Get Adobe Flash player

Business Today: The best news, analysis and comment from ‘The Irish Times’ business desk

about 18 hours ago

Laura Slattery

Overcharging: Minister for Finance Paschal Donohoe at Wednesday’s press conference on the tracker mortgage scandal. Photograph: Brenda Fitzsimons / The Irish Times.




The Central Bank says it remains in dispute with some banks about the extent of tracker mortgage overcharging, while the State’s five largest home lenders have revealed that the number of impacted borrowers may be as high as 21,134. Joe Brennan reports, while Cliff Taylor analyses the scandal.

The European Central Bank’s €2.3 trillion monetary stimulus programme helped shave €4 billion off the 2017 interest bill once forecast for the Republic, according to the head of the National Treasury Management Agency (NTMA). The ECB is expected to announce today that it will ease back the stimulus in 2018. Joe Brennan reports.

Power to the people: Regulators have moved the prospect of a €1.5 billion investment in two electricity cables connecting Ireland with France and Wales a step closer. Barry O’Halloran reports.

Inside Business on the tracker scandal

LN-Gaiety Holdings, a joint venture between Irish impresario Denis Desmond and global music behemoth Live Nation, has received the go-ahead to take control of the Isle of Wight music festival. Mark Paul reports.

A new “North East Quarter” in the heart of Belfast will be created under a major £400 million regeneration project, under plans submitted by Castlebrooke Investments. Francess McDonnell has the details.

In the Net Results column, Charlie Taylor writes that the number of female-founded technology start-ups in Ireland is on the rise – but with the sector burdened by a “tech bros” culture, there is no call for complacency.

Sign up here for Business Today and here for regular updates on business news as it breaks.

Mario Draghi expected to make statement on scaling back of quantitative easing

about 19 hours ago

Joe Brennan

President Mario Draghi. Photograph: Reuters/Francois Lenoir




The European Central Bank’s €2.3 trillion monetary stimulus programme, which started 2½ years ago, has helped shave €4 billion off the 2017 interest bill once forecast for the Republic, according to the head of the National Treasury Management Agency (NTMA), Conor O’Kelly.

The comments, made at an Ireland Strategic Investment Fund (ISIF) gathering on Wednesday for 40 of the world’s top investors, came a day ahead of a crucial ECB governing council meeting at which the bank is expected to decide to scale back its bond-buying programme, known as quantitative easing (QE), next year.

Since ECB president Mario Draghi started the multi-trillion-euro QE plan in 2015 to boost inflation and growth in the euro area, the region’s unemployment has fallen from 11.3 per cent to 9.1 per cent and inflation has surged four-fold to 1.5 per cent.

With inflation still below the ECB’s target rate of close to 2 per cent, economist broadly expect the central bank to continue QE into next year, but reduce the monthly pace of bond-buying to €30 billion from its current €60 billion.

“Irrespective of what the ECB announces tomorrow, there is no doubt that Ireland has been one of the largest beneficiaries of QE,” Mr Kelly told the gathering in Dublin, which included sovereign wealth funds, government reserve funds and major pension funds from Europe, North and South America, Asia, Australia and New Zealand. They manage about €12 trillion of assets between them.

Ireland’s Government debt ballooned from €50 billion to more than €200 billion during the financial crisis and in 2013, the NTMA was forecasting its interest bill would be €10 billion in 2017.

“QE and our improved credit rating have resulted in a situation where our interest bill will soon be below €6 billion,” Mr O’Kelly said.

Last week, the NTMA redeemed €6.2 billion of bonds, much of which were sold in 2012 and carried an interest rate, or coupon, of 5.9 per cent. Earlier this month, the debt agency raised €4 billion selling a new five-year bond at a negative yield of minus 0.008 per cent, meaning the investors are paying the State to hold their money.

The slump in borrowing costs reflects the impact of QE more than Ireland’s improved financial standing during the period. Still, Ireland’s creditworthiness has improved in the eyes of major ratings agencies as economic growth lowered the Government’s debt relative to gross domestic product.

Credit rating

Last month, Moody’s upgraded its credit rating on the Republic by one level to A2, or five levels below its top-notch Aaa stance. Moody’s was among the main ratings firms to give Ireland a “junk” rating during the financial crisis.

The ECB’s move to slow its quantitative-easing programme comes almost four years after the US Federal Reserve began slowing its similar monetary stimulus programme.

“It’s been very well telegraphed that whatever the ECB would do will be extraordinarily cautious,” said James Nixon, a former economist at the central bank, who now works for Oxford Economics in London. “Policy makers have to step away from the table without the whole house of cards falling down.”

(Additional reporting: Bloomberg.)

Trump takes break from ‘Corker’ of a feud to say $4tn in profits could flow back to US

about 19 hours ago

Trump Twitter feud: the president said the Republican senator Bob Corker “couldn’t get elected dog catcher in Tennessee”. Photograph: Shawn Thew/EPA

Lunch date: President Trump on his way to meet Republican senators with majority leader Mitch McConnell; a protester threw Russian flags with “Trump” printed on them. Photograph: Shawn Thew/EPA

Previous Image

Next Image




With the clock ticking on the countdown to Christmas, pressure is on US Republicans to agree a tax-reform plan as they try to pass at least one piece of significant legislation this year. They have one problem, though: their own president.

On Tuesday a rare lunch between the president and Republican senators on Capitol Hill, which was supposed to focus on tax reform, was overshadowed by an escalating feud between Donald Trump and Senator Bob Corker. In a series of tweets Trump said that Corker “couldn’t get elected dog catcher in Tennessee.” Corker said Trump should stay away from tax reform and dismissed Mr Trump’s appearance at the lunch as a photo opportunity. Worse was to come as Senator Jeff Flake delivered a devastating speech castigating Mr Trump from the senate floor, barely an hour after attending the lunch.

Bob Corker, who helped President O give us the bad Iran Deal & couldn't get elected dog catcher in Tennessee, is now fighting Tax Cuts….

— Donald J. Trump (@realDonaldTrump) October 24, 2017

There will be NO change to your 401(k). This has always been a great and popular middle class tax break that works, and it stays!

— Donald J. Trump (@realDonaldTrump) October 23, 2017

In particular, Republicans in Congress are becoming increasingly frustrated with Mr Trump’s interventions on tax. On Monday he tweeted that he would oppose any attempt to reduce the amount Americans could save in their popular 401(k) retirement accounts. In fact that proposal was still under discussion, as confirmed by Kevin Brady, chair of the powerful ways-and-means committee of the US House of Representatives, on Wednesday.

Nonetheless, despite tensions within the Republican Party about how to pay for what the president is calling the “biggest tax cuts ever”, tax-reform plans are advancing.

The 435-member House of Representatives, which is due to vote on Thursday on a budget resolution paving the way for tax reform, may unveil its tax plan as early as next week. The 100-member US Senate is likely to take more time.

Although squabbling continues about the state and local tax deductions available for individuals, for Ireland the focus will be any changes to corporate tax and incentives for multinationals to repatriate profits. Earlier this week Trump suggested that $4 trillion, rather than the $2.5 trillion usually cited, is sitting overseas. “Under our plan that money will flow back in. It will be very quick, and it will be very easy,” he said. Ireland will be watching closely.

Republicans are striving to pass the first major overhaul of the US tax code since Ronald Reagan in 1986

Wed, Oct 25, 2017, 19:59

Kevin Brady, Republican head of the House ways and means committee, which is drafting a tax reform bill. Photographer: Andrew Harrer/Bloomberg




Millions of US citizens working overseas could see their tax bills lowered by an overhaul of the tax system as Republicans eye the elimination of a requirement for American expatriates to pay taxes both overseas and in the US.

Kevin Brady, Republican head of the House ways and means committee, which is drafting a tax reform bill, said lawmakers were considering the measure, which has been the focus of lobbying by Republicans Overseas, a group of party donors around the world.

“It is under consideration. They have made the case,” Mr Brady told the Financial Times at a Christian Science Monitor event.

Some 8.7 million Americans live outside the US, excluding military personnel, according to the Association of Americans Resident Overseas.

For those expatriates, the first portion of their foreign earnings – about $100,000 in 2016 – is already shielded from US tax liabilities, but they have to pay tax on any income above that level to both the host authority and the US.

Republicans are striving to pass the first major overhaul of the US tax code since Ronald Reagan in 1986. They are looking at measures that would simplify the code, lower the corporate tax rate, make it less attractive for US companies to keep cash overseas and changes that they say will help the middle class.

‘Territorial’ regime

Mr Brady later told the FT that lawmakers were taking “seriously” the call for a shift from a citizen-based income tax system to a residence-based system that would tax people only on the income they earn in the US.

Republicans have already decided they want to make an equivalent change for business, switching to a “territorial” regime where most of US companies’ foreign earnings are beyond the reach of American tax collectors.

The US Chamber of Commerce, a business lobby group, has urged policymakers to consider US-only taxation for individuals too, arguing that taxing foreign income hurts American managers at the overseas affiliates of US exporters.

In a recent interview with the FT, Mick Mulvaney, the White House budget office director, said he supported the shift to residence-based taxation. “It is good for American businesses to encourage Americans to work overseas,” he said.

– Copyright The Financial Times Limited 2017

Martin Wolf: Governments have failed to address the many frailties that still lead to financial excess.

Wed, Oct 25, 2017, 14:30

Martin Wolf

The Great Depression. Do we ever really learn, asks Marin Wolf.




“Favourable global economic prospects, particularly strong momentum in the euro area and in emerging markets led by China and India, continue to serve as a strong foundation for global financial stability.”

This statement opened the International Monetary Fund’s April 2007 Global Financial Stability Report. Since this benign view was published on the eve of the most devastating financial crisis in nearly eight decades, it has to be viewed, in hindsight, as a spectacular misjudgment.

The fund is determined not to be caught out again. The question is whether the concerns it pours forth in its latest Global Financial Stability Report are well judged or whether it is crying wolf. As important, what might be the implications, especially for policy, of its worries?


The underlying argument of the report is that “near-term risks to financial stability continue to decline”, but “medium-term vulnerabilities are rising”. The return of global economic growth, combined with comfortable monetary and financial conditions, together with sluggish inflation, strengthens investors’ reach for yield and appetite for risk.

With market and credit risk premiums at decade-low levels, asset valuations are vulnerable to a “decompression” of risk premiums – in blunter words, a crash.

As the report notes, shocks to credit and financial markets well within the historical range could have large negative impacts on the world economy: “A sudden uncoiling of compressed risk premiums, declines in asset prices, and rises in volatility would lead to a global financial downturn.” Many hold the room for monetary policy manoeuvre to be limited. The result might then be a less deep, but still more intractable, global recession than that of 2009.

One element in these risks is yield compression. Yields on investment-grade fixed income instruments have collapsed since 2007, with almost none now yielding over 4 per cent.


This has also encouraged greater capital flows to – and so more borrowing by – emerging countries. Non-resident capital inflows of portfolio capital reached an estimated $205 billion in the year through August 2017 and are on track to reach $300 billion in 2017, more than twice the total in 2015-16.

In addition, argues the fund, low yields, compressed risk spreads and abundant financing are encouraging a build-up of debt on corporate balance sheets.

Reversals in these spreads could cause a jolt: to reach the average levels for 2000-04, market risk and term premiums would have to rise by about 200 basis points for investment-grade bonds. Market volatility is also highly compressed. (See charts.)

Possibly most important, leverage continues to rise across the world, notably in China. In the high-income countries, the net asset position of the private sector has improved somewhat since the crisis, but the governments’ has worsened.

Moreover, assets are currently valued at high, quite possibly unsustainable, levels. Debt service burdens are generally low, at current interest rates. But this would change if those rates rose sharply. Moreover, in several economies debt service burdens in the private non-financial sectors are greater than average – notably in China, but also in Australia and Canada.


Such analyses bring worries into the open. This is helpful: the more worried people are, the safer the system. Yet it is also essential to tease out the implications of the fragility the fund describes so clearly. I would identify four.

First, investors must be very wary.

Second, it has to be possible for the financial system to cope with changes in asset prices without blowing up the world economy. This should not need saying. An essential part of achieving this is deleveraging and in other ways strengthening intermediaries, notably banks. That has indeed happened, but not, in my view, nearly enough.

Third, the generation of demand sufficient to absorb potential supply has become far too dependent on unsustainable growth in credit and debt and also on consumption (especially in high-income countries) or wasteful investment (as in China).

We might break this linkage in several ways. One is to redistribute income, via the tax system, from savers to spenders. Another is to increase incentives for investment, especially by profitable businesses. Another is to remove the tax-favoured position of debt and rely more on equity financing throughout the economy. A final one is to rely more on government spending and borrowing, especially spending on public investment.

Finally, we should not conclude that central banks have to abandon the priority of stabilising the economy in favour of the possibly conflicting goal of stabilising the financial system.


One reason is that monetary policy is a blunt instrument for achieving the latter. A more fundamental objection is that we cannot tell people they must remain stuck in a deflationary economy because it is the only way to stop the financial system from exploding. They will rightly respond that these priorities are wrong.

Similarly, ensuring creditors get the returns they think they deserve is not the job of the central banks. If governments think creditors are so deserving, they should change taxes accordingly. Again, if they think the financial sector remains excessively unstable, they should regulate it.

Criticising the success of our central banks in reflating our crisis-hit economies, because this created today’s financial risks, is not a valid reaction to their actions.

It is, however, an extremely valid criticism of finance. It is also a valid criticism of the failure of governments to address the many frailties that still lead to financial excess. The central banks did their job. Unfortunately, almost nobody else has done theirs.

CVS Health Corp.

CVS, -2.94%

  is in talks to buy Aetna Inc.

AET, +11.54%

according to people familiar with the matter, in a deal that could value the health insurer at upward of $66 billion.

CVS Health has made a proposal to buy Aetna for more than $200 per share, one of the people said. On Thursday afternoon, before The Wall Street Journal reported news of the talks, shares of Aetna were trading at $160.62 each.

Aetna shares initially shot up more than 10% on the report, giving it a market value of some $58 billion.

An expanded version of this report appears at

President Trump may have been boasting when he name-checked his Ivy League pedigree, but his thinking is in line with what many employers expect these days.

In comments to the press Wednesday afternoon, Trump — who graduated from the Wharton School of the University of Pennsylvania — seemingly equated his college education with civility. “I think the press makes me more uncivil than I am,” he said. “You know, people don’t understand. I went to an Ivy League college. I was a nice student. I did very well. I’m a very intelligent person.”

But Trump’s statements were not far off the mark of what many American employers believe today, based on a study released this week by Harvard Business School, consulting firm Continue reading