Monday 2 March 2020 ★ FINANCIAL TIMES 3
M A RT I N A R N O L D— B E R L I N
A RT H U R B E E S L E Y— D U B L I N
Ireland’s central bank chief has warned
against starting a spending spree to
address the country’s shortage of afford-
able housing after the issue led to a surge
in support for the nationalist Sinn Féin
party in elections last month.
Gabriel Makhlouf told the Financial
Times that even though Ireland’s econ-
omy was one of the top performers in
Europe last year with growth of close to
5 per cent, there were risks ahead that
could cause a sharp downturn.
Mr Makhlouf said a no-deal Brexit
was the biggest immediate risk to the
Irish economy, because of its close trad-
ing links to the UK. He added that Ire-
land’s economy was also likely to be hit
by trade tensions, changes to interna-
tional tax rules and the disruption of the
coronavirus outbreak.
“I’m calling this an interesting conjec-
ture because in a bad scenario... you
could suddenly find the fiscal surpluses
that the current government has fore-
cast are suddenly challenged very much
by that change in sentiment and activ-
ity,” he said.
A lack of affordable housing was the
dominant issue in last month’s general
election, which boosted Sinn Féin and
left the country with a deadlocked par-
liament.
Sinn Féin’s left-leaning manifesto
tapped into the anger over housing by
promising a big increase in spending on
public housing, a rent freeze and
changes to banking rules to cap mort-
gage rates — which are higher than in
much of Europe.
The central bank has found that one
dwelling was built for every seven extra
people in the population over the past
eight years. House prices have
rebounded since the 2008 crisis,
although they dipped last year and
remain below pre-crisis levels. Rents
have risen 40 per cent in the past five
years, while average earnings are up
only 14 per cent.
“Absolutely the supply of housing
needs to be addressed,” Mr Makhlouf
said. “Whether you can do that over-
night is extremely unlikely, so it is going
to take a while. It is not simply construc-
tion.”
He said housing supply would also
depend on changes to the planning sys-
tem, public infrastructure and availabil-
ity of labour. “When you are running, as
Ireland is at the moment, an economy at
full capacity, you have to meet all of
those challenges in my view to deliver
the housing supply that you may want
and need,” he said. “It is more than a fis-
cal question.”
Ireland’s public debt ratio has almost
halved in recent years to just over 60 per
cent of its gross domestic product but
that figure is distorted by high foreign
direct investment.
The country’s per capita debt remains
one of the world’s highest. Although the
outgoing government achieved a 0.4 per
cent of GDP budget surplus, the central
bank has predicted that growth could
drop to below 1 per cent in a no-deal
Brexit scenario. The country is also
heavily reliant on increased corporation
tax revenues from multinational com-
panies with Irish operations, such as
Apple, Google, Facebook and Microsoft.
A British citizen born in Egypt, Mr
Makhlouf is the first overseas official to
lead Ireland’s central bank. The 60-
year-old’s appointment last year was
clouded by controversy in New Zealand,
where as head of its treasury depart-
ment, he was found to have wrongly
blamed hackers for a budget leak.
He said public housing concern could
threaten the credibility of the Irish cen-
tral bank. On a recent visit to a technol-
ogy college in south-west Ireland, he
asked the audience what inflation had
been in the past decade and most people
said it had been around 6 to 7 per cent —
above the actual level close to 1 per cent.
“If people’s reality is different to the
one that we assert, then we have got a
problem,” he said. “Housing costs, I
think, at least in Ireland are the main
issue” in creating a gulf in public percep-
tions of prices and the actual data.
He added his voice to those calling for
the cost of housing to be given more
weight in the way inflation is calculated
in the eurozone.
The EU has long debated whether it
should follow the US, UK and other
countries by including the cost of own-
er-occupied housing in its data, even
though it is hard to measure.
“The main thing here is it’s not how
you do it. It needs to be done,” he said.
“The key thing is credibility, for me, and
connecting much more with people.”Ireland’s bank
chief warns on
cash for homes
Trade tensions and potential for no-deal
Brexit pose threat to economy, says Makhlouf
‘The supply of housing
needs to be addressed...
It will take a while... it is
not simply construction’
DAV I D K E O H A N E— PA R I S
France’s trade unions and opposition
parties called for new protests against
Emmanuel Macron’s pension reform
after the government pushed through
the contentious legislation by decree.
The pension overhaul, which aims to
unify 42 different profession-specific
retirement schemes, sparked the long-
est public transport strike in France’s
history before making it to parliament.
Late on Saturday, Edouard Philippe,
the prime minister, announced he
would trigger article 49.3 in the consti-
tution allowing the government to over-
ride parliament to adopt the legislation.
Mr Philippe did so “not to put an end
to debate but to end this period of non-
debate” after opposition parties intro-
duced more than 40,000 amendments
to the bill, he told lawmakers.
The government’s decision to use the
constitutional provision underlines the
toxic political environment facing
President Macron, whose approval
ratings have slid to about 33 per cent.
The reform has become the biggest
challenge to his presidency since the
gilets jaunesstreet protests that kicked
off in late 2018.
Even though the French leader would
have had no problem passing the pen-
sion bill because of his large majority in
the lower house of parliament, the
lengthy and tense discussions were
threatening to overshadow mayoral
elections later this month, in which Mr
Macron’s party is expected to suffer a
nationwide defeat.
“This was the only way for the govern-
ment to speed up the process consider-
ing the strategy of the opposition to pose
30-40 thousand amendments to block
the legislation,” said Vincent Martigny, a
professor of political science at the
University of Nice.
“The opposition pushed the govern-
ment to this route. The France Insou-
mise [party] knew the government
would probably do this and now they
can say the government is not respectful
of democracy,” he said.
Philippe Martinez, head of the
leftwing CGT trade union, told AFP that
the unions would take to the streets
once again next week against the
reforms.
Jean-Luc Mélenchon, leader of the
far-left France Insoumise — France
Unbowed — decried the “extraordinar-
ily violent” methods of the government
while Marine Le Pen, leader of the far-
right Rassemblement National, or
National Gathering, said the French
“will not forgive this outrageous
manoeuvre”.
Article 49.3 was last invoked by
François Hollande, former Socialist
president, to push through labour
reforms in 2016 and before that a slate
of business-friendly reforms put
together by Mr Macron as his economy
minister in 2015. Mr Hollande took the
action in light of his government’s small
parliamentary majority, which put the
law’s passage in jeopardy.
Opposition parties have now called
for a no-confidence vote against the gov-
ernment, which is positioned to win
comfortably next week. “The timing is
absolutely central because it is clear any
debate in parliament would have taken
months,” added Mr Martigny.Constitutional gambit
France faces fresh protests as
pension bill passed by decree
I N T E R N AT I O N A L
Risks ahead:
Gabriel
Makhlouf
advises against
loosening the
purse strings
to address
Ireland’s
housing
shortage, the
issue that
dominated last
month’s general
election
Vivek Prakash/BloombergMARCH 2 2020 Section:World Time: 1/3/2020 - 17: 56 User: ian.holdsworth Page Name: WORLD2 USA, Part,Page,Edition: EUR, 3 , 1