8/7/2013: The More Things Change... in Greece

So Greece - off-the-charts in terms of not meeting its 'Programme' requirements has been fudged:

Now, recall:

• Privatizations penned in for 2012-2013 are not happening - at all,
• IMF requirement for at least full year funding held in reserves - not fulfilled at all,
• 12,500 public sector workers that were to be put into 're-allocation or redundancy' pool are not there,
• There is a massive overspend in a number of areas, including health, with a shortfall of EUR1bn at the state-owned EOPYY health insurer,
• Income tax, property tax and corporate tax are not being enforced in full, despite numerous promises...

Earlier this am I predicted that:

And per IMF release above, this is exactly what has happened - fudging complete... And what fudging!

While Troika says that outlook for the country remain uncertain, there has been a staff-level (technocrats) agreement on new 'reforms' on top of the old one on which Greece failed to deliver. And these new reforms - hold your breath - are more cuts in health spending, repeated promises to cut 12,500 public employees, and more tax reforms... The more things change...

"The More Things Change the more the stay the same

The more things change the more the stay the same

Ah, is it just me or does anybody see

The new improved tomorrow isn't what it used to be

Yesterday keeps comin' 'round, it's just reality

It's the same damn song with a different melody

The market keeps on crashin' "...

Well, at least markets are not yet crashin' cause 'Greece really doesn't matter anymore' theory, right?..


Updated: 

The Eurogroup continued the endless parade of statements, comments and instructions today with this: http://www.eurozone.europa.eu/newsroom/news/2013/07/eurogroup-statement-on-greece/ which is largely the same drivel as already released by the Troika.

Some exceptions:

The Eurogroup also takes note that the economic outlook is largely unchanged from the previous review and is encouraged by the early signals pointing to a gradual return to growth in 2014.

I mean, ok, the logic is iron-clad: for months we've noticed that things are largely unchanged, but we've had rounds and rounds of changes made to T&Cs of the 'bailout' because things are largely unchanged. Still, our expectations never stopped changing... the recovery previously penciled in for 2012 has been moved to H2 2012, then H1 2013, then H2 2013 and now to H1 2014 or maybe H2 2014...

and more:

The Eurogroup commends the authorities for their continued commitment to implement the required reforms

But obviously, these are not enough and are not being implemented, so the commendations are for what?.. Alternatively - they are enough and are bing implemented, in which case why is Eurogroup issuing any statements on Greece?

At the same time, significant further work is needed over the next weeks to fully implement all prior actions required for the next disbursement

Aha, now I understand - 'further work' is needed... except, wait a second, the 'further work' is the 'prior-agreed work' that... per above statement is a part of 'commitment to implement'... which Greece either has delivered (per commendation) or failed to deliver (per rather urgent 'need for further work')... so which one?..

Much of the rest in the statement is rather specific and make sone wonder - if Greece is being asked to do in the next two weeks what it has failed to do in last 12 months, why on earth is Greece deserving and commendations or, alternatively, how on earth can it be expected to deliver that?!

Never mind, all of it is pure fudge - Greece will not deliver 12,500 souls to the Purgatorio and it will not be able to tighten tax collection (something it failed to do over close to 50 years) in time for October 2104. And the Eurogroup is not expecting it to. Instead, there will be noise of compliance, sound of cash register emptying, followed by 3 months of calm and German elections.

To quote another musician:

So long, Marianne, it's time that we beganTo laugh and cry and cryAnd laugh about it all again
Laugh about it, folks... for following the Eurogroup statement, the IMF Chief, Christine Lagarde went out to face the public with a claim that, hold your breath, Euro area needs growth and ... deep gulp of air, please... jobs.

So long, Marianne, it's time that we began...

7/72013: Irish Manufacturing & Services PMI: June 2013

In the previous post I covered in detail the dynamics of the Services PMI (here) and few posts back, I covered Manufacturing PMIs (here). Now, lets take a look at both together.

Chart above shows the deviations of both PMIs from 50.0, with pre-crisis and post-crisis averages.
The relative weakness in Manufacturing performance, from the end of Q2 2011 through current is pretty much apparent. Both, manufacturing and services PMIs signaled much stronger growth conditions prior to the crisis, than since the beginning of 2010.

The most significant decline took place in Services, with the pre-crisis average deviation from 50.0 at 7.6 falling to 1.9 average deviation in post-January 2010 period. With STDEV at 6.5 since 2008 (7.4 prior historical), and with skew at -0.7 and kurtosis at 0.73, we are nowhere near average deviation being statistically significantly different from zero since the onset of 'recovery'.

Manufacturing decline has been more modest, given weak rates of growth in pre-crisis period. The average rate of pre-crisis deviation from 50 was 2.6 and that well to 1.1. With historical STDEV of 4.2 and STDEV since 2008 at 5.2, skew at -1.6 and kurtosis of 3.24, this is again indistinguishable from zero growth conditions.

On slightly better side of things and along shorter-run dimension, 3mo MAs are both above zero, but, once again, none are statistically significantly different from zero.

There is a strong, but non-linear relationship between Manufacturing and Services PMIs at levels, and it shows that year on year, relative gains in Manufacturing over 2011-2012 got erased over 2012-2013 and were replaced by relative gains in Services.

Irish PMIs have, however, very tenuous link to actual economic growth. Here are two charts showing this week relationship for log-log growth terms, but exactly the same picture is confirmed by taking simple level deviations in PMIs from 50, as well as for linear and cubic relationships (for robustness):

It is quite telling that Services PMIs have much weaker explanatory power for GDP and GNP growth than Manufacturing PMIs, confirming that Irish services, dominated by ICT and IFSC tax-optimising MNCs are not as relevant to Irish economy as manufacturing sectors.

Another telling thing is that both for Services and Manufacturing, the sectors activity as measured by PMIs has stronger relationship with GDP than GNP - which is also predictable, once you consider the PMIs heavy slant toward MNCs.


Note: raw data on PMIs levels is taken from Markit-Investec releases, with all analysis above, as well as deviations from 50 and all other transformations, including quarterly data computations, undertaken by myself. These transformations and analysis are intellectual property of my own and should not be cited without appropriate attribution.

7/7/2013: Services PMI for Ireland: June 2013

Necessity is a mother of all inventions. Necessity of recent commands that those of us who care to do an in-depth analysis of Irish data have to scale back analysis of the PMIs. The reason for this is that Investec and Markit are no longer publishing in a general release any relevant data concerning the PMIs components. In the case of Services PMIs, Markit went even farther:

All that is left for any non-profit analysts like myself is to take the few numbers still being reported on an ad hoc basis, and make most of them. Sad to see years of data & analysis models going to waste because Markit & Investec don't really understand how to work with new media and independent analysts.


Here is the updated trends analysis for Services Sectors PMI (my earlier post on Manufacturing PMIs is here):

• 12mo MA for the series stands at 54.0, which is statistically indifferent from 54.9 recorded in June 2013. 
• June 2013 reading is statistically significantly above 50.0, so no denying it, the sector is expanding.
• 3mo MA currently and 54.3, which is also statistically significantly different from 50.0, and is virtually unchanged on 54.2 3mo MA through March 2013.
• The 3mo MA through June 2013 (or Q2 2013 average) is ahead of same period 2012 (50.3), 2011 (51.0) and 2010 (52.9). All pointing in the good direction, then.

Charts below illustrate the trends:

Chart above shows that, despite the robust growth, we are in a secular slowdown in underlying growth when it comes to Services sectors. In pre-crisis period, average PMI ranged 7.6 points above 50.0, which was consistent with roughly GDP growth of 4.4-4.6 percent per annum. Since the 'recovery on-set, average PMI is above 50.0 by 1.9 points, which is not statistically significantly distinct from zero growth in the sector. it is also consistent with average GDP growth of ca 1.2-1.5% per annum.

Now, keep in mind: these are Services, heavily dominated by exports-driven ICT and Financial Services - in other words, this is the sector of the economy where the 'exports-led recovery' story has been the rosiest since the 'official' end of the crisis.

Stay tuned for my combined series analysis for Manufacturing and Services PMI.

6/7/2013: Feeding that Sovereign Cash Addiction?..

When the cure might be worse than the disease?

Two charts from BBVA Research:

Notice the size (as % of GDP) for the BoJ QE and notice the composition: BoJ now bought more JGBs as proportion of GDP than the Fed bought of Treasuries in Q1+Q2+Q3. But, as the chart below shows, that is still not making much of the difference (yet) in JGB holdings: banks and insurance companies remain captive to the state debt.

6/7/2013: WLASze Part 3: Weekend Links on Arts, Sciences and Zero Economics

This the third part of my WLASze: Weekend Links on Arts, Sciences and Zero Economics posts. Links to Part 1 and Part 2.

As I said in the opining for Part 1, this is the week of July 4th, so let's revisit some of the Americana here, again. Some of my favourite imagery from the US of A, tied together by similar theme:

Arizona's Wave Rocks: Coyote Buttes ravine

Death Valley's Mosaic Canyon:

I remember hiking both of the above. Stunning beauty!


More on the theme of American water and art: Christo & Jeanne-Claude's 'Surrounded Islands' (1980-83) in Biscayne Bay, Greater Miami, Florida

h/t for the reminder of this installation to @saatchi_gallery via twitter.


From the arid and tropical USofA to arctic extremes of Kola Peninsula of Russia: "It has been said that the human race knows more about certain distant galaxies than it does about the ground that lies beneath its very feet. In fact, while it took the famous Voyager 1 satellite twenty-six years to exit our Solar System (relaying measurements to Earth from 16.5 billion km away), it took about the same amount of time for humanity to penetrate a mere 12 km into the Earth's surface."

Let's not get embarrassed by this, but we probably now even less about our neighbours next door…
Note: reference to the Voyager 1 mission referenced in Part 1 of WLASze links.


TED Talks tend to be occasionally 'political' and on some other occasions they tend to be rehasments of things we've heard about before and not necessarily pushing the boundaries of what we know into what we would like to know. Here's an exceptional example of good TED (h/t to @rszbt via twitter).

A quote: "…the general understanding is that the crisis came as a complete surprise. To the initiated, his choice of the word “cascaded” to describe the dynamics at work indicates that he has a different view. His hypotheses are
(1) Financial bubbles can be diagnosed in real-time before they end, and
(2) The termination of financial bubbles can be bracketed using probabilistic forecasts.
His underlying concept is the theory of “Dragon Kings”:
Dragon Kings represent extreme events which are “in a class of their own”. They are special. They are outliers which are generated by a specific mechanism which, as Sornette emphasizes, makes them “predictable and perhaps controllable”."

Yes, some bubbles are predictable at least in terms of being able to generate early alerts. Yes, the latest one, especially relating to property prices, was predictable, even using simple AR-based models of property prices. Yes, the propagation of the latest crisis across the balance sheets of financial institutions was also predictable. But… no - timing and extent of the crisis was probably not predictable. And yes, 'bracketed' or interval-targeted predictability is probably here, but we still have no 'turning point' power, in my view.

I like the contrast of Dragon Kings to Black Swans: "A black swan is a rare bird. Seeing it shatters all beliefs that swans should be white. The black swan stands for the idea of unpredictability and extreme events being “fundamentally unknowable”. As Sornette emphacizes, the Dragon King is “exactly the opposite” of a Black Swan, as in his concept, most extreme events are actually knowable and predictable." But the point also is that the Dragon King does not shatter our systems of belief and inquiry - it actually ex-post reinforces them. In other words, if the current crisis is a Dragon King, then the answer to the problems it posses is not in seeking new 'tools' for inquiry, but in reinforcing existent 'tools'. This point is more than coincident with my view that the systems of thinking did not fail us in this crisis, but the systems of enforcement of that thinking did - a point informed by the work I am yet to transcribe into paper format existence on AR models application in forecasting property prices dynamics (work in progress).


Staying on predictability: Nature reported on the latest breakthroughs in quantum mechanics involving the Heisenberg Uncertainty Principle (HUP). In quantum mechanics, HUP sets fundamental limit to the degree of precision which can be assigned to various complementary pairs of physical properties of particles. Classic postulation of HUP states that the more precisely we know the position of some particle, the less precisely we know its momentum, and vice versa. More on HUP here and here.


And for a happy ending to this week's links:

Christopher Wool's Minor Mishap, 2001

Wool was a major 'new blue-chip' name at Basel 2013.

And the opposite of Wool 'complex statism' - the 'arrested dynamism' of Big-Bang-Bullets in Plexiglass:

http://wordlesstech.com/2013/06/30/the-big-bang-bullets-in-plexiglass/


Enjoy!

6/7/2013: WLASze Part 2: Weekend Links on Arts, Sciences and Zero Economics

The send part of my regular WLASze (Weekly Links on Arts, Sciences and zero economics). The first part is available here: http://trueeconomics.blogspot.ie/2013/07/672013-wlasze-part-1-weekend-links-on.html


Let's start with a Prime Ministerial take on Summer in Moscow

via Russia's Dmitry Medvedev @MedvedevRussiaE on twitter and http://instagram.com/p/baqMWzA_MX/

My reports suggest that the city is, per usual in such weather, is being abandoned for dachas, which makes it great time to be in the city. Moscow has this most outstanding quality to it when it is deserted by the crowds - a city full of signs of its tremendous speed and energy, yet devoid of both. Walking its empty (well, nearly empty, as it is Moscow after all) boulevards, city centre streets, in near-solitude. A museum visited on the 'Members-only' days… a park caught in the stillness of a storm approaching… a train station in the dead of the night…

As Brodsky put it: "Loneliness cubes a man at random." (http://www.poemhunter.com/poem/to-urania/) Except in a good way...

On Brodsky's Urania (linked above) - more threading of the needle: Auden's http://poetry.rapgenius.com/W-h-auden-the-fall-of-rome-lyrics#lyric
"Altogether elsewhere, vast
Herds of reindeer move across
Miles and miles of golden moss,
Silently and very fast."


An excellent link via @farnamstreet to Clayton Christensen comments on big data and how ideas emerge interview with The Economist:
http://www.farnamstreetblog.com/2013/06/how-great-ideas-emerge/?utm_source=feedburner&utm_medium=twitter&utm_campaign=Feed%3A+68131+%28Farnam+Street%29
Quote: "most of our education is organized the same way – silos. One way for individuals to improve decisions and ideas is to intersect the main ideas from the big disciplines."
Gels with my article in last week's Sunday Times:
http://trueeconomics.blogspot.ie/2013/07/272013-sunday-times-june-30-2013-irish.html

More on the issue of links between humanities, education and sciences and relating also to my Sunday Times article from last week:
http://qz.com/98892/the-humanities-are-not-in-crisis-in-fact-theyre-doing-great/

Yet more on the same topic of broader thinking: https://theconversation.com/thinking-critically-on-critical-thinking-why-scientists-skills-need-to-spread-15005

Thinking critically on critical thinking: why scientists' skills need to spread - the article takes the half of the complete dimension in education by arguing that science skills should be spread wider across non-scientific fields of inquiry. I agree. But this is now an accepted wisdom: artists do use scientific language and tools. The opposite direction is yet to be accepted in education and academia and even applied sciences…


And here's an example of poor use of visual and signifier tools that comes from 'management sciences'. A hideously MBA-ish image of 'Inspiration' based on uninspiring clutter of pop-icons and half-finished 'thoughts' that creates more confusion than clarity and is brought to an even more striking vividness by the 'pensive' nature of an 'artsy thinker' pondering the banality over the space of an 'academist' blackboard... Yeeks!
https://www.linkedin.com/today/post/article/20130611015532-15077789-8-simple-ways-to-inspire-yourself-at-work?_mSplash=1



Stay tuned for more links in part 3 forthcoming tonight.

6/7/2013: WLASze Part 1: Weekend Links on Arts, Sciences and Zero Economics

Given that this week is the 4th of July week, it is probably apt to start my WLASze: Weekly Links on Arts, Sciences and zero economics instalment with a bit of Americana.

And so we shall.

On sciency-bit side - an awe-inspiring story of a 35-years-old-and-still-running scientific journey: http://www.nytimes.com/2013/06/28/science/space/going-going-still-going-voyager-1-at-solar-systems-edge.html?_r=0
My favourite quote: "…when the two Voyagers launched in 1977 on a grand tour of Jupiter, Saturn, Uranus and Neptune, the space age was just 20 years old, and there was no way to know that NASA had built something that would last 35 years…" Now, recall the life span of your iPhone… 35 months?.. near, not even that. And to that: Happy Birthday, America!


But while on the topic of space, fascinating images from arstechnica on ISS workings:
http://arstechnica.com/science/2013/07/gallery-the-international-space-station-flight-control-room/#image-1 The logos above the Mission Control Center and the typography of the sign are a bit OTT… like, tacky. The second and third images are brilliant: it takes fewer computers and people to run the ISS than to execute a mildly sizeable hedge fund management strategy… The amazing bit is that these guys are managing equipment that is largely Russian-designed and built, floating out in space and manned by all sorts of crews, so Big Respekt!


Via @stephenkinsella - an absolutely amazing, comprehensive and exhaustive visualisation of univariate distributions linkages: http://www.math.wm.edu/~leemis/chart/UDR/UDR.html . You can scroll over the defined distributions of the right hand side to 'focus' on their respective clusters: a list of 76 probability distributions formed by 19 discrete and 57 continuous ones. Screw Tall Ships and Star Wars posters! I know, I want to print this one out on a 'blackboard' paper like 3x3 meters-sized for Luca's room.


On the arts side: "Until It Makes Sense" is an encounter with the work of Mario García Torres at Dublin's Project Arts Centre http://ht.ly/mD7lK . Worth a visit. Here's an interview with Torres in line with this 2007 Stadelijk Museum show: http://www.flashartonline.com/interno.php?pagina=articolo_det&id_art=90&det=ok&title=MARIO-GARCIA-TORRES

An interesting reference to "John Baldessari’s rendition of Sol LeWitt’s Sentences On Conceptual Art" - http://www.artic.edu/aic/collections/artwork/189072 Baldessari's 1972 work.
I prefer Baldessari as a conceptual photographic artist, with works like here: http://www.muralsoflajolla.com/john-baldessari-mural/

and Classic Baldessari:

Staying with art: Arte Laguna - a regular international competition "aimed at promoting and enhancing Contemporary Art" and held at Venice Arsenale was announced for 2013-2014: http://www.artelagunaprize.com/index.php/prize.html
with exhibition to be held 9 October-30 October 2013.

Here are some of 2012 winners. A brilliant recomposition of classical pastoral narratives using photography as the medium to replicate the texture, light and colour gamma of oil by Linda Pottage:
http://www.artelagunaprize.com/index.php/component/content/article/985-linda-pottage.html
In larger size, and including her other work:

Amazingly fluid and, obviously, dynamic structure, reminiscent of 3D plots you might get in Mathematica… or the 'Regression Machine' one of my econometrics professors at UCLA used on us (not a very happy memory of tortured geekiness) by Jill Townsley:
http://www.artelagunaprize.com/index.php/component/content/article/986-jill-townsley.html

Source on 2012 show: http://bellezzedarte.wordpress.com/2013/03/30/la-mostra-dei-finalisti-premio-arte-laguna/

Another excellent work: Jaspal Bir's oil:

Stay tuned - more links will be forthcoming in Part 2.

5/7/2012: Epically scary chart

Via Calculated Risk:

Basically, since 1981 recession, duration of the subsequent jobs losses has been longer and longer and longer. The duration spread has risen from 3 months between  1981 and 1990 recessions, to 14 months between 1990 and 2001 episodes to now 19 months and still counting. At current run rate, we are looking at 77-78 months duration and this will bring the spread to ca 33 months.

Thus spreads: 3-->14-->33.

4/7/2013: IMHO Letter to Governor Honohan

Updated:

Here's this week's letter to the Governor of the Central Bank of Ireland from the IMHO on the topic of Declaration of Last Resort for Family Home Repossessions (you can click on each image to enlarge):

4/7/2013: Jobs Creation by State Agencies

Per press reports today: "IRELAND'S enterprise development agencies created nearly 9,000 net jobs in 2012, new statistics outlined." The reports reference the findings of the Forfas 2012 Annual Employment Survey (linked at the bottom) which showed that "total permanent full-time employment in agency-assisted companies operating in all sectors amounted to 294,785 in 2012, a net increase of 8,975 jobs or 3.1pc."

The quoted statement above is nonsensical and should not have been made. Here's why:

1. These jobs were created by companies working with the agencies, not by agencies themselves. In simple terms, "Ireland's enterprise development agencies" have not created any of these jobs, although they might have been helpful in bringing these jobs to Ireland or helping companies in developing activities that resulted in these jobs creation. 
2. In some instances, working with the agency involves not much more than obtaining an investment from an agency-supported fund that is not actively administered or managed by the agency. In this case, a company 'client' of the agency does not have much of an engagement with the agency at all. In a sense, such jobs creation by the agency amounts to the jobs creation by the financial investors - they provide funds for jobs that are to be created - with or without them, sometimes - but they do not actively 'create' jobs.
3. Net jobs created claim relates to gross increase in total employment during 2012 over 2011 final figure. This increase in its entirety does not accrue to the company activities with the agencies. For example, a mature enterprise can be engaged with an agency in developing new markets for exports. The enterprise might hire new workers for work totally unrelated to its engagement with the agency. Should the credit for these jobs additions go to the agency? Let's put this differently: suppose you broker a deal between companies 1 & 2 to purchase good X by 1 from 2. Should you get credit for company 1 buying from company 2 good A as well? 
4. Net jobs creation on the year 2011 assumes that these are new jobs added. This is also not true. It might be a job that replaces a layoff or redundancy that took place in 2011, but was not filled for 3-4 (or longer) months and thus hiring took place in 2012. What happens? Level of 2011 employment that serves as a base decreases by 1 job, level of employment in 2012 increases by 1. New jobs created = zero, yet Forfas study reports a net jobs creation of 1.
5. The survey includes Ireland-based MNCs, which have multi-annual jobs rolls, so the point (4) above applies to their activities even more significantly than for domestic enterprises. 5,747 of the 8,975 jobs were 'created' in foreign-owned MNCs
6. The survey also includes a number of larger internationally-trading Irish firms. Some of the jobs added could have been created and announced before the company was engaged with the state agency, but their filling was delayed until 2012 when the company was engaged with the agency.
7.  Many of the firms covered in the survey are mature and established firms and are no longer 'assisted' in any meaningful way by the state agencies, since they have long-term established operations in Ireland. A standard practice in business is when a broker of a deal gets a commission for the deal. The broker usually ceases to be compensated for any future deals signed by the two companies engaged in the original transaction once the original transaction is over. In the case of the Irish state agencies, the credit seems to flow unabated regardless of whether their work does directly contribute to the jobs creation or not.
8. In some cases, 'net jobs created' by agencies-assisted companies can be actually poorly accounted jobs rotations within the economy. Example: an agency providing outsourcing service to, say, Nama moves into the country assisted by one of the international FDI agencies in the state. It creates 100 jobs that are counted as new. Yet it takes on 100 staff from the previously closed domestic agency that was not assisted by the agency. Net jobs creation in state agencies assisted companies +100. Net jobs creation in Irish economy = 0.

These are at least some of the reasons why both the 8,975 jobs additions can be questioned and why in general none of these jobs were 'created' by the state agencies and not all of these jobs relate to the activities with which the state agencies are engaged.

There is also a reason to question the very word 'permanent' jobs. If they are permanent, then why has the employment levels in agencies-assisted firms still running below 2006 peak? Permanent is permanent, right?

And it really is not needed to make silly statements of this sort - some of the agencies - e.g. EI and IDA - are doing excellent work in many areas and are wanting in other. This is natural for any agency and any enterprise. The point is not to brow-beat them for the latter nor to ignore it, and it is also not to over-praise them for the former. What is needed is more precise and more transparent accounting and reporting. Alas, Forfas doesn't really deliver on that and never did. Instead we have a report full of chart, numbers and tables that offer little deep insight and even less real analysis.

Full Forfas report is here: http://www.forfas.ie/media/04072013-Annual_Employment_Survey_2012-Publication.pdf

4/7/2013: Blackrock Institute Surveys: North America, Europe and EMEA: June 2013

Two charts showing most recent consensus expectations on North American, Western European and EMEA economies from the Blackrock Investment Institute panel of economists (note: these do not represent views of Blackrock).

Notice clustering of peripherals and France, as opposed to marginally better clustering of the Netherlands, Sweden, Belgium and Eurozone.

Note Ukraine as the sick man of the region. Also note Slovenia and Croatia - two EU economies that are significantly under-performing the regional grouping.

4/7/2013: Blackrock Institute Surveys: North America, Europe and EMEA: June 2013

Two charts showing most recent consensus expectations on North American, Western European and EMEA economies from the Blackrock Institute panel of economists (note: these do not represent views of Blackrock).

Notice clustering of peripherals and France, as opposed to marginally better clustering of the Netherlands, Sweden, Belgium and Eurozone.

Note Ukraine as the sick man of the region. Also note Slovenia and Croatia - two EU economies that are significantly under-performing the regional grouping.

4/7/2013: Ifo Forecast for euro Area Growth Q2-Q4 2013

Ifo Institute latest forecast for Eurozone:

-- "Activity contracted by 0.3% in Q1 2013, falling for the sixth consecutive quarter."
-- "GDP growth is expected to turn slightly positive in Q2 2013 (+0.1%), with a mild acceleration over the following quarters (+0.2% in Q3 and +0.3% in Q4)."
Core drivers:
-- "...progressive improvement in exports and a marginal recovery of domestic demand in the second half of the year."
-- "…fiscal consolidation and ongoing deleveraging in corporate and banking sectors of several Eurozone economies will continue to weigh on economic growth."
-- "Labor market conditions will remain unfavorable, placing an additional burden on disposable income and private consumption."
-- "Due to tight credit conditions and weak prospects for internal demand, gross fixed investment is also expected to remain weak."
-- "Exports growth and the need to replace an ageing capital stock will lead to a modest investment recovery in Q3 and Q4 2013 (+0.1% and +0.4% respectively)."
-- "Under the assumption that Brent oil price remains stable at USD 103 per barrel in Q3 and Q4 and the euro/dollar exchange rate fluctuates around 1.30, inflation is projected to 1,3% in Q4."

Core caveat: "This forecast assumes that financial tensions in Europe do not escalate and a gradual unwinding of the monetary policy stimulus in the United States."

Full note: http://www.cesifo-group.de/ifoHome/facts/Forecasts/Euro-zone-Economic-Outlook/Archive/2013/eeo-20130704.html

My view: optimistic assumption on inflation and EURUSD rate, but generally, agree with Q2-Q3 outlook as a central scenario. Risks are rising, however, by the day.

Core charts:

4/7/2013: Thou Shall Not Dream of Punishment... for banks...

Interesting discussion on July 2 in the Seanad Eireann Debate on the Central Bank Supervision and Enforcement Bill 2011 that is going through the final debates: http://oireachtasdebates.oireachtas.ie/debates%20authoring/debateswebpack.nsf/takes/seanad2013070200034?opendocument#LL00100

Note, the key point in the overall draft of the legislation is that it no longer provides significant powers of enforcement to the Central Bank over the matters relating to the banks practices that can potentially restrict competition in the sector in Ireland. The Government has rolled back on granting such powers to the Central Bank.

Minister Noonan was originally very supportive of adding powers on protection of whistleblowing, evaluation of the banking sector by the Competition Authority and increasing the fines for banks the Central Bank can issue, but Minister of State at the Department of Finance (Deputy Brian Hayes) pulled back in a rather revealing debate.

Good to know that the 'reformed' banking sector shall remain as unenforceable as the one that got us into the proverbial sh*t.

4/7/2013: Irish Services Sector Activity Index: May 2013

Irish Services Index for May was out today, so here are the updated trends.

Wholesale Trade activity rose from 114.7 to 116.7 between April and May 2013, with index up 1.74% m/m having posted a 7.9% rise m/m in April. 3mo average through May 2013 is down on 3mo average through May 2012 by some 7.45% and 6mo average through May 2013 is down 6.47% y/y. Thus, two last months' readings are encouraging, but not yet enough to reverse overall slower activity recorded y/y.

Wholesale and Retail Trade and Repair of Motor Vehicles etc sector activities also improved m/m in May 2013, rising 1.22% after posting a 3.61% rise m/m in April. 3mo average through May 2013 is down 5.27% y/y and 6mo average through May 2013 is down 4.22% y/y. Relative to historical max (history here references period from January 2009), the index is still down 4.27%

Transport and Storage sector is up 1.49% m/m in May 2013 having posted a 1.06% increase in April 2013. 3mo average through May 2013 is up 5.79% y/y and 6mo average is up 6.62% y/y. Relative to historical max, the index is down 5.84%.

Accommodation and Food services activity dipped 0.58% m/m in May, having recorded a 3.38% drop in April. 3mo average through May is still up 1.40% y/y and 6mo average is up 1.72% y/y. The sector is down 17.78% on peak for the period from January 2009.

Administrative & Support services activity rose 0.68% m/m in May, having recorded a 2.42% rise in April. 3mo average through May is still up 20.67% y/y and 6mo average is up 18.06% y/y. The sector is currently at a peak for the period from January 2009.

Information & Communication services activity dipped 3.23% m/m in May, having recorded a 2.11% drop in April. 3mo average through May is still up 10.31% y/y and 6mo average is up 7.72% y/y. The sector is down 5.28% on peak for the period from January 2009.

Professional, Scientific and Technical services activity dropped 4.40% m/m in May, having recorded a 0.11% decline in April. 3mo average through May is down 3.72% y/y and 6mo average is down 4.34% y/y. The sector is down 35.0% on peak for the period from January 2009.

Overall services sector activity declined 0.74% m/m in May, having recorded a 1.21% expansion in April. 3mo average through April 2013 was up 1.83% y/y and this improved to 2.31% growth for 3mo average through May 2013. 6mo average through May 2013 was up 1.72% y/y. Relative to peak, overall services activity is down 1.64%.

3/7/2013: Holdings of Irish Government Bonds: May 2013

The Central Bank of Ireland released the data for holdings of Irish Government bonds for May 2013. Alas, these are not well-defined, as one category, MFIs & Central Bank, pools together two distinct groups of investors.

Here is the data analysis.

The numbers below reference, in addition to those reported by the CBofI, the holdings ex-Promissory Notes. recall that in February we have converted Anglo Promo Notes (EUR26bn worth of the stuff net) into Government bonds. These are held by the CBofI and have nothing to do (for now) with the private demand for Government bonds.

In May 2013, there were EUR115.441 billion worth of Irish Government Long-term Bonds (GLBs) outstanding, with 3mo average through May 2013 up 42.7% on 3mo average through May 2012.

Resident holdings overall amounted to EUR51.236 billion in May 2013. 3mo average through May 2013 is up 143.3% on 3mo average through May 2012, but once we correct for Promo Notes, this increase drops to 'just' 20.9%.

Resident MFIs and CBofI holdings of Government bonds rose from EUR16.671 billion in May 2012 to EUR48.943 billion in May 2013 or controlling for Promo Notes - to ca EUR23.04 billion. 3mo average through May 2013, adjusting for Promo Notes, rose 37.15% y/y. In other words, if contagion conduit between banks and sovereign can be identified with the extent of the banks holdings of Government bonds (and it can be, in part and among other things and with some caveats), then clearly that conduit has gotten larger over the last 12 months, not smaller. I wrote about similar effect in the case of Spain and Italy here: http://trueeconomics.blogspot.ie/2013/06/2962013-banks-sovereign-contagion-its.html

Meanwhile, holdings of Irish Government Long-Dated Bonds by the real resident investors, such as Households and Non-Financial Corporations, have fallen from EUR197 million in May 2012 to EUR193 million in May 2013. 3mo average through May 2013 was down 4.6% y/y. All in, real investors - as opposed to financial institutions, central bank, government and financial intermediaries - held just 0.17% of all Irish Government bonds outstanding in May 2013, down from 0.24% in May 2012.

Non-resident holdings of Irish Government bonds in May 2013 stood at EUR64.206 billion, up on EUR 60.795 billion in May 2012. 3mo average holdings through May 2013 were only 7.8% or EUR4.721 billion ahead of the 3mo average through May 2012.

Two charts:

2/7/2013: Irish Retail Sales May 2013: A View from a Hurricane Shelter

Retail sales stats were relaxed few days back and I had no chance to update the series until now. So here's the headline analysis for May 2013.

Table below summarises the latest data:

The Retail Sales Activity Index is my own index based on volume and value of core retail sales and consumer confidence indicators, weighted to reflect both prices and volumes contributions to sector activity as measured by sector employment and contribution to the national accounts.

Charts below show dynamics:

You can see in the last chart above the flat (negative slope, but basically zero) trend that is prevailing in the series since January 2009. Same trends are basically present in ex-motors, automotive fuel and bars sales, although May 2013 data did come in at an upside, without breaking the overall trend. But the same is not true for the motor trades, which are heading South once again and along what appears to be a turning trend:

2/7/2013: Sunday Times, June 30, 2013: Irish education system reforms

This is an unedited version of my Sunday Times article from June 30, 2013.

Note: an interesting related article on human capital and values of innovation and creativity linked to education in humanities is here: http://qz.com/98892/the-humanities-are-not-in-crisis-in-fact-theyre-doing-great/ and on the need to link various fields of inquiry in education systems: http://www.farnamstreetblog.com/2013/06/how-great-ideas-emerge/?utm_source=feedburner&utm_medium=twitter&utm_campaign=Feed%3A+68131+%28Farnam+Street%29


Since times immemorial Irish political and business elites have been fascinated by technocratic ideals. From the 1990s on, the state bodies like Fas and Forfas have pushed forward the worldview in which Ireland required an ever-increasing investment in advanced specialist and technical education and training in ICT, chemical, software, and general engineering.

The ICT manufacturing is now largely the story of the past, as is the dot.com bubble. The pharma story is fizzling out on foot of expiring super-drugs patents, with last week’s patent expiration for Viagra being case in point. Biopharma is too small to replace lost exports revenues and shrinking FDI from pharma.

As the latest quarterly national accounts for Q1 2013 released this week illustrate, traditional specialist areas of exports are no longer sustaining growth in Ireland. Stripping out the contributions by the tax-optimising ICT services multinationals, our economy is in a structural decline. Seasonally-adjusted industry activity is down year on year, and goods exports have fallen 9.2%. Investment is down both year on year and quarter on quarter. All areas of activity that are linked to the real exports production in the country are down. This decline is driven by the fact that we are falling behind the innovation curve in creation of new enterprises, products, services and investment opportunities.

In line with Irish experience, this month Finnish authorities were forced to revise down their own forecasts for 2013-2014 economic growth from an average of 1.0% per annum to 0.4%. The downgrade was linked, in part, to Finland's struggle to maintain competitive edge in traditional manufacturing, which is falling behind on products and services design and innovation, despite, or may be even because Finland concentrated too much of its resources on technical ICT investments and skills.

Still, policies of fetishising technocracy roll on. From science advisory bodies and MNCs HQs, to the IDA and Enterprise Ireland, our decision makers are promoting an economy based on software codes, data analytics and cloud computing. No one seems to think that the resulting education and skills strategies alignment with the technical needs of these sectors can risk being reactive to the immediate global markets demands, instead of moving ahead of the curve.

Recent research and news flow from around the world shows that innovation is becoming more focused on increased customization, design and creativity of products and services. These require the exact opposites of the purely technocratic approach to education and training. This is a bigger and longer trend, and we are nowhere near capturing it in our education and training systems.

Ireland's policy leaders pay vast amounts of lip service to the Silicon Valley - world's largest cluster of technological innovation and investment. The development agencies, like IDA and Enterprise Ireland commonly cite it as an inspirational example in the context of Ireland’s need to promote education in maths, hard sciences and tech. Their logic is that concentrations of locally-based technological skills and research translate into Silicon Valley-styled success. Many in Ireland, contrary to the evidence from the US research, still link academic institutions clustering in the Northern California to the Silicon Valley formation and achievements.

This logic is over-simplifying the reality. Recent studies from Harvard and Duke University show that less than half of all CEOs and chief technology officers working in the Silicon Valley firms hold advanced degrees. Only 37 percent of all degrees held by the Silicon Valley executives are in the areas of engineering or ICT. Only two percent held a degree in mathematics. Vast majority of undergraduate and graduate degrees held by business leaders in the Silicon Valley are in the so-called ‘soft fields’ such as business, finance, and arts and humanities. Put simply, there are more liberal arts graduates steering Silicon Valley companies than physical sciences graduates.

What about the skills demands of the cutting edge innovation firms and start-ups? In 2011 Bill Gates and Steve Jobs publicly clashed in their views on the future needs for skills and education. In his speech to the US National Governors Association, Gates stated that education should focus limited resources on areas and disciplines that are positively correlated with jobs creation. This implies technical ICT skills. Days later, Steve Jobs identified Apple's success with "technology married with liberal arts, married with the humanities".

Jobs was not alone in this recognition. Carol Geary Schneider, president of the American Association of Colleges and Universities says that liberal arts-linked skills and knowledge are critical to the long-term employability of the workforce. Schneider called Gates’ ideas on technically-focused demand-driven education as "much too narrow and unsettlingly dated”. “The question to ask is not: which [degrees] do the best in initial job placement, but rather, which institutions are sending their graduates forth with big picture knowledge, strong intellectual skills and the demonstrated ability to integrate and apply diverse kinds of learning to new settings and challenges,” she said. Per Jobs and Schneider, and many other analysts and business leaders, arts and tech deserve shared credit in driving world's most successful and most important innovative companies since the late 1990s.

The link between humanities, arts, design and value added in business and across economies is now widely regarded as the source for future growth. The global investment community is starting to treat design-focused technologies and innovation as a new Klondike.

This month, the Pictet Report, a quarterly publication aimed at professional and institutional investors produced by one of the largest and oldest private banks in the world, is devoted in its entirety to creativity-driven disruptive innovation. The main focus, of course, is on investment opportunities linked to such innovation.

Last week, Brimingham hosted a major design expo aimed at "showcasing authentic, regionally-based brands and upcoming graduate and entrepreneurial talent". Birmingham-Made-Me Expo is an extension of the UK-wide movement and policy nexus that attempts to re-position design-driven innovation and entrepreneurship at the heart of the future economy. The UK Government is pumping significant resources behind these efforts.

In the mean time, shortages of ICT professionals, while still evident in Ireland, are becoming less acute across the broader world. Reports from India show that the country is producing an oversupply of ICT engineers and technicians, with estimated 50,000 graduates facing a prospect of underemployment in the near future. The problem is acute enough for India's Commerce and Industry Minister, Anand Sharma, to plead with London this week to relax visa caps for Indian ICT workers seeking jobs in the UK.

Even in the fields of big data and cloud computing, technical skills are a dime-a-dozen, as I noted in a recent speech at a cloud computing conference hosted by DCU. What is truly lacking in these areas is the ability to creatively enrich data insights via user-centric visualization of data, and development of applications that drive deeper into customisation of business. Being able to capture, store and process data is a mass-produced commodity. High value-added future opportunities will be found in delivering communicable and actionable insights out of this data that can enable products and services innovation and individualisation.

The world of innovative and high value-added economies is moving in the direction of embracing more broadly-based creativity, intelligent design, consumer-focused disruptive innovation. In this light, Irish education system must be reformed to bring it into the future, not to chase the immediate skills shortages. While we do need to maintain strong efforts in areas of education linked to software programming, design and engineering, as well as maths and sciences, we also need to develop complex aesthetic, social and design-intensive capabilities. And the former is probably less important in the longer run than the latter, especially if we can succeed in aligning ‘softer’ skills with entrepreneurial and business capabilities on the ground.

At the pre-tertiary education level, we need to focus our education on developing basic literacy skills in arts, humanities, as well as in sciences and ICT. Early exposure to web-based applications, even some coding, is a good anchor for such literacy. Alongside, we need to revise our curricula for history, literature and arts. Religious education and mandatory Irish must be absorbed into electives. Time and teaching resources freed from these should be used to give students good anchoring in world history, philosophy, logic, and art.

It is time for investing in specialization-focused schools to reflect not geographic distribution of students, but students’ talents and interests. Specialist curriculum schools focusing, differentially, on arts and humanities, as well as those focusing on sciences and ICT should be prioritized for future development in larger urban areas. Every IT school and University in the country should be required to run significant Young Scholars Academies offering regular engagement opportunities for children with talent and aptitude. These Academies can act as formal facilitators for their entry into higher education.
We also need to remove our reliance on standardized examinations for progression of students through the entire system of education.

Third level education must support the objectives of making our workforce skills and knowledge base broader. We need restore a four-year degree system. Third level degrees curriculum must explicitly require, not just encourage, students’ exposure to studies beyond their immediate major. Students in technical fields must be exposed to basics of humanities and arts. Students in arts and humanities must be literate in ICT and sciences.

Fourth level education too should be used to further enhance the above processes. We need to develop cross-collaborative MSc and PhD degrees and provide for supplementary degree programmes (joint MSc and diploma packages) for students interested in working on the boundaries of diverse disciplines, such as, for example, creative arts and technology, quantitative analytics and marketing, behavioural economics, and product and servcies design. Industry experience and achievement should form the foundation of enlarged and better-structured adjunct faculty. Subject to peer review, industry research should count as an integral part of academic and adjunct faculty evaluations.

In life-long learning, we need flexible programmes allowing for research-focused studies that can stretch over a number of years. Linked directly to work-related projects and topics, these should lead to degrees being awarded in the end, subject, again, to mature students engaging with minimum of a broader curriculum outside their field of competency.

Box-out:

This week, CSO published the latest data on new planning permissions granted in Ireland, covering Q1 2013. The publication was greeted with a chorus of 'good news' reports, as data showed increases in the Number of Dwelling Units approved. Per official statistics, these rose 31% for houses, and 3.9% for apartments. All increases reported reference quarterly rises. There are several problems with the upbeat reports, however. Number of permissions for houses actually fell year-on-year by a significant 9.31% reaching the second lowest level in history of the data series. Number of permissions for apartments also fell, by 18.4% on Q1 2012. More ominously, aggregate activity in the construction sector, as measured by the new permissions granted, shrunk across the board. Total number of planning permissions granted in the state was down 1.35% quarter-on-quarter and down 2.76% year on year, hitting absolute lowest point for any quarter since Q1 1975. Across the board, it is pretty safe to say that the Q1 2013 data does not warrant much enthusiasm, despite the aggressive spin put on it by some media reports.

2/7/2013: Sunday Times June 23, 2013: G8 and Ireland

This is an unedited version of my Sunday Times article from June 23, 2013


As G8 summits go, the latest one turned out to be as predictable as its predecessors – an event full of reaffirmations of well-known conflicts and pre-announced news. In terms of the former, the Lough Erne meeting delivered some fireworks on Syria. On the latter, there was a re-announcement of the previously widely publicized Free Trade pact between the US and Europe. Another pre-announced item involved the EU, UK and US push for corporate tax reforms.

The two economic themes of the Logh Erne Summit agenda are tied at the hip in the case of our small open economy heavily reliant on FDI attracted here by the opportunities for tax arbitrage. As such, the G8 meeting agreement poses a significant threat for Ireland's model of economic development. Although it will take five to ten years for the shock waves to be felt in Dublin, make no mistake, the winds of uncomfortable change are rising.


The trade agreement, first announced by the Taoiseach months before the G8 summit, promises to deliver some EUR120 billion in net benefits for the EU economy. Roughly 90% of these are expected to go to the Big 5 economies of the EU, leaving little for the smaller economies to compete over. Behind these net gains there are also some regional re-allocations of trade that will take place within the EU itself.

In the short term, Ireland is well-positioned to see an increase in exports by the US multinationals operating from here and to some domestic exporters. The uplift in trade flows between Europe and the US may even help attracting new, smaller and more opportunistic US firms' investments. While tens of billions in trade for Ireland, bandied around by various Irish ministers, are unlikely to materialize, a small boost will probably take place.

However, over time, the impact of the EU-US trade and investment liberalisation can lead to sizeable reductions in MNCs activity here. Under the free trade arrangements, longer-term investment and production decisions will be based on such factors as cost considerations, as well as concerns relating to access to the global markets, and taxes.


Consider these three drivers for future trade and economic activity in Ireland in the context of the G8 summit and other recent news.

On the cost competitiveness side, we have had some gains in terms of official metrics of labour productivity and unit labour costs. Major share of these gains came from destruction of less productive jobs in construction and domestic services. Increase in revenues transferred via Ireland by some services exporters since 2004-2007 period further contributed to improved competitiveness figures.

Once when we control for these temporary or tax-linked 'gains' Ireland is still a high cost destination for investors compared to the majority of our peers.  As reflected in Purchasing Managers Indices, since the beginning of the crisis, Irish producers of goods and services have faced rampant cost inflation when it comes to prices of inputs. Earnings and wages data for 2009-2012, released this week, show labour costs rising across the exports-oriented sectors. Lack of new capital, R&D and technological investments further underlines the fact that much of our productivity gains are related to jobs destruction and transfer pricing by the MNCs.

When the tariffs and other barriers to EU-US trade come down, some multinationals trading into Europe will have fewer incentives to locate their production in Ireland. This effect is likely to be felt stronger for those MNCs which trade increasingly outside the EU, focusing more on growth opportunities around the world. Based on experiences with other free trade areas, such as NAFTA and the EU, this can lead to increased on-shoring of FDI back into the US and into core European states, away from smaller economies that pre-trade liberalization acted as entrepots to Europe.


The tax dimension of the G8 agreement will be the most significant driver for change in years to come.

The G8 clearly outlined the reasons for urgency in dealing with the issues of both tax evasion (something that does not apply in Ireland's case) and tax avoidance (something that does have a direct impact on us). These are structural and will not dissipate even when the G8 economies recover.

All of the G8 economies are struggling with heavy public and private debt loads and/or high domestic taxation levels. All are stuck in a demographic, social security and pensions costs whirlpools pulling them into structural insolvency. In other words, not a single G8 nation can afford to lose corporate revenues to various tax havens.

In line with the longer-term nature of the drivers for tax reforms, G8-proposed agenda can also be seen in the context of quick, easier to implement changes and longer-term structural realignment of tax systems.

The first wave of tax reforms outlined in principle by the G8 Summit will focus on tightening some of the more egregious loopholes, usually involving officially recognised tax havens. On the European side, this will spell trouble for the likes of Gurnsey and Jersey. The first round will also target easy-to-spot idiosyncratic tax arrangements, such as the Double Irish scheme and similar structures in Holland. Shutting down Double Irish will impact around a quarter of our trade in services, or roughly EUR13-15 billion worth of exports – much more than the EU-US Free Trade Agreement promises to unlock. The cut can be quick, as much of this trade involves electronic transactions - easy to shift and costless to re-domicile.

Over time, as changes in tax systems bite deeper into the structure of European tax regimes, losses of exports and FDI are likely to mount. To raise substantive new tax revenues, the EU members of G8 will have to severely cut back tax advantages accorded to countries like Ireland by their competitive tax rates.

Free Trade zones are notorious for amplifying the role of comparative advantage in determining where companies choose to domicile. Thus, to achieve a level the playing field for trade-related investments within the EU, either the effective tax rates will have to be brought much closer to parity across the block, or the basis for taxation must be redistributed more evenly across producers and consumers of goods and services.

Forcing all EU countries to harmonise the rates of tax would be politically difficult. Instead, there is a ready-to-use solution to the problem of redistributing tax revenues available since 2009 - the Common Consolidated Corporate Tax Base (CCCTB).

Under this mechanism companies selling goods and services from Ireland into European markets will report separate profits by each country of sales. These profits will then be reassigned back to the countries where each company has operations on the basis of a complex formula taking into the account company sales, employment levels and capital structure on the ground. The re-allocated profits will then be subject to a national tax rate. The end game from the CCCTB for Ireland will be effective end to the transfer pricing that goes along with the current system.

The EU Commission analysis claimed that with full cooperation, the enhanced CCCTB implementation will lead to an 8% rise in tax revenues across the EU. The main beneficiaries of these gains will be the Big 5 member states. The total net impact of CCCTB on all EU member states is expected to be nearly zero.

This suggests some sizeable reallocations of economic activity and tax revenues away from the smaller member states, like Ireland, in favour of the larger member states. January 2011, study by Ernst & Young for the Department of Finance concluded that Ireland can sustain one of the largest drops in tax revenues in the euro area due to CCCTB implementation. The estimates range up to 5.7% Government revenue decline, with our effective corporate tax rate rising to 23%, GDP falling by 1.6%-1.8%, and employment declining by 1.5%-1.6%.

The Ernst & Young report was compiled based using data for 2005. Since then, Irish economy's reliance on services exports grew from EUR 49.5 billion or under 31% of GDP to EUR90.7 billion or close to 56% of GDP. With services exports being a prime example of a tax-sensitive sector in the economy, we can safely assume that the above estimates of the adverse impact of CCCTB on Irish economy are conservative.

The CCCTB matches nearly perfectly the G8 Action plans relating to the issues of tax avoidance. It also fits the objectives of the OECD plan on addressing taxation base erosion and profit shifting which the OECD is preparing for the Finance Ministers and Central Bank Governors of the G20 in July.

While much of the impact of this week's G8 summit remains the matter for the future, there is no doubt that the G8 push toward curtailing aggressively competitive tax regimes is real.  In my view, Ireland has, approximately between five and ten years before our competitive advantage is severely eroded by the EU and the US efforts to coordinate the effective rates of taxation and consolidate reporting and payment bases for corporate profits. We must use these years wisely to build up our technological capabilities and develop a skills-based high-value added and highly competitive economy.

Box-out:

The latest data on the duration of working life (a measure of the number of years a person aged 15 is expected to be active in the labour market over their lifetime) shows that in 2000-2002, on average, European workers spent 32.9 years in employment or searching for jobs. This number rose to 34.7 years by 2011. In Ireland, the same increase in duration of working life took Irish workers from spending on average 33.3 years in labour market activities in 2000-2002 to 34.0 years in 2011. The increase in years worked in the case of Ireland was the third lowest in the euro area. In 2011, duration of working life ranged between 39.1 and 44.4 years in the Nordic countries and Switzerland – countries with much more sustainable pensions costs paths than Ireland. The significance of this is that given our pensions, housing and investment crises, Irish workers can look forward to spending some four-to-five years more working to fund their future retirement. Aside from a dramatic greying of our working population this means that even after the economic recovery takes hold, there might be no jobs for today's younger unemployed, as the older generations hold onto their careers for longer.