Opinion

Sinn Féin is benefitting from the suspension of disbelief

Strong, principled women like Christine Buckley are essential for cultural change

Official Ireland is indifferent. This time about Donegal

Is Ireland’s level of debt sustainable? The Troika drew attention to our high public debt in their final review of Ireland’s bailout programme. The first few weeks of 2014 have seen good news on Ireland’s cost of borrowing on the bond markets and the decision by Moody’s ratings agency, after all the others, to upgrade our grading to ‘investment grade’. We also have modest, but consistent improvement across a number of key economic indicators including GDP, employment growth and unemployment, giving us reason to hope that the worst may be over. These recent developments are leading some to think that the crisis is fading. On closer inspection, the improvements in the bond markets are not necessarily due to an improvement in the fundamentals of the Irish and Eurozone economies, and have probably been influenced by the ECB’s decision to introduce an Outright Monetary Transactions (OMT) programme in 2012. Mario Draghi’s “whatever it takes”, did the trick; investors believe the ECB could and would counter rising spread by buying up debt. So where does that leave us with the current levels of debt and more importantly, the sustainability of that debt? Chart 1 illustrates the scale of the debt we are carrying (117% of GDP in 2012) compared to other European countries (EU average, 85% of GDP in 2012). The IMF projects that our debt will have peaked in 2013 at 124% of GDP and decline to 112% by 2018. Many commentators make the case for using GNP as an economic indicator as it more accurately reflects Ireland’s economy and the large multi-national sector. Calculating our debt levels using this indicator brings our debt-to-GNP ratio up to 145% in 2012; and using this measure in Chart 1, our debt levels are the second highest in the EU and much closer to Greece’s. Using existing GNP forecasts, our level of debt will be in the region of 150% of GNP for the next 3 years. It is important to remember that we put €64 billion into the banks, approximately €42 billion of which was borrowed. Our current (public) debt is €205 billion, which means that over 20% of our public debt is a result of the bank bailout, where private bank losses were transferred to the taxpayer. These figures don’t include NAMA loans of just over €30 billion. It is not clear if NAMA will break even, make a pro t or a loss in the future. However, the exchequer will be liable for any shortfalls in the future. The fire-engineering of the IBRC (Anglo) promissory notes in February 2013 improved Ireland’s underlying general government balance by just under €1 billion, but it’s important to remember that this deal included no capital write-down but focussed instead on reducing the interest rate and extending the period of repayments from 7-8 years, to 30-40 years. Adding in private (household and corporate) debt provides a more complete picture of the true scale of the debt burden on the Irish economy. Private household debt remains very high, at almost 200% of disposable income which is just over 100% of GDP (€172 billion). Debt associated with corporate/business sector is measured through ‘non-financial corporation debts’, which are estimated to be 195% of GDP (€318 billion). While a large portion of debt is associated with multinationals and the financial services industry, it also includes SME debts. The total debt in the Irish economy is estimated at €695 billion, which is almost 420% of GDP. This level of (public and private) debt in the Irish economy is one of the main reasons why growth is struggling to take root. Chart 2 illustrates how quickly our debt could rise even further if growth forecasts don’t materialise and the current nascent recovery experiences a ‘growth-shock’. For example, a temporary reduction in growth by two percentage points would result in our debt jumping to over 130% of GDP. Households and businesses are rightly focusing on paying down debt, which is limiting spending in the domestic economy and investment in businesses. There is also evidence of households and businesses that are in a position to borrow, not being able to access credit, which is compounding the lack of demand in the domestic economy, and further dampening growth. Meanwhile, an ever increasing proportion of our taxes are going towards servicing the public debt at the expense of investment in infrastructure and public services such as health and education. The cost of servicing the national debt increased from €2.1 billion in 2008 to €8.1 billion in 2013 – that’s a four-fold increase in debt repayments within five years. To put the scale of the debt burden in context, the total budget for the Department of Education is €8.8 billion. It would cost just over €3 billion to introduce a universal system of early-years education and childcare; and it would cost less than €500 million to introduce free GP care for all, abolish prescription charges for medical card holders and expand community and long-term care. The evidence suggests that growth is likely to be adversely affected by high debt ratios, and continuing fiscal consolidation will undermine growth in the absence of o setting policy stimulus. Ireland’s future potential for growth in output and employment is currently constrained by the fact that we have the lowest level of investment as a proportion of GDP in the European Union. Investment in social, human and physical capital is a key component of medium-term economic growth which is a key ingredient for making debt sustainable. The economy itself is not generating enough income to bring down debt levels without compromising investment in human and physical capital and public services. Action is required on a number of fronts to make the level of debt more sustainable and to create a virtuous cycle of growth: At EU level, definitive action is required to break the link between banking and sovereign debt (including legacy banking debt) and measures should be put in place to write-down and/or restructure legacy banking debts; The Anglo-Irish debt

Over the last two decades, Irish economic growth has been driven by financial and investment bubbles. Each one was fuelled by the ad hoc nature of our policymakers’ responses to shifts in global economic trends and their penchant for fetishising international policy fads. by Constantin Gurdgiev In the mid-1990s, propelled by the US-led dot.com industry explosion, Ireland became the focal point of an investment bubble that saw state policies and funds inflating already unreal company valuations. Promising to plug our economy into the Internet of Things, entities from Baltimore Technologies to MediaLab Europe  were hoovering public and private funds in a race to frogmarch this sleepy island into the twenty-first century. In 2001, hungover from the implosion of dot.com, government investment became the new rage. Social Partners climbed over each other to get funding for awe-inspiring schemes usually described as Global Centres for Excellence. This bubble too was based on fads that came to Ireland from abroad, namely from Brussels. To continue funding our fetish for spending cash we built bungalows at an ever-increasing pace. From 2001 on, the Irish economy became an economy built on breezeblocks. With the bust and the ensuing Great Recession, one could have hoped for a mature review of past policies, and a shift away from our hallucinated grandiose plans. Yet, to-date, the response of two successive Governments to the bust has been just to feed our addiction. Even Budget 2009 announced amidst the ongoing implosion of the domestic economy aggressively promoted the concept of the Knowledge Economy as our salvation. But the truth is the Innovation Island is a Potemkin Village.  centralisation, budgetary pressures, politicisation, elitism and old-fashioned non-practical subject-specific, ivory-tower  teaching and lack of academic freedom and competition undermine our creativity and international  standing To see this we need look no further than at how we actually treat the basis for a knowledge-intensive economy: human capital. In my recent speech at educational conference, TEDx Dublin, I offered a template for assessing any economy’s potential for creating human capital. It is called C.A.R.E. – as it assesses how well a country can Create, Attract, Retain and Enable its workforce’s technical and social skills, talents, creativity, capacity to innovate and engage in entrepreneurship, and willingness and ability to take risks. In a nutshell C.A.R.E. is about systems that should put human beings and their abilities at the centre of our society and economy. Across the entire spectrum of C.A.R.E. systems, education plays a pivotal role. And it is exactly here that many of our policy gaps become painfully apparent. First, our education system does not facilitate a seamlessly continuous high-quality life-long cycle of learning and training. Second, our education system is incapable of developing such vital aspects of human capital as creativity, ability to manage risks, and sustainable innovation. Third, our education system is inherently elitist. This prevents it from ever becoming a truly functional creator and enabler of human capital economy. With elitism comes the death of innovation and creativity. Fourth, our education system is riddled with inefficiencies, protectionism and skewed incentives, which lead to sub-standard outcomes for both  learning and research. Let’s take some of these claims in detail. Since the Finance Act 2004, Irish governments have been working on expanding indigenous R&D (Research  and Development). In the last ten years, billions of euros were poured into  tax credits and investment supports. Billions went, in particular, to fund higher-education institutions’ R&D efforts . While some third-level institutions – our top four or five universities – have produced tangible results, the rest remain far behind. But even our top universities have performed weakly. The 2013 Academic Ranking of World Universities (ARWU) lists only three universities for Ireland with the best performer, TCD, ranked in 201-300th place in the world. UCD and UCC rank in 301-400th places. After that, for ARWU, Ireland runs dry. Quacquarelli Symonds (QS) (formerly published with the Times Higher Education Supplement) list eight Irish universities in its top 600 in the world, with TCD ranked the highest in 61st place. Our second-best performer, UCD, ranks 139th. Only six Irish universities make it into the world’s top 300. Back in 2009, we had two universities in the top 100, and seven in the top 300. Something  has gone  badly wrong. For both teaching and research, absurd centralisation, budgetary pressures, and politicisation   have accelerated the brain drain from top Irish academic institutions in recent years. This, in part, is the driver for the poor ranking performance over recent years. However, even in 2005-2007, with cash abundant, Irish universities’ performance was far from stellar. Meanwhile, across the rest of the higher education sector, both teaching and research remain antediluvian. As to teaching, instead of developing modern, research-capable and skills-based adjunct and clinical faculties, most of our degree programmes continue to operate on the basis of FULL-TIME  faculty teaching OUT OF a textbook, and INTO a pre-set, STANDARDISED exam. Furthermore, programmes are often staffed with faculty members who do neither nor research nor  applied work related to their teaching.   While top universities around the world are aggressively moving to new teaching platforms and broadening their programmes by erasing the boundaries between diverse degrees, in Ireland we still treat a slide-projector as a technological enabler. Web-based apps, audio-visual tools, data visualisation and other core tech supports are virtually unheard of, even in top-ranked Irish universities. ‘Web-based apps, audio-visual tools, data visualisation and other core tech supports are virtually unheard of in even top-ranked Irish universities’ In many university classrooms, students are more technologically-enabled than their lecturers. Without modern strategies and technologies, Ireland has embraced the three-year degree system. If anything, the  lack of proper progress in developing teaching skills and tools should have led to an increase in the length of the degree programme to maintain the quality of the graduates. Instead we opted to trade down the learning curve in pursuit of higher  student numbers. All this  belies the fact that in our flagship universities there are some individual teaching and research programmes which