the issues In brief
Cost of oil could drive down Irish GDP – E&Y
The surging cost of oil could drive down Irish GDP by 3pc in 2011, according to new forecasts published by Ernst & Young (E&Y). Current tensions in North Africa and
the Middle East are pushing oil prices to dramatic highs, and economists at E&Y said this will impact on Irish and euro- zone growth and drive unemployment by asmuch as 600,000 by the end of the year. Using the European Central Bank
New AreaWide Model, E&Y found that if oil prices remain at about US$120 a barrel for the next 22 months, eurozone GDP growth would be only around 1pc. “This would mean significant delays in
what was already seen as a slow recov- ery,” said Marie Diron, senior economic adviser. The eurozone economic forecast (EEF)
confirms that if oil prices were to stay at US$120/barrel, Ireland’s GDP is forecast to fall by nearly 3pc this year and rise by only around 0.5pc in 2012.With oil prices at US$150/barrel Irish GDP would con- tinue to fall by 0.6pc in 2012.
EBS deal to complete within months
A consortium led by Cardinal Capital Group has been named as the winning bidder to take over the nationalised building society, EBS. The group, which is largely funded by
Wilbur Ross, will complete the transac- tion “within the next few months”, according to the American billionaire. Speaking on CNBC in the US, Ross
said the deal will be pushed through quickly. The consortium, although heav- ily funded by Ross, also includes other investors, including the Carlyle Group. A “definitive agreement” must be reached on what to do with EBS once the sale is finalised. One question for the new owners is how to compensate the government for the millions of euro it has injected into EBS already. It could offer the State a stake in the lender or guarantee a percentage of future profits.
WarrenBuffett upbeat onUS economy
remains alive and effective.” In the annual letter, which was
released on Saturday, he praised US citizens for their hard work and said the country’s “best days lie ahead”. Not just ‘talking the talk’,
Buffett proved he and his company were ‘walking the walk’. In 2010 alone, Berkshire Hathaway spent US$5.4bn on property and equip- ment in the US. Buffett said this demonstrated
Berkshire’s enthusiasm for capital investment in the face of widespread pessimism about the economy. He added that an “overwhelming
part” of future investments will be “at home”. Commenting on Berkshire’s 2010
Investor and philanthropist Warren Buffett
In his annual letter to Berkshire Hathaway shareholders, the so- called Sage of Omaha, Warren Buffett has given his stamp of approval to the US – its business- es, its people and its economy. “Money will always flow toward
opportunity, and there is an abun- dance of that in America,” he said in the annual letter, which has the power to influence the markets. He told shareholders that there
is current talk of “great uncer- tainty” but he argued that the reality of uncertainty should not “spook” investors. “Human potential is far from
exhausted, and the American sys- tem for unleashing that potential – a system that has worked won- ders for over two centuries despite frequent interruptions for reces- sions and even a Civil War –
businessmoves, Buffett told share- holders that the US$27bn acquisi- tion of Burlington Northern Santa Fe railroad was the highlight of the year, working out even better than he expected. On a more sombre note, Buffett
advised that the social goal for home ownership should not be about the “house of their dreams but rather to put them into a house they can afford”. However, he believes the US
housing market will begin to recover in a year or so. Buffett established Berkshire
Hathaway in 1965 and is one of the world’s richest men. The company owns railroads, insurers, banks, consumer product manufacturers and distributors and more. His well-known business acu-
men has the power to influence markets, and has done on multiple occasions. However, some analysts believe he tends to be early with his predictions. Berkshire closed the year with
US$38bn in cash, up from US$30.6bn at the end of 2009.
12 Irish Director Spring 2011
Photo: Norm Betts/Rex Features
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