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Hello and welcome to The Stand with Amy Dunfee.


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Every little helps now this week and the payments that are debt holidays that up to 30000 Irish firms are availing of with their bankers will come to an end.


And it may be time for people who have loans to try to pay them up. But of course, given the economic problems and the business problems people have, it may not be possible. Last week, the new governor of the Central Bank of Ireland, Gabriel Makhluf, said that the finance minister, Pascal Donahoo, will have to make a decision on which businesses are viable in the long term, which are not out to save businesses that are, in the minister's judgment, viable and not to save, by implication, businesses that can be judged to be unviable in the long term.


The consequences of this fall mostly on people in business and in small and medium enterprise businesses in particular. We're joined now by one of our leading economist, Jim Power, to talk about the consequences of this pandemic for jobs and for businesses. Jim, we saw something last night in Galway, and I'd like to start with asking you about this. It's Freshers Week for Goa University. There were thousands of young people on the streets. There were at least 14 house parties.


There were mass gatherings at Spanish Arch and on Shop Street. It has caused an outcry. The university has issued an apology. But there were a number of what might be called super spreader events in Galway last night. And I've just listened to two businessmen, Republican and the restaurateur, talking about the damage. Galway is on the hit list because cases there have been rising. We can't divorce, can we, Jim? Our own personal behavior from the terrible problems that businesses face.


And as a result, of course, the terrible risk of unemployment and long term unemployment for people at work.


Yeah. Amante You could say at one level that, you know, young people will be young people and that they should be allowed to be young people and behave as young people do, as we all did back in the day. However, we are in a pretty exceptional circumstance at the moment. You know, there is a very violent virus out there that spreads very, very easily, apparently. And we've seen the economic and social damage that this has done since the beginning of March.


And, you know, these these young people who are behaving like this. Last night we had more of that behaviour in Cork at the weekend, not so young people in many cases. So people are just behaving totally irresponsibly. And those young people, you know, who are doing that in Galway last night at that will certainly exacerbate the pressure that was already on and to impose or to recommend local lockdowns for Galway. You know that there is no doubt about that.


And then you get a number of weeks, even months of serious economic damage to Gallaway. Lots of businesses will be forced to shut down. It'll just exacerbate the already precarious situation that we're in. And these same students will then turn around and complain in six months time or in 12 months time, whenever you know that they can't get jobs, they can't get part time work, the economy's dreadful, et cetera, et cetera. But everybody has got to recognise the contribution that their own behavior makes to what's happening in the economy at the moment.


And it's kind of cliched at this stage. But we're all in this together where we're actually not. But we should be I mean, at the end of the day, the priority here has to be has to make sure it has to be to make sure that people behave responsibly, that we do our utmost to prevent the virus from spreading. And that and most importantly, that as many. As possible can continue to function as well as possible in the current circumstances, so the sort of behavior we're seeing from certain groups in society would just make you despair and you start to conclude we're all doomed at this stage because it's just going to create an even more challenging environment.


There's no doubt about that. Yeah.


So I didn't want to draw you into commentary, per say. However, we can't disassociate the problems people have with their businesses, with with their jobs, from our own personal behavior. And it's so important that the messaging gets out there because I go out and witness bad behavior or careless behavior. Not bad in the sense that people don't grow anything, but they're certainly not socially distancing from each other. And we can't remove that from the equation about jobs and businesses.


And just to give us some numbers that I'm sure you don't need at the end of August, there are 36000 small and medium enterprises and 4000 corporate customers making use of this interest holiday. This is where if you borrowed from your bank, you had a holiday on paying back the interest that ends this week. How severe a problem can that be? And do we necessarily have to end it this week?


Well, when you think back to when those measures were initially introduced, it was at a time of intense economic uncertainty, evolving intense economic pain, which subsequently played out over the next three or four months with the forced lockdown of large swathes of the economy. And then there was a period in sort of July into August when we had some semblance of normality. When we start to see many businesses come back, albeit at reduced levels of activity, but at least there was a functioning economy.


There was a lot of functioning businesses out there. And of course, the hope was that that situation would prevail out into next year until either we get a vaccine or the disease becomes treatable, you know, as is the case with something like AIDS and that it becomes manageable and then we gradually return to normality. But of course, when you were thinking in the last few weeks, obviously the resurgence of the virus, we've seen Lockdown's and Offaly, Kildare, Donegal and Dublin currently going through that.


And I think can be pretty certain that a number of other areas will be added to that list very shortly with, you know, Galway and Cork, I suppose, top of the pile at this stage. And you cannot divorce that situation from the way people behave. There is no doubt about that from a business perspective. As I say, when those measures were introduced, the long breaks and so on, it was at a time of serious economic pain.


I think we are really entering a period if we if we got out of it at all. But I think we did to some extent. But we are we now appear to be entering a period of intense economic pain again. And the notion that at this stage you start withdrawing those various payments, supports and so on doesn't make any sense whatsoever. From my perspective on what you're going to end up doing is actually forcing many viable businesses, at least businesses that were viable before this crisis struck.


You're going to force many of those businesses out of business and then you end up with this legacy into next year and the year after of all of these failed businesses around the place, a semi-permanent level of high unemployment and so on. So I think this is exactly the wrong time to be ending those payment breaks. And in fact, you know, in an ideal world, this is where we'd be talking about ramping them up again for at least the next six months.


Because if you look at the headline in the Irish Times this morning, for example, apart from the one million global debts, the other headline that stood out was the fact that health chiefs are warning that we're going to have various levels of corporate restriction for at least the next six months. They say six months here. They can say six months. I have no idea. But you can certainly say it's going to be at least six months. So withdrawing that sort of support at a time like this is a massive mistake, you know, presumably.


The Irish government and the banks will argue, well, we have to do this because of European Central Bank regulations. I would ask a couple of questions. One is, you know, has the Irish government, the central bank, had they actually approached the European Central Bank for an extension to this scheme? Because a lot a lot of rules of engagement, as we know, have been torn up over the last six months, such as the EU fiscal rules.


So there has to be flexibility at the European level to enable every country deal with these problems.


Yes, I mean, in that context, Jim, and when attempts were made to broach the subject of an extension for another three months in recent weeks, it was shot down by the European Banking Authority, which said that the concession should expire as planned on September 30th, which I think is tomorrow. Yes, indeed.


So that the European Banking Authority cannot be allowed to dictate the terms and conditions that apply. And, you know, they may say this is protecting the stability of the banking system. But at the end of the day, and it does some extent, but at the end of the day, if you force to these measures a lot of businesses that are still viable out of business over the coming months, that will just exacerbate the crisis for the banking sector.


Because the one thing, in my view that was absolutely crucial from day one of this crisis was that this economic and business crisis was not allowed to develop into a debt crisis and then morphing into a banking crisis, as was the case back in 2007, 2008. And I think Deniece payment breaks and so on have been absolutely instrumental in ensuring that an economic crisis did not evolve into a debt crisis, did not evolve into a banking crisis. There is certainly a risk now F.T. Supports are removed that you will see a lot of businesses get into serious difficulty.


Then you will start to see debt default rates rise and suddenly you're back in a banking crisis. And this is not unique to Ireland. It is. This applies certainly in every country in the European Union at the moment, so that the European Banking Authority needs to change its mind on this. We need flexibility. We've seen lots of flexibility in other areas of policy over the last six months. This certainly needs to happen. The banks will then turn around and argue, as they did yesterday, with the mortgage brakes, which are ending on the 30th September as well, that they will then deal with mortgage holders on a case by case basis.


I'd ask a couple of questions about that. But the main one being, would you trust the banks to actually behave in a responsible way to address individual problems? I think most people would answer no. Exactly. And, you know, nothing we've seen over the last 10 or 15 years would give you any confidence in the in the behaviour of the banking system. So I believe FDI breaks and which they're likely to I'd be very pessimistic about the consequences of that for individual mortgage holders and more particularly for businesses.


And these are related, of course, because, you know, as businesses get into difficulty, their workers then get into difficulty. And a lot of those workers would be the ones that need these mortgage breaks as well. So, of course, the chicken and egg situation here, you know, it's.


Now, let me ask you about Gabriel Makhluf, the governor of the Central Bank of Ireland, who advised the finance minister, I'm not sure if advice is the right word, that future covid supports should be targeted at businesses with the best chance of survival.


And how subjective judgment is that? How realistic is that? But first, Jim, who does Gabriel Makhluf answer to? Who is he working for?


Well, I mean, as a former as a former banker yourself, I mean, as someone who knows this world, most of us out here aren't sure who this gentleman who's advising the government is representing, OK?


He is appointed by the Irish government. But the. Bank of Ireland is basically a branch of the European Central Bank in Frankfurt, so that's who are they representing?


Well, that that they are representing the population of Europe. They are not representing the banks of Europe. They are representing the peoples of Europe and the U.S. the role of a central bank, first and foremost, the European Central Bank sets monetary policy as in interest rates, money supply and all that stuff. But they are big role of a central bank is to regulate its banking system to ensure that that banking system is sustainable is sound. Yes, and functions in the best interests of the economy because banks should be seen as as a facilitator of economic activity, the creation of economic activity as they came to believe in the run up to the crash in 2007 2008.


So that is Gabriel Maloof. His role primarily, as I see it, is to make sure that the Irish banking system is regulated properly, that it is run properly, and that it is financially stable. And Aziza's answerable to the European Central Bank, but is also answerable to the government of Ireland. In his economic letter to the Ministry of Finance in the last couple of weeks, Makhluf made the point that, you know, it's a normal part of the business cycle and of business, that businesses go out of business and I suppose they go out.


It's kind of creative destruction. They go out of business, new businesses then start up and so on. And that's, I suppose, a natural part of the cleansing process. But this is not a natural or normal economic climate we're in at the moment. We had a functioning economy at the beginning of March, thousands of functioning businesses, some may have been struggling, some may have been doing very well. You know, at any point time, different businesses are behaving or performing in different ways.


But we had a functioning economy and a functioning business sector that was then forced to shut down effectively at the end of March. And we've had various levels of shut down since then. But that the the question now is, you know, should you just allow the Minister for Finance Act got make a decision on which businesses should survive and which businesses should not survive? I'd ask a number of questions. Would any minister of finance and the resources that his or her disposal have, the capability, the resources to actually behave in that manner?


Yes. You know, it's ridiculous to think that you can turn around and say, you know, business down the road should be saved. Why business 100 years down the road should not be saved.


You know, I'm being a politician who'd be open to lobbying as well.


And of course, it doesn't make any sense to me the approach that this has got to be a sectoral approach. You know, you introduce measures to deal with sectors that are experiencing difficulties. So at the moment, obviously, what stands out is the whole accommodation and food services, tourism, hospitality sector. That is the one that is really under the collar at the moment. Non grocery retail is having a challenging time. So that that that's those sectors like that that need specific support, not individual company support within those sectors.


Inevitably, if you adopt that sort of approach, which I believe you have to, you know, you will make mistakes, zombie companies will be saved. But, hey, when you're when you're doing something like this, you know, you can't get one hundred percent. Right. If at the end of all of this you can stand back and say, listen, I have saved or we have saved the vast majority of viable businesses in this country, well, then I think that should be regarded as a good day's work.


The other point I would make, of course, is that, you know, what do you define as a zombie company? If you walk down Grafton Street at the moment and you look left and right, you will see a lot of zombie businesses at the moment. And that the fact is and the point is that they were not zombie businesses six months ago, but they are today because of exceptional circumstances. That was absolutely no fault of their own.


So in that regard, I just don't think it's feasible to suggest that a minister for finance can act as a guide and can make these sorts of decisions. Blanket approach is required if at the end of all of this, we want to restore as quickly as possible a functioning economy with functioning businesses and inevitably then once we get to some sense of normality, whatever that is, you know, you will see those so-called zombie businesses disappear. The state will have spent some money.


Well, so we take the losses.


You know, now, when you look to the future, the consensus seems to be, Jim, that there won't be a vaccine, maybe ever. There's never been a vaccine for the common cold or indeed for AIDS. But as you pointed out, HIV AIDS. But as you pointed out, there are there is a viral compound that now can save people with that deadly virus. There's no vaccine for the common cold. And the coronavirus is a member of that family.


But we're looking at scenes at at least two years where we get wave after wave. But they they they come and then they recede. Then they come back again and then they recede. In that period, if we have the kind of shutdowns that we're experiencing at this moment, the government will be bringing in very little in the way of tax that and other taxes. They'll also be paying a lot of social welfare out. In broad terms, at what point do we get to serious amounts of unemployment, people not being able to pay their mortgages, never mind paying their bank loans or the interest on their bank loans?


Is there a very dark picture down the road if this goes continues on the course? It's on at the moment, Jim?


Well, it's interesting. There are six months into the crisis. The tax take has definitely surpassed expectations from a positive perspective. You know that our multinational friends, well, not the corporation tax take is incredibly strong. And it is really interesting to see how much of an anchor the chemical pharmaceutical sector particularly is providing for the Irish economy at the moment. If you look at our export performance year to date, that sector is recording growth 12 13 percent year on year.


So we're really, really lucky to have that sector and other multinationals who are paying a lot of corporation tax at the moment. But if you look at the income tax side of US income tax is modestly down on this time last year. And that is because those that are most adversely affected by this crisis tend to be or they are lower paid workers. And because of our very progressive tax system, you know, lower paid workers pay very little in income tax.


The vast bulk of income tax in this country is paid by people who actually are doing quite well during the first six months of this crisis. So you're looking at employees in the multinational sector. You look at professional services, you look at financial services, you look at the public sector. And in fact, public sector workers are about to get another pay increase that the dole is looking at at the moment. So those people paying most of the income tax are still doing well.


It's that segment that is a segment of the working population that is most exposed. They are the ones. And it goes back to the other point I was making about we really do need targeted sectoral support for the sectors where those workers work and the workers themselves need support. And we've no choice. We've got to do it. Whether it takes six months, 12 months. We have got to do it, in my view. And of course, if we behave properly, we can make it easier if we all as individuals behave in a manner that controls the virus to the greatest extent possible, well, then, you know, those businesses will many of those businesses will trundle along, as they did in July and August.


But if we misbehave, if we and I hate using the word misbehave, actually, if you continue to get the sort of behavior that we saw in Galway, in Cork in recent days, that's just going to make the situation worse. And we enter then into this very negative, vicious downward spiral. We're starting to go in that direction as well. So what the economic outlook will be like over the next 12 months will be hugely determined. By our personal behavior and the ability to control the virus, incidentally, I was talking to local animal yesterday, and if when one gets, you know, a more optimistic interpretation of what's happening on the medical front, you know, he was very enthusiastic yesterday about a new vaccine that Johnson Johnson is working on, that they've trialled 60000 people.


He's very hopeful in that regard. But he's also very hopeful that we will actually, you know, get those viral treatments that will help. It will it will turn that the virus into much less of a killer like AIDS. Yes.


And there is also news in the last 24 hours of a test, which you got the results in 15 minutes and you can take the test yourself. And it's credible, apparently. So that is another optimistic sign, perhaps.


But Luke might have been feeling good because he had a number of his friends just sold their company for 350 million a day.


That would make you optimistic for a few days prior to the sale of the company. He was he was always positive, but it was things that does concern me on a number of things concern me. But one is about the role of methods. And, you know, I see stories today that it's not willing to Gwen before the Doll covid committee and there's a quote in the Irish Times saying that they said that Stephen Donnelly will update the committee on what's happening.


I would like to see more efforts in front of the committee explaining the decisions it's taking, because, you know, we we've we've seen this really kind of got me in the last couple of weeks, in the couple of days leading up to the renewed lockdown in Dublin. Philip Nolan effort, first of all, produced statistics showing the number of cases that were attributable to various areas of activity. And I think about nine cases over the previous week or so were due to restaurants.


Yeah, well, pub pubs and restaurants are featuring a headline in this morning's Irish Times as being the source of some serious spread of the disease.


But Philip Nolan said that we were also remarks were misinterpreting the statistics. Well, and that, you know, those statistics only showed the previous 48 hours. Well, if that is the case, why publish those statistics? Yes, I really, really worry that we're facing a lot of policy here on non-existent evidence. I would have no problem accepting gladly the shutting down of various sectors of the economy if there was an evidence base to back it up. And I'm I'm astounded that sort of six months into this, we don't have the ability to go back beyond 48 hours to see where the virus might have come from.


The statistics that Ron and Glenn was quoting yesterday in relation to Cork and the number of cases that are attributed to restaurants. I just wonder, is there evidence to support that if there is show to us? They really, really do need to do a better job in communicating to people why they're making these decisions.


If they want people to buy into these decisions, then, yes, they must make themselves accountable and available to our public representatives in the practice committee.


Unkovic, of course, they must they're making that they are giving advice to the political system, which is then making decisions that is fundamentally altering and affecting our lives at the moment. Yes. So you really would like to find out exactly what the thought process behind all of this is. The other thing that kind of disturbs me a bit at the moment is that, you know, the that the motivation during the lockdown was that it would give the system time to build up the resources to deal with the inevitable resurgence of the virus coming into the winter months.


And yet here we are six months later, and it would appear that the capacity is the very same as it was back in March. It does not fill you with confidence that we're at. Actually doing stuff to make sure we're in a better position to handle a possible serious resurgence coming into the winter months.


I think the problem there, Jim, is under increasing sort of noises being made by people who argue that covid has absorbed too much of our energy and attention, that it is absorbing too much of our resources at the expense of other illnesses cancer, strokes, heart disease, obesity, money, money, things. So the point that people some people are making is we've panicked over covid. It is being dealt with at the expense of other more serious illnesses, including, they say, mental health.


Yes, I see a tweet from Jim O'Callahan this morning making that very point about all of those other illnesses and diseases that we're actually ignoring virtually at the moment.


I can assure you I didn't copy it from Jim that I'm not suggesting, but I know it's. But that Madonna guy, Jim, I could try this, but you know that there there is definitely that view that we have devoted all of our resources to this. Everything else has been ignored virtually. And that at some stage, you know, obviously a huge price will have to be paid for all of that. So I think you'd have to question the performance of the Hajazi, the Department of Health over the last six months, a given and given their form, there's every reason to believe a cock up is not beyond them.


Well, yeah, yeah, yeah. Definitely the track record would not inspire confidence. But listen, you know, they need to communicate a lot more to us. They need to explain what they're doing. Yeah. Rather than just coming out, issuing these warnings. Yes. I'd love to see. And I think this is what the political system needs to do for us. The political system really needs to get in there and find out exactly what has been happening for the last six months.


What have they been doing? Have they put us now in a better position to deal with the winter or not? The suggestions are they haven't. And I'd like to know why it was that lack of resources. Is it a lack of motivation? What is the reason? I think as taxpayers who pay for all of this stuff, we need those answers.


OK, Jim, we're very grateful to you for joining us on the stand, Jim Powers, one of our leading economists. And we're grateful to Jim. We're grateful to you for listening and particularly grateful to Tesco, our sponsor. That's all we have time for now. We'll talk to you soon. The stand is proudly supported by Tesco and Tesco. Our exclusive powers for over 65 family carers and extremely medically vulnerable customers are every weekday, Monday to Friday, up to nine a.m..


Health care and emergency services have priority access at all other times now, more than ever, every little helps.