Inside the world of business
Bruton tries to get message across
WITH IRELAND making international headlines for all the wrong reasons, it can’t be easy to sell the message that the State is still open for business. However former taoiseach John Bruton (below), wearing his hat as chairman of IFSC Ireland, and Danny McCoy, head of employers group Ibec, manfully took the task on at a conference in London on Thursday to promote Ireland as a location for international insurers and reinsurers to base their activities.
Their message was clear: Ireland’s 12.5 per cent corporate tax rate will not change and this is still a great place to locate your business, in spite of the banking crisis and the recession. Bruton urged the 80 or so delegates to “look beyond the current difficulties”.
He said a change in government would not bring about a radical change in core policies. Changing Ireland’s corporate tax rate “would not be a good policy for a lender and it wouldn’t be a good policy for a borrower”.
This, of course, was a reference to Ireland’s talks with the International Monetary Fund and the EU over a multibillion euro bailout. “There won’t be any change,” the former taoiseach assured delegates. “This is the time to get into Ireland. It might not have been two years ago when it was expensive but now is the time to do it.”
McCoy highlighted the 4 per cent nominal reduction in pay in Ireland over the past two years and the 9 per cent improvement in unit labour costs. Ireland’s exports are also going gangbusters. “This will be the stimulus for growth,” he said. Dan Gallagher, the chief executive of Met Life Europe, which located its European base here in 2006, said our corporate tax rate was “well down on our decision list” in choosing Ireland. He cited our highly skilled, English-speaking workforce, EU membership and the presence of many peers as the key factors.
Wouldn’t Ireland benefit from leaving the euro, the Irish delegation was asked. “Absolutely not,” was the blunt response from McCoy. There was no “logical reason” why Ireland would want to leave the trading bloc.
Others wanted to know what impact emigration was having on our talent pool. McCoy highlighted how the population had risen by about 10 per cent to 4.5 million over the past decade or so. “There is no mass exodus,” he said. Others asked about the value of holding a general election right now, given the challenges and the costs of a poll.
There wasn’t a stampede to answer that question, but McCoy suggested that a government that had to negotiate economic matters with third parties probably “needs to renew its mandate”.
On that score, there’s no probably about it.
Balancing bondholders and burden-sharing
THE NEWS yesterday that the possibility of “burden- sharing” with Irish bank senior bondholders was actively being considered as part of the Irish rescue talks sent the market into the usual paroxysms.
Participants jumped pretty quickly from holding a number of banks and insurance companies to account for their bad investment decisions to predicting the end of the world, never mind the euro.
The reality was a little more mundane with Irish bank bonds registering significant but not spectacular falls. AIB’s 5.625 per cent senior debt due in 2014 fell to 73 cents, a 5.2 per cent drop. Similarly, Bank of Ireland’s 4.625 per cent senior notes maturing in 2013 saw a drop of 4 cents on the euro, or 4.8 per cent, to 81 cents.
As ever, there are two ways of looking at this. One is that the market does not really think the IMF-EU-ECB troika will actually go through with burden-sharing because of the associated risks. The other view is that the market has already priced in a default of some sort in Irish senior bank debt alongside the risk of default by the sovereign. Given the mood music in recent weeks, one would have to presume the latter view holds sway and yesterday’s verbal pyrotechnics are overdone.
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