Cantillon

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Next episode on the future of RTE

RTÉ PUBLISHED its annual report yesterday. While it endured a tough 2010, the figures show it commands a big share of TV and radio audiences in the Republic despite the fact that many households now have access to hundreds of channels.

One of the concerns RTÉ highlighted in a statement accompanying the accounts yesterday was that it has had to dig into its own resources and borrow from the banks to fund the €70 million development of a digital broadcasting network.

The move allowed the State to meet EU rules requiring that all analogue TV be switched off by the end of next year. As that time approaches, one of the options the Government may consider is splitting RTÉ’s transmission and programme-making businesses into separate entities.

The broadcaster would presumably have to be compensated if it were to lose ownership of a network it built from its own resources, particularly given the fact that the EU obligation is on the State to ensure television signals transfer from analogue to digital. RTÉ simply did the State’s job for it.

If the Government is going to consider splitting RTÉ, it should go one step further and look at the ownership of the actual business itself. There is no reason why the State should own multiple TV and radio stations.

The McCarthy report on State assets, published last April, recommended the sale of RTÉ’s network, with some safeguards guaranteeing the State access to it should it be needed. It would hardly make sense to do this and retain ownership of the broadcasting business, which earns money by selling news, entertainment and advertising.

Privatisation would bring a welcome change for most households in the Republic – it would eliminate the need to charge them TV licence fees, which cost them more than €200 million a year, as private businesses could not be paid a subsidy of this nature.

Germanic approach central in Central Bank

WELCOME THEN to Stefan Gerlach, the new Central Bank deputy governor. The 54-year-old Swedish economist certainly comes with a good CV (it runs to 10 pages and can found on his website, stefangerlach.com).

His various stints at the Bank for International Settlements and the Hong Kong Monetary Authority should more than equip him for his new job, where he will be “responsible for Central Bank functions”.

His CV gives no easy clues as to where he stands on the great issue of the day: to default or not to default.

But one can safely assume that a professor of monetary economics and managing director of the Institute for Monetary Policy and Financial Stability at the University of Frankfurt would be closer to the Bundesbank way of thinking than the Bank of Greece.

Presumably that is part of his appeal, as it sends a signal to the markets that a certain Germanic rigour will be brought to bear at the bank.

What this says in turn about the existing culture of the bank is clearly not very flattering but, given the failures over the past few years, it is not without justification.

The fact that he is a Swede rather than a German dilutes the impact ever so slightly, given that his homeland has opted out of the euro.

But if things keep going the way they are, Dame Street might yet need to bone up on its exchange-rate management skills.

The European Commission-IMF-ECB “troika” will give its verdict on how well we’re obeying bailout rules.

'Junk' penny has been markedly slow to drop

JUDGING BY the reaction of the European Commission and the National Treasury Management Agency, it appears they did not foresee the downgrading of Ireland to “junk” status coming.

How this state of affairs arose is, in a way, far more surprising than the downgrade itself.

The bond markets had been pricing in just such a move since Moody’s downgraded Portugal to junk status last week and analysts in Dublin were also warning last week that we were next in line.

The general amazement expressed in some quarters yesterday also raises the question of what exactly the commission and others thought Moody’s meant when it said in a note on Monday that the linking of further support for Greece to private-sector burden-sharing had increased the risk of default by other sovereigns unable to access the debt market.

“That increasingly negative outlook, alongside the challenges in achieving financial consolidation objectives, lies behind our recent downgrades of Greece and Portugal and our ongoing assessment of countries facing similar challenges,” Moody’s wrote.

This could only be a reference to Ireland.

Clearly the penny has been slow to drop among euro zone governments that you cannot talk openly about your desire to see burden-sharing and not expect credit-rating agencies to take it into account.

Minister for Finance Michael Noonan’s euphoria following Monday night’s deliberations on expanding the powers of Europe’s bailout fund clearly indicates that he did not make the connection, or else he might have been more restrained.

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