The Bull - Fresher's Week Issue by The Bull

FRESHER'S WEEK ISSUE 2014...............................................................................................................................................................................................................................................................................................ISSUE 1 VOLUME 4

THE BULL DUBLIN UNIVERSITY'S FINANCIAL NEWSPAPER - PAGE FIVE -

- PAGE SIX -

- PAGE THIRTEEN -

STUDENT HOUSING

THE US AND ISIS

THE GREAT DIVIDE

Brian Fleming dissects the student housing crisis in Dublin

After the recent beheadings, what is an individual life worth?

Reuben Whelan discusses monetary policy worldwide

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SCOTTISH REFERENDUM We examine both arguments as the big day approaches

- PAGE FOURTEEN-

GAA-ONOMICS Is the GAA selling out?

THE BULL NEWS

NEWS

EBOLA: A PHYSICALLY AND ECONOMICALLY FRANCE AND UK GET KEY CRIPPLING DISEASE ECONOMIC EC POSITIONS

ANDREW CORBY

n late May, a Sierra Leonean woman was admitted to the Kenema Government Hospital in Sierra Leone following a bloody miscarriage. After a series of molecular tests carried out by the hospital’s director of the diagnostic laboratory, Augustine Goba, one of the ﬁrst known and conﬁrmed case of the Ebola infection was detected. Noone however could have predicted the vicious onslaught on the Sierra Leonean people and surrounding areas at the hands of this fatal infectious disease. Ebola virus disease (EVD), formerly known as Ebola haemorrhagic fever, is a severe illness in humans with a case fatality rate of up to 90%. Some of its many debilitating symptoms include bleeding from puncture sites and mucous membranes (present in the nose, GI tract and gums) often leading to bloody vomit, impaired blood clotting and multiple organ dysfunction syndrome. As of the September 5, the World Health Organisation (WHO) has reported a total of 3,967 cases and over 2,100 deaths (and counting). The infectious nature of the virus and subsequent rapid spread of the strain have lead the Sierra Leonean government to take extreme measures and on September 6, it

was announced that a three-day nationwide lockdown would be implemented in an effort to put a halt to this deadly disease. With no established vaccination methods so far, this virus has worldwide attention to such a degree that in the early hours of September 8, US President Barack Obama indicated for the ﬁrst time that he is likely to dispatch US military resources to help combat the outbreak of Ebola in several West African countries. “We have to make this a national security priority. We have to mobilize the international community to get resources in there”, Obama told NBC’s Chuck Todd on “Meet the Press”. This statement came shortly after sharp criticism from Dr. Joanne Liu, president of Doctors Without Borders (Medecins Sans Frontieres), who made call for “states with the required capacity to come forward and offer a desperately needed, concrete response”. The Medecins Sans Frontieres group has more than 1,800 staff members currently battling the virus outbreak in areas of Guinea, Liberia, Nigeria and Sierra Leone, 184 of whom are foreign volunteers. They are joined by over 21,000 people in order to enforce the lockdown and the quarantining of towns in Sierra Leone’s worst-hit regions.

ARGENTINA IN AMERICAN COURT DISPUTE OVER DEBT LESLIE HERON

he Argentinian Parliament have openly deﬁed the decision of a US court in relation to the country’s long dispute with various US hedge funds. The hedge funds purchased Argentine Government bonds at a signiﬁcantly reduced rate following the country’s 2001 default. However they are now demanding full payment of the debt which amounts to $1.3bn. They are rejecting the restructuring deal agreed by over 90% of bondholders in 2005 and 2010 which saw a 2/3rds write off of the bonds’ value. A New York District judge barred US banks from transferring interest payments on more recent bonds, this has effectively pushed the

country into another default. This is being sidestepped by the Argentine Legislature who have passed a bill that would permit their Government to repay their debts outside of US jurisdiction. It is widely expected to receive Presidential approval required to make it law by Cristina Fernandez de Kirchner who has been openly critical of the hedge funds position. To receive payments bondholders will have to operate outside of US jurisdiction and it is as of yet questionable whether this will happen. It is more likely that the bill is itself a statement that they do not feel bounded by a ruling in a US court.

BRIAN EDGAR

he UK will run ﬁnancial services and France will control EU economic policy in Jean-Claude Juncker new European Commission. Jonathan Hill will take up the UK’s post. A former leader of the House of Lords, Lord Hill will oversee the ﬁnancial markets within the union including the City of London. It would seem that this move is an olive branch to the UK’s Prime Minister David Cameron as the country moves towards a potential in/out referendum in 2017. The UK also provided stern opposition to Mr Juncker’s appointment as head of the Commission. France’s former Finance Minister Pierre Moscovici takes over as Commissioner for Economic Af-

fairs, with particular emphasis on tax and customs. Mr Moscovici, a socialists represents Mr Juncker’s attempt to reach out to centre-left politicians. The Commission is one of the key institutions providing bureaucrat functions to the EU. However it has also come under ﬁre from Eurospectics for being undemocratic and wasteful. It is made up of 28 members (one from each memberstate) but they are required to act according to the interests of the EU as whole rather than their individual country. The new Commission is subject to approval from the European Parliament, but this is little more than a rubber-stamp and it is expected to take ofﬁce in November as it replaces the previous Barroso Commission.

RUSSIA HIT BY NEW SANCTIONS LISA KENNY

oth America and the European Union has increased pressure on Russia by imposing new punitive economic sanctions. The sanctions have targeted financial services, the defence industry and significantly Russia’s oil exporters. However it is thought that these will be lifted if the current ceasefire in Ukraine holds, therefore the hope is that these measures will put enough pressure on President Putin to withdraw an estimated 1,000 Russian soldiers from the country. The five major state-owned Russian banks, Sberbank, VTB Bank, Gazprombank, Vnesheconombank (VEB) and Russian Agriculture Bank (Rosselkhozbank) have been restricted from seeking credit in EU financial markets. An earlier ban on trading bonds with a maturity of greater than 90 days has been strengthened to include any maturity more than 30 days. This will severely hinder these institutions from raising capital by effectively excluding them from European Markets.

The major state controlled Russian oil firms have also been restricted from raising capital in the EU. However as of yet the EU have avoided significant restrictions on the more important Russian gas industry. Russian gas is seen as crucial to the German economy and it has been alleged this is behind EU reluctance for stronger measures. 24 Russian officials and separatist leaders have also been banned from entering the EU accompanied by a freeze on their assets. The US have introduced a package similar to the EU as they seek to put pressure on President Putin to withdraw Russian soldiers from Ukraine. The existence of such soldiers has been denied by the Russians. A truce was signed on 5th September although there have been reports of continued fighting around Donetsk it appears that these are isolated and while fragile the ceasefire is holding for now. However Russia have not backed down from their military build-up along their border with Ukraine.

THE BULL NEWS

US JOB MARKET INCREASE BELOW YEAR AVERAGE ANNA SIMPSON

ccording to the US Government the US economy added 142,000 jobs in August. This is below the 12 month average of 212,000. The unemployment level is currently 6.1% with the sluggish growth only reducing it by 0.1% over August. However the below average increase has been chalked up to the loss of 17,000 service industry job losses due to a strike at the Market Basket chain of supermarkets over the ﬁring of a senior member of staff. The dispute has since been resolved with the staff member

Arthur Demoulas returning to the ﬁrm as the majority shareholder. The disappointing job numbers has led to a slight dip in the US markets despite more positive news that average hourly earnings had increased 2.1% over 12 months. There will now be a crunch Federal Reserve meeting on the 16-17th September to decide whether to increase ofﬁcial interest rates from the historically low 0%. It is likely that these recent numbers will lead to a delay in any plans to bow to hawkish pressure and raise the interest rate.

EDITORIAL STAFF EDITOR:

CALLUM TRIMBLE-JENKINS

DEPUTY:

JAMES PRENDERGAST

DESIGN/LAYOUT: FEATURES:

JORDAN BOYD ANNA BRENNAN

FINANCE:

EOIN O'NUALLAIN

OPINION:

RORY O'DONOGHUE

ECONOMICS:

ANDREW NEVIN

PRO:

MARK HUGHES

US:

TOM KELLY

ASIA:

MICHAEL SCHOLZ JR

CAMPUS: EU:

BRIAN FLEMING ELEANOR O'MAHONY

HEALTH:

ANDREW CORBY

Contact: thebull.tcd@gmail.com

ISIS MURDER BRITISH HOSTAGE JAMES DAWSON

video depicting the beheading of David Haines by the Islamic State militants has been released. It is believed to have been carried out by the same militants who earlier killed the two American hostages James Foley and Steven Sotloff. Mr Haines was seized in Syria back in 2013 when he was working in the region as an aid worker. In a statement the British Prime Minister David Cameron described the execution as an “act of pure evil”. In the video a militant with a suspected British accent blamed Mr Cameron for the death of the hostage saying that it related to Britain’s decision to aid Kurdish militia in their opposition to ISIS. He went on to threaten the life of a second British hostage if said assistance is not withdrawn. The Islamic State, also known as ISIS or ISIL have made spectacular gains in recent months after emerging from the chaos of the Syrian Civil War. It is in control of large swathes of territory in the north and east of Syria as well as the Sunni dominated areas of Iraq. Last month they attempted to expand their territory at the expense of the Kurdish regions of Iraq, despite initial successes they have been turned back with the help of US airstrikes.

While the West have been willing to supply arms to the forces fighting ISIS they have been unwilling to commit ground troops. This reluctance is based on passed interventions in the region as well as doubts over whether their electorate would have the stomach for another costly engagement. It is likely that they will try to follow the example set in Libya, providing air support to give local forces a tactical advantage. However this is further complicated by the lack of a coherent opposition force which at the moment is made up of a very loose coalition of Kurdish fighters and Iranian-backed Shia militia. This is particularly embarrassing for the West as the supposedly advanced and highly trained Iraqi Army has taken a backseat in the conflict after being falling back with only limited resistance in the early stages of ISIS’ advance. In recent weeks a deal has been struck allegedly under heavy American pressure to replace Iraqi Prime Minister Nouri Maliki with deputy speaker Haider al-Abadi. It is hoped that the new Prime Minister and his more inclusive Cabinet can help heal the growing divide among Shia, Sunni and Kurd that is essential if Iraq is to survive as a single entity. The aim is also to starve moderate Sunni support from ISIS in what has already been described as a sectarian conflict.

Serious complaints should be addressed to: The Editor, The Bull, Box 31, Regent House, Trinity College, Dublin 2. This publication is partly funded by a grant from DU Publications Committee This publications claims no special rights or privileges

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PISTORIUS GUILTY OF CULPABLE HOMICIDE P

Mr Pistorius was instead convicted of the lesser charge with the Judge declaring his actions negligent and not in keeping with a rational individual. The guidelines for such a conviction are anywhere between 15 years in prison to a suspended sentence. Sentencing will take place in October with the athlete released on bail until that point. He was also convicted of discharging a weapon in an earlier incident in a restaurant, while acquitted of a separate sunroof incident. Oscar Pistorius is the most recognisable Para-athletes in the world and indeed one of the most known athletes full stop. Known as the blade runner he won 6 Paralympic

SHAUNA MCILROY

aralympic Gold medallist Oscar Pistorius was convicted of the culpable homicide of his former girlfriend Reeva Steenkamp. However Judge Thokozile Masipa ruled that his crime was not murder, arguing that the prosecution failed to prove that Mr Pistorius killing of Ms Steenkamp was intentional and premeditated.

DOMINIC FOSTER aralympic Gold medallist Oscar Pistorius was convicted of the culpable homicide of his former girlfriend Reeva Steenkamp. However Judge Thokozile Masipa ruled that his crime was not murder, arguing that the prosecution failed to prove that Mr Pistorius killing of Ms Steenkamp was intentional and premeditated.

VENEZUELA SUFFERS HYPERINFLATION

Gold medals as well as famously competing in the London 2012 Olympic Games in the 400m and 4x400m. In the now well-known incident Mr Pistorius shot his then girlfriend dead in their home arguing that he thought she was an intruder in the early hours of the 14th February 2013. In a statement following the ruling the International Paralympic Committee said that they would not stand in his way if he decided to return to sport after serving whatever punishment the court decides. The ruling itself has proved incredibly controversial with South African Minister of Basic Education

Angie Motshekga claiming that justice had not been done with Mr Pistorius getting off the more serious charge based on technicalities. The family of Ms Steenkamp are also angry with the judgement and held a rally with their supporters not long after the verdict was passed. The prosecuting authorities will have to wait until after sentencing before deciding whether to appeal. The trial itself has proved controversial with every moment recorded by a large media presence. This has meant that the outside world has been able to paint their own picture of what happened that night without necessarily having the legal knowledge to understand the ruling.

In the now well-known incident Mr Pistorius shot his then girlfriend dead in their home arguing that he thought she was an intruder in the early hours of the 14th February 2013. In a statement following the ruling the International Paralympic Committee said that they would not stand in his way if he decided to return to sport after serving whatever punishment the court decides. The ruling itself has proved incredibly controversial with South African Minister of Basic Education Angie Motshekga claiming that justice had not been done with Mr Pistorius getting off the more serious charge based on technicalities. The family of Ms Steenkamp are also angry with the judgement and held a rally with their supporters not long after the verdict was passed. The prosecuting authorities will have to wait until after sentencing before deciding whether to appeal. The trial itself has proved controversial with every moment recorded by a large media presence. This has meant that the outside world has been able to paint their own picture of what happened that night without necessarily having the legal knowledge to understand the ruling.

CRISIS IN UKRAINE: APPETITE COMES WITH EATING PADRAIG LANGSCH

here is an old Russian saying “Appetiit prikhoodit vo vremya yedy” (Appetite comes with eating). This proverb appears to underline the politics of Vladimir Putin over the past years. When in 2008 Russian tanks marched into Georgia, the West limited itself to political rhetoric. In 2014 Mr. Putin annexed Crimea, a peninsula in southern Ukraine with 2.5 million inhabitants, and is now (most likely) militarily involved in Donbas in eastern Ukraine. The scenario is always identical: unilateral claims of mistreatment of the Russian minority population abroad, followed by some form of public unrest and ending with a direct or indirect military intervention. And his appetite grows. It goes without saying that a number of eastern and northern European countries, especially Estonia, are particularly worried. Estonia has over 300 000 ethnic Russians (25% of the population) and one could easily imagine that few

years from now, when Russia and the West “bury the hatchet” over Ukraine (just as it happened with Georgia), Vladimir Putin might want to “protect” these citizens as well. It is important to mention that public international law does not allow military protection of citizens outside the national borders. In other words, unilateral military interventions under such pretext are fully incompatible with the Charter of the United Nations. Meanwhile, the Russian public seems to be completely unable to recognize that taking over foreign territories is unjustiﬁable and according to a recent poll, Mr. Putin enjoys an impressive 87% approval rate in his home country. Last week, the Russian Times published perhaps the most disturbing piece of the Kremlin’s propaganda so far. The article entitled “stanet li Finlyandiya rossiyskim Gonkongom?” (“Will Finland become Russia’s Hong Kong?), quoting for instance the controversial Finnish businessman Hannah Kroogerus, predicted, inter alia, a complete collapse of the European Union and the NATO and integration of Finland as a part

of the Russian Federation. Although Russia is the biggest country in the world, its GDP is only of the size of Italy. In fact, if we combined the economies of Mexico and Spain, to the ﬁnal ﬁgure would be bigger than the current GDP of the Russian Federation. Hence, the argument that we would not be able to exist without Russia as our economic partner does not seem to be based on reality. Heavy economic sanctions (much heavier than we have seen so far) would indeed be very uncomfortable for the European Union and they would most certainly have an adverse effect on the European citizens. On the other hand, they would completely break the neck of Russia’s economy. The EU’s export to Russia amounts to only 1% of its overall GDP, whereas 15% of the overall Russian’s economic output goes to the EU. We need to push Russia over the edge into a full scale recession or even default and hope it will force Mr. Putin to change his course- not because we want to punish Russia over what is happening in Ukraine, but to prevent future expansion

into the Baltic States or other countries with signiﬁcant Russian speaking population. The bigger the Russian economy becomes, the harder it will be to stop Mr. Putin in his “quests” across Europe. Yet the EU’s behaviour shows signs of political hypocrisy. The European Commission has announced on numerous occasions that an independent Scotland will ﬁnd itself outside the European Union and its accession would be extremely dif-

Padraig Langsch is a former undergraduate student at TCD School of Law and is currently studying at University College Cork.

ﬁcult- something that would arguably destroy the Scottish economy and would have serious negative economic implications on its trading partners in the EU. It seems rather ironic that the European Union is very eager to take this risk and to de facto destroy the economy of a nation that seeks to be independent, but is more than reluctant to act against a country that takes independence away from others.

THE BULL CAMPUS

STUDENT HOUSING A NEW CRISIS

BRIAN FLEMING

omething major is stirring in the Irish economy – the place looks set to take off” proclaimed David McWilliams in his most recent assessment of the state of the health of the Irish economy, perhaps we should exercise more caution. Indeed, the unemployment rate has fallen to 11.2%, and continues to fall with high expectations of continued improvement in the rate. With a decreasing trend in our jobless rate, the bane to our economy for over five years now, we can now look to the increased activity in our airports, increasing consumer confidence and returning profitability of our banks (the root of our problem) amongst other indicators and take heart. Finally our economy seems to be on a steady path to recovery. Now pair this with us students, arriving out of University with a good qualification at the opportune moment, hopefully, then we have every reason to feel optimistic and hopeful about the future. Undoubt-

edly the future is bright, but unfortunately the present is also taxing for some of the student body. The improvement in the Irish economy has seen a steady rise in the level of rent prices, land and property values around the country in urban hubs like, Cork, Limerick and Galway, but these increases pale in comparison to the astronomical increases in prices in Dublin. Property owners have seen the value of their assets increase due to another mini property bubble in the capital, but we students who live a meagre existence already, are having trouble keeping pace with the soaring rent hikes. As any student in Dublin will tell you, ﬁnding an appropriate house or ﬂat at a fair price has become near impossible. Personally my rent has increased considerably, and I’m one of the fortunate ones. Over the summer I’ve become accustomed to hearing about the undesirable housing situation of a friend or acquaintance. Whether they face a

huge rent increase, living an hour away from college or having to seek part-time employment to contribute towards accommodation costs, their stories are part of a multitude that most returning students can identify with. The media can of course highlight the much repeated fact that there is a severe shortage but only we, the students, can understand the stress, strain and ﬁnancial pressure our families are under. The increase in prices will also have an unavoidable negative impact on the economy. With rents having increased by up to 15%, spending power of students will fall as will the disposable income of those who support us. A situation has been created and looks set to develop further where the rents will continue to increase and impose unnecessary stress on students, becoming a serious problem for the Irish economy. With the housing situation at near crisis

point, students will be subject to increased pressure, both academically and financially. The financial burden will prevent some from attending University altogether which is a major problem in itself. So where the majority of people in the economy are excited and optimistic, a portion remains nervous and apprehensive. To echo our incoming student body president in his assessment of the situation in the August daft report, this situation will lead to reduction in the standard of our graduates and negatively impact on retention rates. This is a worrying thought considering our governments’ reliance on education for our economy’s recovery. The situation has improved and our battered economy is on the up but while Mr. McWilliams is all set to take off I am keeping my feet firmly on the ground.

THE BULL FEATURES

BETWEEN A ROCK AND A HARD PLACE WE DO NOT NEGOTIATE WITH TERRORISTS

In the aftermath of the brutal and gruesome murder of American journalist James Foley, and again following the news of the death of another American journalist Stephen Sotloff, a constant refrain has been heard: the US does not negotiate with terrorists. These events have sparked a debate on one of the most difﬁcult moral questions of our time. What is an individual life worth?

I ANNA BRENNAN

n 2013, all major western countries signed a G8 commitment not to pay ransom to terrorist groups – an accord reinforced by a UN Security Council resolution taken in January this year. However, the main supporters of these moves, the US and the UK, seem to be the only ones to stick to the letter when faced with a real hostage situation. But the problem is that it is not only American and British citizens being taken hostage. And not all countries have toed the party line: only months before the killing of James Foley saw the release of several of his European colleagues held captive alongside him. The reason given? The home governments of these journalists either paid or facilitated the payment of huge sums of money as ransom, the consequences of which are potentially lethal. There are, of course, problems with this difference in policy. Those who support the refusal to pay ransom maintain that these payments only fuel the expansion and strengthening of terrorist groups, that they

reward criminality and encourage further kidnappings. However, there is also a hard commercial side to it the payment of ransoms mean that the next time the ransom demanded will be higher. When countries show that they are willing to pay, they have lost much of their leverage. It also brings up a more nebulous moral question: if you are willing to pay 30 million to save a human’s life, at what stage do you say enough is enough? And in doing so, effectively pricing a human’s right to life? When looked at in isolation, one could be forgiven for applauding the strength of character of the US and UK government policies. Isn’t it laudable that leaders would take the difﬁcult decisions in order to stand ﬁrm in their convictions? Maybe so, but taken in the context of the wider foreign policy decisions particularly of the US, it becomes less clear cut. If paying ransoms directly to kidnappers is abhorrent, what of the alliances the US maintains with countries such as Saudi Arabia, seen recently to be a proponent of much of ISIS’

aims? It is a delicate business: not all countries have the same capabilities, or competence. Some pay too much money to the wrong people, or at the wrong time. However, the fact remains that all of these arguments seem subsidiary when faced with the facts: four French journalists were released in April after being kidnapped in Syria, including Didier François and Nicolas Hénin, who at one point were held with Foley. The public agony of British and American captives' families contrasted with the joy and relief of the families of freed European hostages put the governments under huge pressure. The moral arguments are likely to be of cold comfort to the families of those murdered or still in captivity. But there is another question to be asked: what are the motives of groups like IS(IS) when they carry out kidnappings? Though it is impossible to generalise, it is nonetheless clear that there are huge political elements to many kidnappings, especially when dealing with Islamic fundamentalist terrorist

organisations with the intention to punish or revenge actions taken by the US army or government, to set an example of a culture unacceptable to their ethos, or to create fear, sometimes money is only subsidiary. So, what are the alternatives? Especially for countries without the military power to instigate complex hostage rescue operations, they are few. Even for the US, whose Navy Seals mounted a successful raid to rescue two aidworkers kidnapped in northeastern Somalia in 2012, other rescue missions have failed, and some have resulted in the deaths of hostages. Similarly with Britain and France, even where a mission can be carried out, success is far from certain, and the stakes could not be much higher. Global consensus on the issue of ransom payments might be the only way that kidnapping would cease to be seen by terrorists and criminals as worth the hassle. But, in a world where the ideologies and actions of terrorist organisations continue to confound the West, there are no easy options.

THE BULL FEATURES

NIGERIA'S EXPANDING ECONOMY: AFRICA'S LARGEST N

MARYK SAHNEY

igeria, having surpassed South Africa as the continents largest economy, is now considered as one of the fastest growing African economies. Nigeria’s image has been tarnished recently due to vast amounts of bad press. This was largely due to the abduction of more than 200 schoolgirls in April by militant Islamist group, Boko Haram. Overall, however, the country has had strong economic growth in recent years. Surprisingly, a recent study conducted by the McKinsey Global Institute emphasised that, over the next 15 – 20 years, Nigeria has the potential to become a major global economy in the world. Financially, this puts Nigeria in a promising position. Nigeria is a signiﬁcant player in the world oil market, thus making oil production crucial to the future economic prospects of the country. Oil production remains critical for economic revenue and this is displayed by the fact that it accounts for over 14% of GDP. However, there are prospects in Nigeria for sustained growth that are driven by an increased performance of key non-oil sectors – agriculture, information and communication technology. One of the most fascinating areas of economic growth in Nigeria is the communications industry. The Chairman of the National Communications Commission (NCC), Mr.

Peter Igho, has stated that Nigeria currently has one of the world’s fastest telecommunications industries. Telecommunications contributes 8.5 per cent to the nation’s Gross Domestic Product and has transformed the manner in which tasks are performed in the country. The presumption that no modern economy can be sustained today without a fundamental telecommunications infrastructure is commonly acknowledged. Furthermore, it can be argued that economic growth will continue provided foreign and local investments into the thriving telecommunications sector are duly supported by existing telecoms laws. Another crucial factor in understanding the possible future growth in the Nigerian economy is the growing consumer class. This will play a vital role in transforming the economy. As the population of Nigeria and the country’s economic growth rises it will consequently lead to massive growth in the consumption rates of the country. This will also undoubtedly result in a scenario where investments by multinational consumergoods producers and retailers become prominent in the country. However, to paint a picture showing that the future economic prospects of Nigeria are completely positive would be deeply misleading. The country has struggled to deal with two major issues – high

unemployment rates and rising income inequality. This is predominantly due to the simple fact that the benefits of economic growth have not trickled down to the poor. The creation of highlyskilled jobs could potentially exacerbate this significant problem because these jobs would be out of reach for the majority of the population. Ultimately, this creates a situation where the rich are beneficiaries while the poor tend to suffer the consequences. Additionally, the spread of the Ebola epidemic can be seen to be horribly damaging to the Nigerian economy. The nation could lose up to $3.5 billion if nothing is done to stop the spread of the disease. The outbreak in Nigeria could lead to serious disruptions in some sectors of the economy, therefore leading to negative financial outcomes.

The most affected sectors are likely to be aviation, tourism and hospitality, trade, medical and agriculture. The encouragement of international business coupled with the development of reforms in Nigeria is crucial to the future success of the nation. Increasing incomes and productivity is essential for potential growth, however, the availability of services such as healthcare are of equal importance. Negative growth in the oil sector as well as the Ebola crisis could be potentially damaging to the Nigerian economy. Overall, the country is in a promising ﬁnancial position for the future but its citizens need the support and prosperity that they deserve.

EBOLA: AN ECONOMIC CRISIS? A

s the death toll from the Ebola virus outbreak continues to climb, experts are becomingconcerned about the potential longterms effects the disease will have on the already fragile economies and markets of the countries who have suffered the worst damage – namely Sierra Leone, Gambia and Liberia. ANDREW CORBY

The United Nations World Food Program and the Food and Agriculture Organization have issued a ‘Special Report’ announcing that they have approved over 65,000 metric tones of food assistance to the 1.3 million people already affected by the Ebola outbreak in the past three months. “Given the already limited social service capacities and raised levels of poverty, the impact of the outbreak is having acute repercussions on the food security of affected areas” the report states, including rising food prices, reduced trade and lower domestic harvests. Areas with highest incidences of the Ebola virus are said to be among

the most productive districts of Sierra Leone and Liberia. This in turn is likely to create a labour shortage and consequently lower crop yields. Measures of lockdown and quarantine are inevitably going to cause serious economic problems. Although somewhat necessary, these aggressive restrictions have resulted in food security concerns that have impeded the movement and trading of goods and services. “This has subsequently lead to ‘panic buying’, food shortages and dramatic price hikes” the report states. Moreover, Guinea, Sierra Leone and Liberia are all highly reliant on foreign trade in order to satisfy domestic consumption. Given that other routes and borders are set to close, the future is bleak. Other areas of major concern include both tourism and mining. In Ebola-afﬂicted parts of West Africa where health systems have been overwhelmed, foreign-based companies are already beginning to pull out workers. China Union,

an investment company involved in numerous shipments of iron ore out of Libya, are already scaling down their activities. If travel restrictions tighten and escape routes close up, the pressure on major ﬁrms to pull out of West Africa will soar. Emirates, British Airways, Air France and two other African airlines have already halted ﬂights to affected countries. According to the World Bank, tourist arrivals to Sub-Saharan Africa are consistently growing year on

year. “My sense is that for sectors such as tourism, foreigners may not discriminate and countries even in other regions of Africa may be lumped together with the three most affected West African countries”, Amadou Sy, an African economist at the Brookings Institute, said to the International Business Times. As the Ebola virus continues to spread at an alarming rate, all signs are pointing towards a dramatic decrease in tourism in Sub-Saharan Africa.

THE BULL SCOTTISH INDEPENDENCE SUPPLEMENT

SCOTTISH INDEPENDENCE - YES AND NO Sarah Gallaway and Seb McInteer from the Dublin University Caledonian Society discuss both sides of the Scottish Independence debate.

REFERENDUM - BETTER TOGETHER O

SARAH GALLAWAY CHAIR

n the 18th of September 2014 the people of Scotland will vote in a referendum to decide whether to remain a part of the UK or not. A “yes” vote would cause the demolition of a 300 year old union, whilst a “no” vote would result in increased devolution of powers to the Scottish government. The “no” campaign has coined the name “Better Together” and is headed by former chancellor to the exchequer Alistair Darling. At the time of writing this article the latest YouGov poll showed that 39% of the Scottish electorate are in favour of ending the union, while 38% are against and 23% are undecided. For all “Better Together” supporters this is a terrifying statistic. Over the past 6 months the Yes campaign has built up enough momentum to lead the polls for the ﬁrst time, overcoming the 22 point advantage previously held by the Better Together campaign. With the SNP and its leader Alex Salmond offering Scots direct access to the EU, a currency union

with the UK (allowing us to keep the pound), a nuclear free Scotland and a more fair and just society some would question why anyone would vote “no”. However the Better Together campaign have, with the backing of a number of Scottish and non- Scottish experts, repeatedly asked questions of the SNPs manifesto and are still failing to get straight answers. There are many issues dividing the two campaigns, arguably the major one is currency, with the SNP adamantly claiming that an independent Scotland would be able to enter a currency union with the UK. However the leaders of the major political parties in Westminster, along with the governor of the Bank of England Mark Carney, have stated that a currency union will not occur. Recently Mark Carney stated that a currency union would be “incompatible” with Scottish Independence and with the recent polls causing the pound to fall to its lowest level in 10 months, Scots and British are left worrying if a break in the union could have di-

sastrous effects on the pound. With no obvious alternative offered by the Yes campaign, many Scottish businesses are left contemplating their future in an independent Scotland. For example, just as this article is being written Standard Life, one of Scotland’s largest employers, have announced plans to move their business to England if Scotland was to become independent. This would be a major blow to the Scottish economy, with the loss of 5000 jobs. The Yes campaigns inability to answer fundamental questions regarding the referendum is already being seen to damage the Scottish economy before the vote has even taken place. Another major issue is entrance to the EU, Salmond and the Yes campaign are certain that they can negotiate entrance to the EU for Scotland from within the EU. However with Jean-Claude Junker, the president designate of the European Commission, already stating that there is a 5 year ban on entry of new member states and speciﬁcally detailing Scotland as one of

them - again we are left wondering what will happen to an independent Scotland. Finally, the Yes campaign has maintained a consistently negative attitude towards Better Together, with many high proﬁle supporters of the campaign being cyber bullied - a notable example of this is JK Rowling who donated 1 million pounds to the No campaign and who received a torrent of hateful comments online. Alex Salmond recently called the referendum race “Team Scotland vs Team Westminster”, however this is simply not the case. Better Together are already on “Team Scotland” and with the SNP incapable of proving answers to the major questions the reason we are voting no is because we have Scotland’s best interests at heart.

A YES TO SCOTTISH INDEPENDENCE O

SEB MCINTEER PRO

n the 18th of September, the people of Scotland will finally be given the chance to peacefully and legally decide on the future of their nation. Coming only a few short months after the seven hundredth anniversary of the of King Robert the Bruce over Edward II, an event of almost mythological importance in Scottish history, the Yes campaign has repeatedly outlined the parallels between the modern Scottish independence movement and the lifelong quests of nationalist heroes such as the aforementioned Bruce and Sir William Wallace. However, despite the obvious historical significance of the rapidly approaching referendum, modern Scotland is a far more complex creature than its 13th century ancestor, making the question of independence accordingly far more convoluted. Nonetheless, a Yes vote is what is required for Scotland to solve its crisis of democracy and to politically reflect the historical, cultural and socioeconomic differences between Scotland and the rest of the Union. It is undeniable that a serious democratic deficit exists between the wishes of the Scottish electorate

and its representation in Westminster’s federal government. It has been repeatedly noted during the campaign that the British Parliament’s majority governing party, the Conservatives, only features one MP from Scotland. No matter what advances are made in the devolution of powers to Edinburgh, as long as the Tories remain in power this crisis of legitimacy will continue. Furthermore, the policies pursued by the aforementioned party often stand in direct contravention to Scottish national opinion. For example, the increasing Euroscepticism of the Conservative party and the gradual movement towards a British exit of the European Union contrasts with Scotland where polling has consistently shown strong support for remaining part of the EU. This illustrates a central aspect of the need for Scottish independence, as the status quo is one that is denying the rights of Scottish citizens to participate in a truly representative democracy and to properly hold their representatives accountable. Nonetheless, Mr. Cameron’s government, presumably panicked by the recent tightening of opinion polls, has repeatedly promised a

fairly substantial transfer of powers to Scotland’s devolved government in the event of a ‘No’ vote. This ‘devo-max’ option would place most policy areas within the scope of Edinburgh’s jurisdiction while keeping defense and foreign policy control in Westminster. However, despite the obvious allure of claiming control of domestic policies from a government that has, for example, savagely damaged the NHS with the move towards its privatization, Scotland needs to be excluded from the disastrous foreign policy decisions made by consecutive British governments. Even ignoring the recent ﬂirtation with a potentially disastrous EU exit, the UK’s involvement in Iraq and Afghanistan and the recent swing to the right in immigration policy is at odds with Scotland’s neutral, inclusive, small-state proﬁle. Independence is the only method by which Scotland can truly control and direct all policy areas in the interests of the Scottish people without interference from a conservative, hawkish Westminster. In economic terms, much uncertainty still remains such as the retention of the sterling, the feasi-

bility of a Scottish banking sector and the true level of North Sea oil income. The lack of clarity on Scotland’s post-independence status within the EU is similarly worrying as is Scotland’s eventual assumption of a share of British government debt. But ultimately, the question of independence should not be framed as anything as trivial as a protest vote against the Conservatives or whether or not you trust Alex Salmond. A Yes vote on the 17th would be an affirmation of the Scottish nation as a single cultural and political entity and one that can properly reflect the significant contrasts between it and the other states of the Union. Do you believe that Scotland should be independent? The answer to that question has to be yes.

Dublin University Caledonian Society does not support or have preference for either side in the question of Scottish Independence. Any views expressed are those of the individual and not of the Society as a whole.

THE BULL SCOTTISH INDEPENDENCE SUPPLEMENT

SCOTTISH INDEPENDENCE: THE DEFENCE DEBATE W

ALISON BURNS

henever the issue of defence is raised in the Scottish independence debate, the topic of the Trident nuclear warheads at the Faslane naval base on the Clyde River in Scotland comes to the fore. Sure, this is an interesting subject – an independent Scotland doesn’t want anything to do with nuclear arms which puts the UK in an uncomfortable situation with regards its own defence but there is so much more to the defence debate then is currently being discussed. As the gap between the “yes” and “no” voters continues to shrink according to the opinion polls and with September 18 rapidly approaching, it’s time to take a closer look at the impact of a “yes” vote on the individual defence companies with interests in Scotland. Some of these companies may be familiar, such as RollsRoyce (not just the gurus of the luxury car realm). Other defence companies with key interests in Scotland include Raytheon, Thales, Selex ES, Babcock Marine and BAE Systems. The main concern of these key players in the defence industry is the uncertainty that comes with independence. What ﬁscal and monetary policies will the new government adopt? How will independence impact the company supply-chain and export opportunities? Will independence cause a

drop in inward investment in both the UK and the Scottish defence market? Politicians on both sides of the independence argument can speculate but no one can give defence companies a definite answer. All of this uncertainty and the cost reshuffling that will be necessary if Scotland gains independence and loses access to the UK’s gargantuan defence budget and international reputation may be too much for some defence companies to bear. Let’s take the example of our luxury car guru with a defensive side. RollsRoyce announced that nearly £4 billion will be knocked off the firm’s value as a result of European and U.S spending cuts in 2014. If Scottish independence was to occur, would RollsRoyce, a company that has operated in Scotland since 1939, survive the costs associated with such a large-scale structural shift? It seems unlikely. On the other hand, some companies may be able to use this uncertainty to their advantage. This can be seen in the case of BAE, the company with the second highest defence turnover in the world. In November 2013, BAE announced that they will be cutting their shipbuilding capabilities in Scotland. With a strong union presence, any layoffs conducted by BAE currently come under extreme fire by Scot-

UK’s new aircraft carrier HMS Queen Elizabeth II, which was largely built in Scotland

tish people. If Scotland becomes independent, the pressure from society shifts from BAE, who is consolidating operations for practical reasons, to the government who is responsible for the restructuring of the defence industry and is answerable for the political and social consequences of this decision. It would be easy to get distracted by the issue of nuclear weapons when predicting possible consequences of Scottish independence. In order to put the nuclear issue into some perspective, it is always helpful to look at the simple statistics more people have been killed by AK47’s than by nuclear weapons. It’s time to take a step back and look at the individual defence

companies with interests in Scotland. Defence companies have become experts at adapting to changes in economic, social and geopolitical circumstances. As such, defence companies will adapt to the results of the independence referendum. This may mean looking for opportunities in emerging markets, such as the BRICS. At the same time, there is no denying the importance of the UK market to businesses in the defence industry. With the failure of past efforts to consolidate the European defence industry, it would be very interesting to see how the defence industry adapts to another strand in the spaghetti bowl that is the European defence industry.

SCOTLAND DECIDES: A BEACON TO BARCELONA? W

GEORGE BOND

ith the US State Department openly giving its support to the ‘Better Together’ camp and Jean-Claude Junker the new President of the European Commission cautioning that an independent Scotland might not be immediately admitted to the EU it might be easy to think that international opinion is fervently against a ‘Yes’ vote. However in Catalonia there is at least one place that may welcome an independent Scotland. This is a big year for the Catalonian Independence movement as they’re current leader and the Catalan President Artur Mas hopes to use the 300th anniversary of the Siege of Barcelona (its end is still celebrated in the region) when the region goes to the polls in November over the issue of independence. This may seem that the movement is in a very strong position however it is in bad need of the boost a Scottish ‘Yes’ vote would give them. Firstly and most importantly while the central UK Government has agreed referendum is binding this is not the case in Spain. Indeed the

Spanish government has complete refuted the right of the Catalan’s to hold their own vote. This opinion is widely expected to be backed up by the Courts since it is explicit in Spain’s Constitution that referenda can only be held by the government in Madrid. This being the case the vote on November 9th is nothing more than a glorified poll. Even this glorified poll might not have the result Mas hopes for. Other Polls suggests just as in Scotland suggest that the result will be very tight. Some have put this down to migration from other parts of Spain but that doesn’t represent the whole story with many Catalans already satisfied with their high level of autonomy. However Madrid still has every reason to be nervous of a breakaway Catalonia which represents a fifth of the national economy. Not only that it is a key source of revenue for an already heavily indebted country it also represents a key research and development hub which will be vital if Spain is to reconfigure its

economy. However these same reasons are also for many a compelling case for independence. This issue is at the crux of why the EU has distanced itself from a quick Scottish entry into the Union. The Spanish Government has even mooted the possibility of blocking an independent Scotland from joining as a warning to their own separatists which also includes the more controversial Basque Region. From a Catalan point of view EU membership would be essential for any new entity and it is a powerful weapon in Madrid’s armoury if it is to hold the country together.

The independence movement has been dealt another blow with the recent revelations that Catalonia’s former President Jordi Pujol has signiﬁcant funds in Andorran bank accounts. This is coupled with strong rumours of corruption and bribery. While it is a personal blow and a major blow to Pujol and Mas’ Convergence and Union Party the overall effect on the movement as a whole is still to be seen. However it can’t be beneﬁcial. There is at least one thing that will unite Spain is that everyone will be following events in Scotland but as for the outcome, it will be deeply divided.

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BOND'S EVOLUTION T

EOIN O'NUALLAIN

he bond market is constantly changing. Not only are yields and prices forever ﬂuctuating, but as time passes, new forms of bonds are being introduced to the world too.

marily those of Pension funds and insurance companies, but there is a stronger demand for these issues now when compared to before, driven by widespread low yields/ market overpricing.

The past summer saw the continuation of the ‘search for yield’ that has been occurring on a global scale since the birth of quantitative easing policies by the Bank of England, the Federal Reserve, and now even the ECB. This ‘search for yield’, which causes investors to seek out riskier and thus higher yielding bonds over low-interest government bonds, has resulted in the market to become contorted. Speaking recently, Janet Yellen (Fed chairwoman) even went as far as saying that some assets have become overpriced. Since that statement, as well as the ever-advancing rise in interest rates, the bond market has calmed down somewhat.

Another type of bond that has risen in popularity is the ‘Catastrophe Bond’. This is a bond that works exactly like any other typical bond, except in the case of a natural disaster i.e. a hurricane or earthquake. It has become so popular in fact, that (according to Willis Capital Markets & Advisory) the largest ever number of cat-bonds was issued during the second quarter of 2014.

However, a calming in one area tends to lead to increased activity in another, and this case is no different. Of late, there has been an increase in the popularity of noneconomy-determined alternatives. Longevity bonds are a perfect example of this. These are a type of security that aim to mitigate longevity risk. Naturally enough, issuers of these bonds tend to be pri-

The ﬁnal bond type is, unlike the cat-bond and longevity bond, economy-determined. However with global yields now at record lows, with interest rates in Europe now turning negative as a result of the ECB’ most recent move, there is a strong urge among investors to ﬁnd alternatives. The ‘sukuk’ is another of these alternatives. The ‘sukuk’ behaves effectively the same as a standard western bond. However, it differs in that under Sharia law, it is illegal to trade in debt. Therefore rather than the issuer paying interest to the buyer, the buyer rents it back to the

issuer, for a predetermined rental fee. Goldman Sachs in particular has expressed a desire to expand its reach into “Islamic ﬁnance – an increasingly important component of fast-growing Middle Eastern and Asian countries’ economies”. Whether you’re attempting to invest in bonds unrelated to the big economies, or you’re avoiding

economy determined bonds altogether, innovation has brought about bond markets that are tailored to meet the needs and wants of all and, in a world where nothing is certain but change, these needs and wants are constantly being expanded.

THE IPO MARKET: COMING OR GOING? T

GEORGE BOND

he summer months have proved to be a topsy-turvy time for companies seeking to float on the stock market for the first time. The market, buoyed by global ultra-loose monetary policy saw in the second quarter of 2014 what proved to be, according to Renaissance Captital, ‘the highest number of IPOs in any quarter since the heyday of the tech bubble’. Particularly noteworthy during this time was the performance of tech stocks which accounted for 28% of all IPO’s. Performance levels amongst these companies were also typically strong, with Chinese firms such as ‘Tuniu’ and ‘JD.com’ posting an IPO return (as of 30/06/14) of 95.9% and 50.1% respectively. Another sector too that saw a sharp rise in IPO levels was that of the banking sector; ‘Opus Bank’ (USbased) is just (as of 21/05/14) one of six banks that had placed themselves on the stock market in 2014, with seven more set to do so later in the year. The primary reason for this recent swarm of IPO’s is that of investor confidence. With interest rates at their lowest levels in recent history and central banks such as the

Federal Reserve (US), the Bank of England and European Central Bank pumping liquidity into their respective economies by way of quantitative easing (QE), investors have turned to high-risk, high-return instruments such as stocks and corporate bonds, rather than making do with government bonds. As such, we have seen huge performances from indices such as the NASDAQ and S&P500 in recent months. In fact, the S&P500 recently (05/09) reached an alltime peak of 2,007.71. Between July 24thworld’s biggest indices recording losses. With much of this down to uncertainty surrounding geopolitical tensions in both Ukraine and the Middle East, there is no doubt that the curtailment of QE programs, and thus the inevitable reduction in global liquidity has a huge part to play for the uneasiness that is currrently ﬂowing through the market. Walking hand-in-hand with this is the reduction/cancelling of IPO’s during this time. With Urban Exposure’s recent quashing of their ﬂoatation, they have already become ‘the second property company to cancel its listing plans within a

week’. Add that to other companies who have already pulled out such as Wizz Air, Liberty Living, FatFace and Clipstone and we see an undeniable trend. Investor conﬁdence will be little helped by recent statements made by a number of hedge funds. Poor performances of late by private equity-backed companies have led numerous hedge funds to build up “short positions in a number of recent equity-backed listings including ‘Pets at Home’, ‘Saga’ and ‘Just Eat’”. Although these companies make up a relatively small section of the market, it is nonetheless a worrisome issue for the stock and August 8th however, the stockmarket tumbled, with many of the market, and one that may cause more issues going forward. Amongst all this pessimism however, there are suggestions by many that we are already at the “beginning of a new cycle”, (Dominique Cerutti (CEO of Euronext), 2014). Following on from the relative slowdown that the IPO market experienced during recent months, the week ended August 1st proved to be the busiest single week in

terms of company listings since 2007. Add to this the fact that Alibaba could become the biggest ever listing in US history when it finally floats on September 18th (date reported by Fidelity Investments). If priced as predicted, the float will raise $24bn for the company and value it at a whopping $150bn. It is difficult to say therefore, which way the market will continue from here. With QE ending on one continent and beginning on another, it’s possible that the focus will turn towards Europe. On the other hand, with the S&P 500 having only recently reached record highs, there’s no reason as to why the market cannot continue to flourish. As we know however, investors are notoriously irrational individuals and, as such, it could be simply a case of wait and see...

THE BULL SCOTTISH INDEPENDENCE SUPPLEMENT

IRISH ECONOMY PREDICTED FOR GROWTH T

ANDREW NEVIN

he Irish recovery is becoming stronger with gross domestic product expected to increase by 3.1 per cent this year, rather than the previously predicted ﬁgure of 2 per cent, according to Ulster Bank. The bank has stated that Ireland’s economic recovery is becoming more sustainable. More importantly, the recovery is becoming more broadly based. This year will mark the ﬁrst since 2007 that exports, consumer spending, and investment will all be growing together.

cent this year. The ﬁnancial crash in 2008 left the domestic economy in a damaging position, and 2013 trends in consumer spending were disappointing. They fell 0.8 per cent in 2013 but the bank expects a return to positive growth of more than 1 per cent this year, and an improvement, to 2 per cent, next year. With an increase in consumer conﬁdence and strengthening labour markets, consumer spending will rise and this will have a positive knock-on effect on the Irish economy.

One of the main instigators of increased economic performance is the higher level of exports. Ulster Bank has stated in its August Economic Outlook Report , "the main driver of the stronger nearterm outlook is a much improved export performance, aided by the combination of improved growth momentum in Ireland's main trading partners (especially the UK and US), and better trends in the pharma-chem sector as the drag from the patent cliff seems to have eased." Irish export volumes are estimated to grow by around 5 per

Employment is also expected to progress from last year, with increases of around 2 per cent which will force a downward pressure on the unemployment rate. The unemployment rate will fall to 11.5% at the end of this year and 10.4% by the end of next year. Although public sector employment has continued to fall, private sector work has steadily showed growth for the last ﬁve quarters. A more promising sign is the growth of full time work, which has grown by over 3 per cent in the last year, a sign that the economy is in a healthier

position and demonstrates the durability of the economy. Indeed, Ulster Bank has reported that employment gains are not conﬁned to Dublin city alone. Six of the seven recorded areas outside Dublin have shown some expansion in employment over the past two years. The latest expansion in residential activity is vital to the improvement of the economy, and residential building is now rising with supply of housing needed in the Dublin area to keep up with rising demand. Nevertheless, excessively high public and private sector debt levels will provide a downside to Irish growth levels in the near future. Therefore, the setbacks to the economy are obvious but the prospects are positive when contrasted to the ruthless situation of the economy over past years. With investment growing and the economy becoming more broadly based, the Irish economy is in an encouraging position when contrasted to the last six years. With increased international growth patterns, the Irish economic recov-

ery is set to become more sustainable. The positive picture painted by the Ulster Bank in August is a sign that the economic growth in Ireland is progressing and Ireland as a whole is battling through the crisis.

WWW.HALPENNYGOLF.COM

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THE EURO CRISIS HAS NOT GONE AWAY; IT IS JUST WAITING OVER THE HORIZON RICHARD MURPHY In the aftermath of Mario Draghi’s “whatever it takes’ promise to support the euro, confidence was restored and leaders believed that the Eurozone was well and truly on the road to recovery. Growth appeared to be returning, troubled countries began to profit from painful measures to cut fiscal deficits and bailouts, bond spreads narrowed and unemployment was decreasing. However, a few months on, the three biggest economies in the euro zone, Germany France and Italy, who collectively account for two thirds of the euro-zone GDP, are beginning to show signs of a growth crisis. In Germany, real output fell by a seasonally adjusted 0.2% in the second quarter from the first, and manufacturing by 1%, French Q2 GDP was flat and the Italian economy fell into recession. A flat-lining economy with zero

percent growth recorded in the second quarter combined with a fall in inﬂation to just 0.3%, well below the near 2% target, has forced the European Central Bank to intervene. In a stimulus package which could extend to €500Bn over 3 years, Draghi announced the anticipated asset-backed security purchase programme set to commence next month. Furthermore, in a rather surprising move, the ECB also cut interest rates to a record low of 0.05%. Unlike the US, Britain and Japan, who have all engaged in traditional quantitative easing (QE), which involves the printing of money to buy assets, the hawkish members of the ECB’s policy making council opted for a more targeted approach. Asset backed securities (ABS) are pools of mortgages and corporate,

auto or credit loans packaged and sold as securities. Put simply, the cash received from these ABS will support new loans to borrowers, which in turn will decrease interest rates, increase consumer spending, ignite growth and boost inflation. Both inflation and growth are forecasted by the ECB to increase to 1.1% and 1.6% next year respectively, although Mr. Draghi did say that if inflation remains low for too long they would have to resort to “unconventional methods”, or in other words, QE. An underlying cause of the current growth crisis is the lack of conviction and courage by political leaders to push through structural reforms to increase competitiveness. Draghi’s plan increases the scope for fiscal policy and structural reforms such as cutting taxes or changing labour laws in order to make their labour force more

nimble. How did the markets react to the latest monetary stimulus? From an Irish perspective, two-year Irish notes dipped below zero for the ﬁrst time while 10-year Irish bond yields fell to 1.64%. Similarly, short-term bond yields in countries such as Germany, Austria, the Netherlands and France also hit record lows and the euro hovered near a 14-month low against the

dollar. After a near seven-year rally, investors are worried that stocks are overpriced, which explains the declining yields on euro zone sovereign bonds. Needless to say the euro crisis is far from over and of course it will be hard, but without a new push from the euro zone’s leaders, in particular German chancellor Angela Merkel, growth will not revive and deﬂation could take hold.

MYOPIC SELF-INTEREST OF CREDITOR STATES THREATENS EUROPE JAMES PRENDERGAST DEPUTY EDITOR

One of the rarely mentioned but arguably most profound legacies of the Euro will be its effect on language. ‘Core’ and ‘periphery’ are two of the words that have entered the popular vocabulary of Europe since the the introduction of the single currency. The Euro, supposed to promote convergence has led to a growing political and economic divergence between creditor and debtor states that now threatens to destroy it. A recent example of this was the opposition of Jens Weidmann, Chairman of Germany’s Bundesbank to the monetary easing measures announced by the ECB on 5th September. This is not the ﬁrst time he has opposed unconventional monetary policy. In September 2012 he voted against the ECB’s Outright Monetary Transactions (OMT) programme to buy government debt, a measure that has yet to be used. Nevertheless it was the commitment to do “whatever it takes” to save the Euro from ECB President Mario Draghi which accompanied this policy that ended the most panicked phase of the sovereign debt crisis. The problem with the latest measures, the most important of which is the plan to buy large numbers of private sector asset backed derivatives is that the market for these in Europe is too small to facilitate the kind of monetary easing that has been successful in reviving the economies of the United States, the United Kingdom and Japan.

To carry out a monetary stimulus of a similar size to that of the Federal Reserve, Bank of Japan and Bank of England in Europe the ECB would need to purchase large numbers of government bonds, a policy which would draw much more vocal opposition from Jens Weidmann. The OMT policy is also being challenged in the German constitutional court which has referred the case to the European Court of Justice. By purchasing government debt, the ECB would in effect be spreading the risk of government borrowing across the Euro Zone as a whole. Germany and other creditor states see this as a “fiscal union” by stealth and one implemented in a very undemocratic way at that. This dilemma exposes the fundamental contradiction at the heart of the Eurozone. It is a monetary union without a fiscal union. Almost all monetary unions involve some sort of fiscal union, whereby wealthy regions make transfers to poorer regions. Northern Ireland for example receives a net subsidy of 29.4% of GDP from the rest of the UK. The economic justification for this is simple. If Northern Ireland had its own currency it would be far weaker than sterling is at present and as a result its economy would be much more competitive. In return for being part of the sterling union and suffering a hugely overvalued exchange rate, Northern Ireland receives a quite staggering subsidy, as does Wales and the North East of England. A much weaker version of this mechanism operates in Europe through the structural funds used

to promote infrastructural development in poorer member states. Between 1989 and 1999 Ireland received on average 3% of GDP in structural funding, and a similar figure from the Common Agricultural Policy. Not bad, but nothing compared to what is needed for a sustainable currency union. And now that Ireland is statistically one of the wealthiest countries in the world, this funding is much reduced. Just as economic theory would predict once the Euro was formed the wealthiest states such as Germany and the Netherlands started to run large trade surpluses while Portugal, Italy, Ireland, Greece and Spain swung into deficits, hurt by the uncompetitive exchange rate. A private sector fiscal union of sorts began with banks in the so-called “core” investing in Spanish and Irish property and Greek and Portuguese government debt. In contrast to a genuine fiscal union, however, the Germans, the Dutch, the Finns and other creditor states are demanding their money back fearful of the consequences of default on their banking systems. When last did you hear David Cameron demand that the Welsh, the Geordies and the Northern Irish start paying back all the subsidies they received over the years from the people of London, Hampshire and Surrey? Never, because he understands how a monetary union works. In their attempt to pay back the debt peripheral Eurozone countries have been forced into unprecedented austerity measures. Not

only have these measures worsened the slump, they have made it even more politically untenable to implement the kind of labour market deregulation that the European elite believe is so key to the recovery of Southern Europe, because in the short-term these “reforms” will only increase unemployment. Moreover, competitiveness is not only about cost levels but also education and health standards, good public services and infrastructure all of which are hurt by austerity. The German obsession with monetary and fiscal prudence is often said to be caused by memories of the consequences of the hyperinflation of the early 1920s an event which supposedly marked the start of Hitler’s rise. While it is true that Hitler’s Beer Hall Putsch happened immediately after the inflation in 1923, the following years were the most prosperous for the Weimar Republic and Berlin was renowned

as a liberal city that artists and writers such as Christopher Isherwood flocked to. Indeed the eventual Nazi takeover was proceeded by deflation and austerity, particularly under Chancellor Bruning. It is in Greece, a country in the grip of deflation and unemployment of 27% and the home of the Neo-Nazi Golden Dawn party, where the danger of fascism is greatest in Europe today. Many other monetary unions and currency pegs have failed the test of severe crisis - from the Gold Standard to Bretton Woods to the Argentine currency peg. If the Euro breaks up it will be the creditor states that suffer the most as soaring exchange rates decimate their economies. Eventually proponents of austerity may regret ignoring not only the lessons of economics, but of history.

THE BULL FINANCE

THE GREAT DIVIDE S

REUBEN WHELAN

ince 2008 and particularly in the shadow of the euro credit crisis the four major central banks - the Fed, the ECB, the BoE and the BoJ - have operated in a coordinated approach to stimulate their respective economies through nonstandard monetary policy. A blanket of low interest rates and cheap borrowing swept the globe with the aim of creating a supply of money for injured sovereigns to lick their wounds. With the exception of the ECB who prefer more specialised measures, central banks have also resorted to unconventional methods of creating money (quantitative easing) and buying, primarily, government bonds with it. For two years now hopes have been pinned to central banks ‘buying enough time’ for their economies to recover. The essential idea behind this is printing money facilitates a window of opportunity whereby demand (the real economy) can pick up from cyclical lows or governments can spend money (fiscal stimulus) to boost the economy. And so comes the great divide. In the UK and US, their respective economies have shown strong signs of a turnaround. GDP is in positive territory, Inflation is moving to 2% (the target of central banks) and house prices are surging (a key criteria following the crash in 2007). The only lag in the UK/US situation is that wages haven’t yet begun to rise, although intuitively with earnings in both countries bouncing back and the labour market slack (the difference between potential and current unemployment) narrowing, this may not be far off. Indeed debate rages among economists as to whether the rate hikes should be preemptive or reactive. In the last BoE meeting its monetary policy committee saw the first split vote since its launch of unconventional measures as to whether rates should have been raised. Japan, for over a decade, has been mired in stagnation and the ex-

ample of its ‘lost decade’ is a tale a central bankers’ mother would have told at night to scare the young technocrat. However the much documented ‘Abenomics’ - after the country’s Prime Minister Shinzo Abe - has implemented three arrows of reform attempting to see Japan rise from the ashes. One of the arrows of this strategy is a monetary policy whereby the BoJ promised to double the money supply through a massive programme of quantitative easing (QE). So far the results have been mixed and the economy has not yet seen the rise in GDP that was hoped for, which is partially attributed to other policies impacting consumer spending and confidence. Japan’s most recent quarter in fact, saw a drop in GDP on an annualised basis of 7.1% after a hike in its sales tax for that quarter. Europe however after positive signs entering the year has allowed itself to slip in a near deflationary zone. The eurozone’s inflation figures creep towards the deflationary boundary of 0% while the economy of Italy enters another recession and the stalwart of Germany may not be far off, helped in no small part by the western sanctions on trading with Russia. With the ever problematic political relationship in the EU, the ECB has often found its hands bound by ghosts of the past in the form of German aversion to a repeat episode of its post WW1 hyperinflation. Mr. Draghi’s Jackson Hole speech saw him call for more fiscal flexibility in terms of boosting aggregate demand and structural reform as he struggles to reinvigorate a conglomerate of radically diverse nations. In the four cases we have seen so far, the Fed and the BoE have seen plans remain relatively on track. While the BoJ has seen mixed results to its current policy, this is still substantially better than the norm for the past 15 years. It is Europe though that provides most interest. While progress was slow, after the

thought process of much of 2012 being ‘how long has the Euro left?’, it showed a strong turnaround to offer hope of a recovery towards the tail-end of 2013. So where has it all fallen asunder? While the answer is by no means clear cut there are strong indications as to where the issues may lie. First and foremost it is clear from Mr. Draghi’s recent speech that the ECB feels governments are not playing their part in the recovery and relying on the ECB to pull the strings. The lack of coordination in fiscal policy (which is governed by each sovereign) is also impeded by the stringent budgetary rules as part of the Fiscal Compact treaty which came into force as of the 1st of January 2013. The key aspects of the treaty are summarised as the 60% Debt-to-GDP rule and 3% Budget Deficit rule. Those who follow the Keynesian school of thought know how counter-intuitive such rules can be. While the principle is a positive one - to ensure sovereigns keep their finances in order (and to avoid a repeat episode of the Greek scenario) - it has further implications which severely restricted the set of options by which a government can respond to economic down turns. A core of Keynesian economics is to run a deficit when an economy is struggling to make up for cyclical short falls and boost aggregate demand in the short run. Both the US and UK to a lesser extent, followed this approach as well as the EU. However since the treaty, the EU and its nations are now limited in the size of these interventions and as a result their effectiveness. Yet budgetary rules are not the sole root cause of where the EU finds itself. Unlike the other three major banks the ECB did not engage in outright quantitative easing, preferring to issue long term refinance options (LTROs). These derivatives work with banks rather than general private institutions and allow the banks to borrow extra money

to, ideally, lend out. However they are only 3 years in length and compared to most forms of QE are quite short dated. This leads us to a closer look at the balance sheet of the ECB. Unlike the four other major banks the ECB’s balance sheet (and thus the money supply) has been shrinking. This form of action has been referred to as a ‘passive tightening’ as it reduces the availability of credit and in turn, banks willingness to lend. Thus the problem is twofold - governments through shirking out of responsibilities to unpopular structural reform and limited fiscal options have kept aggregate demand subdued, all the while the ECB has perhaps unintentionally been limiting the credit available to those who do wish to borrow. Now in the face of deflation the ECB faces mounting pressure to implement QE while the Bundesbank watches on disapprovingly. So what does this mean for the global economy? Well one thing is sure and that is as the US approaches its first rate hike and if the EU continues its regression the Euro will substantially weaken against the Dollar. While this sounds mundane and unimportant it will have serious implications for trade relations with our main trading partner, unsurprisingly the US. US good will cost more in Euros and our imports will fall as the exact opposite happens in the US, EU goods will be cheaper and exports will rise to the US. This should help shift the trade balance in our favour and perhaps, the first step in a gradual move towards a sustained recovery. Yet unless the ECB is prepared to dabble further in the unconventional and buy more time, deflation could take grip. With the levels of public and private debt still existing in the eurozone (debt is fixed in nominal terms while money fluctuates in real terms subject to inflation and deflation), the subsequent fall out could pose a renewed threat to the Euro.

THE BULL FEATURES

GAA-ONOMICS! IS THE GAA SELLING OUT?

T PJ MCGRANE

he GAA is commonly known as Ireland’s largest sporting organisation and as a volunteer led organisation. However is this traditional structure moving in a commercial direction? When we see international broadcasters buying up the rights to our national games and county teams wearing jerseys decorated with international sponsors in particular Dublin’s agreement with AIG is thought to be in the region of €750,000-€850,000 per year if reports are to be believed. Its hard to see how the GAA is not moving in a commercialised direction. Recent controversies over the usage of Croke Park stadium the organisation’s HQ for an American football game and before that what would have been five Gareth Brooks concert has called into question the ethics of the GAA’s new direction. Before the Dáil’s summer recess independent TDs Clare Daly & Mick Wallace dubbed the historic group the Grab All Association. The GAA were set for a €5 million payday with Gareth Brooks concerts from stadium rental but one must ask where is the money going and are we really witnessing the commercialisation of Nations traditions. For GAA fanatics like myself we can find some relief when the GAA’s finances are put under the microscope. Regardless of how much the cynics complain or critics disapprove of the GAA’s financial activities the actual figures do not lie. In the most recently available annual report published in

February of this year gate receipts accounted for 54% of the GAA’s €55 million revenue while commercial revenue had a signiﬁcantly smaller proportion with 32%. Many complain that this year’s results will be very different in particular with the new Sky broadcasting deal but to put this deal perspective 3 One Direction concerts this year were worth more than the entirety of the broadcasting contract with sky sports. So revenues are concentrated from support from within by paying fans but the question remains, where is the GAA spending its money? Understandably the leading cost in 2013 was the money spent to organise much to his and competitions. The spectacles that we saw on the pitches throughout the country at club and county level, as well as the organisation of the stadiums more than justiﬁes why €11.4 million was spent on them equating to 21% of the GAA’s utilisation of the revenue. In true GAA ethos the second most expensive outlay was games development and organisation focused towards improving our games at all levels from U-6’s to Senior Intercounty and everywhere in-between and across all codes by educating coaches, developing models to assist in the education of a footballer or hurler and investing in the facilities available to the stars of tomorrow. €9.2 million was the next largest expense that was entitled by the GAA as County and Provincial distributions. This included the county boards’ shares of gate receipts so

they can develop the structures on a more local scale and assist clubs. 17% of expenditure was used on grants to help clubs individually overcome struggles faced with the recession such as mortgage arrears as well as improving current facilitates aimed at strategic areas of the GAA such as Handball. So when the numbers are crunched it is hard to accuse the GAA of selling out. The growing organisation may be spending more in administration. However this expense remains in proportion as we witness the modernisation of the GAA and as it growing at a rapid pace through 21st-century, it grows in competitiveness against comparable sports like soccer and rugby

while others are quickly growing and catching up such as MMA. Yes the GAA is taking in more money; Yes it is spending more money, Yes it’s taking advantage of its assets such as Croke Park, but No, it has not forgotten its roots. The focus of the GAA’s expenditure has always been, still is and always will be clear; to improve our games constantly, and to provide the facilities for our amateur sport stars to continue to put on an incomparable show and at the same time develop the next generation of passionate volunteers and talented players.

PUTIN: BENT ON CONQUEST? It’s year 2017, Russia has now formed a formal Union with Kazakhstan and Belarus. Putin, who became the head of the new Soviet Union, has now taken military control over Ukraine. It took Moscow three years to capture the biggest European state, which is located wholly on the continent. Armies of the world’s newest country invaded and took over control over the Baltic States in less than a week and now stand 50 kilometres away from Warsaw. NATO forces not only do not react but also retreat to their most-eastern base on the German-Polish border.

JAN SZYSZKO

n one hand, the above scenario can be easily discredited using a range of valid arguments. Those include international treaties, organizations and conventions. On the other, one can ﬁnd just too many similarities with Hitler’s Germany to abandon the most negative sketch of the proximate future. After all, would you have believed me last August if I told you that in a year from then the biggest landgrab since 1945 will become reality just outside Europe’s footsteps? Afﬁnities between the two leaders begin with the economic reality of their countries at the point when they were taking over the leadership. Putin succeeded Boris Yeltsin as Moscow’s most

important man. He took over after Russians were being woken up from the Soviet tale of equal rivalry with the United States. Putin’s politics began reinserting confidence and national pride into Russians, which is still the main fundament for his national support. Similar was the case with Hitler who built his support by negating the Treaty of Versailles and rebuilding the military significance of the German army. Second comes the approximation in global comprehension and fondness targeted at Putin or Hitler. You can see that with the way Putin was is treated and greeted by our leaders at official summits. If that doesn’t sound convincing then there also

is the perfect resemblance in being awarded to host the Olympic games: Berlin 1936 and Sochi 2014. One can say that it is only a sports tournament but it is known for decades that political symbolism often goes in pair with global ceremonies of such calibre.

tin arrived in Crimea. And Luhansk. And Donetsk. And probably soon Mariupol. Nota bene, as all those names might sound anonymous, Donetsk accommodates twice the population of Dublin whereas Mariupol and Luhansk are comparable in size to the Irish capital.

Then comes the argument used by both gentlemen while trying to justify invading foreign territories. It is obvious to Mr Putin just as it was to Mr Hitler that the presence of their troops outside of their own territory is explained by their altruistic will to protect their citizens who live outside of their borders. Such was the case when Hitler who annexed Sudetenland in 1938 and such is the case when Pu-

All that has happened until today cannot make us ignore those events. It is the greatest danger for Europe in decades, arguably since the unstable years of the Cold War and the Cuban Missile Crisis. Only this time the United States does not put peaceful Europe as its uttermost foreign priority. Iraqi oil and Chinese market are much higher on Obama’s list than Estonian security or Finnish prosperity.

THE BULL FEATURES

MORE THAN THE BOTTOM LINE: BUDGET 2015

RORY O'DONOGHUE

iven that this is my ﬁrst piece for The Bull in any capacity, I may be getting ahead of myself when I say that over the next month or so the elephant in the room for all of us will be Budget 2015. Some of us will discuss every detail and possible policy decision to death; others will choose to ignore it, sticking with the old adage that “ignorance is bliss”. I hate to be the barer of frustrating news but the reality of all budgets under the present government lies somewhere in the middle of these two outlooks. The rumors are true, Budget 2015 will have to happen; but it must also be said that I do not feel this budget will not be a signiﬁcant shift in the policies that have been perused to date.Much like the writers of Adam Sandler movies, they have one set of ideas and they are not going to change them. With this in mind, I hope the comment section of this edition gives a different perspective on the current

economic landscape into which the next budget is being delivered. Most economists now agree that Ireland’s economy is returning to growth. We are constantly bombarded with employment statistics and CSO figures showing the tentative signs of recovery. Some of it is indeed spin, some of it is vindication of the claim that “Ireland is back on track”. Instead of just speaking about hard economic facts and figures, I feel that the budget narrative should also reflect the impact of policy decisions and choices. Very often the impact of a slight economic tweak in the budget can have huge impact on a particular section of society. A decision at budget time is as much about the opportunity not taken as it is about the actual change made. Many governments in OECD countries are guilty of not taking this holistic approach to the budgetary process. Government in the EU is so intertwined with society that

a budget can no longer be viewed in economic isolation. A prime example of this can be seen with the discussion over the planned adjustment in the next budget. Many articles and submissions have been written over whether the government should stick to its planned two billion euro adjustment. It seems odd to me that so much time is devoted to this subject and so few pieces have been written about the overall health of the economy. The fact is that wage growth has been in stagnation for some time now. Without an increase in wages and disposable income, the domestic economy will still record sluggish growth ﬁgures until something is done. What about the stubbornly high levels of youth unemployment? The level of young NEET’s (not in Education, Employment, or Training) in Ireland is one of the highest in the OECD. At the other end of the spectrum,

what is the government going to do about the small and medium sized businesses that, despite the microfinance initiative, still complain of a lack of credit to grow their businesses? My point is that in the media right now this budget is being over simplified. It is true to say that it will not be as painful as previous budgets. What is not true is that the government has a 50:50 choice on its hands. The budget will be about more than the size of the overall adjustment. Now the troika has been dispatched, this is the first proper budget for this government. This budget should begin the process of shaping a new economy; the first opportunity to do so since the bank bailout six long years ago. My fear is that the government will listen to the endless media coverage and only focus on the bottom line.

LAME DUCK?

TOM KELLY

Recent polls have thrust Obama, the man whose ideals of hope and equality, and indeed economic recovery, swept the nation only 6 years ago, into the pantheon of ‘most unpopular U.S Presidents’, in some circles mentioned in the same breath as Nixon and George W. Bush. While it’s no secret his popularity has been waning, as is normal for a second-term President, a recent Quinnipiac University survey has shown that Republican Party presidential nominee Mitt Romney would have been a more popular choice amongst voters. To make matters worse, Washington consensus has shown Republicans to be favourites to take the Senate in November’s forthcoming mid-terms, thus controlling both houses and effectively stalling any legislative plans Obama has for his final two years in office. Rumours abound of prominent Democrats actively avoiding being seen in public with their leader for fear of Obama’s contagion. The economy, for so long the stick with which Obama’s detractors have beaten him, is no longer a viable reason for such disdain amongst voters. Thus, as it becomes increasingly lonely at the top, we must ask how it has come to this despite all he has done right, and indeed if there is any way for Obama to salvage his reputation, and his presidency as it comes into its final quarter. If a politician is judged on their ability to follow through on their promises, perhaps Obama’s annus horriblis isn’t all that surprising.

President Obama’s foreign policy is seen by more and more to be a toxic mixture of braggadocio and rhetoric, punctuated by vacillation, inaction and some truly questionable PR manoeuvres. What began as a ‘red line’ drawn against Assad’s use of chemical weapons and the terrorist takeover of the American consulate complex in Benghazi has snowballed into Obama and his administration appearing impotent on the World stage. Bound by a need for maintaining tentative diplomatic relations, and indeed his own public persona, Obama has had to confront a seemingly endless stream of crises – the South China Sea, Boko Haram, Iran and Crimea, amongst others – with little more than what has appeared to be lip-service. This has culminated in a seismic past month for the 44th President, with the deaths of James Foley and Stephen Sotloff at the hands of ISIL accompanied by the chaos of Ferguson to attach a true sense of America being under attack by her enemies abroad and in turmoil at home. Obama’s reply? A dumbfounding comment revealing his administration to have “no strategy yet” as to how to address the growing threat of ISIL. Obama has not been inactive on any of these fronts. However, he has been seen to be inactive. Despite spending more U.S money on military operations than the Bush administration, and reports surfacing that Navy SEALs are operating alongside British SAS in Iraq, to the public Obama is still the Harvard-educated lawyer who stole the public’s heart with ﬁst-bumps,

re-tweets and sparkling orations. This summer alone, Obama has authorised the first U.S combat operations in Iraq since 2011, deploying 1,100 troops and 127 air strikes. The abiding image, however, of Obama in these crisis months has not been of a man waging a covert war, but of one enjoying the summer months playing golf and visiting Stonehenge, shirtsleeves rolled and perma-smile in place. Obama’s unpopularity has stemmed not from inaction or incapability, but from his reluctance to be seen as an aggressive Commander in Chief in these trying times. American voters now seem to want a President who understands the need for America to flex its muscles and intimidate those who dare subvert their authority as the worlds’ ultimate hegemony. Thus we come to Obama’s great dilemma. Does he stay true to the liberalist ideals that his party was founded on, and the anti-war manifesto that secured him his office, or does he take action against those who threaten the security of the nation and the lives of its citizens? It is worth considering the long-term damage that remaining true to these ideals may cause. As Obama’s popularity wanes, so does that of the Democratic Party. Republican Senator Ted Cruz has described Obama as a ‘kitten who met the Russian Bear’. His colleague Rand Paul, widely tipped as a G.O.P candidate in 2016, has accused Obama of allowing Syria to become a ‘jihadist wonderland’. The longer Obama waits to show his hand, the longer the odds of a Democrat sit-

ting in ofﬁce in early 2017. None of this may be Obama’s fault. It is of course entirely arguable that the seeds of ISIL were sown long before Obama came to ofﬁce. It is arguable that Putin’s conquests are the product not of perceived American weakness but of the ghosts of the Cold War not being properly exorcised. But what is not up for debate is that Obama must become more overt in his acts. In order to win back the popularity he has squandered, the perennially smiling Chicagoan must adopt a decidedly less friendly demeanour in the face of those who threaten U.S supremacy. He must balance the needs of both left and right, from the conservative protection against totalitarian governments to the liberal protection of human rights and the welfare of all nations. Obama did not fall in a blaze of glory against Romney in 2012 – perhaps now he has lived long enough to see himself become a villain?

THE BULL EDITORIAL

EDITORIAL

CALLUM TRIMBLE-JENKINS EDITOR

As every economics student has heard perfect competition is the ultimate goal for any economy, but what if the competition isn’t between firms and doesn’t involve prices? At the time of reading Scotland may have become the world’s newest country, with polls still neck and neck it is not certain what the outcome of the referendum will be. If they do chose to leave the UK there will be even more uncertainties both economic and constitutional. There is one thing however which is for sure, the first budget of an Independent Scotland will include an overhaul of its tax code, In particular there will be a cut in corporation tax. The reasoning is simple, they want to compete with Ireland who have benefited greatly from its exceptionally low rate of 12.5%. Major international corporations such as Apple and Google, to name just two have established major bases in Ireland. People should not kid themselves, this is nothing to do with the labour market in Ireland, barriers on the freedom of movement are being broken down across the world and these companies can recruit from pretty much anywhere given their size and prestige. The real reason is the amount of corporation tax that they have to pay, particularly in relation to the UK. Ireland has been able to effectively exploit its position in both the Eurozone and its close proximity to the UK. To use more technical parlance this has given the Republic of Ireland a

comparative advantage, it has been able to attract investment by lowering costs. It is not only Scotland that want to compete with the Ireland’s tax rate, in Northern Ireland even the most ardent of unionists are seeking the power to set its own corporation tax rate. If either Scotland or Northern Ireland where to reduce their rate this would be an ideal example of price competition. By lowering the cost of investment they are seeking to increase the demand to invest, except the cost is not price parse. However countries are not only competing for firms they are also fighting for citizens. In 2012 France’s richest man, Bernard Arnault controversially sought Belgian citizenship in protest against President Hollande’s ‘super-tax’ on millionaires. This is certainly not an isolated case as we can all think of examples of those living abroad for tax reasons. I am not claiming that tax havens are a new phenomenon however the ability to ‘shop’ around for the best tax rate used to be the preserve of only the richest since they were the only ones with the means to base themselves abroad. This is no longer the case, barriers to the freedom of movement are collapsing across the globe (at least for movement between developed countries). Does this mean that tax-payers will act as consumers and seek the most competitive tax rate? I believe that this will be a particular problem within the EU where barriers are practically nil, with cheap flights and improved

road links it is entirely plausible to base oneself according to tax rate. This could potentially lead to a situation where direct taxes levied on both individuals and firms will be cut across the world to stop a brain-drain of either from particular countries. There is no doubt that individual firms and individual taxpayers will benefit in the short run from increased bank balances. Too often this is where economists will leave the story but this will leave out the most important part. What effect will this tax competition have on society as a whole which in turn will determine the outcome in the long run? To answer this question we must look to an historical example. I know what you are thinking, did I not just say that this was a relatively new thing based on an increase in mobility across the globe? However my example is from within one country, and that country is America. In the late 19th and early 20th Century individual states competed with each other for investment, just as could happen between the Celtic nations. This lead to a what was described in the US Supreme Court as a regulatory ‘race to the bottom’ where taxes and regulation fell, this is turn lead to a decrease in spending which was harmful to the particular state in long run. The Court agreed with earlier What about competition revolving around tax on the individual and particular income tax? The Laffer curve, developed on a napkin for future President Ronald Reagan is a key element in the

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argument to reduce tax rates. The theory is well known, if we reduce income tax governments will increase revenue as it leads to economic growth. Some say that mobility of labour will further effect this by reducing the rate countries will attract more rich citizens and thereby increase revenue further. However there is little compelling empirical evidence to support such a conclusion. Indeed a study by the National Bureau of Economic Research found that the US and most EU countries where actually to the left of the Laffer curve’s optimal point, i.e. governments could boast revenue by increasing tax rates. With falling government revenue from taxation if they are to maintain the same level of spending countries must borrow more. Of course we need only look at the Eurozone to understand the limitations of this. Then governments must reduce spending, this will have a detrimental effect on society as a whole which in turn will damage firms in the long run. The question now is what can be done to stop this competition? Tax harmonization in the EU is part of efforts to alleviate this problem. However it is hard to see how tax competition is to be reduced without greater fiscal union not just within the EU but also with other major developed countries across the world. It goes without saying that this could prove extremely difficult.