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Irish report Irish report
by Euro Reporter
2014-04-02 10:50:57
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Cost of doing business in Ireland high and rising slowly

The National Competitiveness Council has said Ireland is still a high-cost place to do business and warns that further policy measures are required to reduce costs and keep the country competitive. With wage pressures and property costs rising, the NCC warned that the Irish economy has reached a turning point in terms of cost competitiveness. It said overall cost competitiveness is now dis-improving, and that a series of upward cost pressures are emerging. In its report ‘The Cost of Doing Business 2014’, the NCC says it believes recent price falls in Ireland are largely a cyclical response to the international recession - namely a result of reduced demand and excess capacity - and not due to structural changes across the Irish economy.  On labour costs, the report says Irish gross earnings are the eight highest in the Euro area, while net wages are the sixth highest. It says Irish unit labour costs increased by 1.4% in 2013 after several years of improvement.

ieland_400Meanwhile, in a warning to Government over tax policy, it says the cumulative impact of increases in income tax, changes to bands and the Universal Social Charge have weakened labour cost competitiveness since the start of the recession. In relation to property costs, it says there is a risk of shortages in prime office space that could result in future rent increases. It also notes the significant differences between local authority rates in different areas. The NCC says that diesel prices in Ireland are 7% more expensive than the Euro area average. Electricity costs in Ireland are the fifth highest in the Euro area for SMEs and the sixth highest for large firms. Landfill gate fees in Ireland are the fifth highest out of ten countries surveyed, while non-hazardous incineration fees are the third highest of nine countries. Industrial water costs in Ireland are the fifth highest of 16 countries, while the NCC is unclear what impact the establishment of Irish Water will have on industrial water costs. On credit costs, new business rates of interest are significantly higher in Ireland than the Euro area average.

Rates on loans of up to €1m are 31% higher, while loans over €1m are 27% higher than the average.  Meanwhile, interest rates on revolving loans and overdrafts are 11.5% above the average. The report says business services costs have also been rising since 2012, after several years of declines, and are now 3.4% above 2010 levels. In terms of the broad cost environment, the report describes Ireland's cost profile as "high cost, but rising slowly".  It says that, in 2012, Ireland was the third most expensive country in the Euro area for consumer goods and services, with prices 14.6% above the Euro area average. It says Irish price levels remain above the average in ten of the 12 measured categories.

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Every one of Northern Ireland's top five schools is a Catholic grammar

Catholic schools are outperforming all non-denominational schools at GCSE level, it can be revealed. Five Catholic voluntary grammar schools have claimed the coveted top slot in this year's Belfast Telegraph league table. St Joseph's Grammar, Donaghmore; Rathmore Grammar, Finaghy; St Mary's Grammar, Magherafelt; Our Lady's Grammar, Newry and Lumen Christi College, Londonderry all saw 100% of their pupils achieve five GCSEs including English and Maths at grades A* to C last year to rank joint first. Since the Belfast Telegraph league tables began in 2012, it is the first time that schools in the Catholic sector have exclusively dominated the number one position.

And of the 10 highest achieving schools -- eight are now Catholic voluntary grammars compared to just four in 2013 and 2012. The findings come just weeks after Sinn Fein Education Minister John O'Dowd gave approval to two Catholic grammar schools to abandon academic selection -- St Patrick's Grammar, Armagh and St Michael's Grammar, Lurgan. St Michael's Grammar, Lurgan, which has improved its GCSE results year-on-year, is to amalgamate with bottom of the league table schools, St Paul's Junior High and St Mary's High, both in Lurgan, to form a new non-selective voluntary grammar. Meanwhile the historic St Patrick's Grammar, Armagh, has stopped selection with immediate effect. A third grammar school, Loreto College, Coleraine, has already moved away from selection. However, it will take several years to see if that decision has any impact on the three schools' GCSE results. The two non denominational schools in the top 10 are Sullivan Upper, Holywood (voluntary grammar) in sixth place and Collegiate Grammar School, Enniskillen in 10th (controlled grammar).

It is also the third consecutive year that Lumen Christi College has been joint first with 100% of pupils achieving five so-called good GCSEs -- a feat no other school has been able to match. But it is also a similar picture in the non-grammar sector with a Catholic maintained school outperforming schools in other sectors. St Catherine's College, Armagh has retained its dominance of the non grammar sector with 71.7% of pupils achieving five GCSEs including English and Maths at grades C and above -- its results pipping two grammar schools, St Mary's Christian Brothers' Grammar (Belfast) and Strabane Academy. And of the top 10 non grammar schools seven are Catholic maintained: St Catherine's College, St Patrick's High, Keady; St Patrick's co-ed Comprehensive College, Maghera; St Patrick's College, Banbridge; St Colmcille's High, Crossgar and Our Lady of Lourdes High, Ballymoney. But of the 138 non grammars just 63 (less than half) were above their sector average with just 37.7% (one in three) of pupils achieving five GCSEs including English and Maths at grade C and above. However, results have improved across the board with the Northern Ireland average, grammar average and non grammar average for the percentage of pupils achieving five good GCSEs all up year-on-year. It is the third consecutive year the Northern Ireland average has risen, up from 60.1% to 60.9%.

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Plan B: how leaving euro can save Ireland

It may seem odd, with the Troika having departed Ireland in December 2013, to call for a default on our debts and for exit from the eurozone. Instinctively, people don't want to do either of these things. The first would involve reneging on debts freely entered into. The second would involve reneging on the European Union's current big project. And the problems of the eurozone have been fixed, right? Listen carefully to the words of someone who should know – Mario Draghi, the head of the European Central Bank. In January he dismissed as "premature" upbeat comments from European Commission president Jose Manuel Barroso, who had earlier predicted that the eurozone would put the crisis behind it in 2014.

Or consider the words the former head of the German Central Bank, Axel Weber. He told the World Economic Forum in Davos in January that the underlying disorder continues to fester and the region is likely to face a fresh market attack this year. "Europe is under threat. I am still really concerned. Markets have improved but the economic situation for most countries has not improved," he said. Since 2008, Ireland (and the rest of the eurozone) has been caught in a debt crisis. You might have thought that, having made enormous sacrifices, we are now slowly but surely paying down those debts. But look at the graph we have reproduced. It comes from an IMF publication last summer.

It shows total economy-wide indebtedness (that is, the sum of government, corporate and household debt) for selected eurozone countries compared to national income (GDP) for the years 2003, 2008 and 2012. Across the eurozone, aggregate debt levels have increased markedly (rather than decreased) since 2008. The increase has been greatest for the country on the left-hand side of the graph – Ireland. We have the greatest aggregate debt level of those countries surveyed. Why are we making so little economic progress despite enduring so much personal pain? In my view, the authorities have misdiagnosed the problem. Their policy prescription, Plan A, is not working. The authorities do not see that it was Ireland's decision to join the euro which sowed the seeds of our financial crisis. Instead, senior policy-makers – such as Central Bank governor Patrick Honohan – would have us believe that the crisis was "three-quarters home-grown".

 


         
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