# Measures to return Ireland to economic stability



## Raskolnikov (9 Jun 2011)

It appears to me that in the face of the economic morass that we find  ourselves in, we must take a drastic one-time action if we are to even  attempt to pull the country back onto steady economic foot. I propose a  list of measures that will reduce the national debt, provide a low cost  source of funding to the exchequer, and will safeguard the future of  Ireland as a sovereign political entity. The medicine is tough, but the  alternative in my eyes is 10, or possibly 20 years of economic  stagnation and hardship. I believe there are three areas that we need to  focus on to achieve this.

1. Reduce the cost of funding for the Irish State, and by extension, the Irish banking system.
2. Reduce the overall level of national debt.
3. Reduce the level of current exchequer expenditure.

_Measure 1:_ Nationalise the private sector pension schemes and  place the NPRF under the direct control of the government; then  liquidate all existing investments. This will give us a pot of €100  billion worth of low cost funding (we could issue bonds with a coupon  payment of say 4%). It would probably put the pension industry out of  business, but it would mean that the cost of managing the national  pension scheme would be brought down to citizen from 1.5-2% to a  fraction of that.
_Measure 2:_ Irish banks currently have €300 billion on deposit,  with citizens holding accounts for possibly hundreds of billions more  that are outside of the state. Assuming the figure is €500 billion, we  could institute DIRT of 100%. If you assume an average rate of 2% paid  out on deposits, that provides us with €10 billion of revenue every  year. 
_Measure 3:_ Institute capital controls to repatriate deposits from  abroad. When the initial bank guarantee was announced in 2008, there  was €1 trillion worth of deposits in Irish banks. That figure is now  down to just over €300 billion. While much of the money that has left  will be corporate, there's no doubt that a decent sized portion of that  will belong to Irish citizens. I suggest that measures be taken to force  these Irish citizens who moved capital abroad to bring it back. 
_Measure 4:_ Institute a flat rate property tax. There are roughly 2  million houses in the state. If we take an average value of €200,000  per house, then apply a 1%, we will create revenue of €4 billion every  year. A property tax of 0.5% will yield €2 billion per year.
_Measure 5:_ Take a Morgan Kelly type scalpel to the public sector.  Excluding the banking bailout costs, the exchequer spent €50 billion  while only taking in about €30 billion. Scrap all new capital spending  (road, hospitals, schools, etc.), tear up Croke Park and institute  instant 25% paycuts, cut welfare by 25%, increase medical/hospital  related charges or reduce services. Aim to close the deficit to figures  in the region of 5% within 2 years. Placate the public by abolishing the  useless quangos, the Seanad, ridiculous semi-state/judicial salaries,  etc; use an emergency national vote if legislation is required.
_Measure 6:_ Sell every semi-state and/or public asset, use the  proceeds to pay the down national debt. Colm McCarthy suggested that we  would reap a windfall of €10 billion from selling semi-state  enterprises. The state also controls other valuable assets such as  roads, fiber, land and buildings. All these non-essentials could also be  placed on the auction block. We might even be able to squeeze out  another €5 billion from this.

I don't know if all these measures would be required together in their  entirety, but I think it's quite clear that we can take quite a lot of  pain to pull through the crisis we're in. Also, these measures would  show international investors that we are deadly serious about our  intentions to repay our debts and to demonstrate our capacity to repay. I  think we could very quickly bring our debt to GDP ratio back below 80%,  that would dramatically reduce existing bond rates and give the State  an outlet to draw down new funding. Another thing, by going it alone, we  would show to the world our strong mindedness in tackling our problems.  Reputationally, we would restore some of the confidence that was lost  by the initial EU/IMF bailout. Our future as a sovereign nation would  also be assured, Europe would have no cards with which to force us to  reduce corporation tax for example.

Like I said, the medicine is tough, but at least with these proposals,  there is actually light at the end of the tunnel. After two years of  gut-wrenching pain, our books would be balanced, the level of national  debt manageable by a combination of low interest payments, and an  overall level of lower capital to pay. The economy would then be able to  return to a position of normality and growth. The cleansed banking  system could be sold for a profit and austerity capital control/taxation  measures could be eased. All we need is a leader who can stand up and  win the confidence of the people, some who is far-sighted enough to see  that two years of extreme austerity is better than ten years of slightly  less austerity and the loss of our fiscal and political autonomy.

Thoughts?


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## DerKaiser (9 Jun 2011)

Raskolnikov said:


> All we need is a leader who can stand up and win the confidence of the people, some who is far-sighted enough to see that two years of extreme austerity is better than ten years of slightly less austerity and the loss of our fiscal and political autonomy.



What do you mean by autonomy? The right to be shafted by a Mayo man? 

The government has no mandate from the people to: 

1) take 100% dirt tax
2) Force private pensions into the government coffers
3) Force savings with non-government owned banks into government owned banks
4) sell the roads!!! 

Frankly I'd want no part in a state that would invade people's personal freedoms and rights to private possessions in such a way. I'd certainly emigrate


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## wakeupEire (10 Jun 2011)

As a person who has run a small business for quite a few years,I still haven't heard a credible reason why the Irish people should be expected to pay the private debt ,which was built up by private companies just because a previous government in its dieing days signed up to it,why cant we just bring in a retrospective law which,, brands this as an act of treson, and continue to pay our real national debt which was incured for the normal running of a modern state ! Can any person on this forum please enlighten me as to why the Irish people ,and their Grandchildren and their Grandchildrens children should incur this wrath ? All I've heard over the last 2 years has been waffle ,I think the Irish  media area bunch of spineless cowards for towing the agenda ,the argument seems to stop back when the Guarantee was given ,and doesn't address the fact that this guarantee was given without due diligence and should not be honoured,as the name says wakeupEire


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## Chris (10 Jun 2011)

I disagree with points 1 to 4 as these would be confiscatory measures of private property. When the state steps over the boundary of confiscating private property you have a country that seriously curtails personal freedom and you are on a very slippery slope to totalitarianism. 
If my private pension were confiscated and forced into a government bond, I would stop paying into such a pension. If DIRT were increased to 100% I would not hold cash and at the very least demand a bank account with 0% interest. If the state forced me to repatriate my savings I would join my savings abroad. Would I be alone? I don't think so. History has proven that you cannot increase tax revenue in the long term by increasing levels of taxation. Quite the opposite is true.



Raskolnikov said:


> I don't know if all these measures would be required together in their entirety, but I think it's quite clear that we can take quite a lot of pain to pull through the crisis we're in. Also, these measures would show international investors that we are deadly serious about our intentions to repay our debts and to demonstrate our capacity to repay.


It would have the opposite effect. It would show international investors that the Irish state is very happy to confiscate private assets and therefore it should be a no go investment location. 


I believe Ireland can still turn this whole mess around by (a) defaulting on banking and construction related, now state owned debt, (b) balance the budget through spending cuts within 2 years, (c) privatise state monopolies, (d) reduce corporation tax to 0%, (e) liquidate all Irish banks. Will any of this happen? I don't believe so.


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## Raskolnikov (10 Jun 2011)

DerKaiser said:


> What do you mean by autonomy? The right to be shafted by a Mayo man?
> 
> The government has no mandate from the people to:
> 
> ...


The choice is being shafted by Enda, or being shafted by Nicholas Sarkozy, the man who wants us to abandon our low rates of Corporation Tax - which one would you choose?


DerKaiser said:


> The government has no mandate from the people to:
> 
> 1) take 100% dirt tax
> 2) Force private pensions into the government coffers
> ...


1. I believe the marginal rate of income in that bastion of capitalism of the United States was 70% during wartime.
2/3. Lots of governments across the world have restrictions on their citizens capital. China for example won't even let their citizens invest in foreign stock or hold bank accounts abroad. Yet capital is pouring into that country from abroad.
4. I'm not saying sell the roads per se, I am saying sell licences to allow operators to put tolls on roads.

Extraordinary times call for extraordinary measures. I think we should most definitely consider the possibility of two years of mega-austerity if it can give us a chance to get the country back on track. As it stands, each year we do nothing, we are simply increasing the national debt and making interest payments on that debt even more unsustainable. The present course of action will end in Ireland defaulting on its debt, having to go cap in hand to Europe, who will then make onerous demands from the country (loss of corporation tax, they will want control of our budget, they will want a lien on public assets, might even start to demand territory!).


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## nediaaa (10 Jun 2011)

You would kill our battered economy over night. Over 50% of businesses would be forced to close within days


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## Raskolnikov (10 Jun 2011)

Chris said:


> I disagree with points 1 to 4 as these would be confiscatory measures of private property. When the state steps over the boundary of confiscating private property you have a country that seriously curtails personal freedom and you are on a very slippery slope to totalitarianism.
> If my private pension were confiscated and forced into a government bond, I would stop paying into such a pension. If DIRT were increased to 100% I would not hold cash and at the very least demand a bank account with 0% interest. If the state forced me to repatriate my savings I would join my savings abroad. Would I be alone? I don't think so. History has proven that you cannot increase tax revenue in the long term by increasing levels of taxation. Quite the opposite is true.


Like I said, even the United States has brought in emergency wartime  measures that you would liken to the confiscation of private property. Despite this, they emerged from each world war even stronger


Chris said:


> It would have the opposite effect. It would show international investors  that the Irish state is very happy to confiscate private assets and  therefore it should be a no go investment location.


Iceland have essentially confiscated private assets by the devaluation of the Krona. Two years later, they are back in the market issuing a $1 billion bond. If they can get back into the market after defaulting on their debt, I am positive that we can get back into the market by being sensible and actually paying our debts.
Like I said before, this is not an ordinary crisis. Garret Fitzgerald himself said that this crisis is worse than the fiscal crisis of the late 1980's, this was the same crisis where the Punt was devalued and Irish savers were effectively robbed on 10% of their savings.


Chris said:


> I believe Ireland can still turn this whole mess around by (a)  defaulting on banking and construction related, now state owned debt,  (b) balance the budget through spending cuts within 2 years, (c)  privatise state monopolies, (d) reduce corporation tax to 0%, (e)  liquidate all Irish banks. Will any of this happen? I don't believe  so.


(a) A default on banking and construction debt is a default to Europe. If we do that, they will cut all funding tomorrow, they will withdraw the ELG facilities, the government would run out of money within months, the banking system would implode, depositors would lose all their cash. It would be a complete disaster.


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## gianni (10 Jun 2011)

Raskolnikov said:


> It appears to me that in the face of the economic morass that we find ourselves in, we must take a drastic one-time action if we are to even attempt to pull the country back onto steady economic foot. I propose a list of measures that will reduce the national debt, provide a low cost source of funding to the exchequer, and will safeguard the future of Ireland as a sovereign political entity...
> 
> Thoughts?


 
I notice that the take home pay of a non-public sector worker would be unaffected under your suggestions. I wonder what sector you work in.


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## Raskolnikov (10 Jun 2011)

gianni said:


> I notice that the take home pay of a non-public sector worker would be unaffected under your suggestions. I wonder what sector you work in.


I am suggesting that private sector pensions be nationalised. The private sector would be doing the State an incredible service with their life savings and foregoing a possibly better rate from equity markets. The EU/IMF facility of €85 billion @ 6.8% could be repaid/rescinded, and the slack could be taken up by paying private pension holders 4%. That give us an immediate saving of nearly €3 billion every year.


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## shnaek (10 Jun 2011)

72% of professionals are thinking of leaving this country in the next three years if things don't improve. While I have sympathy for your views that we need to get this austerity over and done with, I think if your plan was put into effect that 72% of professionals would leave. I know I would. I am thinking I might leave anyways, on hearing of further income tax increases. Ireland is a wonderful country, but just because I love her doesn't mean I will allow myself to be raped by her. And I believe that is true of a lot of professionals here at the moment.


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## Chris (10 Jun 2011)

Raskolnikov said:


> Extraordinary times call for extraordinary measures. I think we should most definitely consider the possibility of two years of mega-austerity if it can give us a chance to get the country back on track. As it stands, each year we do nothing, we are simply increasing the national debt and making interest payments on that debt even more unsustainable. The present course of action will end in Ireland defaulting on its debt, having to go cap in hand to Europe, who will then make onerous demands from the country (loss of corporation tax, they will want control of our budget, they will want a lien on public assets, might even start to demand territory!).


The idea of a default is to bring debts to a manageable level, not to be able to borrow more. If Ireland were to default on non state budget debt, and balance the budget, then there would be no need to go cap in hand to borrow money from anywhere.



Raskolnikov said:


> Like I said, even the United States has brought in emergency wartime  measures that you would liken to the confiscation of private property. Despite this, they emerged from each world war even stronger


Yes, but that was wartime and the US did not confiscate assets, but increased taxation. The fact that they went to war did nothing for their economy but stall and punish it. The economy did well after the war because taxation and spending was cut not because the country had been at war.



Raskolnikov said:


> Iceland have essentially confiscated private assets by the devaluation of the Krona. Two years later, they are back in the market issuing a $1 billion bond. If they can get back into the market after defaulting on their debt, I am positive that we can get back into the market by being sensible and actually paying our debts.
> Like I said before, this is not an ordinary crisis. Garret Fitzgerald himself said that this crisis is worse than the fiscal crisis of the late 1980's, this was the same crisis where the Punt was devalued and Irish savers were effectively robbed on 10% of their savings.


The reason Iceland is able to borrow again is because they effectively defaulted on private debt. The problem is that in just a few years Ireland will not be able to pay its debts, especially not if you signal to international investors that their investments are NOT safe from state confiscation.



Raskolnikov said:


> (a) A default on banking and construction debt is a default to Europe. If we do that, they will cut all funding tomorrow, they will withdraw the ELG facilities, the government would run out of money within months, the banking system would implode, depositors would lose all their cash. It would be a complete disaster.


The government still has tax income, and as long as it balances the budget, there will be no need for additional borrowing. And this whole idea of a doomsday implosion of banking and the greater economy is nonsense. The banks are bankrupt and should be liquidated in an orderly way, and in a way that does not see the tax payer on the hook. Will depositors loose some money? Quite likely, but the other option is to punish all tax payers instead of just the depositors. You have already mentioned Iceland and it is a great example of quickly a country can recover if it slashes spending and defaults on unsustainable debt.


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## Complainer (10 Jun 2011)

shnaek said:


> 72% of professionals are thinking of leaving this country in the next three years if things don't improve.


Source please?


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## shnaek (10 Jun 2011)

Complainer said:


> Source please?



http://www.businessinsider.com/ireland-emigrations-hays-ireland-2011-6


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## onlineprint (10 Jun 2011)

I disagree with your idea of cutting welfare by 25%. Do you have any idea how bad it is for anyone with a family on welfare to live in this country, to pay bills, shop locally for groceries and household items, 25% to a married couple just taking a basic swa allowance may be as much as 85 euro a week, those are the people who in my opinion be hit very hard by your idea.


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## Raskolnikov (11 Jun 2011)

Chris said:


> Yes, but that was wartime and the US did not confiscate assets, but increased taxation. The fact that they went to war did nothing for their economy but stall and punish it. The economy did well after the war because taxation and spending was cut not because the country had been at war.


Alright then, if it's more comfortable to you, instead of the taxation cuts I suggested, let's just increase the top level of taxation to say 70% and the lower rate to 50%, that might get us pretty close to the same level of increased revenue that we need to be generating without "confiscating" private wealth. Sound better now?


Chris said:


> The reason Iceland is able to borrow again is because they effectively  defaulted on private debt. The problem is that in just a few years  Ireland will not be able to pay its debts, especially not if you signal  to international investors that their investments are NOT safe from  state confiscation.


Chris, when Iceland devalued the Krona, it was essentially the same as confiscating the wealth of private citizens. You don't seem to realise that devalution is a politicians answer to the taking private wealth, i.e. instead of me taking your money, I will just print twice as much of it, making yours worth 1/2 as much. The cost of imported goods in Iceland has skyrocketed, ie. cars, oil, most foodstuffs, etc. Unless you really like fish, your standard of living as an Icelandic person has been drastically cut from previous levels.


Chris said:


> The government still has tax income, and as long as it balances the  budget, there will be no need for additional borrowing. And this whole  idea of a doomsday implosion of banking and the greater economy is  nonsense. The banks are bankrupt and should be liquidated in an orderly  way, and in a way that does not see the tax payer on the hook. Will  depositors loose some money? Quite likely, but the other option is to  punish all tax payers instead of just the depositors. You have already  mentioned Iceland and it is a great example of quickly a country can  recover if it slashes spending and defaults on unsustainable  debt.


I don't disagree with anything you have said, the Icelandic solution is also another alternative. However, that means leaving the Euro and going through the same issues that the Icelandic people are going through.


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## Raskolnikov (11 Jun 2011)

onlineprint said:


> I disagree with your idea of cutting welfare by 25%. Do you have any idea how bad it is for anyone with a family on welfare to live in this country, to pay bills, shop locally for groceries and household items, 25% to a married couple just taking a basic swa allowance may be as much as 85 euro a week, those are the people who in my opinion be hit very hard by your idea.


online, believe me, I do understand, I have been through this before. I sincerely believe that we have almost run out of alternatives though.


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## Raskolnikov (11 Jun 2011)

shnaek said:


> 72% of professionals are thinking of leaving this country in the next three years if things don't improve. While I have sympathy for your views that we need to get this austerity over and done with, I think if your plan was put into effect that 72% of professionals would leave. I know I would. I am thinking I might leave anyways, on hearing of further income tax increases. Ireland is a wonderful country, but just because I love her doesn't mean I will allow myself to be raped by her. And I believe that is true of a lot of professionals here at the moment.


shnaek: The only way that politicians could push through such draconian measures would be by also providing a top-to-bottom reform of modern Ireland. This would mean that criminal bankers, developers and politicians would be brought to trial to face up to their negligence that has plunged us to such desperate measures. It would mean the abolishment of wasteful government spending on the overpaid salaries and pensions to politicians and senior civil servants. The reduction of things like town councils, number of TD's and the Seanad. Basically, all the things that 95% of the population want to see happen. 

I would personally give 2 years of austerity in Ireland to see real reform happen, even if we didn't have a crisis that necessitated it.


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## Complainer (11 Jun 2011)

Raskolnikov said:


> shnaek: The only way that politicians could push through such draconian measures would be by also providing a top-to-bottom reform of modern Ireland. This would mean that criminal bankers, developers and politicians would be brought to trial to face up to their negligence that has plunged us to such desperate measures. It would mean the abolishment of wasteful government spending on the overpaid salaries and pensions to politicians and senior civil servants. The reduction of things like town councils, number of TD's and the Seanad. Basically, all the things that 95% of the population want to see happen.
> .



I don't remember 95% of the population voting for all these things in the recent election?


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## Chris (11 Jun 2011)

Raskolnikov said:


> Alright then, if it's more comfortable to you, instead of the taxation cuts I suggested, let's just increase the top level of taxation to say 70% and the lower rate to 50%, that might get us pretty close to the same level of increased revenue that we need to be generating without "confiscating" private wealth. Sound better now?


Yes it does sound better. However, as I already mentioned increasing tax rates does not result in increased revenue. There are numerous examples in economic history that show that as tax rates increase the total revenue collected decreases. Who in their right mind would try and earn more if the state were to take 70% of it? Such a solution may bring in more money in the very short term, but you can bet that a lot of people, especially at the top rate, would either reduce their income or leave.
The best way for Ireland to try and increase revenue would be to make Ireland attractive to high wealth people. Low corporate tax rates worked a treat for attracting foreign corporations, the very same could be achieved for private individuals, by competing with places like Hong Kong, Switzerland and Monaco.



Raskolnikov said:


> Chris, when Iceland devalued the Krona, it was essentially the same as confiscating the wealth of private citizens. You don't seem to realise that devalution is a politicians answer to the taking private wealth, i.e. instead of me taking your money, I will just print twice as much of it, making yours worth 1/2 as much. The cost of imported goods in Iceland has skyrocketed, ie. cars, oil, most foodstuffs, etc. Unless you really like fish, your standard of living as an Icelandic person has been drastically cut from previous levels.


I fully agree with you. The devaluation was a terrible mistake and it was a confiscation of wealth. What I was trying to say is that the reason Iceland can borrow again is because its level of debt is at a manageable level after defaulting on private debt. If anything the devaluation had a negative effect on the ability of Iceland to borrow. You are also absolutely right in pointing out the effects of devaluation. I think it is an all too common belief that if only Ireland could devalue its currency then exports would boom and our economy would be fixed. As you point out, this completely ignores the effects on import prices, which at the very least offsets any export gains.



Raskolnikov said:


> I don't disagree with anything you have said, the Icelandic solution is also another alternative. However, that means leaving the Euro and going through the same issues that the Icelandic people are going through.


I don't believe that following the Icelandic example would mean leaving the Euro. There is nothing in the contract for Euro membership that states that a country that defaults would have to leave the Euro. It certainly would not be popular, but I don't think Ireland should be making decisions based on foreign popularity.


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## RoyRover (12 Jun 2011)

Raskolnikov said:


> _Measure 5:_ Take a Morgan Kelly type scalpel to the public sector. Excluding the banking bailout costs, the exchequer spent €50 billion while only taking in about €30 billion. Scrap all new capital spending (road, hospitals, schools, etc.), tear up Croke Park and institute instant 25% paycuts, cut welfare by 25%, increase medical/hospital related charges or reduce services. Aim to close the deficit to figures in the region of 5% within 2 years. Placate the public by abolishing the useless quangos, the Seanad, ridiculous semi-state/judicial salaries, etc; use an emergency national vote if legislation is required.
> _Measure 6:_ Sell every semi-state and/or public asset, use the proceeds to pay the down national debt. Colm McCarthy suggested that we would reap a windfall of €10 billion from selling semi-state enterprises. The state also controls other valuable assets such as roads, fiber, land and buildings. All these non-essentials could also be placed on the auction block. We might even be able to squeeze out another €5 billion from this.


 
Measures 1 to 4 do seem a bit extreme, but the time is now upon us to engage in a dramatic reduction in public sector pay and welfare levels.

It is economic madness to be pay a healthy 25 year old more than €200 per week, to be sitting at home with his mammy.


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## bullworth (12 Jun 2011)

Raskolnikov said:


> I
> _Measure 2:_ Irish banks currently have €300 billion on deposit



How much of that is ECB money ? I'm under the impression that Irish banks are receiving a transfusion of ECB money while deposits are hemorrhaging.


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