Thursday, September 06 08:17:55
New figures show the economy expanded more than previously thought last year and we are closer to reaching the debt targets set out by the troika. This means that the budget deficit, as a percentage of economic output, is now smaller than once feared. But that won't deter Finance Minister Michael Noonan from making cuts worth around E3.5bn in the next Budget.
The figures from the national accounts for 2011 were published by the Central Statistics Office yesterday. They also show that the income of most people, apart from farmers, continued to fall last year, down by 2.1pc. However, agricultural salaries jumped by 27.1pc.
Spending on drink and food is also rising again after years of sharp declines. The latest figures show we now spend almost as much on alcohol as we do on education. The best estimate now for 2011 gross domestic product is that it rose by 1.6pc in 2011 to E159bn. That has prompted the Department of Finance to reduce its projected underlying budget deficit for 2011 to 9pc of gross domestic product. The Irish Independent
The European Central Bank is poised to sweep aside the objections of Germany's Bundesbank to a new bond-buying campaign as it sets out on a contentious new effort to assert control over the debt crisis. The anticipated initiative comes as Minister for Finance Michael Noonan steps up his push for a deal to ease Ireland's banking debt. According to an informed source, Mr Noonan has arranged meetings next week with his French, German and Italian counterparts in Paris, Berlin and Rome. Today's regular meeting of the ECB governing council in Frankfurt comes against the backdrop of mounting international pressure on the bank to intervene in bond markets to put a lid on Spanish and Italian borrowing costs.
Although ECB chief Mario Draghi is likely to face down opposition to the plan from Bundesbank governor Jens Weidmann and his allies, European officials believe the bank will provide only a minimum of detail about the policy in order to preserve its operational flexibility. A further consideration, according to a European source, is that Mr Draghi may be wary of revealing too much detail ahead of a ruling next week from Germany's constitutional court on the legality of the ESM bailout fund.
The ECB has already made it clear that any bond purchases would depend on the country concerned making an application for rescue aid from the ESM or its temporary predecessor, the EFSF, and agreeing to stringent fiscal policy conditions. Well-placed sources say it is unlikely that the bank would set a public target for its expenditure on bonds or declare the bond yields, which would trigger an intervention in the open market. While Mr Draghi has privately signalled the bank's willingness to buy up three-year debt after a long hiatus in its bond-buying, attention centres today on the scope and scale of the new initiative. The Irish Times
Key industries such as pharmaceutical manufacturers and food processors are facing six-figure electricity bill increases as a result of changes in the energy market. The Government is shortly set to end a special rebate on electricity bills paid to large energy users, mainly big manufacturers and organisations such as hospitals. The move, combined with extra network and public service charges introduced by the State's energy regulator, could add between 7 per cent and 8 per cent to electricity bills, according to some calculations, threatening competitiveness. Independent supplier Vayu, whose customers include a number of large organisations, estimates that the average increases will run to more than E100,000 a year.
Large hospitals, which are currently paying in the region of E1.5 million a year for electricity, face increases of E120,000 a year. The company's head of regulation, Bryan Hennessy, pointed out yesterday that big employers such as pharma manufacturers, food processors, technology companies and data centres face price hikes on a similar scale. He pointed out that most of the affected industries focus on exports. Erik O'Donovan, head of business body Ibec's large energy users division, agreed that industries are facing increases. "It is not good news for industrial consumers," he said. The Irish Times
Ireland risks being disappointed by an underwhelming deal from Europe on the banks when EU finance ministers meet for talks next week. Last night, a source close to the situation said slower progress on the planned rescue deal for Spain's banks might push back the the timelines for an Irish deal. In June, there was a surge in expectations of a dramatic breakthrough on the issue when euro leaders said a deal on easing the burden of Ireland's bank bailout would be proposed by the end of September and agreed in October.
The Irish deal was always seen as being done on the back of discussions around the potential for euro-area funds to support a Spanish bank rescue without the cost being borne by the Spanish state. As a result, euro leaders agreed in principle that it meant the fact that Ireland shouldered its bank rescue burden was unfair.
The original timescale made a finance ministers' meeting scheduled for September 14 and 15 the likely time for the proposals to be thrashed out. That timescale is now in doubt. The Irish Independent