By Harry Keaney
The chief executive of the National Treasury Management Agency has warned that low interest rates present real dangers for the Irish economy, with Ireland’s central bank restricted in combating inflation by the country’s membership in the single European currency.
The result of Irish interest rates coming into line with German rates, Dr. Michael Somers told the Oireachtas Committee of Public Accounts, was that the real impact of any resulting inflation would be felt on jobs.
"In the past, we could have devalued the currency or increased interest rates," he said. "But once we’re linked, the impact of inflation will be felt immediately on the employment front, and jobs will be lost."
He was replying to a question from a member of the committee, Bernard Durkan, TD, who felt that the relative ease with which applicants could obtain mortgages from building societies and other financial institutions was fueling inflation in the Irish property sector. Could credit control restrictions not be implemented by the central bank? Durkan asked. "In theory, if the central bank tried," Somers said, "people could just borrow abroad in France or Spain or wherever." There was nothing to stop people from availing of foreign building societies within the single market.
The NTMA head and his officials had been invited by the committee to explain why debt service costs had risen in 1996 by £134 million, when the actual level of the national debt had declined between the end of 1995 and the end of 1996. The interest figure was related to the average level of debt during 1996 and in previous years, he told the committee.
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"It’s like an individual having an overdraft," he said. " If you clear it at the end of the year, this does not prevent the bank from hitting you subsequently with charges for the overdraft."
But the cost of servicing the debt was not the only figure at issue, said the NTMA chief executive. There were capital items, too, in the shape of sinking fund provisions and the repayment of foreign currency debt.
Despite these concerns, the Irish economy is set for a further boost from lower interest rates in the weeks to come.
Also, the Irish economy continues to surge ahead, with new figures showing strong growth in tax revenues and the unemployment rate dropping below 9 percent. The growth in tax revenues has been boosted by rising employment and booming retail sales. During the first nine months of this year, exchequer revenues exceeded spending by £1.3 billion. For the full year, the government expects to have a surplus of £800 million.
Meriwether’s Irish angle
Last week’s near collapse of the giant hedge fund called Long-Term Capital Management, of Greenwich, Conn., was so serious that Federal Reserve Chairman Alan Greenspan worried it would disrupt the global financial markets if it collapsed. The failure of the fund was prevented when some of Wall Street’s biggest power brokers, led by Merrill Lynch, agreed to prop it up with an injection of more than $3.5 billion.
The chairman of the fund, John Meriwether, 51, a former bond trader at Salomon Brothers, has close connections to Ireland. An avid golfing enthisiast, he is a part-owner of the world class Waterville Golf Course, in County Kerry, which he bought in 1987. He is also a founding member of the Knights of St. Patrick.
Long-Term Capital’s home is at Osprey House, at One East Weaver Street, in Greenwich. Its offices were previously located on Steamboat Road, facing Greenwich Harbor.
Malt Advocate Magazine will host WhiskyFest, a whisky festival, in New York on Nov. 18 from 5- 10 p.m. in The Marriott Marquis on Broadway. The cost is $50 with advanced reservations only. More than 150 of the world’s finest whiskies — including some Irish ‘whiskey’ — will be poured at this event and industry leaders in the whisky business will speak about their craft. For information, call 1 (800) 610-MALT.
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Students, adults and children, may learn to play the tin whistle and other instruments by interacting with multimedia instructional materials at the Online Music Lessons web site. Learning is accomplished by reading text, viewing photographs and video, reading musical and fingering notation, listening to recordings of the instructor playing and "Midi" files (electronic music) of songs being taught. Personalized feedback can be given by reviewing and commenting on recordings made and e-mailed by the student.
Bank of Ireland Group completed its withdrawal from its U.S. retail banking interests in New England when it sold its 23.5 percent shareholding and other interests in Citizens Financial Group to the Royal Bank of Scotland Group for $762.5 million in cash, comprising $752.5 million for its 23.5 percent shareholding and $10 million in respect of unrealized tax losses held by Citizens.
Bank of Ireland has also disposed of Floating Rate Capital Securities that it held in Citizens for $35.5 million.