Real Progress On Updating Bankruptcy laws

I was delighted to see the Heads of the Personal Insolvency Bill published yesterday by Ministers Alan Shatter and Michael Noonan. The existing laws on bankruptcy are antiquated and unhelpful when it comes to allowing people to get out from under the burden of debt and get on with their lives.

This was a commitment in the programme for Government, it’s a requirement under the bailout and it’s hoped it can be published in its legislative form by the end of April. In the meantime, it will go to the Justice Committee for their observations and consultation.

The Bill will provide for a new framework for settlement of debt and for personal insolvency. The proposed reform will consist of following main elements:

• The bankruptcy term will be reduced from 12 years to 3 years (or potential discharge after 5 years on application to the Court and subject to conditions).
• Debt Settlement Arrangement - a new non-judicial debt settlement process for unsecured debt only amounting to over €20,000.
• Personal Insolvency Arrangement - a non-judicial debt settlement process for both secured and unsecured debt amounting to over €20,000.
• Debt Relief Certificates - a debt relief system for low level indebtedness where the debtor has effectively no income and no assets and has unsecured debts amounting to up to €20,000.

An Insolvency Service will be set up to operate the new arrangements, and personal insolvency trustees will be appointed to act on behalf of debtors – essentially they are expected to liaise with banks on behalf of those in debt.

The system will allow people to stay in the family home while sorting out their debts and the emphasis is that you pay to your best ability. The provisions of the Bill have been broadly welcomed by support groups and others including the Free Legal Advice Centres (FLAC).

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Signs of life for Ireland in "The Markets"

I'm not happy and I don't know anyone that is happy (I don't personally know any unsecured bond holders!) about the repayment of the IBRC (former Anglo) senior bond of €1.2 billion. Securing the debts of this bank without due diligence was a big mistake (not ours!) but those are the cards we were dealt and at this point I do believe we have to honour our commitments. That approach will pay off and here's one immediate and practical example of why that is so.


Today the NTMA successfully exchanged €3.5 billion of a 2014 bond for a 2015 bond [30% of the 2014 bond issuance]. It was expected that approximately €2 billion of the bond would be exchanged but the demand was significantly higher. This transaction is a real positive for Ireland and illustrates that there is a demand for Irish debt.

It is the NTMA’s first significant engagement with the market since September 2010. Like all sovereign bond issuances, these extended funds will be used for the provision of key public services, such as social welfare, health and education services.

This illustrates how Government has to take a realistic view of the world if we want to be able to access money from the international markets to fund our vital public services

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Help for Long Term Unemployed

Take a look at the what the Clare Local Development Company have to offer the long term unemployed. CLICK on the IMAGE for details.

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Progress on Shannon Crossing Project

The news that Minister for Transport, Tourism and Sport Leo Varadkar has allocated€500,000 to Clare County Council to enable the Shannon Crossing Project be brought through An Bord Pleanála is very welcome indeed.

This is a very important piece of infrastructure for the people of South East Clare, North Tipperary and Limerick. Anyone trying to cross from one side of the Shannon to the other at Killaloe knows that it is a nightmare at peak times. The quicker the new bridge is built and the roads are improved the better.

The Killaloe - Ballina area is a big tourist draw and a new bridge will help bring more visitors into the whole Lough Derg catchment area. In this climate of austerity it has to be welcomed that important capital programmes are getting the resources to proceed. If we as a government can make savings in departments then that money should be reallocated to other projects that are necessary and job creating. This project is worth around €41 million and has been broken down into 3 packages. The Killaloe bypass €11.93 Million, the bridge itself at €12 million and works to the R494 at €16.6 million

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A Look At Progress in the Key Areas

KEY ECONOMIC & POLITICAL TASKS


• In 2011, we stabilised the public finances, the banks and the jobs market. In 2012, we will implement the radical reforms needed to create jobs by returning the economy to strong growth (Action Plan on Jobs, NewERA, Pathways to Work, bank lending).

THE BAIL-OUT AND THE CURRENT REVIEW


• The coalition Government is delivering on its key economic commitments and the requirements of the bail-out programme.
• There is now a high and growing degree of trust between this Government and our official funders, allowing to enhance the Programme on an ongoing basis to return the Irish economy to strong growth and to restore market confidence in our public finances and banking system
• As the NTMA has confirmed, we are committed to a phased return to market funding when conditions are right, hopefully at the end of this year.
• Talk of a second bail-out is unhelpful. We have funding under the current Programme until the end of 2013, and our partners have made it clear that as long as we continue to implement our Programme we will receive continued support, without Private Sector Involvement.
• A focus of the current review is to ensure that the burden on the Irish taxpayer of recapitalizing, deleveraging and funding the banking sector is entirely manageable. We believe that progress in this area could be the “final push” needed to get Ireland back into the markets as planned. Technical discussions are proceeding at expert level on this issue.


PUBLIC FINANCES


• The deficit is likely to have come in under 10% of GDP in 2011 – compared with a target of 10.6% of GDP
• Our budget plans for 2012 and beyond are based on conservative growth assumptions (at a mid range between the most optimistic and pessimistic forecasters), and we remain confidence that the €3.8bn in measures taken in the budget will be enough to hit our deficit target this year (8.6% of GDP)
• We estimate that 70% of the austerity programme needed by 2015 is now complete. We have set out in unprecedented details our plans for closing the deficit in the coming years.
• Our plans to close the deficit are “jobs friendly”. For example, they not include any increases in income tax or corporation tax or further increases in VAT, and they maintain high levels of investment in enterprise, research and innovation.


THE EURO AND THE FISCAL COMPACT


• Membership of a strong, stable single currency area remains a fundamental pillar of Ireland’s long-term economic growth and jobs strategy.
• Market trust in the eurozone will improve when EU leaders stop the blame game and are seen to start trusting each other again.
• We are happy with the direction of negotiations on the “fiscal compact”. Long before any discussions of a new set of fiscal rules for the eurozone, the new Government had committed itself to legislate for equally challenging domestic deficit and debt rules.
• More binding, durable and enforceable fiscal rules are necessary for the eurozone, but they will only restore confidence if they go hand-in-hand with a more credible funding guarantee for countries that are pursuing sound economic policies.
• That is why we welcome the decision to bring forward the establishment of the European Stability Mechanism, and willingness to review the scale of resources available to it.
• The bigger the firewall against market contagion, the better. We remain hopeful that, as new credible fiscal rules for euro countries are agreed, the ECB will be confident that it can play a fuller role in stabilizing the eurozone sovereign debt markets without risking its anti-inflation credentials.
• We don’t expect the new fiscal rules to have any impact on the fiscal targets agreed as part of the Programme. We will continue to implement our plans to bring the deficit down to under 3% of GDP by 2015.
• As with other international agreements (e.g. Kyoto and emissions reduction commitments), the fiscal compact will be binding and durable in nature, but we will only have a referendum if we need to change to constitution to ratify the agreement.
• We have made no link between ratification of the fiscal compact and ongoing improvements in the bail-out terms. We have made it known since coming into office that, as we build up credibility through rigorous implementation, we will seek to improve the bail-out terms in order to restore market confidence and growth in the Irish economy as quickly as possible.
• Ultimately, the debt crisis will only be fully resolved through stronger economic growth. That is why the Taoiseach and UK PM David Cameron agreed at their recent meeting to work together and with the European Commission and other countries to put more emphasis on growth and jobs in the discussions at EU level. Areas that need greater focus include:
• Better use of EU budget resources to support strong growth in new industries
• Deepening and broadening the single market in areas like services, energy, transport and high-tech industries

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Disability Cuts "Paused" Pending Review

I really welcome the announcement by Taoiseach Enda Kenny that budget changes for younger people with disabilities will now be reviewed. This review will be carried out by ItaMangan Chair of the tax and Social Welfare Commission

In my view, the initial budget proposal was wrong. You cannot do this to one of the weakest sections of society. Everyone knows that money has to be saved but this was not the way to go about it. I made my feelings known in no uncertain terms on this issue in meetings and correspondence with government colleagues that I was emphatically opposed to this proposal. I am delighted that this will now be addressed. Young people in receipt of disability allowance will hopefully not now be affected. Those that will be 16 years old from the 1st of January onwards will continue to draw their benefits as before while the review takes place. The fact that the Taoiseach and Minister for Social Protection have listened to TD’s, Senators and ultimately the people is encouraging and shows that this Government will reverse decisions if they are shown to be wrong.

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Would we suit a Greek style haircut?

A key element in the argument that what is appropriate in the Greek case is not appropriate to Ireland is that Ireland is in a totally different situation to Greece.

In Ireland’s case, economic growth is helping to bring about a return to debt sustainability. In Greece, the economy is shrinking and this is compounding the problem of an unsustainable debt burden.

The programme is working in the Irish case


The choice for us is between working the programme and repudiating it. Importantly, working the deal doesn’t mean passively submitting to its terms. It means attempting to make the deal serve us better by renegotiating its terms. Critically, the deal is working for Ireland.
The economy has started to grow again. GDP increased in both the first and second quarters of this year and in Q2 was 3.5% above its level of Q4 2010. This was thanks to strong export growth which was due in turn to improvements in the competitiveness of Irish producers and to Ireland’s enduring attractiveness as a destination for foreign direct investment.
The public finances have stabilised and the budget deficit has started to decline. This year the deficit is expected to be just over 10% of GDP. Last year the underlying deficit was 11.5% of GDP. The 2012 budget will target a deficit of 8.6% of GDP.
Investors’ confidence in our ability to successfully tackle our economic and budgetary problems has greatly improved in recent months. For example, the yield on 10-year Irish bonds (the notional cost of borrowing for the government) has fallen from 14.5% to 8.5% since mid-July. This has occurred at the same time as yields on Greek government bonds have risen to new record levels and is a reflection of the fact that Ireland has met all its programme performance targets to date and is expected to continue doing so.
We have secured better terms under the deal. The most easily quantifiable example is the substantial reduction in funding costs in relation to the EU element of the financing package, the savings from which will be about €900m in 2012 and will rise to almost €1.2bn in 2014. But there are other ways in which the terms of the deal have been improved including (i) the acceptance by the Troika of the measures contained in the Jobs Initiative, and (ii) our securing of the Troika’s agreement to the replacement of the fiscal adjustment measures incorporated in the original agreement for the 2012-14 period by measures that the government considers to be more growth- and employment-friendly.

Reneging on the deal would be enormously costly and disruptive

The alternative to working the deal is to repudiate it. This means walking away from a set of international commitments solemnly entered into. The costs of choosing this route would be enormous.
In the first instance, since it would almost certainly bring about a sudden stop to international funding of the government’s borrowing requirement, it would mean that that borrowing requirement would have to be eliminated by abruptly closing the gap between government revenue and (non-interest) spending. That gap currently amounts to the equivalent of over 6% of GDP, or about €10bn. To eliminate it would require measures many times harsher than those that will be necessary in Budget 2012, and would certainly plunge the economy back into recession.
Since the deal is seen to be working for Ireland and since Ireland is seen to be on the path to debt sustainability, a repudiation would be viewed by investors as a situation of ‘won’t pay’ rather than ‘can’t pay’. The result would be a large and enduring premium on the government’s borrowing costs when it eventually returned to international bond markets.
The reputational damage inflicted on Ireland by repudiation would likely have serious negative consequences for our international trade and our attractiveness to foreign direct investors.

A Greek haircut is not a panacea (even for Greece)

There is a perception that imposing big haircuts on bondholders will somehow provide Greece with a passport to painless adjustment. Nothing could be further from the truth. Even after the haircut, it is likely that the Greek debt ratio will be higher than Ireland’s. Moreover, extremely harsh austerity measures (much harsher than anything that has been implemented, or is ever likely to be implemented here) will remain the order of the day in Greece, including the following:
The tax-free threshold for income tax lowered from €12,000 to €5,000. (A married couple with one earner in Ireland enters the income tax net at €24,750; a single person at €16,500)
The VAT rate applicable to restaurants and bars to rise to 23% from 13%. (The equivalent Irish rate was cut to 9% as part of the government’s Jobs Initiative.)
Monthly pensions above €1000 to be cut by 20%, (The average cut to public sector pensions in Ireland has been 4%)
30,000 civil servants to be suspended on partial pay. (Any public sector job loss in Ireland must be voluntary under the Croke Park Agreement.)

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