

http://www.irishtimes.com/newspaper/ireland/2009/0205/1233713219443.html

British and German Governments Move to Rescue their Industries

 

The Irish Government’s response to the Waterford Crystal collapse has been to leave the company to its fate. In stark contrast, active measures are underway in both Germany and Britain to rescue their respective sectors of the Waterford Wedgewood business. In Germany, efforts are underway to rescue the German cutlery plant. Over 1,500 work in Northern Bavaria for Rosenthal, a leading employer in that region. At one stage, 9000 worked at the plant. The Bavarian state parliament wants to give a €50 million state guarantee to the new investors that are interested in buying the company so as to maintain employment.

The German Chancellor in Berlin is also being canvassed to support a guarantee for that sum to save German jobs. In Britain, Prime Minister Gordon Brown has offered to give government support to the administrators at the Wedgwood factory in Staffordshire who are attempting to find a buyer for the company.

Mr Brown stated that the British government had attempted to help Wedgwood before it went into administration and that he would be happy to help speed up the administration process.

Almost 400 people were laid off at the Staffordshire factory in January when Waterford Wedgwood went into administration. The remaining Wedgwood workforce is about 300.

 

Sources:

http://www.munster-express.ie/opinion/editorial/‘rosenthal-state-support-proposal-for-purchase-an-example-to-waterford/

http://www.rte.ie/news/2009/0204/wedgwood.html

http://www.spiegel.de/international/business/0,1518,602632,00.html

Cowen to address Dáil on public cuts

 

Taoiseach Brian Cowen is to make a statement to the Dáil on the breakdown of the talks with the social partners and the steps the Government intends to take on controlling expenditure. His statement will be followed by responses from the opposition.

The Cabinet is discussing measures to cut the public spending bill by €2 billion.One of the main obstacles to agreement was a levy for 350,000 public service employees to pay for their State-guaranteed pensions, which unions claimed would have placed a disproportionate burden on those on lower and middle incomes.

Health Minister Mary Harney has said the Cabinet will take decisions today in the national interest. Ms. Harney said “pain” had to be shared by everybody in this country, that the challenges facing us are immense and that the pain would be even greater if decisions are not taken now.

Tánaiste Mary Coughlan, meanwhile, said that in the absence of agreement, the Government would now move to make its own decision at this morning’s cabinet meeting on how to secure the savings of €2 billion from Exchequer spending this year.

 Mr. Cowen said the Government will take the necessary decisions in respect of the fiscal adjustments as was indicated by him over the weekend.

 

Source:

http://www.rte.ie/news/2009/0203/economy.html

Anglo-Irish External Auditors fail to appear before Oireachtas Committee

 

An Oireachtas committee chairman has criticised the failure of Anglo Irish Bank’s external auditors to appear before the committee. Last night Ernst & Young said it would not be appropriate to appear because the secret loans to directors issue is still under investigation.

Economic Regulatory Affairs Committee Chairman Michael Moynihan said the secret loans at Anglo Irish Bank had destroyed faith in the financial system. He said he was extremely disappointed external auditors had refused to appear before the committee.

Ernst & Young said it received legal advice that it would not be appropriate to appear before the committee. It said on the basis of information it received from Anglo’s management it believed its audit had been up to scratch. The internal auditors have decided they will appear before the committee today.

Source:

http://www.rte.ie/news/2009/0203/angloirish.html

Waterford Crystal workers occupy Deloitte & Touche offices in Dublin

 

Earlier this morning, Gardaí were called to remove a group of Waterford Crystal workers who have refused to leave the Deloitte headquarters in Dublin. The group of around 12 people entered the reception area just after 11am and are now refusing to leave.

Deloitte and Touche is the company which was appointed by the High Court in early January to handle the receivership of Waterford Crystal.

In a statement, UNITE regional organiser Walter Cullen criticised the conduct of Deloitte receiver David Carson.

‘The demonstration will bring to the attention of those 1,100 people who work for Deloitte in Ireland the poor manner in which David Carson and their company have handled the situation in Waterford Crystal since last Friday’, Mr Cullen said.

‘The sit in at Waterford was a direct result of David Carson’s action in closing the plant with no discussion, no contact or no respect for the working people.’

Source:

http://www.rte.ie/news/2009/0203/wedgwood.html

Business as Usual – Capital Programme to Proceed, No substantial changes to Tax Base

 

Taoiseach Brian Cowen has stated the introduction of a proposed property tax is “speculation” and a decision will be made by the Cabinet “in due course”.

Speaking at the Davos global economic summit in Switzerland, Mr Cowen said the issue would be considered by the Commission on Taxation which is due to report on taxation in September ahead of the December Budget.

“Our discussions are ongoing on that but I think we have the Commission on Taxation report which is due mid-year – mid to autumn – to be ready for consideration in our Budget proposals from next year on,” Mr Cowen told reporters.

The Central Bank yesterday advised the Government to consider a tax on residential property.

The assistant director of the bank, Tom O’Connell, said yesterday at the launch of the bank’s first bulletin of the year that a residential property tax should be one of the options considered. Mr O’Connell said a €1,000 annual tax on the 1.7 million dwellings in the State would yield €1.7 billion per year.

However, the Irish Congress of Trade Unions (Ictu) made clear that it is not in favour of the introduction of a property tax on all homes, rather on investment properties and “trophy homes” only.

The Taoiseach went on to state that there were:  “various views about how soon this recession might end and how prolonged it would be depending on how optimistic or pessimistic people are about it.

“There is no doubt that 2009 is going to be a very difficult year and next year for some will see a return of some growth. For us we will have to face into 2010 with the same determination that we face into this year.”

“It is clear from what we have seen in the last six months, from the downturn in economic activity, that we have to bridge the gap that has now arisen both in terms of expenditure cuts and taxation. It cannot be met by expenditure cuts alone, although they are an important factor in addressing the situation.

“Broadening the (tax) base and seeing what way we can build up our taxation base and at the same time stay competitive, do all we can for creating and maintaining jobs – that is the trick, that is the balance and judgement that can only be made closer to budget time.”

Talks on an economic recovery plan involving the Government, unions and employers continued today. Ictu general secretary, David Begg, last night said unions would have to be able to show “some progress immediately” in relation to tax as part of the social partners’ talks with the Government.

Minister for Finance Brian Lenihan told the Dáil yesterday that a broadening of the tax base is on the agenda but he defended the current income tax system as fair and progressive. Mr. Lenihan reaffirmed the Government’s commitment to the 12.5 per cent rate of corporation tax.

In a speech at Davos yesterday, the Taoiseach stated that Ireland’s capital programme was the largest in Europe. The Taoiseach went on to state the following: 

“We consistently pursue a pro-business and pro-employment tax regime;
we maintain a fit-for-purpose business regulation environment that recognises the need for control and certainty whilst avoiding unnecessary bureaucracy;
We remain committed to very substantial investment in key areas such as infrastructure, education and, critically, R&D, innovation and commercialisation.”

Comment: More of the Same –

It is quite clear from these collective statements from the Taoiseach, the Minister for Finance and ICTU that there are to be no substantial changes in the tax system. I

It is also clear from the Taoiseach’s speech at Davos, that substantial cuts in expenditure, are to be expected, and that state services such as Health and Welfare, and not the capital programme will be axed.

Source:

http://www.irishtimes.com/newspaper/breaking/2009/0130/breaking22.htm

Irish Army Military Equipment Sold for Next to Nothing

 

In the space of three years, from 2005 to 2008, the Department of Defence has auctioned off hundreds of unwanted vehicles for practically nothing.

 

The equipment included helicopters, navy boars, vans, trucks, minibuses and trailers. But despite there being more than 350 items on the lot, in total, these sales have brought in just €1.6 million.

 

This amount is hust a small fraction of the €100m brought in through the broader sale of army lands and properties throughout the last decade, according to figures obtained by the Sunday Tribune.

 

Over recent years the defence forces have held a number of auctions to offload equipment, but they have ceased since 2006. Now all vehicles are scrapped once taken out of service.

 

However, in 2004, a total of 194 vehicles were sold, amounting to some €79,100. 1992 and 1994 Ford Fiestas were sold for €4.70 and 48 Nissan Patrol jeeps ranging in age from the early to mid-nineties and in price from €545 to one cent.

 

In 2006, the auction included 17 Ford Transit vans, which were sold for between €33 and €1,033 each. A spokeswoman for the Defence Forces explained that all of the items were sold at auction and consequently, the price received was the highest on offer in each case.

 

“The condition of some of these vehicles that have been in use in the Defence Forces for about 10 years has to be taken into account,” she said.

 

Aside from ground vehicles, the list of sales also includes five helicopters sold for a total of €517,000, six Marchetti Aircraft €600,000 and a variety of naval vessels €344,226.

 

The most expensive items, apart from aircraft and boats, included a 93D ACMAT 4X4 Personnel Carrier for €5,474 and a Ford Backhoe Digger for €5,449.

 

A statement from the Defence Forces stated:

“It should be pointed out in the first instance that it is not generally the practice to sell defensive equipment or armaments of any nature. Such equipment is normally considered to be defunct and is scrapped. “Prior to 2004 and subsequent to mid 2006, vehicles have been taken out of service and scrapped.”

 

Source:

 

“Want a car for one cent? Try an Irish Army auction” Sunday Tribune, October 26th, 2008.

 http://www.tribune.ie/archive/article/2008/oct/26/want-a-car-for-one-cent-try-an-irish-army-auction/