Inside the world of business

Bailout may have been a lucky break in disguise

ONE OF the many sore points about the Irish bailout is the lingering sense that somehow the State was bounced into it and should have been given more time to try and convince the markets it was a viable credit option.

The main basis for this grievance is that at the time, last December, Ireland was fully funded until the middle of this year thanks to then prudent husbandry of the National Treasury Management Agency.

With the benefit of hindsight, it’s pretty clear that Ireland would have had little chance of returning to the markets early this year as planned – the bank stress test would have put paid to any such notions.

Injurious though it may have been to the national pride to be pushed unceremoniously into taking a bailout, it may turn out to have been something of a small mercy.

If Ireland had been given more time, it’s possible we would have been looking for money just around now, or more likely we would have done our deal around the end of the first quarter.

Either way the Greek situation would not have provided a backdrop against which a cool, calm and collected assessment of Ireland’s position could be made.

As things stand, by taking a bailout in December and making a decent fist of adhering to the terms to date, Ireland finds itself in its strongest bargaining position for a long while as concessions for Greece now look inevitable.

Mind you, its still not a very strong hand . . .

Pension policy is all Greek to us

THERE IS a worrying symmetry between the Government’s approach to pension policy and the euro zone’s behaviour in the face of the evident need for a comprehensive strategy to address the untenable financial situation of its weakest economy, Greece.

Irish pensions are out on their feet. Increased longevity, lower bond yields and high industry charges have all played a part, as has the lamentable performance of investments over the past decade – a factor only exacerbated by the absolute failure of regulation in key sectors of the economy.

In that light, it was somewhat disheartening yesterday to hear the pensions regulator make no effort to impress on Government the importance of it being properly consulted in advance of any major change.

The Pensions Board report, published yesterday, shows that three-quarters of all final salary schemes are under water, many significantly, and over 43,000 lost occupational pension coverage in 2010.

How has the Government addressed this crisis. It has retrospectively imposed a pensions levy on accumulated savings for the first time in the history of the State, further undermining confidence in the system.

According to documents which became available over the weekend, this was done by a Minister for Finance minister despite warnings about the likely impact from his own officials and the Minister for Social Protection.

The Government, or more accurately, its pensions regulator is also looking at imposing a tighter and more rigid funding standard at the very point when the sector and the 222,000 private sector workers who depend on it for retirement income can least afford it.

The Government continues to promise reform of pensions policy but, if it occurs at all, it increasingly looks like it will arrive after the concept of private pension provision is fatally undermined, leaving future governments exposed to even greater long-term costs.

It’s not hard to see the similarities with euro zone dithering over two years. As it untangles the contradictory positions of refusal to sanction structured default and refusal to allow assistance between member states, Greece now seems certain to make the decision for it. A default that increasingly looks inevitable will be all the more toxic for the lack of proper decision making at the outset.

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