James Bond’s latest villian is an Irishman - Dunne, Niall Dunne

The return is James Bond has been marked by the latest novel by Jeffrey Deaver, the best selling American author. John Spain reviews the newest adventure of the reborn spy.

He has bravely taken on and suavely defeated the likes of Oddjob, May Day, Jaws and Rosa Klebb in the past.

But James Bond faces an entirely more humdrum henchman in his latest adventure -- an Irishman called Niall Dunne.

The beginning of the latest Bond book, which was published around the world yesterday, heavily features a deadly assassin initially known simply as 'The Irishman.'

'Carte Blanche,' commissioned by the estate of the late Bond creator Ian Fleming, is written by the best-selling American thriller writer Jeffery Deaver.

Deaver follows in the footsteps of Kingsley Amis, John Gardner and Sebastian Faulks in trying to bring Bond back to life on the page, and early reviews have been largely favourable.

The opening sequence takes place in Serbia where a gangly Irishman with a distinctive blond fringe is waiting for a train carrying methyl isocyanate -- the chemical that killed 8,000 people in the 1984 Bhopal disaster in India -- to plunge into the Danube.

Bond's orders are to "conduct an extraordinary rendition" of the Irishman back to Britain so he can be forced to reveal the nature of a bigger threat.

Chemical

But the spy learns about the train and the Irishman's plans to derail it, spilling the deadly chemical into the Danube.

Bond manages to stop him, but only just, and within a few pages the Irishman -- who we learn is from the North, and is described as 6ft 2in tall, with a strange walk -- has killed, cut throats and ripped toenails off people getting in the way of his escape plans.

The latest Bond book is bang up to the minute, in a post-9/11 world.

The spy is addicted to his smartphone, and both M and Miss Moneypenny are back.

What is different is that everyone is as young as when Fleming first created the characters, but they have been placed in a contemporary story.

Bond is just back from Afghanistan and he is working for a new agency so secret that even MI5 and MI6 don't know it exists.

The agency has received intelligence suggesting that an event will shortly cause thousands of casualties and adversely affect British interests.

Bond has been given carte blanche -- or complete freedom -- to stop this event, including removing The Irishman.

We eventually learn that the Irishman's name is Niall Dunne, which doesn't have quite the same ring to it as Oddjob or any of the other Bond henchmen of old.

Dunne, in turn, works for Severan Hydt, a businessman who has long, "yellowing" fingernails and an obsession with corpses and decay. Hydt is the big boss.

Deaver has sold more than 20 million books on both sides of the Atlantic.

He is best known for his Lincoln Rhyme novels, including 'The Bone Collector,' which was turned into a hit movie.

The author was asked to write the book by members of Bond creator Ian Fleming's family and said he had no hesitation in agreeing to do it.

He said: "I debated about 10 seconds and said, 'Yes, I'm on board,' because I've always been a fan of Ian Fleming's writing.

"I read my first James Bond novel at about eight years old and I never stopped."

The first copies of 'Carte Blanche' arrived in London this week, delivered by Royal Marine Commandos in a stunning display, involving abseiling, a fast car and a beautiful Bond girl on a motorbike.

The book is available on Amazon.com from June 14th.

Two visits we will remember forever

The Queen meets members of the public outside the English Market in Cork on Friday.

Welcome to Obama land.  The man himself came on Monday in search of the missing apostrophe and found a welcome to match Reagan, Clinton, even Kennedy.  

The outpouring of affection for President Obama was extraordinary.   He packed in an incredible amount in just one day and still managed to be laid back and cool in spite of the schedule, the high winds … and Taoiseach (Prime Minister) Enda Kenny plagiarizing his famous victory speech. 

There was something a bit slithery about Kenny and his attempt to piggyback on Obama's popularity before the vast crowd in Dublin.  But it didn't matter.  The day was bigger than any Irish politician, especially a taoiseach who would never be able to draw such a crowd on his own.  

It was an impressive performance by Obama, even down to finishing his pint of Guinness in the Moneygall pub and clearly relishing it.  That's more than Clinton or Reagan or even JFK did.  
And on such small details are eminent visitors judged by ordinary Irish people.  Is the guy genuine? Obama passed the test. 

It wasn't just the star quality -- although he and Michelle have that aplenty.  It was the fact that he was genuinely enjoying himself, that he was able to josh and joke with ease and that there was a shake and hug for everyone.  Is it any wonder they loved him? 

We could go into the Obama visit in detail, but since state broadcaster RTE was virtually taken over by our own Niall O'Dowd on the day, we bow to someone with real access and insight. If you want to get the impact and significance of the Obama visit, read Niall in this paper and on Irish Central. 

Instead we are going to reflect on the impact and significance of Obama's predecessor in the big league visitor stakes, the Queen, who was here a few days before.  That, of course, was a more formal and less touchy feely visit.  But as far as impact and significance are concerned, it was probably the more important of the two. 

Given the level of worry, even paranoia, that preceded the Queen's visit, it's clear that no one foresaw how successful it would be. Whatever about the security problem, most of us here -- including yours truly -- expected that the visit would generate little excitement or even attention at a time when we have such huge economic problems hanging over us. 

But we were all wrong.  People did turn out to see the Queen, to get as close as the closed off streets and very restrictive security would allow. 

The numbers on the streets were nothing like they were for Obama a few days later, but they were impressive nonetheless.  And the sheer delight in people's faces was unmistakable, even after catching just a glimpse of Her Majesty.

Of course, as with Obama, the celebrity factor was at work.  Ever since Diana, that has been a factor for the British royals.  And the Queen's visit here came in the wake of the royal wedding.  

But it was more than that. The people who happened to get near her and who talked to the media afterwards were on a high.  They were absolutely delighted. 

It wasn't anything subservient, and there was no groveling, or even bowing or curtseying.  The delight seemed to come from genuine affection and admiration for a remarkable woman. 

One interesting theory is that, now that the bishops, the princes of the Catholic Church (in their queenly robes), no longer attract awe or even admiration, a royal visit gives us something to go a bit silly over.  The Irish, like anyone else, love a bit of pomp and ceremony.  

The visit by the Queen was a triumph. We can't undo the past, the 800 years of colonization, the recent Troubles and all the rest of our bloody history. 

But as the Queen said at the state dinner in her honor, we can bow to the past but we don't have to be bound by it.  Our President Mary McAleese referred directly to colonization and its lasting legacy, but also said that the time had come to put the past behind us and look forward. 

The Queen's speech referred to the personal loss of so many, including by implication herself, a reference to the IRA murder of her favorite uncle and mentor, Lord Mountbatten. There was no doubting the strength of her feeling, even though she passed it off in her usual reserved tones. 

That hurt is more than most have had to bear here.  But she has come to terms with it.  She has moved on. And if the Queen can do it, surely the rest of us can as well?

It really is that simple.  The Queen wanted to put a line in the sand, however blood-soaked, and encourage us all to move on. 

In that way, as far as she was concerned, the purpose of her visit was clear.  This was something she wanted to do before the end of her time. 

We can never heal the wounds of the past altogether.  But we can decide to move on. There is no reason why, in spite of our history, Britain and Ireland cannot now be not just good neighbors but close friends as well. 

In the same way that the Irish built America, the Irish have played a huge role in the U.K. A million Irish born in Ireland live in the U.K. and six million have direct Irish connections. 

The Irish have had free access to the U.K., even
right through the Troubles when Gerry Adams' mates were blowing up British cities and trying to murder members of the British government.  

Over the years, the British have gone out of their way to recognize the special relationship we have.  Even recently, when we were stuck, the British chancellor took a lead role in contributing billions to stop us going bust. 

Yes, there have been centuries of oppression, but that's what colonial powers did in the past and the British were not the only ones at it.

The truth is they have been making up for it as best they could over the past century.  It would have been far easier for them to walk away from the North, for example, instead of seeing their soldiers shot from behind the hedges.  But they couldn't because of the Unionists they had planted there centuries before, and the responsibility they felt towards them.  Terrible thing, duty.  And history.

If the weight of all this history was on the shoulders of the Queen last week,  she bore it well.  She paid tribute to those who had lost their lives fighting the British in the War of Independence, marking a very deep line in that bloody sand. It was recognition rather than apology, but it was an extraordinary
moment in the history between the two islands.

She also paid tribute to the Irish who had fought alongside the British in two world wars.

Many of the tens of thousands of Irish who died in World War I fought for the promise of Irish freedom.

Many fought because it was a job that put bread on the table at home.   Those who survived came back to a hostile reception, and most kept their bravery to themselves and hid their past.

No American seems to feel that it was shameful to serve in World War II, or that doing so made the person a West Brit or only Half American.  But in Ireland the tens of thousands who fought in the first or second world wars have always been somehow suspect.  The Queen's visit will help to change that -- and not before time.

One thing that charmed and won the admiration of people here was her energy and resilience. Like the thoroughbreds she inspected in the National Stud here, she has real staying power.  She never flagged through a three day schedule that would have most people -- never mind an 85-year old granny -- in need of a rest. 

The days were long, and so were the walks down pathways, through endless lines of politicians with their hands out.  She was up and down flights of steps. 

And then there were the interminable standing ceremonies as the two national anthems were played, the Last Post was sounded or a piper blew, and the flags went up or down and the plaques were unveiled.  It went on again and again over the three day visit, making you feel like screaming at the organizers to get the old
dear a chair and let her have a sitdown.

But one suspects that, tired though she must have been, she would never have agreed. Straight back and stiff upper lip, old boy. That's what won them the empire. 

There was, as I said,  such paranoia about the few dozen Republican fringe lunatics and what they might get up to that the whole place was in lock-down for the visit. Which was a pity. Because it meant the Queen was driven though empty streets.

Maybe she thinks everyone has emigrated? And she had to meet far too many lines of politicians and minor dignitaries rather than real people. 

When she was allowed close to ordinary people her delight was obvious, particularly on the last day in Cork when the penny had dropped that crowds of people were keen to meet her and the security seemed to relax a little. 

That last day was like the sun coming out.  She got a great reception in Cork, the Rebel County. 

Again, no one was fawning.  But the pleasure in meeting her was unmistakable.  She bantered with the traders in the old English Market in the city, laughing at the jokes and giving as good as she got. 

By then the realization had sunk in. Unlike Obama, the Queen may have spurned the pint of Guinness.  But clearly the woman was genuine.

She really wanted to heal the past and lay down a marker for a new beginning.

The great jobs initiative hoax

Finance Minister Michael Noonan at the Jobs Initiative announcement in Dublin last week.

This column comes to you from a city in lock down.  There are crowd control barriers across the center of Dublin, traffic is being diverted, and there are Gardai (police) everywhere.  

By the time you read this the reason for the security clampdown will be here. And no, it's not another IMF delegation sweeping into town in a motorcade to issue orders.

In fact the Queen arrived on Tuesday afternoon for her historic three-day visit.  We will be analyzing the significance of the royal visit on this page next week. 

My prediction is that all those crowd control measures will turn out to be unnecessary because there won't be enough people out to throng the streets to the point where barriers are actually needed.  No one seems to be that interested.  

Now, if it was Kate Middleton (or even better, Pippa) it might be different.  But let's face it, the Queen is like anyone's granny, except that she always dresses like she's going to a wedding. 

So no one is excited, and don't expect any thronging of the streets here this week.  We'll take her to see the horses on a few stud farms, and we'll be polite to her at a few major events and gala dinners.   But that's about it.   We've too many problems at the moment to have time for a distraction like this.    

In the real world, one of the main worries concerning a lot of people here right now is the government raid on private pension funds to pay for the so-called Jobs Initiative program announced last week. You will remember that the Jobs Initiative was a major plank in the Fine Gael election platform, promising radical action to tackle the huge number of people out of work. 

I did point out at the time that since we had no money and we can't borrow any money, it was unlikely to be quite as radical or extensive as Fine Gael were saying.

Well, last week we discovered the reality.  The great Jobs Initiative, which just a few weeks ago was being announced like something as magnificent as one of Chairman Mao's Five-Year Plans, turned out to be a bit of a hoax.  The reality is very pedestrian. 

And guess what? The reason is there's no money to spend on new projects.   Anything we do, the government admitted, has to be budget neutral. 

The Jobs Initiative plan was presented to the Dail (Parliament) last week by Minister for Finance Michael Noonan and Taoiseach (Prime Minister) Enda Kenny.  The aim, we were told, is to stimulate economic growth.

We have around 430,000 people out of work at the moment, and the plan aims to get 100,000 of them back into jobs over the next four years, or 25,000 a year.  

Now we all know that a government -- any government -- can't actually create jobs, unless they are jobs that are paid for by someone else's taxes in the real economy.  And we don't have any money left to spend here on big new state infrastructural projects, and we can't borrow money to do that either.

So the government is depending on the private sector to produce extra jobs, and the Jobs Initiative is a series of measures designed to stimulate the real economy in which real businesses make products and services that have a market and are not paid for by someone else's taxes.  

Despite this, Noonan did say that the initiative would quickly provide 6,000 new jobs in “shovel-ready” state construction projects, including badly needed road repairs.  But the government later admitted that this would be funded by shifting around or delaying other state infrastructure plans.   

So there's a bit of three-card trick stuff going on here, although in fairness the aim seems to be to get the bang for the bucks much faster than had been planned before. 

The main stimulants for the private sector where most of the jobs are to come are things like sales tax reductions in targeted areas which are labor intensive.  So the lower sales tax rate will fall from 13.5% to 9% for restaurant meals, hotel stays, entertainment and even sports match tickets. 

This is aimed at increasing tourism, an area where there has been a sharp decline recently.  Tourist numbers from Britain are down by almost half over the last few years, for example, and if we can get that business back it would mean a significant jump in jobs in the sector. 

Also aimed at giving tourism jobs a boost is the government's announcement of a new visa scheme to allow non-EU tourists visiting Britain to come here for 14 days with no visa requirement.  The target groups are the large numbers of Chinese and Indian tourists (and those from other emerging countries) who now visit London in their millions, with even more expected for the upcoming Olympic games.

The idea is that their British visa will be accepted here as well, and a campaign will be mounted to get as many of them as possible to come over here for a few days while on a trip to the U.K. 
Some of this makes a lot of sense, and it's possible that it will be successful and boost jobs here. 

Another part of the initiative is actually an upskilling plan designed to get more people who have lost their jobs into educational programs to give them the new skills that will be in demand as soon as today's depressed Irish economy starts to recover.   It includes an internship placement program for graduates. 

But of course these educational programs are no substitute for real jobs, even if they do get people off the jobless statistics and make the government look better.   The experience with these training programs up to now is that they do little to increase someone's chances of getting a real job.

All told, the Jobs Initiative announced last week was a bit of a damp squib.  Some people even dismissed it as a hoax.  It might have been ignored altogether, but in fact there was an overwhelming reaction to it -- of anger and outrage.

This had nothing to do with whether it would really create real jobs or not.  It was all about how the initiative, which is to cost over €2 billion over the next four years, is to be funded.  

And that is where the real sting in the tail came.  Bear in mind what I was saying about the IMF/EU insisting that the initiative would have to be budget neutral -- in other words, any extra spending has to be matched by extra taxation or cuts in state spending elsewhere. 

To pay the bill for the initiative that may or may not produce any real jobs, Noonan announced last week that he was immediately introducing a 0.6% annual levy on private pensions, and it would stay in place for the next four years.   It will bring in ****470 million euro a year at least. 

This was a real cheap shot by Noonan aimed once again at the coping classes, the people who work hard, pay their bills and their taxes and save to build up a fund to finance a private pension for themselves in retirement.  In other words, responsible people who do their best to pay their own way and not to be a burden on the state.

There are a lot of people involved in this, about half the private sector workforce.  They save and invest in a private pension so that they will have their own pension to top up what they get from the state pension, which they have also been paying into, of course, through a compulsory income tax add-on called Pay Related Social Insurance.

The pensions levy was clever because it avoided tax hikes, welfare cuts or reductions in frontline public services, any of which would have caused an outcry.  It appeared to have no immediate effect that you could feel. 

But of course it will have an effect in the long run adding up to over a 2% cut in the pension funds of individuals over the next four years.  And that will reduce the pensions people get when they retire. 

The government tried to justify this on the basis that everyone must make a contribution, and that people who save for pensions had got tax breaks because you could put money into a pension without paying income tax on it.  They were just taking a little of this tax break back, the government said. 

This is horse manure, of course, because although in the past you didn't pay income tax on income that went into pension contributions, you do pay tax on the income you have when you start to draw on the pension after you retire.  

The other obvious point is that pension funds have collapsed with the stock market, and in spite of the recent partial recovery in the global economy most of them are still down 40-50%.  So applying a levy to them is like kicking a man when he is not only down, but half dead.

That's not the only reason people here are mad about the levy, however.  Soon people woke up to the fact that it was called a private pensions levy because it applied to private sector workers only, not to state workers. 

The reason for this, the government said, is that state workers have already been hit with pension levies.  

But this was more horse manure, because not only are the contributions that state workers make to their generous pensions still very low in comparison to private sector workers, but the guaranteed pensions that state workers get are huge in comparison with what private sector pension funds now produce.   

If state workers were forced to pay the full market cost of funding their pensions, they would be paying three times what they are paying now.  Yet this new levy will not apply to them!

To make matters even worse for the government, it also emerged that company directors and others who pay into Approved Retirement Funds (ARFs) -- a kind of pension scheme for the better off in the private sector -- would also be exempt from the new levy.  

So the only guys who will be paying the new levy will be Joe and Josephine Average, the typical middle income, middle class people with a job in a private company with a pension plan for its employees. But there are tens of thousands of average citizens and they are easy targets for this government, which is why they are being hit.

The state workers, in contrast, are unionized and militant and they fight to hold on to what they have, no matter how unfair that is to everyone else. 

So the government -- and in particular the Labor side of the government -- is afraid to touch them and hits the private sector workers instead.

One effect of all this has been to shatter whatever illusion there was left that this new government might make courageous decisions in the struggle for the survival of the Irish economy.   

This episode has revealed the truth -- they're just as spineless as the last government.

Morgan Kelly: the professor who tells the truth

Central Bank Governor Patrick Honohan.

Talk about having your weekend ruined!  Like thousands of people all over Ireland last Saturday morning I opened my Irish Times to find another Weapon of Mass Destruction from the economist Morgan Kelly. 

Ireland, according to Kelly in his latest full page missile/missive, is in mortal danger of becoming an economic dead duck. 

Now if anyone else was saying this -- especially one of the economists here who write in our papers every week -- we might pass over it.  But Kelly, who is professor of economics at UCD, Ireland's largest university, is different. 

He writes an article about once a year, and only for The Irish Times.  He is the guy who predicted the crash in Ireland years ago before it happened and, when the boom began to falter, accurately forecast just how severe the collapse would be.

He was laughed at by his colleagues at the time and ridiculed by politicians.  But he was right.  In fact he was so accurate in his predictions of doom that he has now become something of a seer in Ireland.  

As I said, he only writes a piece about once a year and he rarely gives TV or radio interviews.  So when a new article by him appears, it is seized on like the words of a prophet. 

His latest article, which appeared without any advance publicity, dominated the news here over the weekend. 

There must have been people all over Ireland last Saturday morning, like me, who wished they had had their breakfast before starting it. 

Because believe me, when you finish reading it you feel sick instead of hungry.  (You can find the full text on the Irish Times website, where it is Number 1 on their most popular story menu. Have your breakfast first!) 

Part of the reason that Kelly is so widely read is that he is absolutely fearless.  He says exactly what he thinks, he doesn't care if he upsets powerful people here in the process and this latest article is further proof of that. 

Plus he happens to be a more entertaining writer than any economist has a right to be!

The headline on this latest article was “Ireland's future depends on breaking free from bailout.”  Other people (including yours truly) have been saying the same thing for some time. 

But Kelly's analysis of why we need to do it is more perceptive, more detailed and more convincing than anything else that has been written here on the issue. And it is far more direct. 

"Ireland is facing economic ruin," Kelly writes, unless we break free from the bailout deal and take drastic action to save ourselves.  You can't be clearer than that. 

He likens the new government's policy to one of "lying on the ground with a begging bowl and hoping that someone takes pity on us.”  He says the last government was "spineless," and that former Finance Minister

Brian Lenihan's original decision to give a blanket guarantee to the Irish banks in September 2008 was a serious mistake.

But Kelly reserves his real fire for what came after that.  "The real error was in sticking with the guarantee long after it had become clear that the bank losses were insupportable," he says.

We all know now that the banks either covered up or did not grasp the full extent of their losses back then, and that Lenihan was misled about the scale of the problem.  But as time went on, the depth of the black hole became increasingly clear.  And instead of confronting it, we tried to hide it under the carpet.

By then it had become clear that Lenihan had made a big mistake, and that the hole in the banks which we had guaranteed to fill was big enough to drag the state down as well. 

"The ideal time to have reversed the bank guarantee was a few months later when Patrick Honohan was appointed governor of the Central Bank and assumed de facto control of the Irish economy," Kelly says. 
Instead of forcing bond holders in the Irish banks to swap bonds for shares, Honohan carried on as before, insisting that the losses were "manageable."  

"Honohan's miscalculation of the bank losses has turned out to be the costliest mistake ever made by an Irish person," Kelly writes.

The Irish government continued to borrow vast amounts of money to give to the banks so they could pay back the foreign bondholders and banks that had gambled on the Irish property boom. But the markets were wise to this foolishness, and towards the end of last year they simply stopped lending to us because they didn't think Ireland would ever be able to pay back the debt. 

After that, we were completely dependent on the European Central Bank (ECB). The game was up.

Kelly also accuses Honohan of siding with the ECB against his own minister for finance who he "deftly sliced off at the ankles" when he (Honohan) went on radio last November and insisted that Ireland would need a bailout of "tens of billions."  

This intervention came at a critical time when Lenihan was hanging tough and was resisting the bailout that the EU was attempting to force on Ireland to protect the rest of the Euro zone.

At the time, Lenihan was in a position to exploit a "strong negotiating position" to get a haircut for bank debt, according to Kelly.  But the other EU finance ministers wanted us to accept a national bailout to stop panic spreading to Spain and Portugal.

Honohan "also played for the opposing team" as a member of the council of the ECB, Kelly writes.  And
Honohan's intervention was a key influence in forcing us to accept the ECB line that we needed a national bailout, that there would be no haircuts of bank debt and that the Irish bank losses should be repaid by Irish taxpayers following the bailout of the state.

Kelly also has an interesting insight into the role played by the U.S. in the critical decisions that were taken when Lenihan and the Irish government were in negotiation with the EU-IMF.

"The IMF, which believes that lenders should pay for their stupidity before it has to reach into its pocket, presented the Irish with a plan to haircut €30 billion of unguaranteed bonds by two-thirds on average," Kelly writes. 

"The deal was torpedoed from an unexpected direction. At a conference call with the G7 finance ministers, the haircut was vetoed by U.S. Treasury Secretary Timothy Geithner who, as his payment of $13 billion from government-owned AIG to Goldman Sachs showed, believes that bankers take priority over taxpayers.

"The only one to speak up for the Irish was U.K. Chancellor George Osborne but Geithner, as always, got his way. An instructive, if painful, lesson in the extent of U.S. soft power, and in who our friends really are," Kelly writes.

"The negotiations went downhill from there. On one side was the European Central Bank, unabashedly representing Ireland's creditors and insisting on full repayment of bank bonds. On the other was the IMF, arguing that Irish taxpayers would be doing well to balance their government's books, let alone repay the losses of private banks."

As we all know, the Irish caved in and took the bailout ... and the government used most of the money to repay the bank debt in full, thereby reducing us to the state we are in where we can't borrow on the markets. 

All this detail, fascinating though it is, is just billions down the toilet. We are where we are ... and what we need to do now, according to Kelly, is take drastic action unless we want to default, go bankrupt and collapse. 

What Kelly proposes is a two-part solution beginning with walking away from the bailout.   Part one involves us telling the EU and anyone else we owe that this debt has been swapped for equity and that they are now the proud owners of the Irish banks. 

This means, of course, that our pipeline of funding from the EU would be shut off, which is where part two comes in.  We would immediately reduce government spending by about one-third to balance our budget.  We would have no choice because we would be unable to borrow. 

Kelly writes, "The ECB can then learn the basic economic truth that if you lend €160 billion to insolvent banks backed by an insolvent state, you are no longer a creditor: you are the owner. At some stage the ECB can take out an eraser and, where ‘emergency loan’ is written in the accounts of Irish banks, write ‘capital’ instead. When it chooses to do so is its problem, not ours.

"At a stroke, the Irish government can halve its debt to a survivable €110 billion. The ECB can do nothing to the Irish banks in retaliation without triggering a catastrophic panic in Spain and across the rest of Europe.  The only way Europe can respond is by cutting off funding to the government.

"So the second strand of national survival is to bring the government budget immediately into balance … Cutting government borrowing to zero immediately is not painless, but it is the only way of disentangling ourselves from the loan sharks who are intent on making an example of us.

“By bringing our budget immediately into balance, we focus attention on the fact that Ireland's problems stem almost entirely from the activities of six privately owned banks, while freeing ourselves to walk away from these poisonous institutions.

"Just as importantly, it sends a signal to the rest of the world that Ireland ... is back and means business."
So that's Kelly's solution.  Several papers have taken to calling him the maverick professor or the radical professor. 

But there's nothing radical or maverick about what he's saying.  In fact he's more a conservative and a realist than anything else. 

The truth is there is no alternative other than a long and painful slide into bankruptcy, which will come at some point in the near future when the debt burden overwhelms us and the EU pulls the plug. 

On the present trend, we're going we're going to be around €250 billion in debt within a few years. Cutting back a few billion a year to balance our budget in four years' time is not going to help much, despite all the pain it will cause.

Which is why it makes sense to go for the nuclear option immediately, and why many people here agree with Kelly's “radical” solution. 

So alarmed were the government and the Department of Finance at the huge coverage given to Kelly's article over the weekend that Taoiseach (Prime Minister) Enda Kenny, the department and senior politicians all made statements rubbishing it. You know he has to be making sense when all those boys are out together to shoot him down. 

The Department of Finance pulled no punches.  State pensions, child benefit and the wages of 300,000 public sector workers would be slashed by one-third if we abandoned the EU-IMF bailout deal, it said. 

Which of course is alarmist rubbish.  It's true that government spending would have to be cut by as much as one-third if we don't raise taxes.  But there is so much waste and overpayment in government spending that the correction should be possible without going near sensitive areas like old age pensions if we raise taxes a little.

As for child benefit, it should have been means tested years ago. And as for the wages of state workers, the Central Statistics Office here in March of this year released figures showing that Irish state workers earn an average of €912 a week compared with state workers in the U.K. who earn an average of €634 a week, and compared with Irish private sector workers (the real economy) where people earned an average €625 a week. 

And don't start me about all those directors and managers and consultants and PR minders, and all the rest of the vast overpaid top layer on the state payroll both directly in the state service and in semi-state organizations.  And all the doctors and lawyers and all the rest of the professionals who make a fortune supplying overpriced services to the state and raising the cost of living for the rest of us.  

We can make the cuts and still afford pensions and welfare for those who really need it.  We can shed all the rest of the Celtic Tiger fat. 

Kelly is right.  We should just get on with it and tell the ECB guys to take a hike.

In Ireland life revolves around the slip sliding economy

Paul Simon

Paul Simon is playing a sold out gig in Dublin next month and I’ve promised to take my daughter, who is 19.

I once actually spoke to Simon back in 1965 in the Les Cousins folk club in Soho, a favorite haunt of a few of us Irish students who were doing summer jobs in London at the time, mainly working on building sites. 

None of us had a penny because we were all saving for college, but you could hang out in Les Cousins all night listening to the music for a pound or two.  

Simon didn’t have much at the time either.  He arrived by himself at the small club which was in a basement under a restaurant in Greek Street. 

I remember him opening the guitar case, tuning up and chatting away to the capacity audience -- about 50 of us.  I think he got £50 for the gig. 

That was good money for someone who was relatively unknown at the time, but it was still a bargain.  He played and played into the early morning and we were enthralled by his songs, songs that went on to become global classics. 

My daughter is a big fan.  She’s part of the iTunes generation who know sixties and seventies music better than those of us who were there at the time. 

She has a vast iTunes library (I know because I see all the songs on my credit card statement!) with James Taylor, Jackson Browne and all the rest of the greats from back then.  It’s one of the best things about the iPod and on-line music.  It’s brought great songs to millions who were not even born when they were first released.

Simon could fill a stadium here, but the upcoming Dublin gig is an intimate concert in a small hall called Vicar Street (although it’s still ten times bigger than the basement folk club in Soho).  That’s why it’s sold out and why tickets are changing hands for small fortunes.

If we can get tickets, I’m going to shout up a request for “Slip Sliding’ Away.”  It’s one of those songs that instantly transport me back to the old days. 

And the title seems somehow appropriate for this country at the moment.  Which is where this column slyly segues into yet more about the Irish economy.  

The problem for any columnist here right now is that, in the end, everything comes back to the economic catastrophe that has befallen us.  Of course there are other things going on, but everything else seems trivial in comparison.  The elephant in the corner of the room is so enormous it cannot be ignored.

This column could focus on some of the other things that have been making the news, including the capture and killing of Osama bin Laden on Sunday. It could discuss why the Irish were glued to the TV coverage of the Royal Wedding, or the preparations for the visit by President Obama, for example. But there is an air of unreality about everything else.  Somehow even events as big as that seem a distraction from what we need to focus on.

Moving attention away from the Big Question (how can we survive as a nation over the coming years without financially going belly-up?) seems like we’re dodging the elephant.  It’s like we’re pretending the problem is manageable.  Or that it’s slowly getting better.
It’s not.  It’s getting worse. 

Last week the government revealed that growth this year in Ireland is likely to be 0.7%, not the 1.7% that had been estimated in the budget in December. And the official forecast for 2012 has been downgraded as well. 

In normal times, this might not be such a big problem.  But it’s a huge problem now because our ability to get our budget deficit down and make our repayments on the EU-IMF bailout are dependent on growing the economy so that tax revenue increases and spending on welfare falls as more people find work.

Our four or five year plan to get our economy back on a sustainable path depends on growth.  Without that growth we are, as Paul Simon sings, Slip Sliding’ Away.   

You will remember that our agreement with the EU requires us to get our deficit below 3% of national output (GDP), by the end of 2015.  The target used to be the end of 2014, but the new government pushed that out by a year.  

Even that extended target now seems unachievable, with some IMF sources last week predicting that it will be 2017 at the earliest before Ireland hits the target 3%, which is the agreed maximum deficit level under EU rules.   

Our almost stagnant economy means tax revenue is still down and that the government now expects borrowing this year to be 18.2 billion euro compared with the original estimate of 17.7 billion euro.  And it could be more. 

That’s more or less where it was at last year. Which means we are still living way beyond our means.  Tax revenues still only pay for two-thirds of what the government spends and the rest is being given to us by the EU-IMF. 

If there is any improvement in our finances this year, it will be fractional.  It will not be nearly enough to get us back on track.

None of this is a surprise. You don’t have to be a government economist to be aware that the economy is still in the dumps – the closed shopfronts everywhere tell us that, as does the number of people out of work or emigrating.

The official figures that were released last week came in the first progress report on how the economy is performing since we got the bailout.  The report, called the “Stability Program Update,” has to be produced every quarter for our masters in the EU.

These new rules also require us to submit budget plans for assessment by the EU Commission. The government is insisting that the planned 3.6 euro correction due in next December's budget will not be increased, even though it’s now clear we won’t be meeting our targets this year. 

The government is saying that any deeper cuts needed to make up the lost ground will be pushed out to the budget for 2013. But it remains to be seen whether the EU and the IMF will accept this, or whether they will insist that deeper cuts must be made in the budget for 2012 in December.

My bet is that the EU won’t appreciate our long-fingering approach to the problem and will insist that we make an adjustment (the polite word for cutbacks) of ***5 billion euro in the December budget. The fact is that the deficit this year is still way up there and next year it won’t be much better (8.6% compared with the target of 7.3%), according to the new figures.

The government is blaming higher interest rates on its borrowings, the huge welfare bill and so on.  But the real problem is that significant growth has failed to emerge, growth that would have paid some bills and kept us on track. 

What all this means is that we have some very severe budgets coming at us for the next three or four years at least, with massive cutbacks in state spending and tax hikes. 

The original plan for our recovery was based on steady and increasing growth, with the economy growing from next year by an average of 3%.   Based on the figures we got last week, this now looks hopelessly optimistic.  

What that means is more and more cutbacks, which will make the depression even harder to turn around since there will be less money out there.

One scary item in the government figures released last week was the forecast that interest payments on the national debt will gobble up around 21% of tax revenues by 2015, compared with just 3.5% of revenues in 2007.  And that’s just to pay the INTEREST on the debt. 

For the ordinary person here what all this will mean is that there will be no extra state money to spend on anything.  Instead, services will be cut and our standard of living will fall sharply.

It also means that all those promises made by the new government during the election are out the window unless they can be paid for by cuts elsewhere.  Or as the IMF guys like to put it, they have to be budget neutral. 

The first casualty of this is the so-called Jobs Initiative which was a key election promise by Fine Gael.  The government has now admitted that there will be no new money for the Jobs Initiative Fund.  The promised jobs budget is not going to happen because reducing the deficit has to be the priority in any budget, not extra spending on government programs. 

The cost of the Jobs Initiative -- which it was said during the election would put thousands of people back into work -- will have to be paid by reducing spending elsewhere.  So it’s unlikely to happen to any significant degree.

There is a way out of this mess, of course.  But it requires a complete change of strategy by the EU and the IMF, involving an acceptance that Ireland can’t pay back everything and that foreign banks and bondholders are going to have to take a major hit.  

If that doesn’t happen, we will end up defaulting anyway and Greece and Portugal may default as well.  The money markets are already betting on this. 

Maybe I should ask Paul Simon to dedicate “Bridge over Troubled Water” to us instead?

Irish people still mad as hell over fat cats

A worker removes the Anglo Irish Bank sign from a location in Dublin last week. Anglo Irish was the worst offender in the Irish property crash

There was a very minor, very brief, but also very interesting court case here last week.  It involved a journalist I happen to know, a work colleague of mine for many years. 

My friend, the former Irish Press reporter Des Nix, had been caught by the Gardai (police) in Dublin driving at a little above the speed limit, and he had been issued with the usual €80 automatic fine. 

Dozens of these fines are issued every month for parking violations and minor speeding offenses.  You get the penalty notice in the post and if you pay on time you don't have to go to court.  That's what most people do. 

But Des, a law abiding, solid citizen in every way like the vast majority of people here, decided that he was not paying.  Instead he wrote back to the Garda office and said that he was returning the speeding ticket and that he was refusing to pay the fine.  

He was refusing to pay, he explained, not because he was denying that he had unintentionally exceeded the speed limit, but because money going to the state was now being used as "a slush fund to pay gangster bankers."  

He said in his letter to the fines office that his refusal to pay was "an act of civil disobedience."
Having failed to pay the fine on time, he was summoned to court. He appeared before the judge last week, but the prosecuting Garda (police officer) failed to turn up in court on the day so the case was dropped. 

After his court appearance Des told reporters that he thought it was unacceptable that the government should act as the "bag men" for the bankers and bondholders who are taking money from "people who never had any dealings with them."  

Which is precisely how the vast majority of people here feel. They deeply resent the fact that ordinary taxpayers here are now being saddled with the vast bill for the IMF-EU bailout, and that most of the money is being used to pay back the foreign banks and bondholders who gambled on the Irish property market and lost.  

A huge chunk of the money that is raised in taxes here -- and in all other sources of state revenue like my friend's speeding ticket -- will in the future be going to pay back the massive bailout from the IMF-EU.  Even paying the interest on the bailout money each year is going to take a significant amount of state revenue.  

As we have pointed out here before, the primary reason for the €85 billion euro bailout is to prevent an Irish default and to enable our now state guaranteed banks to repay all the money that was pumped in here by the German and French banks and the bondholders who all wanted a piece of the action in the Irish boom. 

Most ordinary people here feel that this is unjust and unfair.  They deeply resent the fact that so much of their tax money in the years ahead will be used in this way instead of being spent on schools, hospitals and all the other services provided by the state which are in need of improvement. 

They deeply resent the fact that so much money is going to be sucked out of the Irish economy every year at a time when we desperately need it at home to get things moving again.  

In fact resentment is far too mild a word to describe the feelings of the majority of people here about what is happening.  A better description would be seething with anger. 

People here mistakenly believed that the new government would be able to offer an alternative solution to the deal negotiated by the previous administration.  Now they have woken up to the truth.

Now they realize that the new government is not able to offer any alternative to the economic crucifixion of the country.  And they are boiling with rage as a result.

Talk to anyone here right now and that fury comes pouring out.  Some people talk about leaving the country rather than staying and seeing their taxes being used to pay off the billions the banks owe. 

But others -- a small but growing minority -- talk about staying and refusing to pay into an economic system they now see as unjust.  What they are really talking about is civil disobedience. 

The stand taken by my friend Des Nix is probably one of the first examples of the kind of action that a lot of people here might decide to take in the future.  Which is why what happened in court last week is potentially revolutionary. 

Suppose people decided to stop paying not just speeding tickets, but car tax, waste collection charges ... even income tax? 

This might seem far fetched now.  But those of you who are old enough may remember the tax marches that brought the center of Dublin to a standstill back in 1979.   That was over what was perceived as an unbalanced tax system at the time, an internal matter.

But the situation facing taxpayers here now -- all taxpayers -- is a far greater injustice, with everyone being forced by external forces to carry a heavy tax burden for at least the next four or five years (and possibly much longer), not to improve life here but to repay the billions our banks owe to foreign banks and bondholders.  

There is no sign of widespread civil disobedience here yet.  But mark my words, give it time. 

Des Nix may have been the first.  But he won't be the last.  Unless there is significant debt restructuring and burden sharing with our EU partners and the IMF -- unless the foreign banks and bondholders accept that they have lost a lot of the money they lent into Ireland -- there is going to be trouble. 

Unless this is done the ordinary Irish taxpayer will have to carry the entire enormous debt burden, and that will cause public outrage because it is seen as totally unfair.  Not much has happened yet because although the recession is deep and unemployment is high, the real impact of what is happening has yet to hit us.

When the cumulative effects of the cutbacks and tax hikes really start to hit home in the years ahead, there is likely to be a mass reaction with street protests and possible widespread civil disobedience.   

It may only take a single issue -- something like the means testing of the old age pension, for example -- to set it off.  But once it starts I believe it will be difficult to contain, and the authority of the government and the cohesion of Irish society will then be at risk.  

This may seem alarmist at this stage, but there is a serious underestimation at EU and IMF level of the anger and bitterness that is now festering among ordinary people here at the situation we face. 

The bottom line is that the boom was not driven by ordinary people here, yet they are being forced to pick up the tab for its collapse, a tab so big that it has bankrupted the nation, stolen our economic sovereignty and will swallow a huge part of the taxes we pay for years to come. 

Over the past week we have seen several developments which have added fuel to the flames of fury here.  First up was the revelation that the former head of Ireland's biggest bank AIB, the black hole which has been taken over by the state, got a €3 million severance package when he was removed last year. 

He was part of the senior management team throughout the period of the boom when AIB went completely off the rails.  Yet he has walked away with a personal fortune at a time when thousands of ordinary people are struggling to keep their heads above water. 

That is just one example.  Details of the departing pay and pension packages given to many senior managers who were key figures during the boom were published last week and added to the outrage of everyone else. 

Also last week, two important reports were published. The first was the one on the collapse in Irish banking which was commissioned by the last government and produced by the respected Finnish banking expert Patrick Nyberg. 

Finland came through a banking crisis over a decade ago which is why he got the job.  
But his report was disappointing.  It told us what we knew already, that the crisis was caused by poor regulation, flawed lending policy and what amounted to a "mania" in the banks which replaced normal risk management. 

What Nyberg did not do was name names.  He did not identify all the people who had been in the key positions in the various banks when the mania was in full flow.  Instead he spread the blame across all of Irish society. 

The following sentence from his report was run as a headline across the front page of The Irish Times: "The extent to which parts of Irish society were willing to let the good times roll on until the very last minute, a feature of the financial mania, may have been exceptional."

This enraged ordinary people even more. Was Nyberg saying that we were all to blame for what went on in the banks? 

Were we all to blame for the tens of billions that were lost in property speculation?  Were we all to blame for the failure by politicians, regulators and banks to calm the market? 

The other report which emerged last week was the one recommending the sale of state assets (like the electricity and gas utility companies) to pay back some of our debt.  This may well result in higher prices and even poorer service for ordinary people. 

And the bottom line is that it is unlikely to raise more than €5 billion when our total debt is now heading for €250 billion.  So we would be selling the family silver to give the money to the foreign banks and in the end it would not make much difference, except that ordinary people would eventually lose out.

Much more of this and my friend Des Nix will not be the only one making a stand.

Bargain hunters feast on bust property in Ireland

Bargain hunters line up for the property auction at the Shelbourne Hotel in Dublin last week

So is the Irish property crash over?  Have property prices here hit bottom at last? 

All eyes in the country last Friday were on the first mass auction of distressed properties since the bubble burst.   The sale of a mixture of over 80 apartments, houses and commercial properties had been widely publicized in recent weeks, with reserves (minimum prices) for the auction pitched at about one-third what the properties had been worth at the peak of the boom.

It was going to be the biggest test of just how far the market had collapsed, the experts said.  It would reveal just how far prices had fallen and put a floor under the property market for the future. 

The properties were mostly in Dublin but some were down the country, and the main thing they had in common was that almost all of them were being sold by receivers (court appointed administrators) of bust developers or on behalf of broke bank clients, or else they had been repossessed.

The mass auction was held in the biggest function room in one of Dublin's poshest hotels, the Shelbourne on St. Stephens Green.

So many people turned up in search of a bargain that the crowd spilled out onto the pavement and the Gardai (police) arrived to maintain order. 

Inside in the auction room there was seating for 350, with standing room for an additional 500.  And even with that amount of space people were not able to get in. 

All but two of the 82 properties on offer were sold in a few hours, amid frenetic scenes the likes of which have not been witnessed since the height of the property madness here four or five years ago.   

The real estate agents involved -- a U.K. company that specializes in handling fire sales of this kind -- said it was so successful they are going to have another one, much bigger, with more properties, in a couple of months.  

The event illustrated a few things clearly.  One was that, in spite of everything the country has gone through, a lot of Irish people still have not lost their fascination with property as an investment.  

Another is that there are still a lot of people here with plenty of cash at their disposal. And their fascination with property borders on the obsessional. 

They don't like shares and they don't trust the banks.  So if they think prices are low enough they still fall over each other in a rush to buy property.  

So were there real bargains to be had?

Well, yes, there were some properties that seemed cheap.  One pub, which sold for €3 million in 2005, had a reserve price of just €260,000 and there was a lot of interest as a result.  It went for €400,000 in the auction, which seems like a bargain. 

But the pub is in Arklow, a town in Wicklow which has lost most of its jobs.  And we all know the pub trade in Ireland, especially in small towns like Arklow, has been struggling badly in recent years.

So a bargain? I'm not so sure.  If it can't make a profit it's not going to be cheap at  €400,000, even if it once sold for €3 million.

Another property that attracted media attention was a studio apartment in Temple Bar, the trendy "Left Bank" area of old Dublin beloved of tourists. It sold for €126,000 (nearly 60% over its reserve price) and during the boom here it would have made more than twice that. 

A bargain?  Well, maybe.  Temple Bar is also a favorite weekend destination for stag parties and younger tourists who want to get the Irish pub experience, listen to diddle d-i music and drink plenty of Guinness. 

Which means it's not necessarily the best place to live, and a lot of local apartment dwellers have learned that the hard way.  Add in the fact that there are thousands of unsold apartments around Dublin in areas where you don't have to step over the vomit in the morning, and the studio in Temple Bar seems like less of a bargain.

So maybe not all the properties sold last Friday were as much of a bargain as the media suggested.  Even so, the mega auction was certainly a ray of hope, however faint, for the property market here.
Real estate agents had tried a similar bumper property auction here in April of last year and only six of the 70 properties being sold that day found buyers. So last Friday did show that confidence is starting to return. 

Because of the variety of properties being sold and the fact that they were a mix of commercial and domestic, of houses and apartments, it's hard to be definitive about what it told us about the market.   Looking across the auction results, I think it would be fair to say that it suggests that prices in general are now just under half what they were at the peak.  

For example, a few properties last Friday were houses in Dublin 14, around the mature Churchtown area.
This area was never as expensive as Dublin 4 or the costal strip on the south side of the city. But it's a solid middle-class family area with good facilities and was always a desirable place to live.  

Last Friday four houses in the area sold at the mega auction for prices in the €400,000 to €500,000 range, or just under half what they were making during the boom.  

Local real estate agents say that these prices are very close to what similar houses in the Dublin 14 area have been making in recent months.  So it seems, for the moment, that is where the floor is in the market. 

Using the established Churchtown suburb as a guide, we're down between 50% and 60% from the top of the market about four years ago.  That's what the real estate agents want to think. And that's what the few people who have been buying property want to believe. 

They want to believe we have now reached the floor and that things won't get any worse.  But I'm not so sure.  

And the reason I'm not so sure has to do with a few rather bemused people who walked past the crowd outside the Shelbourne last Friday.

They were none other than the now famous Ajai Chopra and his mates from the International Monetary Fund and the EU who were in town last week for the first inspection of the Irish government's books to monitor our progress in cutting state spending to meet the targets that were agreed when we got the bailout money. 

The Shelbourne happens to be close both to Government Buildings and to the luxury hotel our IMF/EU masters stay in.  So it was not that surprising that Ajai and his chums happened to stroll past. 

What they thought of the renewed outbreak of property fever can only be guessed.  Their expressions caught on camera are of mild embarrassment, as though they had stumbled across something they would rather not have seen.

Whatever they thought of the shenanigans in the Shelbourne, they seem to have been less than impressed with the Irish government.  They issued a bland statement saying they were pleased that Ireland had met all conditions for the loan in the first three months since we got the bailout cash.  

But this did not fool anyone.  The fact is that last year the bill for the state payroll here was €18.8 billion, which was 60% of our total €31 billion euro tax revenues.  This was up from 37% of tax revenues in 2007. 

What’s happened is that tax revenue has collapsed since then but state pay has continued to increase. Now you don’t have to be an economist to see that this can’t go on, particularly now that we have huge interest bills to pay on the bailout and bank rescue.

Little or no progress has been made in reducing this state worker pay bill beyond the small adjustments that happened a year ago.  Instead the government has been sticking with the ludicrous Croke Park agreement under which the unions were guaranteed a year ago there would be no further cuts in pay for state workers until 2014, on the basis of increased productivity.

This has turned out to be a joke, with no measurable increase in productivity over the past year even though the Croke Park deal was supposed to deliver real change in the public service fast. 

Instead we have had more revelations about long holidays, inefficiency, poor service and so on … and of course despite the small cuts a year ago state workers are still earning far more than their counterparts in the real economy, and have guaranteed jobs for life and generous pensions that private sector workers can only dream of. 

The fact is that NO progress on the state sector pay bill has been made in the three months since we got the bailout.  And you can be sure that Ajai and his hit-men pointed this out to the new government behind the closed doors of Government Buildings. 

Which may explain why there were three cabinet meetings in four days last week.  And why the minister in charge of the public service made a tough statement saying that the public service was “not fit for purpose” and that we needed a service that was “leaner, more efficient etc.”

No doubt all this was for the benefit of our IMF and EU masters to give the impression that the new government has got the message.   But talk is cheap. 

Getting real change is going to be very difficult, particularly now that Labor, which depends heavily on the public sector unions, is part of the government.