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Ireland 2015: A Whale of a Time

10 March 2015
Giada Vercelli

With the clock ticking down to the Euromoney Ireland Conference in Dublin, timing is on our side. On Thursday, we’ll singlehandedly gather together policy and market-makers’ first reactions on current game-changing events.

The ECB’s programme of bond purchases, finally launched on Monday, has lead banks, pension funds and insurers across the continent to hoard government bonds in the weeks before its take-off, both for regulatory and accounting reasons. How are the Irish banks participating? Do they use it for repos or outright sale? And on the Irish DMO’s side, how is European QE affecting the market? The ECB’s governor Mario Draghi has made it clear that securities will not be purchased if their yields are below the ECB’s deposit rate of minus 0.2%. Will this be sufficient? Will the plan lead to a scarcity of fixed-income assets? These questions are particularly poignant for the Irish National Treasury Management Agency, which has been able to give a full calendar of bond auctions this year for the first time since Ireland was locked out of the international debt markets in November 2010. The NTMA plans to raise 12 billion to 15 billion euro over the course of the year to repay the remaining 9 billion euro in IMF loans.

Ireland’s debt to GDP ratio is expected to fall to 110.3% in 2015 and to 108% in 2016. Ireland’s banks’ holdings, whose bail outs ski-rocketed Irish debt, are a pillar of the debt reduction strategy. The first annual profit of Allied Irish Bank, one of the banks rescued by the Irish taxpayers between 2008 and 2010, may signal the return of the government’s holdings to shareholders in 2015. With David Duffy, the man at the helm of the turnaround, leaving the bank just ahead of reaping the merit that would come with a return to the stock market, Dublin is the place to have an in-depth discussion on the banking sector this week.

With a debt level double the 60% or less sought by the EU, Ireland is still exposed to external shocks. The slowdown in the euro and the performance of the British economy may affect the country’s energetic recovery. At the conference we’ll discuss the prominence of the Irish brand in the US, and how net exports should continue to grow in spite of slowing growth in the UK and the euro-area. Ireland is set to remain the fastest-growing economy in the EU with growth of 3.5% predicted for 2015.

Ireland is the poster child of the EU, with even the real estate sector picking up. At the conference we will address the scepticism around the real estate recovery given that the bursting of the real estate bubble led the country to ask for an 85 billion euro bailout. Behind the rebound is the strong interest of international investors such as Lone Star, Blackstone and Kennedy Wilson, keen to buy the properties that the Irish State has been selling after they bailed out failed banks. The National Asset Management Agency - the ‘bad agency’ specifically set up to deal with the property loans made by the banks before the financial crash - sold their whole Northern Ireland loan book to Cerberus last April. On target for Ireland is mostly Dublin commercial real estate, i.e. multinational corporate office space. With 2.2 billion euro poured into Dublin in the first three-quarters of 2014, the capital’s house prices have also started rising again. Dublin ranked again in second place within the top five European real estate investment markets in 2015, according to PWC data. Beyond Dublin, it’s a different story. Will the Irish Central Bank mortgage rules protect the economy from another real estate bubble or will they limit lending?

The substantial presence of multinationals mirrors Ireland’s effort to deliver the ‘4 Ts’ strategy: talent, tax, track record and technology. Trademark protection is a 5th ‘T’ to be added. Global firms are highly sensitive to challenges to intellectual property protection, and we will discuss controversial decisions taken by the Irish regulators on this front. In a global economy, Ireland must compete for both foreign investment, which leads to the development of new technology and skilled labour. Minister Simon Harris TD is the first financial minister ever appointed by the government to define a new strategy for international financial services. Minister Harris TD will join us to explain what has triggered the decision to define such a detailed strategy on financial services. He will update us on how Ireland has created a conducive environment for business drawing on tax management, advanced fin-tech services, infrastructure, quality of life, and proximity to London. Ireland’s tax regime, in particular, is crucial to attract capital, but also to retain talent: how is Ireland competitive? However, there are two sides to every coin: if Ireland is perceived as a tax haven when global firms increasingly worry about their public reputation, is there a risk of a sudden reversal of foreign direct investment flows? These are just some of the key questions we will be asking this Thursday. Also joining us to deliver the opening address will be Minister Noonan TD. We look forward to welcoming them both to the conference on 12 March.

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