Sunday, 28 September 2008

Daft - House Prices Crash - Cost of Living Soars...

The middle classes bear the brunt of crippling hikes in cost of living
Cost of living survey

The real cost of living is rising much, much faster than official figures suggest...

The Sunday Independent/IIB Homeloans Cost of Living Index reveals who is being squeezed hardest and who can keep spending like there’s no tomorrow...

Cost of living up 14% in just two years

THE Irish stock market is down 65 per cent, property prices are down about 20 per cent and Lansdowne Road won't be open for another two years. It's been an awful time for Ireland's aspiring middle classes. They have been hockeyed as their cost of living has risen at about one and a half times the national average.

If you've bought a des res in Ranelagh, you'll feel the pain of a 68 per cent jump in mortgage repayments over two years. Especially if your house has lost 20 per cent of its value. Education costs are up 11.3 per cent. Insurance costs are up 3.6 per cent in the last year.

Heating and lighting bills are up 23.4 per cent, meaning that it's even more expensive to run that 45-inch plasma TV. However, electrical appliances are way cheaper.

Equally painful is the hike in fuel prices. Filling up your Land Rover now costs close to €145. But at least the price of new cars has come down, with 08 models down 0.8 per cent.

Getting a new set of . . . er, implants, a tummy tuck or botox is also pricier, as outpatient services are up 13.4 per cent.

Clothing is much, much cheaper than it was two years ago. But this is down to the Penneys effect.

Heading out to Renards, the Ice Bar or L'Ecrivain could be pricier, with eating out and drinking costs up 7.6 per cent over two years. Entertainment services are up 7.9 per cent. These socialising costs make up over one-fifth of all outgoings of these aspirant middle classes.

Cost of living up 9.4% since August 2006

PENSIONERS' cost of living has soared in recent months. At the beginning of the year, it was miles behind the average cost of living rate but huge increases in food and heating have pushed pensioners' personal inflation rates up to the national average.

The cost of necessities such as food (up 6.4 per cent) and heating (up 14.2 since January!) could make winter particularly harsh. But given that pensioners spend close to 40 per cent on food and drink and over 17 per cent on heat and lighting, these increases will be tougher to bear.

Getting a little man in to fix the roof or unblock the toilet has also become more pricey, with maintenance bills up 4.1 per cent. Pensioners will also be hit by rising tobacco costs, up 12.5 per cent in two years.

Cost of living up 7.9% since Aug 2006

THINGS may be grim in the construction sector but migrant workers are at least seeing their cost of living rise slower than the national average. Rents -- which account for nearly 43 per cent of all outgoings -- have increased by 13.4 per cent. Gas, fuel and electricity costs have risen 14.2 per cent in 12 months or a staggering 23.4 per cent in two years, according to our Cost of Living index.

Food costs are up 9.3 per cent in two years or up 6.4 per cent since this time last year. Tyskie and Tiger beers are only slightly dearer, with alcohol prices up 1.8 per cent. Bus costs are up 5 per cent since August 2007, with rail prices 4.3 per cent up in the same period. Buying a car is also cheaper, with prices down 1.8 per cent in 12 months.

Prescriptions or medical appliances and equipment have increased by a modest 2.3 per cent in the last year. Gyms and entertainment services are up 9.4 per cent in two years.But phoning or emailing home is actually cheaper than this time last year, falling 0.3 per cent. Flying home is well cheap, with prices down 13.2 per cent in the last year.

Cost of living rockets 20.1% since August 2006

FIRST-TIME buyers have been kicked senseless by the jackboot of inflation. In the last two years, their inflation rate has risen by over 20 per cent, or more than twice the national average -- as if negative equity wasn't enough to bum them out.

The biggest chunk of this unsustainable hike in living costs is from soaring mortgages repayments, which have jumped 70 per cent since August 2006. They have risen nearly 18 per cent in the last year alone, according to the Sunday Independent/IIB Homeloans Cost of Living index.

Given that most first-time buyers have been forced further and further away from urban centres, they have been hard hit by rising petrol costs -- which have leapt 13.3 per cent in the last year alone. At least the price of a new motor is down 1.3 per cent in a year.

Yo-yo oil prices have seen heating and lighting bills skyrocket 23.4 per cent since August 2006. This double whammy of increased mortgage repayments and rising fuel costs has eaten up any spare cash they may have had, dramatically slashing their spending power.

What little cash they can hoard can, at least, go a little further on doing up their house. Leather sofas, coloured loo seats and other first time buyer staples have fallen in price by 8.1 per cent. Fridges, cookers and other household appliances are down 5.8 per cent in two years, with TVs and stereos about 12.6 per cent cheaper this year.

The price of a handyman has risen just 0.8 per cent in the last year.

Cost of living down 1.2% over the past two years

YOU'D be bonkers to leave the family home in your 20s. The cost of living for 20- and 30-somethings who haven't fled the nest has actually fallen over the past two years, according to the Sunday Independent/ IIB Homeloans Cost of Living index.

There's no need to worry about spiking interest payments or even double-digit increases in rent. There may be a teenchy contribution to family food bills, which have risen 9.3 per cent. But that's it.

All the time spent on Facebook or iTunes hasn't taken much of a bite either, as mobile phone, internet and communications charges are down 0.3 per cent in the last year. Buying iPods, DS lites or other electrical equipment is miles cheaper, with prices down 22.5 per cent in two years.
Skinny jeans are way cheaper, too, as clothing and footwear costs are down 8.3 per cent. Given that clothing costs make up a good 15 per cent of stay-at-homers' spending, it represents a significant fall.

Weekends away are dirt cheap, with hotel prices sliding 3.3 per cent this year alone. Ryanair and cheapo flights are down over 14 per cent in two years. Tobacco prices are up 6.8 per cent in the past year, with booze rising 1.8 per cent in the same period.

Going to the movies and other entertainment services have increased by 5.3 per cent this year -- but Heat, Grazia or magazines with semi-naked girls from Big Brother are up 6 per cent since 2006.

Cost of living soars by 16.2% over the past two years

IF BEING swamped by smelly nappies or being stuck watching an endless loop of Dora the Explorer cartoons wasn't bad enough, young families have seen their cost of living rate spike 75 per cent in just two years.

Education and school bills have risen close to 11.3 per cent since the end of the World Cup in Germany, with creche and childcare up nearly eight per cent.

Weekly shopping costs are up 6.4 per cent since August 2007 and up 9.3 per cent in two years. A glass of wine, once the little ones have all been put to bed, is slightly dearer, with alcohol prices up 1.8 per cent in the last year, according to the Sunday Independent/IIB Homeloans Cost of Living index.

Soccer moms and those doing the school run have been hammered by a 13 per cent rise in fuel costs this year alone. Giant people carriers and SUVs have proven ridiculously expensive to run. But it's the near 70 per cent increase in mortgage costs over the last two years that is strangling the finances of young families.

Trips to casualty and other medical expenses have risen steadily, with hospital costs up 15.3 per cent in two years. These costs have increased 10.5 per cent in the last 12 months alone. Insurance has increased by 3.6 per cent over the same period.

With the knees coming out of a pair of jeans after about two wears and pink Converse a must must-have, young families can get some respite as the cost of clothing has slid 8.3 per cent in two years.

Package holidays have increased by just 0.7 per cent in the past year.

The other bit of good news is the startling slump in the price of electrical goods -- they're down an average of 22.5 per cent.

Cost of living up 7.5% since August 2006

GOOD news for those in bedsit land; their cost of living has risen more slowly than the national average. Rent is their biggest cost, making up over one third of all outgoings. Although rents have escalated by 13.8 per cent in the last two years, the increase is far, far smaller than that suffered by mortgage holders.

Given that renters are more likely to use public transport, they have suffered less from huge spikes in petrol bills. Bus and rail fares have risen by up to 8.3 per cent since August 2006. Taxi fares have swelled 12.4 per cent.

Eating out and pub prices are up 7.6 per cent, making it cheaper to go out than entertain at home as food bills rose 9.3 per cent. However, booze prices have risen just 0.9 per cent.

Report by Nick Webb - Sunday Independent.

Thursday, 25 September 2008

Global Property Guide - Biggest Fall In House Prices Worldwide...

IRELAND had the fourth biggest fall in house prices in the world this year...

Only Estonia, the US and Latvia have been harder hit by the drop in property values, a study by research group Global Property Guide shows.

House prices in Ireland fell by 9.6pc in the year to June, according to the index. But when the level of inflation is taken into account, the drop was 13.9pc.

The compilers of the index point out that "in Ireland, the 2009 Budget will include a 'stimulus package' helping first-time homebuyers".

Latvia recorded the biggest fall in prices, after inflation was taken into account, with a 33pc drop. In the US, the inflation-adjusted fall for the year to June was 19pc.

A host of European countries have recorded much smaller falls in house prices than Ireland. In Britain, the inflation-adjusted drop was nearly 10pc and Portugal recorded a fall of 8pc.

Spain, which is now experiencing a sharp construction slowdown, recorded an inflation-adjusted decline of 2.5pc.

In a commentary with the report, the authors state that the Baltics, the US, Britain and Ireland led the global decline in house prices in the year to June.

There are indications that the slowdown in house prices is getting worse, according to research on

At this stage last year, only five countries out of 33 had seen annual declines in house prices in real terms. This year's figure is 21, according to the online research firm.

The efforts to rescue the world's housing markets are becoming increasingly global, the study points out.

In the US, the authorities are attempting to put together a $700bn (€475bn) bail-out package to purchase almost all of the country's bad mortgage debt in an effort to unfreeze the nation's credit markets.

The British government has raised its stamp duty exemption threshold and unveiled a £1bn package to assist first-time home buyers and households struggling with their mortgage payments.

Last week's house price index from Permanent TSB/ESRI shows that the rate of house price decline in this country is rising again after several months of slowing falls.

Prices fell 0.9pc in August, to take the fall for the year to 9.9pc, according to the ESRI/Permanent TSB house price index.

The 0.9pc decline compared with reductions of 0.2pc in July, 0.6pc in June and 1.2pc in May.

Report by Charlie Weston Personal Finance Editor - Irish Independent

Housing Market Crash - Domino Effect Across Our Economy...

Does the following sound fimilar?...

"This is an extraordinary period...Over the past few weeks, many...have felt anxiety about their finances and their future. I understand their worry and their frustration. We've seen triple-digit swings in the stock market.

Major financial institutions have teetered on the edge of collapse, and some have failed. As uncertainty has grown, many banks have restricted lending. Credit markets have frozen. And families and businesses have found it harder to borrow money. We're in the midst of a serious financial crisis...

First, how did our economy reach this point?

For more than a decade, a massive amount of money flowed...from investors abroad, because our country is an attractive and secure place to do business. This large influx of money to... banks and financial institutions -- along with low interest rates -- made it get credit. These developments allowed more families to borrow money for cars and homes...some for the first time. They allowed more entrepreneurs to get loans to start new businesses and create jobs.

Unfortunately, there were also some serious negative consequences, particularly in the housing market. Easy credit -- combined with the faulty assumption that home values would continue to rise -- led to excesses and bad decisions. Many mortgage lenders approved loans for borrowers without carefully examining their ability to pay. Many borrowers took out loans larger than they could afford, assuming that they could sell or refinance their homes at a higher price later on.

Optimism about housing values also led to a boom in home construction. Eventually the number of new houses exceeded the number of people willing to buy them. And with supply exceeding demand, housing prices fell. And this created a problem: Borrowers with adjustable rate mortgages who had been planning to sell or refinance their homes at a higher price were stuck with homes worth less than expected -- along with mortgage payments they could not afford. As a result, many mortgage holders began to default...

The decline in the housing market set off a domino effect across our economy. When home values declined, borrowers defaulted on their mortgages, and investors holding mortgage-backed securities began to incur serious losses...found themselves saddled with large amounts of assets they could not sell. They ran out of the money needed to meet their immediate obligations. And they faced imminent collapse. Other banks found themselves in severe financial trouble. These banks began holding on to their money, and lending dried up...

The government's top economic experts warn that without immediate action...could slip into a financial panic, and a distressing scenario would unfold: More banks could fail... The stock market would drop even more, which would reduce the value of your retirement account. The value of your home could plummet.

...ultimately, our country could experience a long and painful recession...

Our economy is facing a moment of great challenge."

Could be talking about Ireland! - In fact it's some of George Bush's speech to American's about the problems facing the US economy.

Tuesday, 23 September 2008

Ireland - What A Total Waste - It's A Scandal...

Pressure on Cowen as millions go to waste...

Millions of euro of taxpayers' money has been lost by state bodies and agencies, the report from spending watchdog, the Comptroller and Auditor General (C&AG) said.

In his first report, new C&AG John Buckley starkly uncovered the extent of the Government's failure to properly control its dwindling finances.

It was published as ministers prepare to slash public services in next month's budget, which has been brought forward by six weeks, in a bid to combat the deepening economic downturn.

The report revealed that the tax authorities had to make an embarrassing settlement of €1.7m to themselves for unpaid taxes, after failing to tax travel benefits awarded to their own staff. Mr Buckley's report exposed many of the same inadequacies as his predecessor, as he raised direct and specific concerns.

He identified:

"Shortcomings in the management of the State's financial resources".

"Questions as to the efficient use of public funds".

"Weaknesses and deficiencies in the procurement procedures and practices".

"Significant cost savings that could be generated".

The Health Service Executive (HSE) came in for the most stinging criticism of all, as it was lashed for being "fragmented, disjoined and difficult for patients to access".

The report said HSE management failed to act promptly on an overrun of €245m.
He also sharply criticised the managers for assuming they would be "bailed out" with extra funding.

"There was considerable delay in addressing the emerging deficit. In a number of instances where significant overruns were occurring, it could have been expected that specific action would have been taken but the review found no evidence that any such action was taken."

The Comptroller identified a plethora of areas where the taxpayer was being let down, including:

garda cars being bought but not used for a year.

councils building up over €1bn in levies.

border-duty bonuses being paid to soldiers, even after the peace process.

exorbitant management fees being paid on a savings scheme.

no competitive tendering in sections of the prisons service.

flood-relief scheme money not being spent for two years.

Despite Mr Cowen's promises to reform the public service, all of these incidents happened during his watch as Finance Minister.

Mr Cowen's successor, Brian Lenihan, had no response to the highly critical report last night
. He instead referred it to the Dail Public Accounts Committee.

The Taoiseach himself also chose not to respond to the report's findings. However, his officials referred to the upcoming report on public-sector reform, which Mr Cowen says will outline actions to be taken.

The Opposition said the report pointed to the Government's continued failure to manage resources.

Labour deputy leader Joan Burton said Mr Lenihan should read the report, as it highlighted a number of areas for reform which "would undoubtedly lead to significant savings".

Fine Gael enterprise spokesman Leo Varadkar said many of the items related to wasted spending by state bodies, agencies and quangos.

"Fine Gael has already highlighted the problems associated with the explosion of quangos."

Report by By Fionnan Sheahan and Aine Kerr - Irish Independent

What a total waste - it's a scandal - no wonder the country is going down the tubes!

Taxing Times In Ireland - But Not For The Taxman!...

Revenue failed to tax €2m staff benefit...

BENEFIT-IN-KIND TAX: DELAYS BY the Revenue in identifying obligations to tax benefit-in-kind (Bik) of approximately €2 million paid to its own staff is highlighted in the report.

In the course of drafting a Statement of Practice during 2006, officials raised concerns in relation to the tax treatment of benefits received by Revenue's own staff in respect of travel to and from work.

A working group reviewed benefits which had accrued from January 2004 to June 2007. About €2 million accrued by way of Bik during the period reviewed. This comprised €1.7 million for use of official vehicles by officers for travel to and from work, and €0.3 million paid under agreements made with staff whose work began or ended between the hours of 11pm and 8am in locations not served by public transport.

An overall liability was calculated at €1,656,920, including interest and penalties.

The relevant Inspector of Taxes was informed of Revenue's intention to make a voluntary disclosure and arrangements were put in place to ensure full tax compliance in future. A settlement was reached and payment was made in November 2007.

The issue of travel expenses in the Irish Prison Service also features in the report. A senior officer was paid €24,117 in 2007 for travel to and from his workplace.

Report by DEAGLÁN DE BRÉADÚN - Irish Times

Monday, 22 September 2008

Bye, Bye American Pie - Capitalism & Russian Roulette...

OPINION: Unbridled capitalism outlived its communist rival for exactly 17 years...

POLITICAL HISTORIES, with their clear before-and-after dates, are so much neater to write about than their rather more tortuous economic cousins. On December 21st, 1991, the representatives of all member republics of the Union of Soviet Socialist Republics, with the exception of Georgia, signed the Alma-Ata Protocol, dismembering the USSR. Just five days later, on St Stephen's Day 1991, the Supreme Soviet dissolved both itself and the country it had once ruled. One of the two great political and economic theories of the 20th century, Soviet communism, ceased to exist.

The year 2008 will enter our history books as the year when the rival 20th century theory of unbridled capitalism passed away. As this demise is an economic one, we lack an equivalent before-and-after date.

Perhaps historians with a sense of symmetry will select December 26th, 2008? Such a selection would allow us to write that unbridled capitalism outlived its communist rival for exactly 17 years.

Over recent weeks the Republican administration of George Bush, which can reasonably be described as the national government that most zealously believed in the mantra of unfettered capitalism, has carried out the greatest wave of nationalisations our modern world has seen.

One major source of economic inspiration for the Bush Republicans has been (the past tense is now obligatory) Grover Glenn Norquist, leader of Americans for Tax Reform and a board member of both the National Rifle Association and the American Conservative Union.

Norquist once famously remarked: "I don't want to abolish government. I simply want to reduce it to the size where I can drag it into the bathroom and drown it in the bathtub." Mr Norquist would now need a bathtub the size of the Pacific Ocean were he to realise his ambition.

On Sunday, September 7th last, the US treasury secretary, Henry Paulson, announced that his government was effectively nationalising the mortgage giants Freddie Mac and Fannie Mae.

The US Federal Housing Finance Agency took them into "conservatorship" - nationalisation being an unacceptable term - to underwrite their ballooning debts of around $800 billion.

The two companies were already semi-public, and between them underwrote over $5 trillion of the US's $12 trillion mortgages.

The market was about to devour them, and in the process destroy itself. The market had failed and only the state could save it.

Heresy metamorphosed in the blink of an eye into orthodoxy.

One week later, unfettered capitalist orthodoxy briefly reappeared when Paulson allowed the 158-year-old Lehman Brothers investment bank to collapse.

Paul Krugman of Princeton University and the New York Times suggested Paulson felt "that playing Russian roulette with the US financial system was his best option".

The odds in Russian roulette are five-to-one in your favour as only one of the revolver's six chambers actually has a bullet in it. The odds against Henry Paulson's last free market hurrah turned out to be considerably shorter than that.

On the following Wednesday the penultimate nail was hammered into the coffin of financial orthodoxy when the Federal Reserve lashed out $80 billion to take over the troubled insurance giant American International Group, and fired its management. The Fed then asked the treasury to borrow more money to help it handle the strain of shovelling over $220 billion into sandbags to shore up the crumbling levees of the US financial system.

Two realities, one potentially lethal, the other painful, made this borrowing possible.

The potentially lethal one is the drying up of credit in the US economy. On September 18th, the US interbank rate, or what banks charge other banks for borrowing stood at 3.25 per cent.
The return on short term treasury bonds was 0.05 per cent, but lenders preferred the security of government bonds to the risks of lending to their fellow bankers.

The painful reality is that the rest of the world has effectively said it is no longer prepared to lend money to US companies and individuals. It is still prepared to lend money to the US government, but that is a willingness which will be increasingly conditional on Washington abandoning its unfettered free market zeal.

The rest of the world's profits and savings have funded US consumption and its housing boom during a period when Americans had simply stopped saving. That party is now effectively over as Lehman Brothers discovered when they went looking for foreign buyers.

There is now a growing consensus in Washington that the federal government needs to remove all the toxic financial instruments from the market by purchasing everything unsaleable at a knockdown price - the final nail in financial orthodoxy's coffin.

Blind faith in the ability of markets to regulate themselves, and in the infallibility of complex mathematical formulae to dilute and spread the risk element of investments has brought the US financial system to its knees.

There is more than an element of delicious irony in the fact that the trumpet of doom first sounded from Paris when BNP Parisbas announced in August 2007 that its highly qualified staff could not put a price on the US asset-backed bonds it held.

The US, with a lot of help from the rest of the planet, will eventually sort out its financial mess and its inherent inventiveness will relaunch its economy. It will, however, be a version of the mixed economic model the rest of us have long come to accept as a reasonable compromise.
Economic commentator Nouriel Roubini of New York University, also known as Dr Doom, sums it up: "Zealots of any religion are always pests that cause havoc with their inflexible fanaticism - but they usually don't run the biggest economy in the world."

This time they did and they ran it into the ground.

Report by Tony Kinsella - Irish Times

Sunday, 21 September 2008

Irish Property Crash Is The New Porn...

The crash is now the new porn...

Fair play to the Irish, we'll knock a bit of crack out of anything. The property boom, for all that the official line now says it was the worst thing that ever happened to us, we treated as one huge game in which everyone could be a player.
Even people who weren't investors as such, but who just happened to own a house because that's where they lived, had a great ride for 10 years as they constantly calculated how much their house was now worth and how much more they had made in the property game last year than they made by actually working.

Most people were never going to sell their houses, and if they were they were going to have to buy an equally overpriced one, but people just enjoyed the feeling of getting ever richer on paper. What other nation could come up with a whole new type of porn, based on fully-clothed people standing in their kitchens, often flanked by their cute children? And the sight of a Miele kitchen in a period house with an architect-designed glass box at the back of it turned us on more than any fake-boobed Californian getting some work done at the back.

It seemed that buzz was gone forever until last week. But last week we discovered our new buzz -- market chaos.

And let me tell you, if seeing Foxrock Fannies parading their bijou boxes was softcore "Debbie does D4" kind off stuff, market chaos is hardcore, top-shelf material. In a country jaded by regular cocaine, market chaos was just the kind of crack cocaine we needed.

So while the experts were all barrelling out of bank shares last week, every gifted amateur in the country was getting in -- just a little bit, for the crack. It would take the Irish to treat market chaos as an extended horse race that went on all the time. And so we did. And anyone who got into BoI on Thursday at five had the exhilaration of seeing their money increase by 50 per cent by nine the following morning, only for it to drop 20 per cent again in the space of an hour.

The best part of it all was that, like property, this was something everyone could get in on. Even if you weren't buying shares or spread betting, you could always just spend your time discussing taking your money out of the bank and putting it into prize bonds, the post office, or more thrillingly, just getting huge wedges of cash out and keeping them in the house for now, where they'd be safe.

Of course, we were aware that the backdrop to all this chaos was possibly a very bad thing and the end of life and credit as we know it. But, we're Irish and we're adaptable and we figured, look, it's happening anyway, we might as well try and enjoy it in some small way. And that, my friends, is why you'll never beat the Irish. The sky may be falling in, but we're the ones selling each other umbrellas.

Report by Brendan O'Connor - Sunday Independent.

Thursday, 18 September 2008

Ireland & Immigration - Let's Get Politically Incorrect & Let's Get Real...

"Immigration is now not merely the dominant feature of Irish life, it is the greatest threat to the existence of the Irish nation as a coherent, and cohesive whole"

"No country has ever accepted, never mind assimilated, the volumes of foreigners now present in this state. We have some 400,000 legal immigrants; but everyone knows that the army of illegals, especially Africans and Chinese, is vast, and probably tops 200,000. In all, Ireland has received at least 600,000 immigrants, most of them within the past five years. It could be many more. No one has the least idea.

In the US, such immigration would translate into an inward population movement of 45 million. In the UK, the figure would be nine million. Needless to say, neither state would be so idiotic or feckless as allow such vast numbers to enter.

Only Ireland would be so idiotic and so morally lethargic as to allow such massive inward population movements.

And of course, we haven't got the resources to cope with the consequences of such an influx. But worse than our lack of resources, is our lack of courage in confronting the issue"
- Kevin Myers - Irish Independent

"...we are seeing already where areas are developing as ghettos for people from certain countries so you can come here and work within your own community and converse only with those people who are from the country that you are from"

"..we are now creating a huge underclass of unemployed Irish. Ireland is now being run not as a society for the benefit of its people, but rather an economy...over ten years they have never once discussed the issue of immigration in our national parliament, that is scandalous...."

"Over the last ten years, in a sense there has been an effective plantation of the country, I suppose is the only word I could use for it"
- Ted Neville,

So, I suggest, let's get "politically incorrect"...

It's taboo to criticise immigration in Ireland. But the vast number of immigrants that came to Ireland over the past number of years is totally insane and unsustainable - and as Ireland goes down the tubes, the Irish tax payer must support huge numbers of unemployed immigrants. All this adding to existing the financial headache.

No other country would have allowed such a wreckless lack of policy.

There certainly is a need now for politicians and the government to put the Irish "natives" first...

Perhaps getting politically incorrect is the only way of getting real?

Ireland's Economic Meltdown - Biggest Economic Crisis...

THE GOVERNMENT has no plan to deal with the biggest economic crisis in a quarter of a century and lacks the conviction to win public confidence, Fine Gael leader Enda Kenny told an opening session of a two-day special conference of his parliamentary party in Co Clare yesterday.

Warning that the next general election "may come a lot sooner than expected", he told his colleagues that if they were "united, disciplined and tough" they would win power in the next Dáil.

Focusing on the Government's approach to the economy, Mr Kenny said people were frightened because nobody seemed to be in charge.

"In response to the biggest economic crisis in a quarter century, the Government first denied, then dithered, then went on holidays."

He added: "All the Government seems to be able to do is congratulate itself - in advance - for tough actions they haven't yet taken, and they'd never have needed to take if they'd done their job well enough in the first place.

"They also do something else. They blame everything and everybody in the world for their problems. The economic meltdown is all the fault of external circumstances."

The No vote in the Lisbon Treaty referendum was the Government's latest excuse for our economic difficulties. "The blunt fact is that none of that is true."

Claiming that Ireland's economy was suffering "disproportionately", Mr Kenny asked: "Why are we doing so much worse than France or Spain or Singapore?"

The answer was that "the foundations of our economy were so skewed by the love-affair Fianna Fáil has with construction".

"Fine Gael consistently pointed to the lack of balance. We warned of its dangers."

That was what "honourable opposition" was all about: "telling the truth fearlessly. Saying it as it is. Sounding the warning klaxon and proposing corrective action. While we did all this, Fianna Fáil wilfully continued to drag this country towards disaster." He added: "There's a bleak consistency in Fianna Fáil's approach to vested interests. They face them down, back them up against a wall - and give them what they want.

"Other than wanting to pump the construction industry back to its old, unbalanced status, where is the plan? Where are the development ideas? There are no ideas."

Outlining the programme for the annual "think-in", he said: "This conference is about setting out what we as a party are going to achieve in the next 12 months.

"It's about laying down deadlines, details and deliverables. It's about practical planning - for power."

He added: "This Government doesn't have the conviction or the competence to win and hold the confidence of the public. The next general election may come a lot sooner than expected."This party has, therefore, got to have a sense of belief that it can win that election."

"That is my agenda. It's the frontbench's agenda. It's your agenda, and if we are united, disciplined and tough in its pursuit the next general election is ours to win."

Guest speakers at the different sessions of the conference, which are being held in private at a Co Clare hotel, include broadcaster George Hook, ESRI senior research officer Alan Barrett, Prof Richard Sinnott of UCD and US author and political analyst Prof Drew Westen.

Report DEÁGLAN DE BRÉADÚN - Irish Times

Wednesday, 17 September 2008

Abrakebabra Magic & Celtic Tiger Bites...

Celtic Tiger eatery closes its doors as downturn really bites...

Now facing closure, Cooke's Cafe has long been one of the favourite eateries of the cashed-up chattering classes in Dublin.

But the award-winning venue -- which counts celebs like U2 among its customers -- has this evening been served up as the industry's first high-profile casualty of Ireland's credit crunch.

A spokesperson for the eatery, situated on the corner of South William Street and Castle Market, has confirmed to the Herald that they will cease trading at the end of this month. "It's true, we're closing up," he said.

In news that has sent shock waves through the tight-knit circle of Dublin restaurateurs and chefs, Cooke's will close its doors in two weeks.

It's understood that the lease has now been bought by Abrakebabra owner Graham Beere, who has indicated he may turn it into a sushi restaurant or use the venue to extend his chain of Gourmet Burger Kitchen.

As proof that the Irish hospitality industry really is set to take a hammering during the ongoing recession, speculation now abounds about which Dublin eatery will be next for the chop. The cafe, under restaurant veteran Johnny Cooke, opened its doors in 1992. For years, it occupied a prime slot as the place to be seen in the capital city.

Cooke, who is now considering offering private catering services to some of his A-list clients, spent years learning his craft in California before returning to his native country to open his own premises.

His restaurant quickly became a firm favourite among theatre luvvies and southside foodies, picking up a string of awards for its food and wine.

Sad end
Publisher Trevor White of the Dubliner magazine has described the closure as a "sad end to a notable chapter in Irish culinary history."

He went on to say how Cooke's return to Ireland in the early 1990s and his decision to set up the eatery was a sign of the imminent Celtic Tiger boom.

"It's a bittersweet end to the talented chef's tenure. Cooke's cafe was often cited as an emblem of Ireland's so-called Culinary Renaissance," he explained.

"I have clashed with Johnny Cooke in the past but today is not a day to dance to graves. Cooke is a seriously talented chef, and his next move will be watched with considerable interest. Good luck to him."

Report by Melanie Finn - Evening Herald

Crash Gets Crashier - Record Job Losses For Ireland...

Uncertainty over jobs after record market fall...

AS grave uncertainty hangs over the future of thousands of jobs at Irish branches of recession-slammed US firms, markets are not expected to rebound quickly from yesterday’s record-breaking fall.

At home, the ISEQ index of Irish shares’ closing figure was its lowest for more than five years. Across Europe, the trend was similarly dismal for a second day, with the FTSE Eurofirst 300 index falling 2.6% to its worst close since May 2005.

The stock market shock waves followed the collapse of investment bank Lehman Brothers, the 158-year-old fourth largest financial institution in the US.

In response, central banks around the globe pumped funds into the money markets, including €70bn from the European Central Bank, $50bn (€70.5bn) from the US Federal Reserve and £20bn (€25.2bn) from the Bank of England.

Lehman’s bankruptcy filing, the biggest in US history, followed Merrill Lynch & Co’s decision at the weekend to sell itself to Bank of America. Last week, the US government took over Fannie Mae and Freddie Mac, the mortgage finance companies.

Today, all eyes will be on another potential US casualty, the insurance behemoth AIG, which has 74 million customers worldwide and employs 150 people here.

Further dread on the Irish employment front has been generated by Hewlett Packard, the world’s largest maker of personal computers, which is to embark on a global cull of more than 24,000 jobs.

HP employs more than 4,000 staff in Ireland across a range of operations in locations in Leixlip, Dublin, Galway and Belfast. It was unclear last night whether Irish jobs would be lost as a result of the cuts.

Shares in Irish banks were hammered by concerns of the Lehman Brothers fallout through credit derivative contracts.

According to financial sources, it could be months before the full extent of this potential impact is known.

AIB fell 56 cent to €6.95, and Irish Life & Permanent dropped 52 cent to €5.34. Bank of Ireland lost 3.35% on the day to €4.62. Another casualty was building group CRH, which lost 75 cent to €17.70.

France’s CAC 40 and Germany’s Dax also registered falls, while London’s leading shares also plunged to a three-year low.

Back in the US, the Federal Reserve kept interest rates steady, despite pressures from shaky financial markets to ease borrowing costs to help reduce the risk of greater turmoil on Wall Street.

Report by Dan Collins - Irish Examiner Newspaper.

- Just when you thought things couldn't get worse in Ireland!!!

Tuesday, 16 September 2008

Time To Get Smart - Carbon Footprints In Your House...

Smart talk?

The whole global warming and need for carbon reduction is very much debatable. But measures are being taken in Ireland to reduce your carbon footprint in your house...

It's now time for..."Smart meters scheme to help reduce home electricity bills...

HOUSEHOLD ELECTRICITY meters in the Republic are to be replaced by "smart meters" which offer a range of functions including the intelligent use of cheap-rate electricity, while also providing for householders to sell home-generated electricity back to the national grid.

The meters are to be rolled out over the next four years at a cost of almost €1 billion.

Launching a pilot scheme involving an initial 15,000 smart meters yesterday, Minister for Energy Eamon Ryan said they would help householders to reduce their electricity bills, improve the operation of the electricity system and reduce carbon emissions.

Smart meters can monitor and record the amount of electricity used by the householder, as well as when it is used.

This data is communicated directly to the electricity supply company which can establish very clear patterns of energy usage.

It also makes the customer aware of how much energy they are using and allows them to make decisions on when to use electricity. For example, smart meters could be set to automatically shut down electricity to selected electrical items at peak times when power is at its most expensive.

Minister Ryan pointed out yesterday that electric cars could be charged by smart meters at night when electricity was cheap, and used during the day, when electricity was expensive.
Because of the system's ability to read meters every half hour, very accurate billing information and time-of-use pricing will be available to the consumer.

The electricity supplier will also cut costs, by improving electricity planning and system management.

Smart meters also allow two-way flow of electricity in that as well as buying electricity from the grid a householder or micro-generator of electricity, will be able to sell it back to the supplier.
But while he insisted that "Ireland is leading the world" with the introduction of smart meters, Mr Ryan indicated that proposals to allow households to sell electricity into the grid as well as buying from it were not as yet finalised.

This has been introduced already in parts of Scotland where commercial customers who have installed wind turbines may sell electricity back into the grid. Indeed this is supported by the British government which pays the "micro-generators" a Renewables Obligation Certificate (ROC). The ROC is paid per unit of electricity generated.

Various forms of smart meters have been introduced around the world but few offer the opportunity to domestic customers to sell electricity back to the grid.

In Ireland the project is being led by the Commission for Energy Regulation (CER) which is co-ordinating the various departments and companies involved.

The Minister said letters inviting electricity customers to take part would be going out and he urged all customers who receive a request to participate.

"When customers realise how much they can save and the carbon reductions that ensue I believe they will find smart meters one of the smartest devices ever installed in their homes," he said." Irish Times Newspaper

Friday, 12 September 2008

Guinness - James's Gate Brewery Moves To Leixlip Kildare - Guinness Brewery Video Tour & News

It's changing times for Dublin City...

"Dublin's last iconic factory to become real estate After 249 years, tracts of the brewery are to be sold to developers.

THE SIGHTS, sounds and smells of the Guinness brewery at St James's Gate in Dublin have been part and parcel of the Liberties for nearly 250 years - ever since Arthur Guinness himself first secured a 9,000-year lease on four acres of ground in 1759 for an annual rent of £45, including water rights.

The brewery has expanded substantially since then and now occupies 64 acres on either side of Thomas Street, stretching down to Victoria Quay on the River Liffey. It was from here that the Guinness barges transported kegs of stout downriver to the Lady Patricia and Lady Gwendolyn, moored at City Quay.

The vast brewery has its own theatre and swimming pool, as well as the tracks of a narrow-gauge railway that once served the site. It still has its own power station to fuel the production of over 50 million barrels (nearly 83 million hectolitres) of beer - including Guinness Extra Stout, proudly brewed at "James's Gate Dublin".

At one stage, the brewery employed as many as 4,000 people and, although the number has fallen to a fraction with the onset of automation, Guinness remains the largest employer in the Liberties - but that's now likely to change.

The inner city lost Jacob's biscuit factory, the Powers and Jameson distilleries and many other traditional industries, and now St James's Gate is to be "consolidated", with a new brewery to be built on a greenfield site.

Powers and Jameson went to Middleton, Co Cork, and a replacement distillery that resembles a chemical plant.

A new "state-of-the-art" brewhouse is to be developed at St James's Gate, and much of the rest of the site will be sold off. But the visitor centre will stay. This nine-storey Chicago-style warehouse was converted into the Guinness Storehouse in 2000 and, drawn by the Gravity Bar, tourists have flocked to it in huge numbers. Even by 2004, the storehouse had welcomed two million visitors and it is it now "Ireland's No 1 visitor attraction", as Diageo notes.

The Gravity Bar, with its panoramic views over the city, has also hosted numerous functions, including the 30th birthday party of Rory Guinness, younger brother of the current earl of Iveagh.

The storehouse is a protected structure, listed in the Dublin City Development Plan, as are several other buildings in the brewery, particularly along Thomas Street. Whatever development takes place on the site, these buildings will have to be retained - though many would be suitable for conversion into loft-style apartments.

Even if only half the site is sold, it would be one of the largest areas to come up for redevelopment in recent years. Its long frontage on Victoria Quay is a largely blank wall, protecting a huge marshalling yard for beer trucks. This could be a prime development site, particularly because of its proximity to Heuston station, Dublin's main transport hub.

Coincidentally, the Harp brewery in Dundalk (also known as the Great Northern Brewery) is located right next to the town's railway station on the Dublin-Belfast main line. The Smithwick's brewery in Kilkenny also occupies a town centre site between Parliament Street and the River Nore, and includes the ruins of a Franciscan friary.

Because of the sheer scale of the Guinness site in Dublin, it is clear that a detailed local area plan would have to be prepared by the city council's planners before any development gets under way.

This would be on the scale of a city quarter, which will hopefully retain such amenities as the swimming pool and Rupert Guinness Theatre.

Any planning scheme would also have to take account of Iarnród Éireann's proposed underground rail link between Heuston station and Spencer Dock, as it would traverse the site on its way to High Street, St Stephen's Green and Westland Row, before crossing beneath the Liffey to Spencer Dock."Irish Times

Here's a short video tour, that I like, of Guinness James's Gate Brewery:

So now it's...

"Hops, skip and a jump...

Guinness goes back to its Kildare roots

IT'S coming home. After more than 250 years, Guinness has announced it is to return to its Kildare roots to build its new flagship brewery.

And remarkably, the firm has had to turn to the Guinness family's descendants for the land on which it will build the facility, due to open in 2013.

More readily associated with Dublin and St James's Gate, Guinness in fact began life in Leixlip's Ralph Street, with the River Liffey running behind the stone brewing halls.

The new brewery, part of a €650m scheme to modernise the firm, will be owner Diageo's biggest site in the world and will be known as The Arthur Guinness Brewery.

The St James's Gate site in Dublin will be modernised, and will continue to make Guinness for the Irish and British market.

The Guinness family is selling 50 acres to Diageo, while Kildare County Council will provide the remaining 20 for 70-acre Leixlip site.

Yesterday, Desmond Guinness, the son of former brewer Bryan Guinness, who has lived in Leixlip Castle since 1958, said he was "awfully proud" Diageo had decided to turn to its past in order to build its future.

"The news is just wonderful," he told the Irish Independent.

"It means the strong historical roots between the Guinness name and Leixlip will endure for generations to come."

Mr Desmond's granddaughter Jasmine got married in Leixlip, in July 2006, to Gawain O'Dare Rainey, in a wedding featured in Hello! magazine.

Arthur Guinness was born in 1725, most probably at Celbridge according to family and company records, where his father worked for the Archbishop of Cashel.

"It has frequently been suggested that both Arthur and his father had made beer at Celbridge for the Archbishop and in this way learned the "art and mystery" of brewing, the company said yesterday.

"Arthur honed his brewing skills between 1752 and 1755. In a suit in the Irish Court of Chancery dated September 11, 1755, in which he is the defendant, he is described as 'Arthur Guinness of Leixlip, Co Kildare, brewer'."

The new facility will be state-of-the-art, but back then Arthur had to make do with a riverside well and barley from nearby farms. Hops were brought in bales from Dublin.

In 1759, Arthur left the Leixlip brewery in the hands of his brother Richard and moved to Dublin. There, on the December 31, 1759 he obtained the famous lease for St James's Gate.

Now, the story has come full circle. Brian Duffy, chairman of Diageo Ireland said: "Not only are we demonstrating our commitment to Ireland, we are also staying true to the roots and heritage of the Guinness brand and Arthur himself." Irish Independent


Thursday, 11 September 2008

Luck of the Irish: History of Change: Celtic Tiger Celtic Myth...

"Luck and the Irish: A Brief History of Change 1970-2000" is a book, by Roy Foster, that looks at the development of the Celtic Tiger...

"Cuddling Up With the Celtic Tiger" a report by Adam Kirsch, on the New York Sun, which gives an interesting American 'take' on "Luck and the Irish: A Brief History of Change"...

"When you consider how large a place Ireland occupies in" the Americian "cultural imagination, it's astonishing to realize how small a country it really is. Its current population is slightly more than 4 million; more people live in the boroughs of Brooklyn and Queens than in all 26 counties of the Republic of Ireland. If the island seems to loom like a continent, the reason is, first of all, the Irish emigration that did so much to shape America in the 19th century. According to the Census Bureau, some 34 million Americans claim Irish ancestry, more than any other nationality except German.

But you don't have to trace your family back to Cork or Limerick to feel that Ireland is part of your cultural heritage. Anyone who reads English literature is inevitably exposed to the war of imagination and memory waged between the English and the Irish since the days of the first Elizabeth. The dilemmas and reproaches of Irish writers stand out like a sharp discord in the harmony of English literature. Jonathan Swift, in "A Modest Proposal," straight-facedly urged the Irish to eat their babies; Oscar Wilde summed up his countrymen as "a nation of brilliant failures"; W.B. Yeats gibed that "Romantic Ireland's dead and gone." James Joyce spoke for them all when he described Irish history as "a nightmare from which I am trying to awake."

So ancient is the literary association of Ireland with suffering that it comes as something of a shock to turn to the actual condition of modern Ireland. Even today, the country is most likely to be in the headlines when Protestants and Catholics kill one another in the North — or else when the politicians announce yet another installment of the peace process. But in fact, for most people in the Republic of Ireland, the last 15 years have been a time of unprecedented good fortune. R.F. Foster, the eminent Irish historian and biographer of Yeats, opens "Luck and the Irish"...his pithy survey of recent Irish history, with a blizzard of statistics on the economic boom known as the Celtic Tiger. "Output in the decade from 1995 increased by 350 percent, outpacing the per capita averages in the UK and the USA, personal disposable income doubled, exports increased fivefold, trade surpluses accumulated into billions." Most remarkably, for the first time since the Great Famine, Ireland has become a destination for immigrants, rather than a point of departure. A line from Philip Larkin seems appropriate: Ireland has never known "success so huge and wholly farcical."

The hilarity of that success can be felt on every page of "Luck and the Irish," a short book based on a series of lectures Mr. Foster delivered in Belfast in 2004. Mr. Foster, the author of "Modern Ireland: 1600–1972," takes evident pleasure in producing this sunny sequel to his magisterial survey. This does not mean that he is uncritical or boosterish; on the contrary, he writes with most relish when attacking the excesses and idiocies of the Celtic Tiger, or shooting darts at the politicians in his personal rogue's gallery. But his linked essays — on economics, religion, politics, culture, and the Northern problem — are energized by a constant sense of Ireland's liberation...

The basis for this hopefulness is the sustained boom that Mr. Foster calls, with typical wryness, "the miracle of loaves and fishes." Because he is a historian, not an economist, he does not attempt to give a conclusive explanation for why Ireland's economy suddenly took off. Instead, he surveys the two major schools of thought on the subject, which he names "Boosters" and "Begrudgers." The Boosters point to Ireland's entry into the European Economic Community in 1973, which brought the country generous subsidies and a lavish new market for its agricultural produce; to its low corporate tax regime, deliberately designed to lure international employers, which helped to create new jobs in microchips and pharmaceuticals; to its educated English-speaking workforce, well suited to an age of outsourcing, and to the "social partnership" of government, employers, and unions that helped to ensure labor peace.

The Begrudgers, Mr. Foster writes, come from "the left, or from the nostalgic shores of neonationalism." They point to Ireland's increasing income disparity on the American model; to the decline of public services and the loss of cultural distinctiveness, and to the fact that the corporate profits of multinationals generally get exported back to America or Japan, instead of being reinvested in Ireland. As a result, Mr. Foster notes, Ireland is exceptional in having a greater gross domestic product than gross national product.

While he gives the Begrudgers their due, Mr. Foster's very name for them implies that he is not on their side. For the sheer fact of increasing prosperity, despite its associated costs, has brought a new buoyancy to all areas of Irish life. "The economic and psychological boundaries that defined the country have altered and expanded," Mr. Foster writes. "What has changed, perhaps decisively and forever, is a question of attitude." The most obvious of these changes has to do with the declining role of the Catholic Church in Irish life. The Catholic Church's rapid loss of moral influence was partly self-inflicted...As with similar scandals in America, Mr. Foster writes, "the Church's moral authority was further destroyed by the hierarchy's apparent inability to apologize for its inaction in practically every case."

Yet the declining role of Catholic moral teachings in Irish life, Mr. Foster shows, long predates these scandals...Just opening up these subjects for debate was an important step in a country where, as late as 1971, the archbishop of Dublin could declare that "civil divorce is evil and contraception is evil; there cannot be, on the part of any person, a right to what is evil." A good emblem of Ireland's evolution is Mary Robinson, who began her public career as a controversial feminist activist, and by 1990 was popular enough to be elected Ireland's first female president.

...He approvingly quotes a businessman who exclaimed that dealing with Ulster's Protestants and Catholics was "like dealing with children. Big, Mad Children." The heroes of Mr. Foster's story are the Irish politicians who gradually gave up the irredentist ambitions that lingered after the partition of the country in the 1920s. In a 1998 referendum, he notes, 96% of Irish voters agreed to amend the constitution to eliminate the words, "The national territory consists of the whole island of Ireland."

If Ireland's prosperity sponsored religious and political progress, however, it also brought splendid new opportunities for corruption. Mr. Foster's chapter on Irish politics during the last 30 years is the least accessible to an American reader, depending as it does on a fairly thorough knowledge of Irish parties and personalities. Even so, it is a pleasure to read, if only for Mr. Foster's gleeful flaying of his bête noire Charles Haughey, three-time prime minister or taoiseach of Ireland. Haughey emerges in Mr. Foster's portrait as so exuberantly, shamelessly corrupt that even indignation fails; only amazed laughter is possible. "An odd combination," as Mr. Foster puts it, "of Napoleonic enigma, Ascendancy hauteur, Gaelic chieftain and Tammany boss," Haughey used his position to amass bribes worth tens of millions of dollars, mainly from property developers. The rampant corruption of an increasingly prosperous society puts Foster in mind of France's Third Republic; but so, too, does Ireland's remarkable creative renaissance, which has given the world artists ranging from Seamus Heaney to U2.

Haughey's reign finally came to an end in 1992, when one of his biggest donors, the Irish supermarket heir Ben Dunne, was arrested in a hotel room in Orlando, Fla., "carried from the hotel hogtied to a pole" after "an incident involving a bag of cocaine, call girls, and a violent psychotic episode on a seventeenth-floor balcony." The ensuing scandal and inquiry exposed Haughey's web of offshore accounts in the Cayman Islands. "This is the point," Mr. Foster deadpans, "where the story of modern Ireland demands its Zola rather than its Balzac." Mr. Foster is not a novelist, but in "Luck and the Irish," he has given contemporary Ireland the sharp, funny, illuminating chronicle it deserves." New York Sun

Although it's now 2008 and the Celtic Tiger has vanished into the mists of our memories and has been added to our many other Celtic Myths!

The luck of the Irish has finally run out!!!

Wednesday, 10 September 2008

Fannie and Freddie Monkey Business - Hear No Evil, See No Evil, Speak No Evil.

The 'Fannie and Freddie' factor faces our banks too...

If the two biggest American mortgage banks can go bust and be bailed out by the US government, could the same happen here? When the US government intervened to save Freddie Mac and Fanny Mae on Monday, it put the world on notice. We are now in a new era where our banks are the single biggest weakness in the economy and the State (meaning the taxpayer) will be expected to save them.

The developments in America have serious implications for Ireland. If anything, our property boom was more ridiculous than that of the US. So the obvious question now is whether one of our banks might go bust. It could happen, but is it probable? We don't know; but if it wasn't a possibility, why has the share price of Irish banks fallen 60pc in the past year?

The reason share prices have collapsed is that investors are afraid their money will disappear. Like the rest of us, they don't believe the banks' management. They have lost faith in the business model and they are not going to risk their money. Internationally, some senior managers of banks have been exposed as frauds, who seemed to be totally out of touch with what was going on in the banks they were supposed to be running.

They constantly underestimated the losses they were facing and when they did finally acknowledge malpractice (well after shareholders lost their shirts), it was too late. Now no one believes anything stated by banks.

As Bill Gross, of Pimco -- one of the biggest investors in the US -- said recently, the question today for investors is not "return on capital", it is "return of capital". So if the professionals are worried about the Irish banks, shouldn't you be too?

We are in a new epoch, where it is necessary to think the unthinkable. It is only by questioning the spin, hype and lies of vested interests that we can arrive at something close to the truth. At the moment the vested interests are circling the wagons and dismissing any concerns about the viability of Irish banks as wild speculation. They did the same three or four years ago when a few questioned the sustainability of the housing boom. Back then, those of us who said that the housing market would collapse were ridiculed and branded traitors, extremists and unpatriotic. It is important to appreciate that what was branded extreme last year is now mainstream.

Consensus-thinking has moved dramatically. It is now commonplace to hear 'experts', who last year were saying that the Irish fundamentals were strong, now claiming that we are in for a protracted recession.

The lesson of the past year is that the experts actually "know nothing" and therefore, you have to trust your own instinct and analysis. It's your money after all, and if it disappears no one will cry for you.

So with that in mind, let us analyse the Irish banks. At the moment, for some reason best known to themselves, the experts are telling us that the banks are in decent shape. Last Saturday, I mentioned the possible weakness of the banks during 'Saturday View' on RTE1 radio. The Minister for Finance reacted to this reasonable concern by saying such talk was "dangerous". Now I can understand the minister's position, but suggesting that questioning the establishment is dangerous means that we have not learnt anything. Years ago, questioning the housing mania was also described as dangerous. When the establishment tries to muzzle questioning, you know we are in three monkeys territory -- hear no evil, see no evil, speak no evil.

But back in the real world, we know that the banks are tightening their belts. They are not lending. The Central Bank's monthly figures on total lending in the economy show that bank lending has fallen off a cliff. So what are the implications of this macro trend for individual banks?
Banks work in a very simple way. Typically, for every €1m in capital they have, they can lend out €10m. The profit is the difference in the cost of capital and money they borrow to lend and the interest rate they charge. If a bank is paying 4pc for your money and charging 8pc, it is making 4pc times €10m -- a gross profit of €400,000. That is a whopping 40pc return on invested capital.

Of course, they have to be able to take some losses. If they had a €500,000 loan go bad, that would have eaten up all their profits and dipped into their capital. Now they would only have €900,000 in capital. That means the bank could only make €9m in loans. Either the bank will have to raise more capital from investors or reduce its loan portfolio, in addition to writing off the bad loan.

It's easy to see how bad loans and defaults can rapidly turn a 'strong' bank into a 'weak' one. To keep lending, the bank has to go back and ask its investors for more money. However, as share prices have been falling, investors are reticent to lend to the banks.

In tandem, as house prices fall further, and unemployment rises, the bad debts in the banks will increase exponentially.

Thus, the bank in a downturn is caught between a rapidly deteriorating balance sheet and an inability to raise money. The bank still has to pay out interest on its deposits, but if it's not earning interest on loans because they are being reneged on, it can't pay deposits without raising more money from shareholders.

Like so many aspects of finance, the game is a confidence trick. If that confidence evaporates, as it has done in the US, depositors naturally get worried.

To make matters worse in Ireland, we know that at the height of the boom, the Irish banks were borrowing close to 50pc of their financing needs, not from depositors like you and me, but from overseas investors.

These loans have to be paid back too. Therefore, as the economy slides, the Irish depositor is in competition with the foreign investor as to who will get their money back first. This is when the crisis becomes a reality.

Who can say that over the next two years, this will not happen in Ireland? If it happened in the US this week, only a monkey can rule out the same here.

Report by David McWilliams - Independent Newspaper

Saturday, 6 September 2008

Value Ireland - Property Prices Property Values - 2008...

With the market at its lowest point for many years, it's difficult to establish the right price for a property.

Orna Mulcahy asked agents to nominate homes that represent good value. Simon Carswell suggests who might buy them, and how the purchase could be financed...

FALLING PROPERTY prices may make it appear that there are bargains to be found out there but the tightening on mortgages means that borrowers will be fighting for higher loans.

The credit crunch has forced lenders to seek larger cash deposits and higher borrowing costs from their new mortgage customers.

The maximum mortgage to first-time buyers has been capped at 92 per cent by most lenders and standard variable rates have risen by an average of half a percentage point over the last year as the banks' own funding costs have risen.

However, prices on many houses have reduced substantially to sell and banks are still open to lend mortgages to customers with large lump sums and a strong ability to repay.

AIB, the largest bank in the country, is tough to beat on rates, particularly in straightforward cases such as first-time buyers borrowing within reasonable loan-to-value limits.

However, Frank Conway, director of the broker business, the Irish Mortgage Corporation, says prospective buyers will find their borrowing power becoming "tighter" in complex deals when approaching most lenders.

"The bottom line is that some lenders will do a deal where others would not and their rates will match the risk," he says.

Individual buyers can borrow up to five times' their annual salaries, while couples can borrow up to 5.3 times their combined income, though lenders no longer offer "kickers" in deals where there is the prospective of a guarantee from a parent or where a room will be rented...

Here are examples of properties on the market and the best rates available from lenders.
It's worth noting that most lenders offer a discount rate for the first year of a new mortgage but these are not included below...

A COUNTRY house complete with an old mill, outbuildings and river frontage for €625,000 seems to offer good value and plenty of possibility for life changers. Cloggy House (new owners might start by changing the name) is a pretty four-bedroom house with 1.75 acres on the River Erne, 5kms from the village of Ballinagh and 6kms from Cavan.
It's in good condition throughout and decorated cottage-style with lots of exposed beams.
The coachyard has several renovated outbuildings that could be converted into offices, workshops or even holiday cottages.
Agent: Knight Frank
LET'S SAY a couple in their forties want to buy this house in Co Cavan. The husband earns €110,000 a year and the wife doesn't work.

They have €300,000 for a deposit and plan to use the house as a holiday home initially rather than as a primary residence.

The best mortgage deal on offer at the moment is AIB's tracker rate of 5.6 per cent for investors where the loan is less than 60 per cent of the value of the house.

The bank would offer a term of 15 years on the loan, making monthly repayments €2,672.
The couple would have to pay stamp duty of €35,000, legal costs of between €2,500 and €3,000 and a valuation fee of €127.

126 SHELMARTIN Road, Fairview, Dublin 3 is a three-bedroom terraced house in Marino that needs updating.
In the "good days" it would have made €525,000, according to Conor Gallagher of DNG's Fairview office, which has just taken it on its books.
It's an executor sale, so it has to be sold. Needs work, but it's on a nice road where many of the houses have been updated. It has a west-facing back garden which is another plus. It's good value at €385,000 according to Gallagher.
Agent: DNG
LET'S presume a first-time buyer - an engineer earning €75,000 a year - is eyeing up this three-bedroom house in Fairview, Dublin for €385,000, though the house needs work. He has set aside €35,000 in cash for the deposit so he'd be seeking a mortgage of €350,000. As a first-time buyer he will not have to pay stamp duty on this property and the mortgage comes in at a loan-to-value (LTV) ratio of 90.91 per cent, which is within many lenders' limits.

EBS offers a tracker rate of 5.69 per cent, which would mean monthly repayments of €2,029, though AIB's 5.2 per cent two and three-year fixed rates would leave our borrower repaying €1,921 a month.

The problem with this borrower is that their income is fairly tight. Being a "professional", AIB and Bank of Ireland may approve a higher LTV mortgage.

Karl Deeter, head of operations at Irish Mortgage Brokers, says that given that the property needs work, the buyer could borrow up to €397,000 with First Active.

He said the borrower could get the property valued with a "value in repair" figure where First Active would lend on the contract price value with a retention until the work is completed and provide up to 92 per cent of the final value of the property, subject to a ceiling of €397,000

IN MONKSTOWN, this Victorian terraced house at 5 Vesey Place went on the market in autumn 2007 at €3.85 million, the adjoining house having sold for €4.2 million. A year later, number 5 has been reduced to €2.95 million, and Lisney is looking for offers "in that region".
On a price per square foot basis, this could be considered value. The house has over 353sq m (3,800sq ft), and there is over 93sq m (1,000sq ft) in the original coach-house at the end of the garden. The house needs updating, but has kept most of its original features, including marble fireplaces and plasterwork.
Agent: Lisney
LET'S SAY our prospective buyer is a 55-year-old businessman who earns €200,000 a year. He has cash of €1 million in the bank that he can use as a deposit. This buyer would therefore be looking to borrow almost €2.2 million.
A mortgage of this scale would equal 11 times his annual income, and no lender would be willing to provide a mortgage on these terms. A bank or building society would really only be willing to provide a maximum mortgage of about €700,000, according to Frank Conway, director of the Irish Mortgage Corporation.

"The problem is that income is too low and the maximum loan term is too short," he says.
If they had an additional €1 million for the deposit and the businessman was earning double (€400,000 a year) what he was currently making, he may secure a tracker mortgage rate of 5.35 per cent from Halifax or 5.4 per cent from AIB on a LTV ratio of 50-75 per cent. But on a mortgage of €1.2 million with a rate of 5.35 per cent over 15 years, the businessman would end up paying Halifax a whopping €9,700 a month.

190 UPPER RATHMINES Road is offering a lot of house for the asking price of €1.35 million. It's got seven bedrooms in the 243sq m (2,616sq ft) of living space arranged over three floors. Renovated three years ago, it has kept many of its original features, with some expensive additions such as the Aga.
Located close to the junction with Cowper Road, it's close to the Luas stop. There is enclosed parking at the end of the garden.
Agent: Savills HOK
A BUY-TO-LET investor might be attracted to this house on Upper Rathmines Road as with seven bedrooms it may make a suitable property that a landlord could rent out.

Let's say an investor already has rental properties worth €7.5 million in a portfolio on which he has borrowings of €5.5 million. He would be willing to put up €500,000 in cash to buy this property and borrow the remainder to make up the purchase price of €1.35 million.

The investor could avail of AIB's tracker rate of 5.75 per cent or the bank's variable rate of 5.7 per cent for investors where the LTV is greater than 60 per cent.

The tracker rate would mean the investor would be repaying €5,253 a month over 25 years.

THIS WELL-LOCATED three-bedroom pre-war semi at 44 Farney Park in Sandymount, Dublin 4 has come a long way down in price since it first went on the market in late 2006 at €1.55 million.
It is now for sale through Bennetts at €1.1 million, though the owners are open to offers.
Although it has been updated with a new kitchen, new owners will probably start all over again and extend the 139sq m (1,500sq ft) house to gain an extra bedroom or two.
There's off-street parking at the front, and a 90ft garden facing south-east to the rear.
Agent: Bennetts
A SECOND-TIME buyer may be attracted to this three-bedroom house in Sandymount, Dublin, which is on the market for €1.1 million, having been reduced from €1.55 million.

Let's say a couple in their mid-30s has a combined income of €175,000 and a lump sum of €300,000 from the sale of their first house, but the sale has not yet been finalised.The couple would qualify for a mortgage of €964,000 from Halifax which would offer a tracker rate of 5.35 per cent on a LTV ratio of less than 75 per cent.

This would mean that they would have to make monthly repayments of €5,383 over 30 years.
The big issue facing the couple is the stamp duty of €70,250 they will have to pay. This will eat into their €300,000 cash lump sum.

The couple has a bit of wriggle room on the LTV ratio on the mortgage and because they are young they can spread the mortgage over a longer term.

Report - Irish Times Newspaper.

The Houses:

Irish Property - Interesting Price Cuts...,,

Developers cut prices, give interest free loans...

Apartments in Elm Park, D4 and The Grange in Stillorgan are among those being offered at cut rates to buyers...

TWO OF the country's largest developers are offering financial packages to buyers in an effort to kick-start the new homes market.

In Dublin 4, two-bedroom apartments in the Elm Park development on Merrion Road, have dropped at least 20 per cent to €470,000 with developer Radora offering buyers loans at zero interest of between 20 and 30per cent of the selling price. Radora is controlled by Bernard McNamara along with Gerry O'Reilly and David Courtney.

Meanwhile Ray Grehan of Glenkerrin Homes is offering buyers a 15 per cent interest-free loan for up to seven years on luxury two-bedroom apartments at The Grange in Stillorgan which are being sold at 2005 prices, of €525,000.

The deal, which is backed by the Construction Industry Federation, is being offered across other Glenkerrin-developed properties including Ballintyre Hall in Dublin 14 (starting price €395,000) and St Edmunds in Lucan (€235,000).

The deals send a clear message to the housebuilding industry which has been crippled by the shortage of mortgages and by the deteriorating market conditions.

"There are two problems with this market - lack of money and lack of confidence," says Ray Grehan. "If we can provide one, we might be able to help the other. Sales have come to a halt because the banks will only lend 80 per cent and so people are having to come up with 20 per cent deposits. On a €300,000 property that's a €60,000 deposit and people simply do not have that money in savings. We're trying to bridge that gap."

Under the new scheme, buyers in Glenkerrin's developments will have to pay a 5 per cent deposit, and will then be offered a deferred payment of 15 per cent by way of an interest free loan to be repaid at the end of seven years. The purchaser owns 100 per cent of the of the property, with the developer's loan secured by way of a second charge on the property. The mortgage process will be administered by Savills HOK.

The incentives are being launched as banks take a more aggressive policy on development funds. The major financial institutions are now anxious that the large number of apartments and houses overhanging the market get cleared even if it means reduced profit margins for developers. In some cases, housebuilders are being pressurised to sell units at cost rather than to allow them to remain vacant indefinitely.

According to one new homes agent, Dublin now has a three-year oversupply of new houses and apartments on the market, while potential buyers are determined to hold off until the market bottoms out.

The substantial price cut at Elm Park could trigger sales, as it's a major mixed-use development in a premium location that is likely to weather the downturn better than most. Built on land previously owned by the Sisters of Charity at Merrion Gates, Elm Park has picked up an architectural award for its commercial blocks, but its 330 apartments have been slow to sell. Many of these were reserved from plans as far back as 2004 but not all the reservations translated into sales as the scheme neared completion last year.

In recent weeks two-bedroom units at Elm Park were listed on at €585,000. The adjusted price is being seen as "extremely keen" by rival new homes agents who will clearly have to encourage their building clients to cut their prices accordingly.

"The building industry needs a solution and it has come up with the solution now," says Elm Park sales agent Ken MacDonald of Hooke MacDonald who expects to sell 60 to 70 units under the scheme.

"I think it could have a dramatic effect on the market. It's a creative way of helping the purchaser to buy and it could bring a bit of confidence back into the market. The developers are the ones who are having to take the pain. It is so attractive to purchasers that other developers will inevitably follow suit."

No deposit is required at Elm Park, where purchasers will get up to 30 per cent of the purchase price as a loan with zero interest for five years.

"If the developer gives 30 per cent on a €470,000 purchase, the buyer only has to put up €329,000 which is very enticing." says MacDonald. " Repayments (capital interest) on a 30 year mortgage of €329,000 would be €1,840 per month which is very close to the typical two-bed rent at Elm Park of €1,650 per month," he said. "The target market will be owner-occupiers. We see parents living in the area who want to help their children get on the ladder. Under this scheme they don't have to put down any money."

Orna Mulcahy - Irish Times

Thursday, 4 September 2008

Ireland - State Of Emergency...

State of emergency...

BRIAN COWEN last night tried to get a grip on the country’s escalating economic crisis by calling an emergency October budget that looks primed to inflict deep spending cuts.

The unprecedented decision to advance the budget — the centrepiece of the Dáil year — by almost two months to October 14 was sparked by shock in government circles at the collapse in tax revenues over the summer that has left the country heading for a €6 billion deficit by the year-end.

The cabinet made the dramatic move as unemployment surged to a 10-year high as dole queues swelled by record amounts for the fourth month in succession.

Finance Minister Brian Lenihan said the Government’s priority was to “curb spending” and this would be achieved through a “balance” of taxation, borrowing and cuts as he warned the country faced the worst economic conditions since the late 1980s.

“We cannot let our state to drift into fiscal unsustainability. We have to take corrective action,” said Mr Lenihan.

The dramatic nature of the announcement was questioned in some quarters as spending cuts and any income tax changes announced would not kick in until 2009, while Mr Lenihan would be making fiscal forecasts in October, with 34% of 2008’s tax haul still to be taken in. This is considered a risky calculation considering the Department of Finance has got such predictions so spectacularly wrong in the past.

The early budget was interpreted as a warning shot to the social partners that expectations must be lowered and an attempt to prove to the money markets the Government was still in control of events.

Mr Lenihan admitted Ireland would break through the 3% barrier on borrowing imposed by the EU for this year and next year, and that previous finance department attempts to stimulate the deflating housing market had failed.

However, Mr Lenihan refused to be drawn on the likelihood of a new package modelled on the multi-billion-euro rescue plan for the British housing market unveiled this week.

With many economists expecting the republic to slide into its first recession for 25 years in the coming months, the Government admitted the economy was “under considerable pressure” with the construction sector pulling the rest of the economy down with it.

Mr Lenihan predicted a year-end deficit of €3bn in July, but has now revised that to €5bn. However some experts said €6bn was more likely as Mr Cowen refused to accept any blame for getting Government figures so wrong in the past.

“The tax shortfall is horrific and it’s going to get worse,” said Friends First chief economist Jim Power. “People could interpret this as panic, but the positive interpretation is that at least they are standing up, recognising the problem and doing something about it,” he said.

Fine Gael finance spokesman Richard Bruton accused the Government of reacting too late to the worsening situation.

Labour’s finance spokeswoman Joan Burton called for an early return of the Dáil.

By Shaun Connolly, Political Correspondent - Irish Examiner

Wednesday, 3 September 2008

Irish Property Crash - It's time that the Government put away their golf clubs, suntan lotion and Dan Brown paperbacks and got a grip...

Exchequer faces €5bn shortfall as tax revenues drop sharply...

TAX REVENUES are continuing to plummet, according to the latest official figures, which indicate the shortfall for the year could exceed €5 billion. This is far worse than the Government was expecting as recently as two months ago.

In July, the Government projected a tax shortfall of €3 billion for the year, but a rapid slowdown in consumer spending has hit VAT receipts, while the dramatic slowdown in stamp duty and capital gains tax receipts has continued due to the property crash.

The implications of the figures will be discussed by the Cabinet today at its first meeting after the August holiday break. Substantial cuts in public spending for next year now appear inevitable and are likely to be accompanied by increases in borrowing and taxation.

The Opposition parties last night accused the Government of failing in its duty to get to grips with the crisis in the public finances during the summer and taking its traditional August holiday as if there was nothing wrong. Fine Gael deputy leader and finance spokesman Richard Bruton predicted that the tax shortfall for the year would be €6 billion, double the amount predicted by Taoiseach Brian Cowen and Brian Lenihan seven weeks ago.

"In the time the Government have been away on holidays, their July predictions for the economy and taxes have been shown to be 100 per cent off-target," he said. "It is now time that the Government put away their golf clubs, suntan lotion and Dan Brown paperbacks and got a grip on the deteriorating Irish economy," added Mr Bruton.

"This alarming swing from surplus to deficit is not due to bad luck, it is down to Brian Cowen's reckless management of the public finances over the last four years."

Labour Party finance spokeswoman Joan Burton said the figures showed a further huge black hole opening up in the Government accounts.

"Our golfing Taoiseach has truly driven the economy not just into the rough, but has played the ball off the course," she said. Ms Burton said that, so far, the Government's response to the crisis was to criticise others for "talking down the economy", while the problems had been created by the incompetent mismanagement and self-serving behaviour of the Government.

Mr Cowen faces a further challenge this week as he seeks to restart negotiations on a new national pay deal. The Taoiseach has invited employers and trade unions to talks on Friday but the two sides are showing no sign of weakening their bargaining positions. ESB workers are the latest to lodge a play claim following the recent collapse of talks. Unions representing the State electricity are seeking an 11.25 per cent pay rise over 18 months.

The unions, including Unite, Siptu and the Technical Electrical and Engineering Union (TEEU), met yesterday and agreed to lodge the €60 million claim. They are basing their claim on the fact that the cost of living has gone up 5 per cent in the last year. The ESB said last night it had yet to receive details of any claim, adding that it was aware the Government was attempting to revive the national pay talks and it supported that process.

The exchequer returns, published yesterday, show that tax revenue at the end of August was €2.8 billion lower than expected. The total tax take for the first eight months of the year at €24.7 billion was 10 per cent behind budget projections and a full 9.4 per cent lower than in the same period last year.

All tax revenues were down for the first eight months. The biggest shortfall came in VAT receipts, which were €1.177 billion below projection, 11.4 per cent below target and 6 per cent down on last year. The slowdown in the construction industry was reflected in a shortfall in stamp duty of €480 million, a 45 per cent drop on last year, and in a shortfall in capital gains tax of €436 million, 39 per cent below target.

Report by STEPHEN COLLINS and BARRY O'HALLORAN - Irish Times Newspaper