 So good afternoon everybody and welcome as Director General of the IIEA, the Institute of International and European Affairs. I am delighted to welcome you to our latest IIEA webinar focused on economic recovery post COVID-19. We're joined today by Mark Coleman who will discuss the economic response to COVID-19 particularly in the light of the recent domestic stimulus package and the EU response agreed last week at the European Council meeting in Brussels. Mark will speak to us for about 20 minutes and then we will go to Q&A and you'll be able to join the discussion using the Q&A function on Zoom which you should see on your screen in the usual way. Please feel free to send your questions in throughout the session as they occur to you and we will come to them once Mark has finished his presentation. Today's presentation is on the record. Mark Coleman is founder of Octavian, an international policy and public affairs consultancy. Mark was formerly director of financial services Ireland and head of international business at Ibeck and a former economics editor at the Irish Times, a presenter at News Talk, an economist with the European Central Bank and the Department of Finance. Mark you're very very welcome indeed to this IIEA webinar. The floor is yours. Thank you very much Michael. It's a great privilege to be speaking to the Institute and its members. So thank you all. At the outbreak of the last economic crisis there was a plethora of very destructive very protracted and very negative comment and it was my firm belief that tens of thousands more jobs were lost than was necessary and that crisis went on for perhaps a year or two more than was necessary as a result of it. So when this crisis broke I was determined to do what I could to prevent that happening again and to influence an early constructive and positive narrative. So if we go to the first slide and hopefully see the cover of the book and maybe get the full, if we can, the full picture there, we were already, the planet was already on the brink before COVID as a result of a number of issues, Brexit, populism, growing gulf and a breakdown in multilateralism and that sense of urgency was what motivated me in the middle of March to begin writing the book and you can see, I hope you can see on the bottom right hand side the cover of the book and in the next slide you will also see some of the books in the next slide that I would have written in the previous crisis and their function was really to try and promote long-term positivity, long-term support for trade and openness and as the regard for Ireland's tremendous global resources, the diaspora, respect in multinational institutions, our long-standing resilience with previous crises that we had come through in the 1950s and 1980s and the latter two books in a more precise way with input from the Thornishta, the Tishik and various key stakeholders at the time tried to put a little bit more detail in terms of how we could use policy instruments at the European level and how we could use the great power of globalization, particularly in Asia, to power the recovery. So what I tried to do was to use as much as was relevant in those books, in the book that I'm going to talk about now, by noticing obviously the key differences in this crisis. So in the next slide, the next slide will tell you what the three key functions of the book are. Number one, to promote confidence in early action. It was written in April and there was an opportunity to shape the narrative and I wanted to take it. Number two, I wanted to make the case for a just transition and talk about what that might mean in practice because there was a very unjust transition in the last crisis with some sectors far worse than others and given the election that we had had, it was my view that that is not something that the political system could sustain. So I wanted to illustrate how we needed this crisis to differ. And then thirdly, Ireland's tremendous potential in no small thanks to the work of the Institute of European Affairs as recently shown by the amazing success of our diplomats in securing a place on the UN Security Council, the success of Pascal Donahue becoming proud of Europe. The question is what could Ireland do to help influence things for the better at an EU and global level? So let me turn to one and in the slide one is basically promote confidence of the action. So further slide on from that you will see a timeline of the first couple of weeks. We said the first case in the north on the 27th of February. We had the first case in the republic on the 29th of February and we had around the middle of March a clear understanding that we were going to have a lockdown, that schools were going to be closed, we didn't know how long for and we had restrictions on travel. So in the 22nd of March I came out with the first of my a weekly briefing and the weekly briefings have run both a few weeks before the book was published and subsequently because I felt as well as a book you need to update the situation that is moving very rapidly. And I'll talk a little bit about the first key messages that I put out there. The book was published on the 7th of April after what I would call was three weeks of stakanavite intensive work and but which had the benefit of four previous books where I had a lot of narratives and structures that I could draw on. So we go to the next slide What the first briefing aimed to do on the 22nd of March was to give hope and give hope by pointing to three key differences with the last crisis. The first was that our personal debt is now much lower than it was in 2008. The growth in our economy is much much more diversified. You can see the growth story from the private sector credit, you can see the much healthier structure of our economy and external balance. But there's a caveat to that and the caveat is the government debt is much higher and I'll talk about that a little bit later. In the next slide and another confidence booster is that our international trade portfolio is much more diversified now. For example our exports to Britain are less than 10 percent of total exports. Now that does to a certain extent understate our exposure in some more labor intensive sectors but we're in a much better position now than 10 years ago and in a far better position than when we joined the euro. And I'd like to hope that two of the books that I produced during the crisis would have played some role in directing the government's thinking towards that diversification agenda. In the next slide you will see a more technical briefing which I produced in the 29th of March and this was all about urging the HSE and the government to ensure that testing capacity bottlenecks were dealt with early on. That we had a system for producing data and analytics to exploit and understand demographic and locational differences in the spread of the virus and that we were dealing with beds and personnel bottlenecks. Why is that important from an economist point of view? Well because if you get your micro policy right it means you don't have to have the lockdown for such a protracted period or you can localize the lockdown. So there's a strong link between macro and macro and the success of the developing of an app now which is being shared with the rest of the world is very welcome and I think it illustrates the kind of leadership that I was talking about that Arland could play. And it would I think have helped had that app come out some months earlier but we want to stay positive so we won't dwell on that but at least that briefing came out on the 29th of March. In the next slide you're going to see a timeline and all of this material is in the book in one shape or form and I'll give people a link to the book. I wanted to convey a clear sense of crisis recovery and normalization. We're now somewhere in the middle of the crisis period and a key message in the book was that for us to bring forward the recovery and normalization period we wouldn't need to stimulate demand sometime in the middle of the year if we were going to get the recovery curve pointing upwards towards end 2020 or at least beginning Q1. Thankfully we've seen that in the last week now and that has happened. But in the next slide you're going to see something a little bit worrying and the next slide will show you two pieces of data from the April stability forecasts of government and they showed that prior to the stimulus there was a strong there was an expectation of a strong divergence between personal consumption on the one hand which was expected to decline very rapidly as a result of the crisis and on the other hand government consumption which was going to grow domestic demand was forecast to fall very dramatically but net exports were forecast to increase and that looked like a rerun of the well kind of a rerun of the 2008 crisis that we needed to avoid because the more imbalanced the growth is in between different sectors the less of a just transition that you have. Now that was the picture in April as I'm going to say later on the stimulus and the forthcoming budget look like they're pointing in the right direction to dealing with that. Now in the next section we're going to talk about the second goal which is just transition and demand stimulus and I think that picture really says it all because we are all in this together and but there's an anecdote my corporate finance lecture used to tell me about a chicken and a pig having a conversation before the farmers the morning of the farmers breakfast and the chicken turns to the pig and says well you know we're both involved in the farmers breakfast and but whereas I'm involved you're a little bit more committed and I suppose the the image there is that there is a spectrum in terms of job security pension security access to power and there's a lot more pressure in the small business sector there's a lot more pressure that than there is say in the large corporate sector there's more pressure in the large corporate sector than there is in most of the state funded sector and despite the relative size of the the the people in that image as I'm going to show later on this the SME sector for example accounts for 99.8% of all the companies in Ireland and employs over two thirds so ensuring that there is a much better distribution of balance distribution of pressure is a key goal not just economically but politically and the next slide will show you what happened the last time out and and it will show you in the next slide the bigger chart in the top of the middle shows you in yellow how the multinational dominated measure of GDP minus construction was basically recovering from 2009 now it didn't fully recover but it was at least on the way back up whereas the black line shows you that the more domestic economy had a relapse and went down significantly and and that means the recession dragged on in the domestic economy much more so than in the multinational economy and part of that story is illustrated by the taller graph on the further right which shows you that contrary to the austerity narrative most of the austerity was actually taxation rather than spending. Spending was certainly cut in some areas of public spending but overall spending in public administration education actually rose over the period it was a bit of a zigzag motion but it was actually higher by the end of the recession than at the start whereas you see on the right hand side curve the black curve shows you that construction output fell by 50% which meant that we could have invested in capital spending we could have built a lot of the houses that we now have discovered we needed but we didn't because there were other priorities and we now have a housing crisis as a result and the next slide will show you some data from a senate report a senate committee report on the small business sector undertaken last year showing that there was already a funding crisis in the SME sector and that there was particular exposure in wholesale and resale to issues like funding and the facts are staggering I mean SMEs are 99.8% of all enterprises 93% of them are Irish owned they account for two-thirds of employment and a lot of them were left behind by previous initiatives sole traders self-employed they just fell through the nets and they're the most exposed so I wanted to highlight that as quickly as possible and I wanted to highlight in a way and I mean no criticism but I wanted to highlight in a way that I felt that some of the more established research institutes might not do because many of those people working there don't have not worked in the private sector so probably wouldn't see that that it wouldn't be on the radar screen and in the next slide you will see what the SME sector were asking for the SME recovery group were asking for essentially a business reactivation scheme they were saying look this crisis is as a result of a government edict you know a very understandable government edict but it's not an act of the free market it's it's effectively imposed on the private sector so we need that recognized in the form of a reactivation funding scheme businesses should not have to borrow to get through this crisis because they did not create did not create it and there was also a request for cost flexing in terms of the ability to pass on some overhead so if you've no income coming in and do you bear all the brunt of that or are you able to pass that through to your suppliers and that there should be a more flexible arrangement to preserve employment and maybe reallocate employees at least temporarily and then looking at state aid rules some of that has come through the next slide will take you through the demands of the Chambers Ireland group which was made a very good presentation to the Eruptus Committee on Covid they called for clear clarity on tax liability on the temporary wage subsidy scheme for looking again at the loan schemes calling for an extension of credit guarantee which has pretty much happened one can argue about the extent but at least it's happened and an improvement in the trading and business continuity voucher schemes which had run out of funding an augmentation of the restart grant which has been it has been augmented and an extension of tax deferrals and waivers on rates which again has been has been brought in the next slide will talk a little bit more about demand so we had a saying in the last crisis that you cannot push in a piece of string you can provide all the liquidity you want but if there's no customer at the other end that's no good to you and companies are very reticent to borrow because they don't feel the demand is there so there's a number of measures that I recommended which I won't go into too much detail but they did include tax cuts and in the next slide you will see basically in summary there were seven things that I recommended in the April book the first basically was a July stimulus and I didn't go into the detail in this this is a summary slide but the first point was to understand the urgency of recovery the need for both the july and an october budget we've kind of got that now that's been committed to in the program for government on the first half delivered last week there was strong advocacy for EU cooperation on fiscal policy again the ECB had pumped a lot of liquidity into the market but we weren't seeing the fiscal action from the presidency again that happened last week and then we wanted tax cuts to stimulate demand and a commission on taxation and we wanted to see partnership between multinationals and SMEs the other two things that I called for were a recognition of the fact that business and taxpayers have really been underrepresented in policy and secondly the legacy of the debt from the last crisis needed to be looked at and there's been no action on those two points I think it's probably premature to address those but I don't think those issues are going to go away and I won't dwell on them here though because we could talk a lot a lot about them the next slide will give you just a quick overview on the measures taken in the program for government I won't dwell on them there are five key pillars there's investment and stimulus educating education training enterprise policy business and financing regulation and costs it's all good stuff it's all going in the right direction the concern is the institutional implementation and making sure that the people implementing it and the institutions implementing it have people from a public both the public sector background an academic background to understand the theoretical issues but critically also a private sector background the mix will be essential to ensuring good implementation the next slide will give you a sense of the magnitude of the stimulus we've just seen and the next slide is a chart and over on the right you'll see the comptroller and auditor general's estimate of the bank bailout cost has measured last September you will see what various groups ibeck and ismay called for in terms of the magnitude of stimulus in the light blue chart that's 15 billion my own book called for 16 billion which is close enough there were differences in how the cake was split what we've seen so far well we've seen last week we've seen 7.2 billion in fact there are prior measures taken over the summer which i won't go into too much detail and but there is a gap between what we've asked for of around eight or nine billion some of which is accounted for by measures taken prior to last week the remainder of which i'm quite confident the budget forthcoming in October can close again i'm not going to go into too much micro detail because we don't have time but i will go on now to the third and i think the most important pillar of this presentation which is the idea of promoting EU and global cooperation angle guria OECD general secretary has a very good quote from him and that the OECD's analysis underpins the need for sharper action to absorb the shock and a more coordinated response by government to maintain a lifeline to the private sector and to deal with the health crisis now the next slide will break down for you the four pillars of what i'm going to finish up on i'm going to talk about what we've learned from the rest of the world which was dealt with in the book i'm going to look at what we've learned from the rest of the world both from the previous SARS crisis which is the only it's the only laboratory we have to look at what we've learned from the rest of the world in terms of this crisis what other countries are or how they're responding look at EU coordination and the potential for the irish role and then what i call a german lesson but don't worry i'm not going to start talking in german it's more about policy lessons and the next slide will show you a very nice picture of a gate in Hong Kong and it will also show you that the Hong Kong and Ireland Ireland economies are very similar in many respects high GDP per capita high a fixed exchange rate or pegged very high openness very high degree of travel and tourism and english common law business systems high levels of foreign direct investment and good quality of health care sanitation two strong differences obviously our population density excuse me and the fact that Hong Kong is probably a little bit more dominated by the chinese economy and the Irish economy but otherwise a pretty good similarity and the positive news is on the next slide which is that when SARS hit Hong Kong and the death rate was roughly comparable to the death rate we have in this country it bounced back very quickly it in fact grew for the year 2003 now of course the huge difference is that SARS was concentrated in Hong Kong and parts of southern china whereas this crisis is much more global so that means we've now got to look at the second point of this final stretch of the presentation and that is the need for countries around the world to have fiscal and economic policy responses to deal with the sheer magnitude of this crisis Hong Kong really didn't have to do that china didn't really have to do that with SARS because it wasn't a big enough crisis but that has to happen this time so how well are the countries doing well we'll see on the next slide and if i can on the next slide ask you to to look at the further further right most column the column furthest on the right you will see the UK and Germany up there with combined stimulus now this is april we're talking about things have changed slightly haven't changed hugely for the uk germany and us but they've changed a little bit Germany leads the pack with a 30 injection into its economy an absolutely massive total of 1.1 trillion euros injected into the german economy and ireland at the time was very much trailing behind with 1.2 percent as i said this is pre-stimulus things have moved on now but that is the position where we had when the book was published and that is where i thought there was a real need to point to the rest of the world to try and flag the urgency of what we needed to do the next two slides i won't dwell on i'll just if we can just flash them momentarily and they go through they take a sample of countries and look at how early action was taken how mandatory the action was the decision level of action was at central or regional government and the principal features and tools of government policy and the next slide will basically give you a quick timeline of how that worked out in terms of how soon the lockdown was ended i'm not going to dwell on them but what i'm going to focus here is the different policy effects have had the following results and you'll see it in a quote on the next slide which i will read out and so their ability to coordinate with each other and i'm talking about different countries both in relation to reducing the divergence and approaches to both public health and fiscal monetary policy coordination challenges is a crucial issue given the aforementioned differences in policy approaches to containing the virus this is likely to be spread over several quarters as the crisis peaks in different trading partners that's a bit of a geeky kind of academic sentence but the importance of it will be shown in the graph in the next chart because this is what we are facing now and you will see in yellow Ireland's COVID curve is flattening out but you will see in orange the global curve continues to rise so we have COVID curve divergence which basically means as long as this situation persists we have a threat of a second lockdown or at least we have a second threat of the or the or ratio going back up to critical level because of a lack of global coordination from the start and if we go to the next slide and in one of my weekly briefings and i think it was week number 16 i put this picture of the globe we had just won a un security seat and succeeds council seat and i was feeling very proud i asked the question can Ireland save the world and then the following slide two weeks later pascal dunna who got appointed to the president of the euro group i was absolutely delighted for him personally but also for the country because i think it illustrates the clout that we have and also simon coveney came along with funding for the world health organization at a time when it was badly needed so i think we have done ourselves proud and i think our strategic links as a bridge between the america and the e you and to the uk and asia thanks to the excellence of our diplomats i must say and isn't it means that we can play a role that uh is way in way above our sizes as a nation and if we can go to the next slide i'm going to finish up now in a few points of policy coordination my former employer the european central bank was very quick to act as where the other central banks and it made a seven to hundred and fifty billion intervention but as i've said before liquidity pushes no good unless you have demand pull so in the next slide you'll see a quote and with a picture of both christine legarde and ursl of underline and the quote is if fiscal and monetary policy coordination was desirable during the last crisis it is an absolute imperative now not just at national but at e you and as far as possible at global level and then the next slide will give you the positive news in that last week uh charlie shell after a marathon five day session uh president of the european council announced we did it and it was a 750 billion package of supports incorporating a 390 billion package in grant aid for the first time underlying collective introducing collective borrowing to be repaid by 20 58 by funding on tax and digital activity tax on plastics and digital activity and key elements are related to the climate agenda the just transition and the digital agenda and then finally i want to finish on what i call the german lesson and our director michael collins was extremely uh hospitable and gracious in letting us use the german embassy when he was our ambassador to germany our the Irish embassy in germany when myself and Ralph Lisak published ireland and germany partners in european recovery and we looked at the success of germany in pulling through previous crises and we derived some lessons about how some what features of the german economy enable it to uh recover more quickly well it's a very pro small business economy it has efficient regulation low taxes strong SME access to credit and in that book we wrote about the credit anstalt for vida aufbau which was the institution set up to promote growth after the devastation of germany in after the last war and remember the germans have been through a situation where they they had to reconstruct everything and we recommended the establishment of a similar institution here and the strategic banking corporation of ireland was the result the following year but germany also has good spatial policy affordable housing fair and efficient rents rates very well functioning public sector low cost of living very competitive internal markets for things like insurance and it has a very good labor market and a system of apprenticeship and courts are abide i think also on the next slide a key point uh before we go to the next slide is that germans understand the importance of representing the taxpayer and the small business in politics they learned the hard lessons those sectors were not represented well um in the 1920s and 30s they understood that a properly functioning social market democracy requires a strong voice for the small business and the taxpayer that's an absolutely crucial insight for the next few years and it brings me to the last few slides if you go to the next one in terms of fairness in policy representation and debate and we can go one slide ahead and we can go back to our image of the pressure coming down from the top i think what policymakers must understand is that they may not realize how much in charge of the narrative they are uh none of us begrudge it to them it's not a criticism but the policy making world is by and large one of job security where paying pensions are immunity from the crisis and there's good access to influence good access to media there's an ability to use the xjacker the ntma to fund any uh uh you know to tide you over for the next few years universities are assured of funding large corporates are one rung down they have strong cash reserves they can withstand the lockdown for a good period of time they're not immune in the long term but they're relatively resilient in the short to medium term they have a good strong voice in the corridors of power and they also have the resources and expertise to comply with the various back-to-work restrictions and the bureaucracy that must accompany COVID-19 whereas at the bottom the small businesses the sole traders the self employed they're the most vulnerable to demand severe impact on cash flow it's an existential threat to their livelihoods that many of them don't even have pensions they have terrible access to funding and well sorry that's not fair they don't have terrible access to funding but there's a serious funding issue already pre-covid and they have a relatively weak voice in policymaking compared to say germany or other countries and they have very little resources to comply with a lot of the health restrictions that are coming out as a result of COVID there's another kind of divide which we show on the next slide and it it's the demographic divide and the stark fact is that the rate of unemployment amongst 18 to 25 year olds is 45 percent I mean that is that is like a science fiction rate of unemployment and that is because the weakest sectors are the ones with the highest youth participation we've already heard a very loud signal from the demographic that the youth cohort in the last election in relation to housing again asset rich older age court cohorts tend to vote more tend to have more of a political voice so younger voters were already struggling with the accommodation issue COVID-19 now moves them from the frying pan into the fire in that regard and so finally a point about equity and confidence and policymaking and we are going to have to devote a lot of attention to this and I think one thing that stood out in my mind there was a very good event it was it was very well intentioned and all of the speakers were excellent and it was pulled it was a conference on small business funding it was intended for the 30th of January and all of the speakers were excellent I know most of them personally but I did notice one fact of the 13 speakers at this event planned to discuss the crisis already facing the small business sector in funding 12 of them 12 of them came from within the public sector and one of them only one of them was representing the small business community now imagine if you will if you had a conference which was promoting the role of women in business and you had 13 speakers and 12 of them were men and only one of them were women that really tells you that diversity gender diversity is extremely important but diversity and policymaking is going to be the key challenge of the next couple of years so I'm going to sum up and once the next slide is going to sum up everything in four key messages two positive messages and two worrying ones the good news the first two bits of good news are that the first immediate challenge I spotted in April was we had a real challenge of a divergence between a more sheltered and publicly funded and a more sheltered multinational sector on one hand and on the other the SME in the private sector now that divergence is still a threat but it is being addressed the good news is that the stimulus and I hope the budget is going in the right direction the second piece of good news is that the divergence I feared between monetary policy which was very active and fiscal policy at the EU level at that divergence is now being addressed thanks to the EU presidency initiative last week the less positive news it relates to point three the divergence between Ireland's flattening COVID-19 curve and the upwardly rising global curve that is threat number one that's the threat of the second lockdown and the final threat is a more domestic one that I've just spoken about between public and private sector input to policymaking I don't think that has yet been addressed and it would be far better to tackle it now and actively and do it before it's too late and for anybody who's interested there's a little information about me on the next slide but people can look at that at their own leisure and at the last slide and for anybody who would like to I do a weekly briefing which updates on the book because things are moving so fast if anybody would like a copy of the weekly update just contact me on those details and I'd be delighted to put you on the list thank you for your patience and Michael apologies that have gone over time that's not a problem at all Mark thank you there's a vast amount of detail there that I'm sure people will want to follow up on and we're likely to be able to cover all of it in any further detail I suppose beyond that in the Q&A but maybe just to get the ball rolling and giving your particular reference to Germany there I mean it is striking that the size of the stimulus the stimulus in Germany I think you mentioned it was 30% of GDP I think it is isn't it and ours in April was in around just about the 1.2% I know it's been improved since then what hope is there for everybody else in Europe if the Germans are likely to be motoring out ahead to the extent that they are with this level of stimulus beyond the capacity I presume of any other country to offer to in its domestic space well I think the Germans are probably too polite to say this Michael but there is an obligation and they have invested in an awful lot of providing money structural and cohesion funds to countries like Ireland and there is an equal responsibility of the member states to be vigilant in responding to this crisis I think the size of the German I can't speak for the German government I don't represent the German government but I would imagine that the sheer size of Germany's response also reflects a sense of responsibility that the Germans have as the largest economy so I think they are doing it to a significant degree to help the other economies of Europe as much as to help themselves but I think the onus is on I think the bigger countries tend to to have bigger programs we shouldn't beat ourselves up too much however remember that very helpful and welcome measures were implemented by the public service in Ireland at a time when we didn't have a government so I don't think there's anything I'm saying that's criticizing Ireland we did what we could given that we didn't have a government and when a government was formed in July it has in the last four weeks come out with a stimulus package that while it isn't perfect is very very promising and we have another three months because as I called for in the book a July stimulus and an October budget we're now going to get both we've had the July stimulus there is now another three months to design a budget and the program for government has very very positive and very appropriate motifs that I think will really help us close the gap okay well that's a good point I mean if Germany is doing well I suppose all of Europe is likely to be doing that a little bit better as well including ourselves of course I think we're the third Germany's you know Germany's our third most important export market so as I say their economy is beginning to thrive again and I suppose the verdict is still out on that I mean I don't know what the recent figures are from Germany in terms of the the way in which they are recovering but I suspect like elsewhere in Europe despite the stimulus it's relatively hesitant yeah I did a briefing on the German recovery and it is looking positive now you've caught me I can't remember the exact figures but as early as May there were signs that the retail confidence and recovery was beginning to return and I stress it cannot be stressed enough the speed of Germany's recovery reflects T.K. Whitaker did one great thing for this country and he he made us understand the importance of external competitiveness and the IDA have done an amazing job on promoting Ireland as a place where the external economy is fantastically competitive and our our low corporation tax really reflects that the news about Amazon a thousand jobs coming from Amazon is is really positive in that regard but it cannot be stressed enough that the domestic economy is a far higher tax and does not operate with the sufficient degree of flexibility that you would find for example in Germany or Austria in the Netherlands that is going to be our challenge because the domestic side of our private sector is where all the pressure is going to be and the faster we can get competitive markets and efficiency and efficient implementation of policy the sooner we will start to behave like Germany in terms of having a much more balanced and much more even spread of both the recession and much more even benefits from the recovery. Okay Mark so just to bring it back home I suppose the question here from Peter McLoan who's a board member of the IAEA he wants to know what are Mark's thoughts on how to stimulate every boosting of the interrelated tourism hospitality and aviation sectors or are we facing a prolonged period before recovery starts presumably in those sectors. It's an excellent question from Peter I would say that in relation to tourism and we are here a prisoner of the what I call the COVID curve divergence and there is really nothing we can do about that other than stimulate domestic demand and I would link that to the recent and staycation voucher which was a very welcome initiative and I think that I would urge governments to take a look at that voucher it's going in the right direction but I would urge that it would think about first developing a little bit more generous with the size of the voucher and making it easier for people to actually spend the money and the first response of a policymaker is very understandable it's to use the tax system and that is entirely an appropriate and correct where you are designing measures to stimulate the business sector why because businesses have tax advisors businesses having corporate form tend to think in multi-annual tax years so it's absolutely appropriate and correct to use the tax system and tax credits for individuals and families it doesn't work like that the tax system is a burden it's a hassle it's not understood so I think there's a golden opportunity for the government to just it's got I think 90% of everything right in the stimulus and I think it's done a very good job I would be urging government to look again at the staycation voucher make it more generous make it more accessible and I think we could be getting a lot of families visiting a lot of families who need a break bringing the tourism sector back to life I'm delighted to see that a former colleague of mine David Swan has been appointed to the aviation group which has been set up he's a very good person and I think that the aviation sectors of critical importance I haven't prepared any thoughts on that Peter I apologize to you but I will try and address it in the future brief because it is a very important one. Thanks Mark of course you mentioned several times there the budget the often budget of course which is another opportunity for the government to introduce further measures or to to take take further initiatives and of course an off-lock can happen between this and then including the possibility of course of a relapse of some description God forbid but nonetheless a possibility that has to be kind of at least anticipated to some extent but do you anticipate will be the the gaps or the the issues that have not so far been addressed by government in its stimulus package most recently last week there are likely now or that would be likely to be needing to be addressed in the autumn budget I mean there are lots of other aspects to the budget as well but where do you think the the further initiatives lie are now we are supposed at the maximum of fun can we be satisfied that we're at the maximum of what we can do for today almost I think you said that the stimulus was more or less right and so far so good there are obviously some shortcomings but where would you see the autumn giving further opportunity to sweeten the pot even more so it's an excellent question Michael and I would draw two two distinctions between the stimulus that we have had and the the the the the October budget and they're necessary and good distinctions the first distinction is that the stimulus is necessarily designed to tackle what I call the crisis period you may remember I showed a chart of crisis recovery and normalization it's back up a few slides and it's primarily oriented at keeping the economy going through the second half of this year getting through that tunnel into early next year and that's why it needed to be done in July and by contrast the October budget is able to look at a multi-annual budget framework over the entire three-year period that's the first distinction the second distinction and then I'll answer your your excellent question is that the stimulus master measures are necessarily applied across all sectors of the economy with some exceptions the staycation voucher we spoken about but most of them are designed for all sectors and all regions of the economy whereas if you look in the program for government there is a lot of very useful direction towards investment in town centers investment in sustainable communities and really rethinking our spatial balance away from putting everything in the center of Dublin which we've done up to now and more targeted spatial investment so in October the government will have the time and over the next three months to really study instruments that are more precise more adaptable and more long term so the two instruments that's why the two instruments were needed one for the here and now and one for the longer term and I would say a key issue is housing in answer to your question and there wasn't time to deal with the housing crisis it hasn't gone away you know if I can use phrase it's still there and it's going to have to be the focus of October not only that Michael but if I may say at the very back of the book that I wrote in chapter seven I had an entire chapter on what I call correcting Ireland's lost decade of investment and in the book which is free by the way everybody can access it on the website you just see the book and just click on it chapter seven shows how really we got it totally wrong we really decimated public investment between 2008 and 2018 we could have built the houses we could have built the schools in the road we didn't we now need to do that with urgency and that is the one issue we should not be afraid to borrow for we should be borrowing and provided we have good control of value for money we should be borrowing with gusto for public investment in housing on an enormous scale okay just maybe just turning to the European stimulus of which we are going to be the beneficiaries in excess of obviously one billion plus whatever we get out of the brexit fund and first of all do you think we're getting our fair share out of the European stimulus package obviously it's I think it's a good day's work that Europe demonstrates that it can come together in the way that it has but I suppose you know just a question of I suppose whether whether Europe you know the package that's coming from Europe and the money that's coming from Europe is it enough to make a difference in our case the bulk of the money it's clearly going to Italy it's going to Spain it's going to the countries that are most have been most affected by the the pandemic first of all do we get a fair shake in the package and secondly you know I mean you know it is one billion plus going to make much of a difference in the end of the day I would say Michael as somebody who tries to be a good European and who grew up in Germany and hence my interest in the country that when I was born 50 years ago the population of the republic was three million and it was a country where the income per capita was 40 percent below the European average we're now a country of five million and depending on what measure of economics you use our income per capita is between 20 and 40 percent above the EU average so in answer to any question have we got our first shake out of Europe I would say absolutely over the long term yes I would say that after 50 years of immensely successful engagement in Europe we have to realize now we're one of the leading nations of Europe we really are up there in terms of reputation economic performance credibility and I think with that has to come a certain maturity that we have we have received so much and we've worked for it we've earned it but there does come a point in time where those questions I think just need to be responded to by looking at the long-term fundamental transition we have got from Europe and in the words of John F Kennedy I think it may be time to ask the question ask not what Europe can do for you but ask what you can do for Europe well indeed Europe may come asking in some areas including in areas like taxation and digital taxation in particular but maybe I would make one caveat to that in that I did notice the role of public debt during the last crisis and I think going forward the steady state current management of policy and I think things are going broadly correct there is that lump of debt from the last crisis and I referred to it in the book I don't think that issue is entirely something we can just completely ignore I think as our debt ratio goes up we may need to remain open to having a constructive conversation about it but other than that I think the presidency arrangement of last week is a fair deal very good okay from a colleague in the institute Dara Dara Moriarty he said we saw Amazon announced a thousand jobs this week you've already referred to that in Ireland and we also of course had the apple tax ruling do you have any concerns regarding renewed pressure coming on US multinationals to boost investment in the US and a particular particular singling out of Ireland by President Trump in the forthcoming election campaign and if I may just add to that I mean one of the things one of the ways in which of course Ireland has succeeded over the last number of decades is the fact that we have become a you know we were participating in the beneficiaries of the global economy and to the extent that globalization now is becoming some part of a of a diminished that is prospects maybe somewhat diminished is this an additional threat to us and that brings in the whole question of repatriation of maybe some strategic industries not just to the United States but to elsewhere as well but Dara's question obviously yeah obviously the threat from the US the threat from further measures by by President Trump well I will I will respond knowing that there are people in the institute with far more expertise and intelligence than I to answer that particular question I quote one of my favorite episodes of Father Ted's and say that that would be an ecumenical that would be an ecumenical matter if you remember that line the in in relation to Ireland being singled out there is an OECD BEPS process and I think I think have been very vigilant on this as have other organizations like American Chamber in making sure that we have a smooth transition it's not that we do not want to participate in everybody paying their fair share but I think what we need to make sure is that the multilateral approach of the OECD is paramount and so that we have a smooth ordered transition to a fair global corporation tax environment one in which countries like Ireland can plan their adjustment in good order and with good notification but we do not want to sudden surprises and sudden rulings and that upset the apple cart in terms of disturbing arrangements that were understood and entered into by parties acting in good faith so in that sense I think the ruling was very positive for Ireland however however we are going to face the question that if we look at the last recovery even before we go into the divergence of covid and its impact on on different sectors of the economy as I've spoken about the stark difference in the benefits of the last Irish recovery to the in multinational sector and the domestic sector is huge as is the difference between the average the corporation tax rate is twelve and a half percent here the marginal income tax rate is over 50 percent there's a gap of 40 percentage points between what the you know someone on 50 grand will pay in marginal income tax to government and what a corporation tax will pay now if we go to Germany the corporation tax rate is something like 26 percent I would not advocate you know any increase in corporation taxes but we need to think about the fact that the average tax on income in Germany is around 28 percent so it's about the question of the evenness will make confront us and for example the universal social charge which is applied to the self-employed in a very discriminatory manner I think the risk is that the domestic you know we'll see what happens in the US presidential election and I to our I couldn't answer I think Dara could answer the question as well as I could I don't know what's going to happen there and there are other people who can do better what I do worry about is that we need to have a domestic conversation about the political equity of how we tax the multinational sector and that the incentives we have for indigenous Irish entrepreneurs in setting up companies here and getting funding here and I worry that that could be an issue if we don't address it okay just a question here from Michael Tutty whom we will be well known to to you former of course senior official in the Department of Finance among other things here he asks do you expect that the recovery in the economy would be sufficient to eventually balance the Exchequer books or will cutbacks or extra taxes be inevitable in future years well it's great pleasure to receive a question from my former boss and I hope Michael as well and to answer that question I would I would immediately be starting to separate the current and capital account and you know I'm not so worried about capital borrowing and I think we have done far too little I would quite frankly on the current side and I will link the answer to the previous question do we need to extract more taxation from the economy not necessarily a better strategy would be to enrich and to deepen the involvement of the multinational sector in the domestic economy and let me illustrate that with two figures so during the last recovery and I was speaking about the divergence between the multinational sector GDP increased by 66% in the last five years that is a staggeringly amazing figure but gross national income modified which is the measure of the domestic measure increased by 22% there is no economy I know where there is such a stark divergence not to blame the multinationals they are fantastic and they're doing great work here but that gap tells me that we have an amazing opportunity to enrich both the labor intensity and the tax yield from multinational activity simply by having strategies of effective partnerships between multinational and small businesses it's what I called for in my book and the program for government is moving towards that it speaks of clusters of activity within sectors where you get multinational and small businesses to deepen their supply chain interaction if you do that you will automatically get an improved tax yield and that is I think a better and more natural way do we need to cut costs in public spending I hope not but I would say that I remember Michael as a as a great one of the country's greatest top we just also I think momentary there Mark but I'm sure you're making a telling point but we're coming towards the end and I just wanted to get in one question because it would be bordering on the surreal in the context of this presentation if we didn't at least pay three or four minutes attention to brexit so I just on the brexit issue we spoke about Germany obviously you know the extent to which we can anticipate a decent recovery in in Britain without a deal at the end of the year obviously that's going to affect our economy as well obviously the better the deal that the relationship with the european union the better it is for us and I mean so we have we have the the brexit challenge as well coming down the line and which has to be factored in we know more about that of course in the next number of months but what's your current prognosis in terms of the the challenge is that that is as far as you can see them the challenges they represent to the Irish economy given the prospect I suppose that most people are talking about now that a relatively thin deal rather than kind of the overwhelmingly although the larger deal that at one stage we we might have liked to believe was possible well regrettably you're right the brexit challenge I mentioned how we have diversified our exports and how this was positive in dealing with COVID but I put a caveat on it and the caveat is that Britain's chair of labor intensive Irish exports is still very significant in the food and fishery sector for example and what we need to do as a matter of urgency is look at the impact of a no-deal brexit look at the WTO regime that will prevail look at the tariff impacts on the export sectors I remember doing this in the Department of Finance when Michael was there and we did it with the ESRI and the run-up to EMU we're going to have to do it again and this time we are going to have to target markets on continental Europe particularly Germany and look at sea bridge and land bridge alternatives and use the transport infrastructure program to ensure that Irish exporter exporters and the excellent work of Bordeaux and Bordeaux-Cawara and Enterprise Ireland we're going to have to accelerate and resource and getting Irish exporters ready for alternative markets particularly in Germany which is 82 million consumers if we work hard and if we also target Asia as I've said in two previous books there is more than enough demand to absorb the exports we will lose to Britain but we have to work and we have to invest also in learning languages may I say here and I've been honoured by being designated the champion of foreign language use and business by the languages connect program which is run by the Department of Education and Skills we're going to have to get out of the mindset that the only place to go is Britain because it isn't anymore but there's a psychological barrier in our exporters if we can get them over that there's a market of 430 million people not too much further away there's another three billion people in Asia by the way so in the medium to long term I'm not so worried but we have to act now Mark we're precisely on time where we've reached five o'clock and I'm just going to draw proceedings to a close by thanking you I mean an extraordinary amount of information an extraordinary amount of insight an extraordinary amount of that it's a very rich theme in terms of the the books you've been writing and the books that inevitably you will continue to write because this is an issue obviously which the all the issues around this obviously are worth the the reflection that you give them so I want to just on my own behalf we have the IAEA just to say thank you to you I think you've given the details of follow-up that people want to contact you and to the benefit from your from your briefings and obviously we commend your your your efforts and the insights that you offer and just say you've been very welcome here at the Institute this afternoon we look forward to seeing you again on a future occasion thank you so much Michael it was a great pleasure thank you thank you very much