Thursday, 9 October 2008

"With banks being bailed out and markets melting down would Scots really fancy being on their own? Of course not."

Alan Cochrane’s Telegraph article, examining the impact of the financial crisis on Scottish nationalism is worth reading. Iain Martin adds his comments on Three Line Whip.

“The Nationalists look worried, I am told, about the upcoming Glenrothes by-election and no wonder. It's there for Labour to win now……. With banks being bailed out and markets melting down would Scots really fancy being on their own? Of course not.”

Both men point to Alex Salmond’s description of an ‘arc of prosperity’, whereby he wishes to add Scotland to a series of independent northern European states, perceived to have achieved economic success. One of the chief of these is Iceland, much to the satisfaction of Scottish Unionist. Another is the Republic of Ireland, which fell into official recession quicker than any other EU state other than Denmark.

After all the talk of small economies being nimble and therefore equipped to react swiftly to the market, it is those very economies which have proved most exposed to international economic turbulence. Global action and action by larger states and institutions are proving to be the instruments which must combat the financial crisis. Smaller economies are not insulated against the inclemency sweeping markets and the banking sector.

16 comments:

Kloot said...

There is nothing 'percieved' about Irelands economic success. Is there for all to see. Yes, there is a recession but yes the Irish economy will recover and return to a state of growth. The Irish economy is affected by the global downturn as much as any other. But that does not mean it was a hollow success.

Anonymous said...

The Celtic Tiger was founded on a property boom, low taxes, low wages and a not insubstantial input from the EU.

Three of these are no longer in place and the reliance is now on low taxes which are not so attractive as they once were with low taxes in other areas in Europe eg Bulgaria has a blanket 10% tax for individuals and companies coupled with wages at about £100 per week.

The financial sector, as we all know, is on its knees and job losses must be incurred in Dublin as this intensified over coming weeks.

As in many things size does matter and smaller states are less viable in the long run.I think confidence in these smaller states eg Iceland will be severely eroded and an independent Scotland is even less likely than before.

Scottish Unionist said...
This comment has been removed by the author.
Scottish Unionist said...

There's no satisfaction in this, Chekov - neither on a political level or in terms of the personal impact. Icelanders are now in a very real fix.

Chekov said...

"There is nothing 'percieved' about Irelands economic success. Is there for all to see. Yes, there is a recession but yes the Irish economy will recover and return to a state of growth. The Irish economy is affected by the global downturn as much as any other. But that does not mean it was a hollow success."

It's effected more. For the reasons which anon outlines.

See this article by Iain McWhirter. It's excellent.

ROI could go bust like Iceland

Kloot said...

Chekov,

See this article by Iain McWhirter. It's excellent.

I read it. Thought it was very poor. It showed up his complete misunderstanding of how the scheme introduced by the Irish Government last week and also a complete misunderstanding of the problems facing the banks in the ROI. None of the Irish banks were facing bankruptcy when the government intervened

Chekov said...

It seems like the 'modern', 'confident' Republic is too confident to see when it's in deep shit.

Aidan said...

What is happening in Iceland and Ireland is what happens when a country is mismanaged.
Finland recovered after a massive recession in the 1990s to become one of the most prosperous countries in the world with the best education system by many measures. They were able to change their educational system partly because they are such a small country. The Netherlands is a small country that happens to be a world leader in countless fields. Denmark is the world leader in hearing aid technology. Small, nimble, technologically advanced.
Great Britain went to the IMF to be rescued in 1976. Size is not of foremost importance.

Kloot said...

It seems like the 'modern', 'confident' Republic is too confident to see when it's in deep shit.

The ROI is facing the same problems that the rest of the world are facing. That is obvious.

Do you really believe this is a problem limited to small countries.

Irelands property problem is mirrored in other countries such as the US. Where money was loaned to people who just could not afford it. House prices were overvalued etc. Property, however, while important to the Irish economy, is not the only game in town.

It was a liquidity problem that Irish banks faced when the government intervened. The government will now guarantee all savings in Irish banks so as to prevent a run on the banks, thereby causing further liquidity problems and possible disaster.

No single independent country is going to solve this problem on their own. All governments can do is to try mitigate the problems in their own economies, which is what we are seeing at the moment.

Kloot said...

Chekov,

Regarding Iain McWhirters article

"But Ireland is now faced with the mother of all crashes in a small island. House prices are plummeting, and the Irish banks are effectively bankrupt as their extravagant loans to property speculators face default."

This was not the reason behind the Irish governments intervention in the banking market. He is wrong to insinuate it. Yes, Irish banks are heavily exposed to property speculators, and that may yet prove disastrous.

"But the reality is that the Irish government has placed the profits of its banks above the welfare of its people by mobilising the entire nation's financial resources in a desperate bid to bolster the share prices of delinquent financial institutions."

Rubbish. The Irish government took a pre-emptive approach to trying to stop people taking money out of the banks thus putting further liquidity pressures on the banks. The scheme announced by the Irish government means that should ALL of the banks fail, the Irish government will be required to pony up the cash. The scheme does not call for the government to pony up if an individual bank fails. The banking sector has agreed to cover the failures of individual banks.

"It is also a crisis for what might be called Celtic neoliberalism: the notion that small countries such as Ireland could slash taxes, borrow like there's no tomorrow and go on raiding parties to the big old economies of Europe"

Again, factually incorrect. Irish national debt has been decreased year on year since the late 90s.

http://www.finfacts.com/irelandbusinessnews/publish/article_10005097.shtml

http://archives.tcm.ie/irishexaminer/2001/07/20/story8406.asp

Anyone that believes that the Celtic tiger was founded on low taxes alone is wrong!.

Iceland and Ireland thought that they could rely on financial expertise and risk-taking to build what was called "a modern service economy", but which now looks more like a pyramid-selling scheme.

I cant even begin to respond to that uninformed statement.


I aint saying there isnt a problem. There clearly is a world problem and local problems, but this guy hasnt a clue what he is talking about.

Chekov said...

“Do you really believe this is a problem limited to small countries.”

Clearly I don’t Kloot. But larger countries with more diverse economies are better placed to weather the storm.

“Irelands property problem is mirrored in other countries such as the US. Where money was loaned to people who just could not afford it. House prices were overvalued etc. Property, however, while important to the Irish economy, is not the only game in town.”

Property is disproportionately important to the Republic’s economy, precisely because of the country’s size.

“It was a liquidity problem that Irish banks faced when the government intervened. The government will now guarantee all savings in Irish banks so as to prevent a run on the banks, thereby causing further liquidity problems and possible disaster.”

They pre-empted the worst of the banks’ problems.

“No single independent country is going to solve this problem on their own. All governments can do is to try mitigate the problems in their own economies, which is what we are seeing at the moment.”

And smaller countries are subject to the worst excesses which these problems cause.

Chekov said...

And so McWhirter is wrong for pointing our the possibility of a disaster which you acknowledge is perfectly possible.

"Irish national debt has been decreased year on year since the late 90s."

And this year ROI is set to record a budget deficit 5.5% of GDP, which is twice what the EU allows. In 2009 IBEC think the figure well reach 9%.

Kloot said...

And so McWhirter is wrong for pointing our the possibility of a disaster which you acknowledge is perfectly possible.

Its perfectly possible, but where we differ is on the cause and also the uniqueness of the position of the Irish.

The whole world is on the brink of an economic crash. What ever happens to the Irish economy, it will have been as a result of the global problems now facing all countries. Yes, the pain maybe more focused in Ireland, time will tell.

I just do not agree with what he and others are implying, namely that the Irish economic success was a sham. There was an over dependency on property, thats a given, however the Irish economic success was made from more then that alone.

And this year ROI is set to record a budget deficit 5.5% of GDP, which is twice what the EU allows. In 2009 IBEC think the figure well reach 9%.

Thats this year. The author, in his attempt to belittle the Irish economic success, put it down to low taxation and rampant borrowing. My point is, that he is clearly wrong. Quite the opposite took place with regards to borrowing.

Anonymous said...

Kloot

You should look at what the boom was founded on in detail, as I said above 'founded on a property boom, low taxes, low wages and a not insubstantial input from the EU'

Do you see anything else that I missed?

Unless you do the Irish economy is in severe difficulties.

Kloot said...

'founded on a property boom, low taxes, low wages and a not insubstantial input from the EU'

Do you see anything else that I missed?


Sure, add to that

1. The public partnership agreement
2. A government and tax system much more open and geared towards inward investment and business creation and relocation
3. An aggressive development authority
4. An english speaking highly educated workforce

Unless you do the Irish economy is in severe difficulties.

And today the Irish government will announce a budget that will be the toughest in 20 years with cuts in expenditure being made all over the place. The pain will be felt across the board.

However, it will recover, given time.

http://www.irishtimes.com/newspaper/ireland/2008/1008/1223335464271.html

Anonymous said...

Kloot

1. The IDA sold low wages, taxes and grants very successfully.

What are they selling now?

No more low wages in an economy that is overpaying itself.

Taxes that that aren't the lowest in the EU any longer.

Grants that have greatly reduced by the EU.

I suspect the bubble has well and truly burst, as much of the West has found a property boom and its impact on an economy are transient and illusory at best.