Showing posts with label Village. Show all posts
Showing posts with label Village. Show all posts

Sunday, October 23, 2016

23/10/16: Too-Big-To-Fail Banks: The Financial World 'Undead'

This is an un-edited version of my latest column for the Village magazine


Since the start of the Global Financial Crisis back in 2008, European and U.S. policymakers and regulators have consistently pointed their fingers at the international banking system as a key source of systemic risks and abuses. Equally consistently, international and domestic regulatory and supervisory authorities have embarked on designing and implementing system-wide responses to the causes of the crisis. What emerged from these efforts can be described as a boom-town explosion of regulatory authorities. Regulatory,  supervisory and compliance jobs mushroomed, turning legal and compliance departments into a new Klondike, mining the rich veins of various regulations, frameworks and institutions. All of this activity, the promise held, was being built to address the causes of the recent crisis and create systems that can robustly prevent future financial meltdowns.

At the forefront of these global reforms are the EU and the U.S. These jurisdictions took two distinctly different approaches to beefing up their respective responses to the systemic crises. Yet, the outrun of the reforms is the same, no matter what strategy was selected to structure them.

The U.S. has adopted a reforms path focused on re-structuring of the banks – with 2010 Dodd-Frank Act being the cornerstone of these changes. The capital adequacy rules closely followed the Basel Committee which sets these for the global banking sector. The U.S. regulators have been pushing Basel to create a common "floor" or level of capital a bank cannot go below. Under the U.S. proposals, the “floor” will apply irrespective of its internal risk calculations, reducing banks’ and national regulators’ ability to game the system, while still claiming the banks remain well-capitalised. Beyond that, the U.S. regulatory reforms primarily aimed to strengthen the enforcement arm of the banking supervision regime. Enforcement actions have been coming quick and dense ever since the ‘recovery’ set in in 2010.

Meanwhile, the EU has gone about the business of rebuilding its financial markets in a traditional, European, way. Any reform momentum became an excuse to create more bureaucratese and to engineer ever more elaborate, Byzantine, technocratic schemes in hope that somehow, the uncertainties created by the skewed business models of banks get entangled in a web of paperwork, making the crises if not impossible, at least impenetrable to the ordinary punters. Over the last 8 years, Europe created a truly shocking patchwork of various ‘unions’, directives, authorities and boards – all designed to make the already heavily centralised system of banking regulations even more complex.

The ‘alphabet soup’ of European reforms includes:

  • the EBU and the CMU (the European Banking and Capital Markets Unions, respectively);
  • the SSM (the Single Supervisory Mechanism) and the SRM (the Single Resolution Mechanism), under a broader BRRD (Bank Recovery and Resolution Directive) with the DGS (Deposit Guarantee Schemes Directive);
  • the CRD IV (Remuneration & prudential requirements) and the CRR (Single Rule Book);
  • the MIFID/R and the MAD/R (enhanced frameworks for securities markets and to prevent market abuse);
  • the ESRB (the European Systemic Risk Board);
  • the SEPA (the Single Euro Payments Area);
  • the ESA (the European Supervisory Authorities) that includes the EBA (the European Banking Authority);
  • the MCD (the Mortgage Credit Directive) within a Single European Mortgage Market; the former is also known officially as CARRP and includes introduction of something known as the ESIS;
  • the Regulation of Financial Benchmarks (such as LIBOR & EURIBOR) under the umbrella of the ESMA (the European Securities and Markets Authority), and more.


The sheer absurdity of the European regulatory epicycles is daunting.

Eight years of solemn promises by bureaucrats and governments on both sides of the Atlantic to end the egregious abuses of risk management, business practices and customer trust in the American and European banking should have produced at least some results when it comes to cutting the flow of banking scandals and mini-crises. Alas, as the recent events illustrate, nothing can be further from the truth than such a hypothesis.


America’s Rotten Apples

In the Land of the Free [from individual responsibility], American bankers are wrecking havoc on customers and investors. The latest instalment in the saga is the largest retail bank in the North America, Wells Fargo.

Last month, the U.S. Consumer Financial Protection Bureau (CFPB) announced a $185 million settlement with the bank. It turns out, the customer-focused Wells Fargo created over two million fake accounts without customers’ knowledge or permission, generating millions in fraudulent fees.

But Wells Fargo is just the tip of an iceberg.

In July 2015, Citibank settled with CFPB over charges it deceptively mis-sold credit products to 2.2 million of its own customers. The settlement was magnitudes greater than that of the Wells Fargo, at $700 million. And in May 2015, Citicorp, the parent company that controls Citibank, pleaded guilty to a felony manipulation of foreign currency markets – a charge brought against it by the Justice Department. Citicorp was accompanied in the plea by another U.S. banking behemoth, JPMorgan Chase. You heard it right: two of the largest U.S. banks are felons.

And there is a third one about to join them. This month, news broke that Morgan Stanley was charged with "dishonest and unethical conduct" in Massachusetts' securities “for urging brokers to sell loans to their clients”.

Based on just a snapshot of the larger cases involving Citi, the bank and its parent company have faced fines and settlements costs in excess of $19 billion between the start of 2002 and the end of 2015. Today, the CFPB has over 29,000 consumer complaints against Citi, and 37,000 complaints against JP Morgan Chase outstanding.

To remind you, Citi was the largest recipient of the U.S. Fed bailout package in the wake of the 2008 Global Financial Crisis, with heavily subsidised loans to the bank totalling $2.7 trillion or roughly 16 percent of the entire bailout programme in the U.S.

But there have been no prosecutions of the Citi, JP Morgan Chase or Wells Fargo executives in the works.


Europe’s Ailing Dinosaurs

The lavishness of the state protection extended to some of the most egregiously abusive banking institutions is matched by another serial abuser of rules of the markets: the Deutsche Bank. Like Citi, the German giant received heaps of cash from the U.S. authorities.

Based on U.S. Government Accountability Office (GAO) data, during the 2008-2010 crisis, Deutsche was provided with $354 billion worth of emergency financial assistance from the U.S. authorities. In contrast, Lehman Brothers got only $183 billion.

Last month, Deutsche entered into the talks with the U.S. Department of Justice over the settlement for mis-selling mortgage backed securities. The original fine was set at $14 billion – a levy that would effectively wipe out capital reserves cushion in Europe’s largest bank. The latest financial markets rumours are putting the final settlement closer to $5.4-6 billion, still close to one third of the bank’s equity value. To put these figures into perspective, Europe’s Single Resolution Board fund, designed to be the last line of defence against taxpayers bailouts, currently holds only $11 billion in reserves.

The Department of Justice demand blew wide open Deutsche troubled operations. In highly simplified terms, the entire business model of the bank resembles a house of cards. Deutsche problems can be divided into 3 categories: legal, capital, and leverage risks.

On legal fronts, the bank has already paid out some $9 billion worth of fines and settlements between 2008 and 2015. At the start of this year, the bank was yet to achieve resolution of the probe into currency markets manipulation with the Department of Justice. Deutsche is also defending itself (along with 16 other financial institutions) in a massive law suit by pension funds and other investors. There are on-going probes in the U.S. and the UK concerning its role in channelling some USD10 billion of potentially illegal Russian money into the West. Department of Justice is also after the bank in relation to the alleged malfeasance in trading in the U.S. Treasury market.

And in April 2016, the German TBTF (Too-Big-To-Fail) goliath settled a series of U.S. lawsuits over allegations it manipulated gold and silver prices. The settlement amount was not disclosed, but manipulations involved tens of billions of dollars.

Courtesy of the numerous global scandals, two years ago, Deutsche was placed on the “enhanced supervision” list by the UK regulators – a list, reserved for banks that have either gone through a systemic failure or are at a risk of such. This list includes no other large banking institution, save for Deutsche. As reported by Reuters, citing the Financial Times, in May this year, UK’s financial regulatory authority stated, as recently as this year, that “Deutsche Bank has "serious" and "systemic" failings in its controls against money laundering, terrorist financing and sanctions”.

As if this was not enough, last month, a group of senior Deutsche ex-employees were charged in Milan “for colluding to falsify the accounts of Italy’s third-biggest bank, Banca Monte dei Paschi di Siena SpA” (BMPS) as reported by Bloomberg. Of course, BMPS is itself in the need of a government bailout, with bank haemorrhaging capital over recent years and nursing a mountain of bad loans. One of the world’s oldest banks, the Italian ‘systemically important’ lender has been teetering on the verge of insolvency since 2008-2009.

All in, at the end of August 2016, Deutsche Bank had some 7,000 law suits to deal with, according to the Financial Times.

Beyond legal problems, Deutsche is sitting on a capital structure that includes billions of notorious CoCos – Contingent Convertible Capital Instruments. These are a hybrid form of capital instruments designed and structured to absorb losses in times of stress by automatically converting into equity. In short, CoCos are bizarre hybrids favoured by European banks, including Irish ‘pillar’ banks, as a dressing for capital buffers. They appease European regulators and, in theory, provide a cushion of protection for depositors. In reality, CoCos hide complex risks and can act as destabilising elements of banks balancesheets.

And Deutsche’s balancesheet is loaded with trillions worth of opaque and hard-to-value derivatives. At of the end of 2015, the bank held estimated EUR1.4 trillion exposure to these instruments in official accounts. A full third of bank’s assets is composed of derivatives and ‘other’ exposures, with ‘other’ serving as a financial euphemism for anything other than blue chip safe investments.



The Financial Undead

Eight years after the blow up of the global financial system we have hundreds of tomes of reforms legislation and rule books thrown onto the crumbling façade of the global banking system. Tens of trillions of dollars in liquidity and lending supports have been pumped into the banks and financial markets. And there are never-ending calls from the Left and the Right of the political spectrum for more Government solutions to the banking problems.

Still, the American and European banking models show little real change brought about by the crisis. Both, the discipline of the banks boards and the strategy pursued by the banks toward rebuilding their profits remain unaltered by the lessons from the crisis. The fireworks of political demagoguery over the need to change the banking to fit the demands of the 21st century roll on. Election after election, candidates compete against each other in promising a regulatory nirvana of de-risked banking. And time after time, as smoke of elections clears away, we witness the same system producing gross neglect for risks, disregard for its customers under the implicit assumption that, if things get shaky again, taxpayers’ cash will come raining on the fires threatening the too-big-to-reform banking giants.


Note: edited version is available here: http://villagemagazine.ie/index.php/2016/10/too-big-to-fail-or-even-be-reformed/.


Thursday, January 15, 2015

15/1/2015: 2015 Outlook for Ireland: Domestic Bliss & Foreign Squeeze


This is an unedited version of my article for the Village Magazine, January 2015 (link here)


December data on Irish economy is painting a picture of a major slowdown in growth momentum and once more highlights the troubling nature of our national accounts statistics. With that in mind, and given the spectacular tremors rocking the global economy outside the well-insulated doors of our Department of Finance, Irish economy is set for an eventful 2015.

Let’s take stock of the prospects awaiting our small haven for tax-optimising MNCs and regulations-minimising foreign investors in the New Year.

Domestic Bliss

On domestic front, three drivers of economic recovery are offering some fireworks over the next 12 months. Here they are, in order of their importance.

The ongoing shift in MNCs activities here from profit-booking to cost-based transfer pricing, colloquially known as ‘contract manufacturing’. In simple terms, this means unprofitable low margin activities are outsourced by MNCs to their subdivisions and other MNCs located abroad, and resulting revenues are booked into Ireland. Official GDP rises here, while our domestic economy stands still. In H1 2014 this game of accounting shells has accounted for 2.5 percent of the 5.8 percent recorded growth in Irish GDP. In other words, some 43 percent of the growth ‘miracle’ that is Ireland Inc. was bogus. We don’t have detailed analysis of Q3 2014 data to determine the broader impact of ‘contract manufacturing’ yet, but the National Accounts data is not encouraging. The gap between the National Accounts-reported exports of goods and the same exports reported in our Trade Statistics is growing once again. Over Q2 and Q3 2014, this stood at a whooping EUR7 billion more than what a historical average implies. That is, roughly, 7.65 percent of our entire GDP over the same period. If we correct National Accounts data for this discrepancy, cumulative Q2-Q3 2014 GDP in Ireland would have posted a 0.4 percent decline year-on-year, not a rise of 5.4 percent recorded in the official statistics.

As the trend accelerates in 2015, Irish economy is likely to post greater paper gains and lower real activity amidst continuously deteriorating quality of our economic data.

The second driver to the upside is also MNCs-focused. Budget 2015 introduced massive incentives for the MNCs to book into Ireland intellectual property. Instead of the notorious Double Irish we now have an even more generous Knowledge Development Box. This reinforces already absurd change to the National Accounts estimation practices that re-labels R&D spending into R&D investment. The combined effect of both factors is likely to be more R&D ‘imports’ into Ireland. Latest data shows that overseas-originating patents filled in Ireland rose 22.4 percent year on year in Q3 2014. And that is before the ‘Knowledge Development Box’ opened its welcoming lid. As 2015 rolls on, expect more GDP supports from the new ‘investment’ products to hit the market here. Just don’t count on new jobs and higher domestic incomes to materialise out of this ‘smart economy’ any time soon.

The third force likely to propel Irish growth to new highs is the ongoing squeeze on building and construction sector imposed by a combination of a credit crunch, Nama assets-disposal strategy and woefully poor regulatory reforms that de facto cut down supply of buildable land and redevelopment sites, funding for development and dried out planning applications pipeline. The result is rising rents (GDP-additive) and prices (so-called ‘investment’ side of the national accounts) amidst deepening misery of rising business costs and escalating cost of living. Added up, Irish property sector ‘revival’ is now yet another force that simultaneously transfers money from the households and firms into the pockets of rent-seekers and the Government, whilst gilding with fools gold national accounts.



Foreign Squeeze

The domestic bliss of GDP growth described above will be severely challenged in 2015 by the continued deterioration in the global economic conditions. Here we have some serious flash points of risks, trailing back from 2013-2014 and some new ones that are likely to emerge in 2015 on their own right.

Back at the beginning of 2014, expectations for global growth recovery in 2015 were driven by rosy forecasts for North America and the Emerging Markets.

Euro area was expected to post rather sluggish, but nonetheless above 1 percent recovery in 2014 and rise to close to 2 percent annual growth rate in 2015. Fast forward to today. Latest forecasts suggest near-zero growth in 2014 followed by ca 1 percent growth in 2015. So Europe’s prospects are bleak. That’s roughly 35 percent of our indigenous exports trade in the bin. But at least low growth is likely to delay the inevitable rise in interest rates, giving our heavily indebted households another stay on execution.

The U.S. miracle of economic recovery is heavily dependent on interest rates policy not reverting back to rising rates and in all likelihood, the U.S. Fed might just oblige. Should the Fed change its mind, all bets are off: we might see a slowdown in the U.S. recovery and with it – a fall-off in the U.S. demand for Irish exports, both indigenous ones and MNCs’.

The UK is a great example of the fragility also present in the U.S. economy. Like the U.S., the UK is heavily dependent on supportive monetary policy. And, ahead of the U.S., its economy is starting to hit serious bumps. Latest data shows continued declines in house prices, while demand is stagnating and inflation is slipping to long-term lows. Last time we saw UK inflation at current levels was in 2002 – amidst the dot.com bubble-induced recession.

Take U.S. and UK markets and we have over 50 percent of demand for Irish indigenous exports put under rising risk.

Which leaves us with the rest of the world. Here, the Emerging Markets are tanking, fast. Brazil is in an outright recession. Russia is slipping into one at a speed of a rock falling through the foggy ravine. China is on the brink of a major de-acceleration in growth, and that is under rather rosy predictions. India is enjoying some warm afterglow of expansionary monetary policies, but the question is – for how long. South Africa is moving sideways: a quarter of contraction is followed by a quarter of anemic growth.

Irish Government Budget 2015 projections were based on following assumptions:
-       Irish GDP growth of 3.9 percent or 0.85 percentage points above the IMF forecast from October and 0.6 percentage points below November forecasts by the OECD
-       Euro area growth of 1.1 percent or bang on with IMF and OECD forecasts, as well as the EU Commission, but the risks are still to the downside in all of these forecast.
-       U.S. growth of 3.1 percent, virtually identical to the IMF forecast and current consensus amongst the economists, but some business surveys suggest growth closer to 2.4-2.5 percent.
-       UK growth of 2.8 percent or 0.1 percentage points above the IMF forecast from October and OECD forecast from November. More recent forecasts published in early December suggest UK economy might expand by 2.4-2.6 percent in 2015.

Global headwinds are not favourable to Ireland, although we do have some aces in our sleeve. These aces are: aggressive tax optimisation and already suppressed domestic demand, the two drivers that might, just might return that 3.9 percent expansion in 2015.

Still, for now, the forecasts arithmetic suggests that the Government really did miss a major opportunity in Budget 2015. You see, the pesky problem is, as the Irish Fiscal Advisory Council estimates show, Irish growth at 3.5 percent in 2015 will mean the Government missing on the illusive 3 percent deficit target. As the above forecasts slip back over time, the 3.9 percent growth assumption is likely to be revised closer and closer to that critical point at which the Government risks losing face in front of the proverbial International Markets. And that won’t go too well in the Government buildings.

Add to the above some other silly assumptions made in the Budget, such as static current expenditure for 2015-2018 horizon and zero policy change, and you get the idea. Over recent months, the Government has revised its spending plans in relation to Irish Water by some EUR300 million. And over the next 12 months it will have to revise its agreements with the Trade Unions on public sector costs moderation. Then, there is the political cycle that simply commands that the Government unleash a torrent of budgetary giveaways onto electorate itching to send the FG/Labour coalition into the proverbial recycling bin of history.

All told, the real economy is likely to continue underperforming into 2015, just as it did in 2014. In the first 3 quarters of this year, total domestic demand (a sum of private and public consumption and investment, plus changes in the stocks of goods and services in the economy) was up just 2.18 percent year on year in real terms. Over the last three years, covered by the current Government policies, total domestic economic activity has expanded by a miserly 0.29 percent in real terms. That is less than half the rate of growth in GDP over the same period. And the latest quarter has been even less impressive, with domestic demand falling 0.3 percent year on year, same as in Q3 2013.

So tighten those belts for one more year of pain: the slimming down of Irish economy is not over yet.


Saturday, April 27, 2013

27/4/2013: Village Magazine, April 2013

The third of three posts covering my recent articles.

This is an unedited version of my regular column in The Village magazine, April 2014.




As the events of the last few weeks clearly show, Irish trade union movement is suffering from a number of acute crises, ranging from systemically existential to psychological.

First up, the crisis of identity, best symptomised by the conclusion of the Croke Park 2.0 deal in which the Unions once again traded the interests of their future members – the younger public sector workers – to preserve the privileges of their current and past members. This is hardly surprising. During the last decade-and-a-half, the Unions and their leadership have became firmly embedded in the corporatist structure of the Irish State. Self-serving, focused on the immediate membership concentrated in the least productive sectors of the economy, the unions have opted to be paid over being relevant to the changing economy and society.

Second, the crisis of the short-term memory amnesia. In recent weeks, the Irish Trade Unions have managed to produce much bluster on the topic of the centenary anniversary of the 1913 Lockout. Throughout the crisis, the very same unions have been vocal on the topics of social fairness, austerity, protection of the frontline services etc. Yet, all along, the Liberty Hall has attempted to sweep under the rug its principal role in helping the Irish State to polarize and pillage both the society and the economy during the Celtic Tiger era, in part aiding the very processes that led to our national insolvency. Promoting the narrow interests of the state and associated domestic private sectors’ elites, the Social Partnership (including the two Croke Park agreements) assured boards representations, funds and other pathways to decision-making for unions. This power was deployed consistently to reduce accountability in the public sector for decisions and actions of its foot soldiers and bosses alike. By corollary of the cooperative approach to policy formation, the Partnership also protected domestic sectors, especially those dominated by the semi-state companies.  As the money rolled into the unionized sectors of the economy, the Unions had no problem with rampant costs inflation in health insurance and services, energy, transport, and education. The interests of the own members were always well ahead of the interests of the society at large.  Thus, today, in the environment of reduced incomes and high unemployment, with hundreds of thousands households in sever financial distress, Liberty Hall sees no problem with state-generated inflation in state-controlled Unionized sectors.

All in, the irony has it, Irish Trade Unions movement has been traveling along the same road previously mapped out by the Anglo Irish Bank: reducing their scope of competencies, their reach across various social. demographic and economic groups, and focusing on a singular, medium-term unsustainable objective. Where Anglo, post-2001, became a monoline bank for funding speculative property plays, Irish Trade Unions today are a monoline agency for preserving the status quo of the incumbent public vs private sector divisions in the economy.

The failure of the Trade Unions movement model in Ireland is best exemplified by the years of the current crisis.

Since the onset of the present economic recession Irish Government policy, directly and indirectly supported by the majority of the Unions’ leaders was to consistently shift the burden of the economic adjustment to younger workers in both private and public sectors, indebted Irish households, and consumers. Liberty Hall’s clear objective underpinning their position toward these groups of people was to retain, at all possible costs, the pay and working conditions protection granted to the incumbent full-time employees in the public and semi-state sector. Grumbling about the ‘low-paid public sector workers’ aside, the Unions have consented to the creation of a two-tier public sector employment with incumbent workers collecting the benefits of jobs security and higher pay, and the new incoming workers paying the price of these benefits with lower pay and virtually no promotion opportunities. The very same unions are now acting to preserve, at huge costs to the economy, unsustainably high levels of employment in our zombified banking sector.

Even on the surface, based on the headline figures, the Unions act to protect the pay and working conditions of the incumbent public sector employees. Average weekly earnings in Ireland have fallen 2.7% between 2008 and 2012 in the private sectors, while in the broader public sector these were down only 1.1%. Over the same period of time, the pay gap between public and private sector has risen from 46.1% in favour of public sector employees to 48.5%.

But the reality is much worse than that.  Between 2008 and 2012, numbers in employment in private sectors have fallen 14.7% while in the public sector the decline was less than 8.9%.  Within the public sector, largest losses in employment took place in Defence (-20% on 2008), Regional bodies (-15.4% on 2008), Semi-State bodies (-10.1%). No layoffs or compulsory redundancies took place, with natural attrition and cuts to contract and temporary staff taking on all of the adjustments.

In simple terms, the Machiavelian Croke Park deals have meant that the Irish public sector ‘reforms’ were neither structural, nor progressive in their nature. These ‘reforms’ do not support long-term process of realigning Irish economy to more sustainable growth path away from the bubbles-prone path of the last fifteen years.

Lack of layoffs and across-the-board shedding of temporary and contract staff have meant that the public sector in Ireland has lost any ability to link pay and promotions to real productivity differentials that exist between individual employees, work groups and organizations. This effect was further compounded by the Croke Park 2.0 agreement. The shinier the pants, the higher the pay principle of rewards has now been legally enshrined, relabeled as a ‘reform’ and fully protected at the expense of younger, better educated and potentially more innovative employees.


Such a system of pay and promotions engenders severe and irreversible selection bias, whereby the quality of applicants for jobs in the public sector is likely to decline over time, with more ambitious and more employable candidates opting out of pursuing careers in the state sector. Deterred by limited promotions opportunities and lower pay for the same, and in some cases heavier workloads, younger applicants are likely to seek work in private sector and outside the country. This selection bias will only gain in strength as economy starts to add private jobs in the future recovery.

The status quo of non-meritocratic employment in the public sector will also mean continued emigration of the younger workers with internationally marketable skills.

Meanwhile, per EU-wide KLEMS database, back at the peak of the public sector activities in 2007, labour productivity in Ireland’s public sectors was already running at below 1995 levels. In Public Administration and Defence, Compulsory Social Security sector, labour productivity stood at below 86% of 1995 levels, in Education at 80% and in Health and Social Work at 95%. In contrast, in Industry, labour productivity in 2007 was running at 153% of 1995 levels.  The same holds for the technological innovation intensities of the specific sectors. Three core public sectors of public administration, education and health all posted declines in productivity associated with new technologies compared to 1995 of 17-30% against an increase of 8% in Industry and a 20% rise in Manufacturing.

If Irish public services productivity was falling in the times of massive spending uplifts and big-ticket capital investment programmes, what can we expect in the present environment of drastically reduced investment? Unfortunately, we do not have data beyond 2007 to provide such an insight.  But the most probable answer is that stripping away superficial productivity gains recorded due to higher current spend on social welfare supports being managed by fewer overall state employees, plus the productivity growth arising from reductions in employment levels, there is little or no real same-employee productivity gains in the public sector.

One has to simply consider the ‘cost reduction’ measures enacted through the Budgets 2010-2012 to realize that during the crisis, Irish public sector was shedding, not adding responsibilities. Much of these reductions in services was picked up by the private sector payees and providers. This too implies that the actual productivity in the public sector in Ireland has probably declined during the years of the crisis.

Marking the centenary anniversary of the 1913 Lockout, Irish Trade Unions movement needs serious and deep rethink of both its raison d’etre and its modus operandi. Otherwise the movement is risking being locked out of the society itself as the irrelevant and atavistic remnant of the Celtic Tiger and Social Partnership.

The Liberty Hall must shake off the ethos of corrupting proximity to the State power and re-discover its grass roots. It will also need to purge completely the legacy of the Social Partnership and embrace new base within the workforce and the society at large in order to assure its ability to last beyond the rapidly advancing retirement age of its members. Lastly, the Unions should think hard about their overall role in the society to better balance the interests of their members against the needs of the country and the reality of the new economy.

Irish society needs a strong and ethically underpinned Unions as the guarantors of the rights of association and supporters of the policy dialogues and debates. What Ireland does not need is another layer of quasi-state bureaucracy insulating protected elites and sectors from pressures of demographically young, technologically modernizing and global competitiveness-focused small open economy.