Friday, 15 April 2011

Troika statement: It's Friday, let's go to the pub

From the statement by the EC, ECB and IMF released today:

‘The teams’ assessment is that the program is on track but challenges remain and steadfast policy implementation will be key.’

Oh. I wonder if they are referring to the National Recovery Plan which the three institutions endorsed and became the basis of the Memorandum of Understanding; or maybe there is some secret, super-encrypted plan which the masses don’t have access to. Let’s go through the headings.

The Macro-economic Outlook

The NRP projected growth up to 2014 to be 2.7 percent annual average. The IMF projects an average of just under 2 percent. According to the ESRI, at 2 percent we risk a deflationary spiral. In addition, the IMF is projecting nominal GDP to be some €10 billion less than the NRP estimates – over 5 percent less. There’s hitting targets and then there’s hitting targets.

The Bank Sector

This doesn’t pose too much of a problem for the cheerleaders of the NRP. If €24 billion in new recapitalisation won’t do the trick, then there’s always another €20 billion waiting to be burned up. And if that doesn’t do it, there’s always the Central Bank’s Hibernian QE. There is no shortage of money to be thrown at the problem – and as we all know, the taxpayers’ pockets are black-hole deep.

The Fiscal Front

The NRP claimed it could get the deficit down to under 3 percent by 2014. The IMF projects that on current trends it will be 2017 or 2018. On that small matter of the debt, the NRP hoped to keep it 100 percent of GDP – the IMF says, no, it will be 25 percent higher.

Structural Reforms

But not to worry, the IMF believes this will do the trick. Cutting workers wages always promotes growth – and cutting low-paid workers’ wages via ‘reform’ of the JLC will no doubt double that growth.

* * *

On just about every metric the NRP, which forms the basis of the bail-out deal, is completely defunct. Yet the Troika says everything is just as it should be.

I know why. It’s Friday. What would you rather do? Admit ‘game over’, sit down and work on something new? Or sign-off on a statement and get to the pub? I mean, the Troika are only human.

And let’s forget the small matter of the debt. The NRP was hoping to keep debt at 100 percent of GDP. The IMF projects it to be 124 percent.

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