Just as Enda Kenny announces his nation's break with its creditors, the threat of another meltdown rears its ugly head
For Ireland, it reads like a happy ending. Enda Kenny announced on Thursday that Dublin would make a clean break with its creditors next month, after a gruelling three-year economic fitness programme of tax rises, spending cuts and reforms.
Instead of requesting a precautionary credit line from the International Monetary Fund, to be triggered in the event of a future crisis – as most investors had expected – Ireland will kick out the hated "troika" of the IMF, the ECB and Brussels, and go it alone.
With Spain, too, signalling last week that it wouldn't need any more money from its eurozone partners to bail out its crippled banks, and Cyprus pledging to lift restrictions on cross-border capital flows that have been in place since its fumbled bailout last March, it would be tempting to think that the worst of the turmoil that has gripped the eurozone over recent years had come to a neat and tidy close, and that "normalcy", as Irish finance minister Michael Noonan calls it, had been restored.
Yet while Noonan was right to say that the eurozone currently looks quite tranquil – making it a good moment for Ireland to dip its toe back into the public debt markets, instead of relying on the troika to fund its deficits – last week brought a host of reminders that there may still be trouble ahead.
For one thing, the economic weather across the 17-member single currency bloc is deteriorating. While the 18-month eurozone recession came to an end in the second quarter of 2013, the latest data, published last week, showed GDP expanding by a paltry 0.1% in the third quarter, with the French economy recording a contraction.
Alongside that sluggish growth performance, there is an increasingly credible threat that the eurozone could slip into deflation: indeed, some of the hardest-hit peripheral economies are already there.
Across the eurozone as a whole, prices rose by a negligible 0.7% in the year to October. In Greece, they fell by almost 2%.
It was undoubtedly the fear of deflation that prompted Mario Draghi to cut European Central Bank interest rates to a record low earlier this month: it is most central bankers' worst nightmare.
If falling prices become entrenched, it can be extremely difficult to escape from a vicious cycle of declining profits, wages and growth – and unlike US Federal Reserve chairman Ben Bernanke, Draghi won't just be able to turn on the money taps and implement quantitative easing, as it's not clear the ECB even has the authority to do so – QE is certainly taboo in Germany, still haunted by memories of Weimar-era hyperinflation.
For debtors, of which there are many across the eurozone – households, companies and governments – deflation is particularly pernicious, as liabilities tend to be fixed, unlike the incomes from which they must somehow be paid. And when debtors get into trouble, so do banks – still the weakest link in the eurozone recovery story.
Meanwhile, the ECB is preparing to shine a light on banks' balance sheets through its asset quality review – and with negotiations about a eurozone-wide banking union still ongoing, no one quite knows what will happen if they find a black hole. Oh, and with the Federal Reserve contemplating withdrawing the $85bn-a-month of cheap money it has been pumping into world markets through QE, government bond yields worldwide – and thus their borrowing costs – are expected to drift higher over the next 12 months.
And just in case all that wasn't enough to fret about, Friday saw Brussels deliver its sinisterly named "fiscal surveillance package", part of the new co-ordination regime put in place in the wake of the crisis, which doled out homework to a whole list of countries. Spain and Italy were urged to revise their budgets or risk missing stringent debt targets; France was told to get its act together on structural reforms; and even Germany, which likes to see itself as a shining example to its eurozone neighbours, was criticised for ignoring the commission's calls for reform.
In other words, even if Dublin's politicians have made the right judgment and Ireland is fit enough to stand on its own, it could yet be sucked back into the mire by a eurozone-wide crisis not of its own making.
From On the Buses to on your bikeForty-five years have passed since Reg Varney – aka Stan Butler in On the Buses – became the first person to withdraw cash from a hole-in-the-wall machine. It heralded a revolution in banking. No longer was cash accessible only from a teller sporting a rubber thimble between 9am and 3pm on weekdays and for a couple of hours on a Saturday morning. It was available 24/7. There have been other revolutions since – debit cards, telephone banking, call centres, which have all resulted in fewer high street banks and tellers. And now another is under way.
The proliferation and popularity of online banking means that an average customer now visits a branch just twice a month, while mobile banking services are used more than once every two days. A survey out on Friday showed that one in six of 18-to-30-year-olds had never stepped inside a bank branch.
So it is not exactly a shock that last week Barclays said it wanted 1,700 of its 33,600 branch staff to put their hands up for voluntary redundancy. That is just over one job going from every branch in the Barclays network. People are being replaced by iPads and smartphones: customers can sort out their bills and standing orders from their sofas. And even those who still venture inside branches are being encouraged to think digital, with iPads available for use there too. The labour and other costs of offering a retail banking service are, basically, being transferred to the customer.
There are other huge changes under way: customers can transfer cash directly to their friends in bars and restaurants with the Pingit app. The UK's three largest mobile phone networks, EE, Vodafone and O2, have joined forces to turn smartphones into virtual wallets. Shoppers will walk into a store, pick out a purchase, scan the barcode, and pay by tapping their phone on an Oyster-card-style reader, rather than at the till. There are even safety deposit boxes in the cloud.
Antony Jenkins, the Barclays boss, has been talking about automation ever since he took the top job a little over a year ago. Analysts believe he could slice 40,000 off the 140,000 workforce. It will be brutal. And it will be universal. Tellers could soon be history.
PPI scourge could do with a bank jobThere was a bit of moaning when Natalie Ceeney was named chief financial ombudsman four years ago. What does this former director of the British Library know about the financial services industry, was the cry. She went on to treble the size of the Financial Ombudsman Service so it could tackle 500,000 cases a year – up from 150,000 – as it was swamped by complaints about mis-sold payment protection insurance. "The biggest clean-up in financial services history," is how she has described the scandal, refusing to heed the banks' whines that claims management firms are to blame for the high level of complaints. The banks are still cleaning up the PPI mess – and, knowing how the industry operates, we are no doubt not far away from another scandal. Now Ceeney has quit, those same banks might consider giving her a job sorting out their customer service operations.
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