Irish Financial Review

Britain to get Ukraine-type agreement with EU

It will have to comply with EU rules but have no say

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Continued compliance with no input to EU laws places future UK position at major disadvantage

Despite a pledge by Theresa May that ‘Brexit means Brexit’ and the UK would chart a new course, it seems that Brexit does not mean the type of Brexit Theresa May considered in the early months following the divisive referendum result.

As recently as January, the UK Minister ruled out “partial membership of the European Union, associate membership of the European Union, or anything that leaves us half-in, half-out. We do not seek to adopt a model already enjoyed by other countries.”

But in little over a week since the UK triggered Article 50, the mechanism that sets in motion the actual process of exiting the EU, emerging views from the UK seem to point to a continued association with the EU.

“Brexit means Brexit” has been replaced with a “deep and special partnership”. And this is what the EU has in place already with many neighbouring countries.

IN respect to the Ukraine deal, its agreement, although somewhat controversial within some EU member countries,  covers security and foreign policy as well as a deep and comprehensive trade agreement allowing Ukraine tariff-free access to much of the EU single market for goods in return for compliance with EU rules.

But it is the compliance with EU rules that could pose one of the single biggest optical dilemmas for the warring parties of the UK’s ruling Tory Party, some of which are seeking to restore aspects of British colonialism.

In less than a week, Mrs. May has signalled her willingness to bend to reality. She appears to have accepted the EU’s position on parallel negotiations, which the EU has firmly ruled out. More recently, she has also suggested that the free movement of EU citizens will continue for longer than promised during the 2016 referendum. And Mrs. May was quick to row back on what some perceived as veiled threats on broad security cooperation.

For many of the most ardent anti-EU members of the Tory Party, Mrs. May’s shifting positions and acceptance that the power dynamics are shifting in the EU’s favour must serve as a red flag. One of the major sticking points will be the reality that the UK will continue to be subject to EU rules that the UK has no say in crafting.

But for many British nationals, Mrs. May’s shifting position is likely to provide far more long-term benefits than they would have otherwise have enjoyed under an all out departure from the EU.


Who cares about free lunches when there is free money for college grads


By Frank Conway

Before you get carried away with your spending plans, spare a thought for some really important money incentives that will super-boost your net worth.

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Yes, it really is free money and it is there for the taking for recent college grads starting their first job

Many employers love to brag about how well they care for their employees. And while it can be fashionable for employees to complain about how much the Government demolishes their pay cheque, recent college grads starting their first job have a golden opportunity to take some free cash from both their employer and Government too.

Here is how it all works.

Imagine you want to save €100. The normal way is to work hard and save. But, doing this after you get paid (and the Government takes its tax), that €100 saved comes out of your remaining income.

But what if you could save the €100 BEFORE the Government takes its tax? Well the answer is you can. In other words, you don’t have to save the full €100 at all. In fact, depending on how much you earn, you might only have to save €80 or even €60 and still manage to put €100 into your savings account. It’s called ‘tax relief’ and it’s designed to get more people to save for their long term money needs. In other words, Governments give you back some of your tax as long as you save it for specific long-term needs (in this case, post-employment).

Employers have also gotten in on the act and many will even match your savings (up to certain limits). So, for every €100 you put aside into your long-term savings account, employers often top that up with an additional €50 or €100.

So, while you might actually save €80, with the Government giving you back tax and employers giving you extra cash, you could end up with as much as €200 in your savings…now that really is a great rate of return!

So don’t fret about the free lunches and take the free cash instead, you’ll be all the richer for it!

Fair mortgage rates campaign is populism that will hurt consumers

By Frank Conway

As popular as it might sound, the fair mortgage rates campaign in Ireland is populist and flawed.

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Campaign may have good intentions but it has a flawed approach that will ultimately hurt consumers

While some political parties have backed the campaign, the Irish Central Bank and the leading consumer agency have not. Neither does the European Central Bank which views such campaigns as severely misdirected that will ultimately hurt the consumer.

Despite their best intentions, it is politicians that have usually sowed the seeds of mortgage market dysfunction. One only has to think back to some disastrous policy decisions on issues such as the stamp-duty thresholds, Section relief and even failure to reform draconian debt laws that have hurt borrowers over the decades.

Today, there are still fewer mortgage originations than at any point since 1987. In 2017, it is possible there will be no more than 27,000 – 28,000 mortgages drawn down. This is what was drawn down in 1986 / 1987 so we are still hovering at a 30-year low.

If the politicians really want to make a real difference in the Irish mortgage market, instead of writing legislation that will probably do more harm than good, what they should focus on is creating competition.

If those parties that argue for greater controls over mortgage margins, instead of arguing until the cows come home, they should start building the foundations of an alternative mortgage market that WILL force commercial lenders to compete. This is how mortgage giants such as Freedie Mac and Fannie Mae in the US got their start and both have been providing liquidity, underwriting standards and rate benchmarks ever since.

Instead of using public shame, campaigners here should develop public fear; fear of loss of business, fear of real competitive alternatives that are driven by value for the customer and market share. If the campaigners are correct, if current margins on mortgages are ‘too high’, then a not-for-profit mortgage platform should force real change. And there could  be a number of routes to market, including pre-approved brokers, credit unions and even banks. But also, the not-for-profit alternative should highlight the true cost of lending in the Irish market once-and-for-all. After all, if the State cannot be the measure of the true price floor, surely then we would all know that the case for a fairer mortgage market was ever only hot air and populist mantra.

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