Economics 24/06/2009: Agriculture's Value in Economy

Let the number speak for themselves. Per CSO data release yesterday:
Subsidies as a share of total value of production are creeping up, accounting in 2008 for 31.6% of the entire sector output. Intermediate consumption is also up, made up of various inputs. Net value added is down - the contribution of the sector to this economy through activities actually attributable to production: from 32.3% in 2004 to 13.7% in 2008. Why are we still having a Department of Agriculture in this country if the net and gross value added by this sector is smaller than the net subsidies the sector receives, i.e the sector produces less real value than it takes out of the EU in handouts...

Time to dump some bad risk? and ESB's rip-off 'investments'

EXCLUSIVE: Is it time to let Nationwide sink?
Here is an opportunity to show the financial world that we are serious about cleaning up the mess. It is also a good opportunity to show the world that we understand, as a country, that finance is about controlling the downside as much as exploiting the upside - in other words, that risky trades must be closed off. Nationwide is one of the riskiest plays in town - so the Government should let the stronger ones - including international banks - bid for the pieces. In other words, the Government should not mix Nationwide in with the systemic banks for nationalization or future re-capitalisations, or indeed NAMA cover.

Here are tomorrow's results from the Nationwide:

1. Loss after tax €243mln on a loan impairment charge of €464m (2007 pre-tax profit of €309mln), Operating profits €260mln
2. Total Capital at 10.2%, Core Tier 1 at 7.2% (not spectacular, but on par with other Irish banks - hardly impressive for internationals)
3. Total assets at €14.43bn - down 10% (unrealistic assessment, given equity and property markets conditions and shut down of land markets - details below)
4. Loan Book at €10.474bn - down 15% (so lending stalled, the patient is dead)
5. Customer accounts €6.785bn, so accounts cover 65% of loans - up from 59% cover in 2007 (but at what cost did Nationwide achieve this gain in cover?)
6. Cost-income ratio at 17% - the lowest among Irish financial institutions (i.e they have no soft-savings left to achieve as a cushion against future losses)
7. Liquid assets stand at €3.26bn - liquidity ratio of 24% - again, good luck to them if they think they can actually sell the stuff they hold against the loans...
8. Society reserves are at €1.2bn

"The Society did a very detailed examination of the loan book with the result that the sum allocated for provisions was a very robust figure of €464m for the year under review in line with market expectations... The Society’s loan book decreased in 2008 to €10,474m from €12,332 at the end of 2007. €1,339 of the reduction was attributable to the decline in the value of sterling; the balance was a reduction in capital balances. The commercial loan book now stands at €8,183m with the residential book at €2,291ml. As a result the total assets of the Society were reduced from €16,099m in 2007 to €14,429m in 2008."

So the impairment charge is of 3.22% of the total asset base and 4.43% of the property book. This is laughable. Also, Nationwide claims that as a part of its strategy it was actively reducing its exposure to commercial loans. But this active reduction took out at most only €331mln (16,099-14,429-1,339) in real assets, or ca 4%. This is in the time when property values fell over 20% and equity values are down more than 80%?

"Because of the reserves built up over the years from cumulative profits the Society was able to absorb the impairment provision. The Society still has total reserves of €1.2 Billion to absorb further impairment charges should they arise."

Well, now, suppose real impairment rises to 15% of the property-related loan book on commercial and 5% on residential. You have a need for €1.34bn in cash right there but you have only €1.2bn... and that is in the form of Tier 1 capital...

So are Nationwide's numbers (especially in the area of impairment) a case of exemplary management? Or of reckless 'ostrich' syndrome? You decide, but it does look to me like something is amiss. Here's what.

In 2008, Nationwide repaid some €750mln plus £500mln in debt securities, and in December 2008 it raised £325mln in new term notes maturing September 2010 (note the date?). But the beast still has €2.23bn in debt maturing in 2009 alone and "the Society plans to finance [this] through reduction of its loan book, the securitization of loans as well as the issue of new loans."

Yes, you did hear this right - securitization of loans (presumably Irish buy-to-let properties in the UK and Irish developers toxic waste in Ireland have strong market with ready buyers?). Of course they have no such hope, so in reality the Society is most likely looking for refinancing.

And here comes the confession: "the ability of the Society to raise wholesale funding on a continuing basis depends on the Government Guarantee. The Government intends in line with its previous indication to put a State guarantee in place for the future issuance of debt securities with a maturity of up to five years... The society's ability to remain a going concern and achieve its Business Plan is dependant on the continuation of Government support. As a systematically important institution Irish Nationwide was included in the guarantee Scheme. The Irish Government is committed to ensuring the continued viability and stability of systemically important credit institutions."

So here is Nationwide's survival strategy in a nutshell: "Give us more tax money! Now!"

In the end, Nationvile has €2.23bn of debt maturing this year alone and needs the extension of the Government guarantee to keep itself going. It also has an acute case of denial when it comes to potential losses it faces on its asset base and its loans, so it will need even more tax money to survive. This looks like they've gone to the markets to raise refinancing, but the markets laughed at them, they've gone to the auditors for a life-line on their NAV and they got that extension, so now its up to rich Uncle Taxpayer to rescue a systemically important private estate. Hmmm...


ESB's 'stimulus'
For shortage of time - more analysis of this is to follow, but in the nutshell, ESB announced new plans to 'create' 3,700 jobs through 2013... The Government & Opposition have welcomed the move that will see a notorious state monopoly

• using consumers' and businesses' cash (remember - it cannot pass cost reductions to its clients because it's out of town subsidiary - CER - doesn't let it)
  
• hire more grossly overpaid (remember, ESB runs a unionized closed shop with highest salaries in the entire public sector and work pracices that allow its employees draw full pay even when are asigned for years to plants producing absolutely nothing)
• to expand its dominance in the market that is so starved of competition, that much of our economy's competitiveness loss can be attributed to the ESB's existence.
  

This is a farce that passes in this country for industrial, fiscal and economic policies. Instead of breaking up a noxious monopoly, the state will allow ESB to piggy-bank the revenue it gains from ripping off its customers into 'developing new infrastructure such as smart metering and a system to allow for the recharging of electric cars'.

You might also notice that the two investment objectives are a red herring. Smart metering is already widely available and does not require any 'infrastructure' - you can install smart meter at your own home. Electric cars are about as widely spread in Ireland (or indeed anywhere else in the world) as dinosaurs. By 2013, this is unlikely to change.

Lastly, the Government has been calling for increasing ESB's and other state monopolies contributions to the Exchequer to compensate for some of the revenue losses incurred in this crisis. Now, the same Government is welcoming ESB chipping into this contribution. Who will make for the shortfall? Well, the same people who will be paying for those 3,700 new jobs to be 'created' by the ESB - you, me and the rest of taxpayers. ESB claims it can raise funding for the investment in private markets. Maybe so, but it can't raise funding for interest charges on the loans and it can't raise funding for paying lavish salaries to its new employees. At over €80,000 per average ESB job, this 'green investment' will cost the consumers some €300mln per annum in wage costs alone. Now that's what I call 'smart' metering.

WSJ today (here) has an excellent parallel story to the ESB circus.

Government's Plan for Ireland: Exclusive... Part 5

Per earlier posts, italics are my


5. Work together to implement a reform agenda

(i) to implement an agenda for enterprise and competitiveness based on the Framework for Sustainable Economic Renewal: Building Ireland’s Smart Economy including:

• building on strengths in the Agriculture, Fisheries and Food sectors (back to De Valera's Dream, then?)
  
• developing the ideas economy with intensified R&D activity and greater commercialisation of the output of that research (more MIT Media Labs and E-voting machines?)
• supporting the manufacturing sector (How?)
• encouraging entrepreneurship and business start-ups (by raising taxes and taking more money out of families' pockets?)
• pursuing opportunities to expand the services sector, in particular international services (by doing what?)
• realising the long-term potential of the tourism sector (How? By setting a minimum wage that makes our labour uncompetitive? By hiking VAT rates and adding new taxes on tourism?)
• improving trade, investment and tourism links with new and fast-developing markets (more junkets to exotic destinations for the Cabinet?)
• pursuing opportunities in the Green Enterprise sector, including in the area of energy efficiency (aka we take your money and your light bulbs?)
  

(I have commented on this plan before. It is a road map to nowhere for a number of reasons outlined here and here. But what is truly egregious in all of this is that the ‘plan’ above comes after the promise of carrying out only evidence-based expenditure programmes, despite most of it being based on no evidence at all and parts of it having the preponderance of evidence against them.)

(ii) to develop a new approach to upskilling and reskilling those in employment and those outside the labour market; we will convene a Jobs and Skills Summit in March 2009 to devise innovative approaches to maintenance of employment, creation of new employment and early and active engagement with those losing their jobs; we will also seek to maximise eligible support from the European Globalisation Adjustment Fund for initiatives to support those who are made redundant

(Read: we'll get FAS to fly back to see NASA and beg the EU to give us some handouts to pay for their trips)

(iii) to ensure that sheltered sectors of the economy, including professional services, bear their full share of the burden of adjustment

(This Government cannot even force its own employees to take a cut, imagine them going after protected professions? But what they will do is tax. Tax anyone with a degree - for people who invested in their education tend to earn more. Tax anyone with skills - for people with skills tend to earn more. Tax anyone with experience - for... well - you get the wind.)

(iv) to implement the employment rights provisions in the Towards 2016 Transitional Agreement

(And raise wages and perks for the least productive in our economy?)

(v) to deliver measurable public service reform to improve the efficiency and quality of public services, based on the Government’s Statement on Transforming the Public Service published in 2008

(Since 2008, the Government sat on its hands, doing absolutely nothing about this. Will they change their mind? Not. The entire programme proposed by Mr Cowen today is a give-away to the public sector trade unions and politically-connected lobbies. Mark my words - there will be no change!)

(vi) to continue implementation of the Health Service Reform Programme, including utilising the Health Forum under Towards 2016

(After a gratuitous increase in pay for consultants in exchange for no new responsibilities or any work load increases, there hardly anyone in the country who believes in this drivel)

(vii) to finalise a comprehensive framework for future pension policy which responds to the challenges facing the Irish pensions system in the years ahead

(Read: mandatory pensions, claw back of tax benefits for pensions savings and vast transfers of pensions-linked wealth from the private sector. In other words - another tax!)

(viii) to ensure our approach to regulation, accountability and corporate governance delivers a sustainable society and economy

(Mr Cowen's speak for more red tape on ordinary businesses!)


6. Conclusion

The Government and Social Partners commit to work intensively over the immediate period ahead to develop specific measures to finalise and then implement a Pact based on this framework.

Ends

This 'plan' is a classic example of “How to Destroy a Country in Five Easy Steps” guide:
1) Raise taxes in a recession;
2) Yield on everything to the narrow interest groups;
3) Spend precious taxpayers cash on feel-good Government waste;
4) Pile on more regulation and delegate democracy to an unelected group of public sector lobbyists;
5) Keep rolling back your previous promises and commitments (i.e Mr Lenihan’s repeated promises that he will not raise taxes)

If this is Mr Cowen’s way, his philosophy, would the last person leaving this country turn of the lights, please!

Government's Plan for Ireland: Exclusive... Part 4

Continued, as earlier italics are my:

Part 3:


An Equitable Approach

The Government and Social Partners believe that support for these adjustments will be strengthened by measures which demonstrate that the burden is being shared equitably across society. This includes:

• the need to ensure that moderation in respect of executive remuneration is seen to contribute meaningfully to the adjustment required
• that those who benefited most from the economic boom should make a particular contribution to the adjustment required
  

(This is it? Given that wages in the public sector earn 40%+ premium on pay in comparable private sector occupations, who, Mr Cowen, has benefited most from the boom?)


Delivering the Fiscal Stabilisation Framework

The Government and Social Partners agree that a credible response to the fiscal situation requires a further adjustment at this stage of the order of €2 billion in 2009.

(But this is the same response Mr Lenihan announced in July. This means that either the Government finds no need to change its response to the crisis as it evolved since July, or that Brian-Brian-Mary are simply dumping more than 90% of the budget deficit for 2009 onto the shoulders of the private sector alone, with the unionized public sector carrying less than 10% of the burden. Is this their version of evidence-based equitable policy?)

In addition to this immediate adjustment required in 2009, the Government and Social Partners commit to working together under the Pact to support the further adjustments required to reduce the General Government Deficit below 3% over the remainder of the five year period.

(Can the authors of this document explain how on earth can this Partnership deliver on cuts of €4bn in 2010, €2bn in 2011, €1.75bn in 2012 and €1.25bn in 2013 – as envisioned by the DofF January 2009 forecast (see here http://trueeconomics.blogspot.com/2009/01/doff-instability-report.html) if the same Partnership is having such a hard time delivering a €2bn cut this year? Furthermore, observe that there is not a word about cutting excessively high public sector pay, freezing public sector wages or reforming public sector pensions and perks. None! This leaves the cuts to come solely from the service side.)

4. Short-term Stabilisation of the Economy

In order to maximise economic activity and employment in the short-term, the Government will:

• provide a fiscal stimulus in 2009 and 2010 by maintaining capital investment at a high level by both international and historical standards

(In other words, their emergency response is to continue with NDP investment planned well before the crisis hit. This is equivalent to doing nothing, Brians)

• re-prioritise this capital expenditure in 2009 and 2010 in order to support labour-intensive activities where possible
• bring forward further proposals to support enterprises during this extremely difficult period, recognising in particular the pressures arising from currency movements, and thereby support those in vulnerable employments
  

(What does this mean? There are no details on any of these measures and it is impossible to determine what exactly can the Government do to achieve these objectives)

• act quickly to improve competitiveness including increasing competition across the economy and reforming price regulation in areas such as energy

(ditto)

It is recognised that stabilising the financial and banking sector is essential to secure a banking system which is fit for purpose. Accordingly, Government action will seek to:

• assist those who get into difficulties with their mortgages; in early 2009 a new statutory Code of Practice in relation to mortgage arrears and home repossessions will be brought forward, and the mortgage interest scheme will be reviewed

(Again, no details on a crucially important promise.)

• maximise the flow of credit to the enterprise sector and ensure early introduction of a code of practice on business lending

(This is pure financial and economic nonsense. The Government cannot ‘maximize’ credit flows and short of requiring the banks to issue sub-prime equivalent high risk business loans at knock down rates, no ‘code of practice’ will help restaring credit flows to failing businesses. Subsequently, this section simply proves economic and financial illiteracy of our leaders.)

• introduce controls on the remuneration of senior executives, in accordance with the recommendations of the independent committee established by the Minister for Finance...
• maximise sustainable employment in the sector
  

(What sector? How about maximising sustainable employment of proof-readers for future Government programmes?)

Recognising that unemployment will rise significantly in the period ahead, the Government and Social Partners will work together to maximise employment and help those who lose their jobs by:

• designing a flexicurity approach appropriate to Irish conditions which keeps people working where feasible and equips people to return to employment as quickly as possible by maximising the availability and impact of education, upskilling and training supports

(Flexicurity is an unproven approach to labour market regulations that can be cost-prohibitive to the society at large and ineffective in delivering real employment gains. The Government, having committed itself earlier in the document to ‘evidence-based’ policies has just committed to a policy which was never debated and the evidence in support of which is thin and contradictory. What is far worse than that however, is that the entire labour market policy of Ireland has been at the will of the Government surrendered to an unelected, unaccountable to the taxpayers Partnership. This is an afront to democracy.)

• redeploying resources to ensure efficient and timely delivery of direct State supports to those who lose their jobs including social welfare payments, redundancy payments and payments to workers in cases of insolvent companies

The Government and Social Partners will address the serious and urgent difficulties facing private sector pension schemes.

(Again, after wobbling through a list of secondary measures, a major area where reforms in the public sector and private sector are truly needed is left unadressed!)


More to come, stay tuned...

Government's Plan for Ireland: Exclusive... Part 3

Continued as before, italics are my:

Part 2

Framework for a Pact for Stabilisation, Social Solidarity and Economic Renewal

3. Stabilising the Public Finances

The Government and Social Partners are agreed on the necessity to progressively reduce the level of Exchequer borrowing over the next five years in order to reduce the General Government Deficit to below 3% by 2013 through an appropriate combination of expenditure and taxation adjustments.

Public Expenditure

The adjustment to be achieved through reductions in expenditure will be based on the following criteria:

• ensuring a fair and equitable spread of the burden of adjustment
• maximising the level of sustainable employment
• solidarity with those now losing their jobs
• maintaining high-priority public investments
• careful forward priority planning
• increased efficiency, effectiveness and a focus on outcomes
  

(Recap the above bullet points: if the new Framework were to deliver careful forward planning, does the Government now admit that such was not used in the past? Can anyone explain to me how any of these bullet points constitute any sort of a forward-looking programme to deal with the crisis?)

The scale of the necessary adjustment requires scrutiny of all areas of public expenditure including agreeing measures on how to constrain growth in public sector pay and pension costs.
(Don't hold your breath - when we get to these in a second, you'll see that there is scarcely any change in Government's traditional modus operandi on public expenditure...)

Taxation

The adjustment to be achieved through further taxation measures will be informed by the following principles:

• Changes to be fair and equitable with a higher proportion falling on higher incomes while minimising distortionary effects between different forms of tax

(No details are given, but given that a further tax increase on those earning €100K pa are going to yield only a modest, if not negative, revenue increases to the Exchequer, expect ‘higher incomes’ to mean middle class – i.e. YOU! Of course, notice that the above means everyone’s taxes will go up.)

• Support the productive sector of the economy to keep Ireland competitive

(How can this be achieved? This Government, has been blabbering about this objective since the beginning of this century and has managed to do nothing to deliver on it. Do any of us believe they can do any better this time around? With Mary Coughlan at the helm of ETE?)

• Ensuring that tax expenditures are fully evidence-based

(This a pure case of political ‘gibberish’. What does ‘evidence-based’ mean in relation to tax expenditure? Evidence of the money being spent? Of efficiency? When no one, neither in the Government, nor in the civil service is made accountable – with their jobs, pensions, perks – for any failure in delivering on promises made, who cares if their spending decisions are ‘evidence-based’ or ‘we-just-feel-like-doing-it’-based? Does anyone care if Mr Cowen has evidence to support his lofty Building Ireland's Smart Economy ideas? It simply cannot work - evidence or none (see here)!)

• Broaden the tax base and make changes that are straight forward, easily understood and easy to administer

(Broadening tax base means finding new taxes to pin onto us. Oh, but the above is not enough, so…)

• Additional progressive tax measures consistent with the social solidarity approach

Additionally, given the urgency of the situation and the role that taxation will have to play in bringing stability back to the public finances, the Government is asking the Commission on Taxation to identify appropriate options to raise tax revenue and to complete its report by September 2009.

(So, recap – general taxes will go up, new taxes will be thought up and then there will be more progressive tax measures. And in return, the over-worked civil servicemen and underpaid ministers are going to give us ‘evidence’. And compassion.)

Stay tuned for more...

Government's Plan for Ireland: Exclusive... Part 2

Here is the document I promised to post, with some of my own comments in italics.

Part 1:

28 January 2009

Framework for a Pact for Stabilisation, Social Solidarity and Economic Renewal

1. The Challenge
…While the uncertainty about international developments makes predictions difficult, Ireland now faces the prospect of:

• a reduction of up to 10% in national income over the 2008-10 period (January 9, 2009 Addendum to the Irish Stability Programme Update from the DofF states that we are expecting a cumulative of 6.2% decline in GDP and an 8.2% decline in GNP. Where is the ‘up to 10%’ figure is coming from?)
  
• a loss of more than 120,000 jobs over 2009 and 2010 (this is consistent with DofF latest forecast, so if the Government expects national income to fall more than the DofF predicts, should the unemployment figure expectations be higher as well?)
• an increase in unemployment to more than 10%
• tax revenues in 2008 more than €8 billion below expectations, and a further fall projected in 2009, creating an unsustainable Exchequer deficit
• without further adjustments, a General Government Deficit in the range of 11% to 12% of GDP for each year up to 2013
  

There are in fact significant downside risks to these projections including:

• a steeper or more prolonged downturn in our main trading partners
• the possibility that global financial market problems deepen or persist for some time
• further exchange rate appreciation
• a further decline in international and domestic confidence and investment

(So nothing really to do with us, then? Clearly our leaders do not think that the loss of competitiveness, sky-high costs, climbing taxes, inept governance, lack of any economic development platform for the future and a host of other problems besieging Ireland Inc are not something we should be concerned in the future...)

This document therefore sets out a framework within which the Government and Social Partners have agreed to develop a Pact for Stabilisation, Solidarity and Economic Renewal.

2. Shared response through partnership

...In developing a Pact, the Government and Social Partners are fully committed to an approach in which all sectors of society contribute in accordance with their ability to do so, and conversely the most vulnerable, low paid, unemployed and social welfare recipients are insulated against the worst effects of recession.

(It will be interesting to see how the Government is going to achieve this. Is the Revenue going to treat those of us who become unemployed in 2009 when it comes to collecting taxes for 2008 with kid gloves by ‘insulating’ us from the need to pay back taxes if doing so puts our families over the edge or is this a case of caring going too far? The Government certainly gave it no thought when it raised taxes in Budget 2009.)

The Government and Social Partners believe that by making the correct decisions now, and committing to working together through the further difficult challenges which lie ahead, we can deliver reforms which allow us to still realise our shared goals for Irish society, most recently outlined in Towards 2016, while also laying the foundations for sustainable economic recovery.

(Need I remind you that Towards 2016 is a document primarily designed to reward public sector workers, offering nothing to the vast majority of our private sector employees, taxpayers and consumers. Furthermore, I personally fail to see how, if the Government expects the crisis to continue through 2013, can we deliver on what was originally conceived as an 10-year long plan within 2 last years of its existence?)

More to follow...

Government's Plan for Ireland: Exclusive... Part 1

Watch this space - I will be publishing Government's Briefing to the Social Partners - received from my academic sources - as soon as I read through the document. For now, part 1 of analysis...

Since the beginning of this week, a media circus surrounds the hot air factory we call the Upper Merrion Street.

Yet, ask anyone in the street what they think will be the outcome of the Social Partnership talks and the responses you get are pragmatic. "Taxes will go up for all!" "[the unions] will make us pay for public sector salaries and job security." "The Partners will get nowhere. Look, the Government can't control its own spending."

They are right. Common sense tells us that the Government that sat on its hands as the crisis unrolled through out 2008 is simply incapable of change. Our Cabinet has no progressive thinkers at the top.

When Mr Cowen took over from Bertie the reigns of this state, his first economic argument was in favour of preserving lavish wage increases granted to senior public sector employees and politicians. Incidentally, this was also the last thing Bertie did as far as economic policy is concerned. When President Obama sat down for his first day in office, he froze salaries of senior public officials.

Notice the difference? Right, it's that leadership thing that Obama seems to have, while our Brian- Brian- Mary Tri-Headed Hydra appears to absolutely lack.

But don't take my words for it. Look at the economic policy tofu they've been feeding to the markets and the Social Partners in the last couple of weeks.

Per sources advising the talks participants on economics side, the Government has forwarded a proposal to the Partners that includes:

• significant 'income adjustments',
  
• the adoption of budgetary 'stabilization' programme for 2009-2013,
  
• a nationwide 'jobs and skills summit' to be presided over by FAS,
  
• a reform of taxation – after the Commission on Taxation produces its recommendations, and
• unspecified public expenditure 'savings' after mid-2009, and a reform of pensions.
  

All of these ideas have been floated by the Government since July 2008 and none have seen any progress, with exception for the first round of 'income adjustments' (oops, tax increases) passed in Budget 2009.

In fact, the Government has now fallen so far behind the news curve, that it is undoing its own earlier plans. For example, Department of Finance January 2009 Stability Report factors into its budgetary deficit projections the minimum level of public expenditure savings of €16.5bn through 2013. Yet, according to the news coming out of the Partnership talks, the Government was asking for 'up to €15bn in spending cuts in 2009-2013'.

So much for the adoption of a budgetary stabilization programme. DofF's forecast is for the Exchequer deficit to run at 9.5% of GDP in 2009, 9% in 2010, 6.5% in 2011 and 4.75% in 2012, assuming the Government cuts €16.5bn starting now, not in the second half of 2009. Without these cuts – we are likely to be in an Icelandic deficit territory through 2020.

Surreal? Wait till you look closer at the rest of the Government proposals.

'Income adjustments' for 2009 and beyond are nothing else but tax increases on ordinary families and consumers who already face higher taxes (income and VAT), rising unemployment, falling wages and upwardly mobile public services costs. If anyone thought that a near tripling in personal bankruptcies in 2008 was a sign of a serious problem, wait until our Government's efforts to 'stabilize' the economy take a massive bite out of ordinary incomes.

No FAS-led "Jobs Fair" would be able to mop up even one tenth of the unemployment created by these Government-induced 'income adjustments'. FAS spends ca 7 times the average annual wage per each job created. At this rate 85,000 jobs that the Department of Finance forecasts to be lost in 2009 will take a cool €20bn 'Job Fair' to replace. And 85,000 is the number not counting in the jobs lost by the rapidly evaporating foreign migrants.

Finally, don't be fooled by the lofty ideals of reforming taxation and pensions. The official brief has only one stated purpose for such reforms – to raise more revenue out of the private sector economy to pay for more spending. Public sector's favorite folly is to tie us all into a mandatory pension scheme and then take away tax incentives to save.

Not to help up to 250,000 homeowners who will be stuck in the negative equity by the end of 2009, nor to aid families crippled by childcare costs or healthcare bills. Most certainly – not to give an inch back to the pensioners and savers whose funds have been devastated by the collapsed market.

Our only hope is that a handful of economically literate Partners might stand their ground in these absurd talks. Otherwise, as a fellow panelist of mine exclaimed at a recent radio discussion concerning our economic future, "We all will be truly screwed…" By those who are supposed to serve us, I might add.