Tuesday, 29 December 2009

Ghosts Of Debt And Jobs Will Haunt Economy...

OPINION : By 2015, Iceland will almost certainly be a lot better off than Ireland because it dealt decisively with its banks...

WHILE THINGS are hard to predict, the future, especially the situation of the Irish economy, is so stark that even an economist can make some predictions that stand a chance of being right.

Two ghosts of Christmas will haunt Ireland in 2015: jobs and debt.

For 20 years, the Irish economy experienced extraordinary growth. Unfortunately, this growth came from two separate booms that merged imperceptibly into each other. First we had real growth in the 1990s, driven by rising competitiveness and exports. However, after 2000 competitiveness collapsed, and growth came to be driven by a lending bubble without equal in the euro zone.

As Michael Hennigan of Finfacts ( has pointed out, of the half million jobs created in the last decade, only 4,000 were in exporting firms; and fewer people now work in IDA-supported companies than in 2000. The Irish economy has been faking it for a decade.

Now that the property bubble has burst, people hope that exports will once again become the engine of our salvation. The problem is that, back when we were becoming rich by selling houses to each other, we priced ourselves out of world markets. Wages have risen by one-third here compared with Germany since 2000. Restoring competitiveness will be an arduous task where nobody, outside the banks and ESB, will see a pay rise for a decade, and many will take pay cuts.

Whether desirable or otherwise, leaving the euro is not possible for a mundane reason. Changing currencies takes a lot of organisation, as we saw when the euro was introduced. If the Government announced that a New Irish Pound will be introduced in 12 months, everyone would rush out to withdraw their savings in euro and wipe out the banks.

Prolonged mass unemployment is a disaster not only for its victims, but for all society. The great Harvard sociologist William Julius Wilson showed how the disappearance of low-skilled jobs in the US during the 1970s led to the social collapse of black ghettos.

In Ireland for the last 20 years we saw this process working in reverse, as rising employment turned what had been sink estates into decent, if not wonderful, places to live. Finding a job does more for the disadvantaged than a legion of social workers: people’s sense of self-worth is transformed by being able to earn the money to do ordinary things like own a car, buy toys for their kids at Christmas, and take their family on holiday.

While many commentators argue that the benefits of the Celtic Tiger flowed exclusively to the wealthy and connected, this is nonsense. The benefits went overwhelmingly to ordinary people in the form of something that Ireland had never seen before: abundant jobs. By 2015 we will have seen what happens when jobs disappear forever, particularly from less educated men who were able to earn a good living in construction. In effect, Ireland is at the start of an enormous, unplanned social experiment on how rising unemployment affects crime, domestic violence, drug abuse, suicide and a litany of other social pathologies.

We will be forced to discover the consequences when people, who had worked hard to make decent lives for themselves and their children, find themselves reduced to nothing. Less than nothing in fact because, unlike the unemployed in the past, people now losing jobs are weighed down with debt and facing the terrifying prospect of losing their homes.

Debt will be the second ghost of Christmas 2015. Back in 1997, when exports drove real growth, Irish banks lent little by international standards. By 2008, Ireland had twice as much debt for its size as the average industrial economy: banks were lending a third more to property developers alone than they had been lending to everyone in Ireland in 2000.

It was this tidal wave of credit that inflated house prices and launched the construction boom that drove wages and government spending to unsustainable levels.

To fund this suicidal lending, Irish banks borrowed heavily internationally, and now must pay it back fast as the world realises that our recent economic miracle was less in the spirit of Adam Smith than of Bernard Madoff. As Irish bank lending returns to ordinary international levels, property prices will fall by at least two-thirds from their peaks.

However, five years from now, property prices could have been driven far lower than that by a deluge of sales of unsold, foreclosed and abandoned homes.

Mass mortgage defaults caused by unemployment and falling house prices are the next act of the Irish economic tragedy. As well as bankrupting our worthless banks all over again, the human cost of tens of thousands of families losing their homes will be enormous but, because the Government has already exhausted the State’s resources taking care of developers with Nama (National Asset Management Agency), there is very little that can be done to help these people.

Most people, of course, will not lose their jobs and homes. However, even they will be forced painfully to relearn something our parents already knew: beyond a small mortgage, debt swiftly turns into pure poison that will eat away your prosperity and happiness.

One response to large-scale home repossessions that will be attempted is to buy ghost estates for public housing to accommodate evicted home owners, providing ample opportunities for good old fashioned petty corruption.

For grand corruption, though, we will have to look to Nama. By allowing the banks to dictate the terms of their bailout, the bank rescue was turned into the most lucrative and audacious Tiger Kidnapping in the history of the State, with the difference that, like the sheriff in Blazing Saddles , the bankers held themselves hostage.

Bad banks like Nama were tried on a large scale in the early 1930s in the US, Austria and Germany; and proved to be profoundly corrupt and corrupting institutions, whose primary purpose was to funnel money to politically connected businesses. The German bank is best remembered for setting up what we would now call a special purpose vehicle to fund the presidential election campaign of the odious Paul Hindenberg.

Bad banks do not just happen to be corrupt and anti-democratic institutions, it is what they are designed to be. Effectively, bad banks give governments the power to choose which of a country’s most powerful oligarchs will be forced into bankruptcy, and which will be resuscitated to emerge even more powerful than before.

Nama will get to pick which of the fattest hogs of Irish development will be sliced up and fed, at taxpayer expense, to better connected hogs (remember that Nama has been allocated at least €6.5 billion, considerably more than the Government saved by draconian budget cuts, to “lend” to favoured clients).

While Nama may have momentous political consequences, it has already failed economically: the Irish banks are still zombies, reliant on transfusions of European Central Bank funding to survive until losses on mortgages and business loans finally wipe them out. In the next few months we will discover if the State bankrupts itself by nationalising the banks; or if it has the intelligence to free itself from bank losses by turning the foreign creditors of banks into their owners, as Iceland has just done with Kaupthing bank.

It is ironic that by 2015, having devalued its currency and dealt decisively with its banks, Iceland will almost certainly be a lot better off than Ireland.

Article by Morgan Kelly - Irish Times.

Going, Gone: Property Plummets...

Just eight houses sold under the hammer in Dublin this year, as the number of houses offered at auction collapsed by 80 per cent. In total,19 properties were offered for sale in the capital’s auction room; in 2006, at the height of the boom, more than 1,000 properties were auctioned in the city.

Estate agents Bennetts held most of this year’s auctions, putting five properties under the hammer. Lisney handled four auctions, as did Sherry FitzGerald, while Colliers Jackson-Stops auctioned three.

Douglas Newman Good, Harper O’Grady and Property Team each held one auction.

Simon Ensor, director of auctions at Sherry FitzGerald, described the number of auctions this year as unprecedented.

‘‘In the past, a quiet year for us would have been one where we [Sherry FitzGerald] held 25 auctions and where overall, there were around 100 across the entire market," he said.

‘‘I’ve been selling houses by auction since the mid-1980s, and I don’t ever remember a year where there were so few sales."

Ensor said he expected few auctions again next year, albeit not as few as this year. ‘‘There could be twice as many auctions in 2010, but even that would still represent a very low number," he said.

Only houses which ‘‘tick all the boxes’’ for buyers, or rundown properties with very competitive asking prices, would be auctioned for the foreseeable future, according to Ensor. ‘‘If a house has everything that a buyer could possibly want - a fantastic location, a beautiful interior, a great garden and off-street parking - then we would still sell it by auction," he said.

Report by Gillian Nelis - Sunday Business Post.

Wednesday, 23 December 2009

Repossessions Occur Daily...

Repossessions occur almost on daily basis, says regulator...

Level of arrears doubles in 15 months

THE homes of 331 people have been repossessed this year -- almost one a day -- and a further 26,271 mortgage holders are three months or longer behind in their mortgage repayments.

This means the percentage of households falling into arrears has more than doubled in the last 15 months, new figures from the Financial Regulator show.

But mortgage experts accused the regulator last night of down-playing the extent of the mortgage crisis.

They said the figures take no account of the thousands of homeowners who have got permission from their lenders for a payment holiday or are now only paying the interest on their mortgage in a bid to lower the repayments.

The figures show that the State's 22 mortgage lenders held a total of 331 repossessed homes by the end of September. In the three months from June to September alone 110 properties were repossessed.

Included in the 331 repossessed properties are 79 that were voluntary surrendered or abandoned.

But the director general of the Free Legal Aid Centre, Noeline Blackwell, warned borrowers that they will still owe money on the house even if they abandon it.

They may also be turned down for social welfare payments and will not get on a local authority housing list because they will be regarded as having intentionally made themselves homeless.

The 26,271 homeowners who are in arrears for three months or more represent 3.3pc of the 791,634 mortgages outstanding. Of these, 17,767, or 2.2pc, were more than six months in arrears.

The figures show that a total of €4.8bn is owed on the 26,271 mortgages that are more than 90 days in arrears, and that €3.2bn is owed in respect of accounts more than six months in arrears.

Ciaran Phelan, of the Irish Brokers Association, said the repossession and arrears figures did not represent the true extent of the mortgage mess.

"This study only looks at those people who are in breach of their loan agreement and doesn't include those mortgage holders who are on repayment moratoriums or have reduced to interest-only repayment with the consent of the lender.


"Although not technically in arrears, there are probably as many people in these latter groups as in the regulator's survey."

Diarmuid Kelly, of the Professional Insurance Brokers Association, said the new figures were a huge under-estimate of the scale of the mortgage crisis facing homeowners.

The Irish Bankers Federation (IBF) said figures showed that subprime lenders who are not members of the IBF account for just 2pc of mortgages but 42pc of all repossessions.

The head of the IBF, Pat Farrell, said: "We are acutely aware of the pressures facing some homeowners in the current economic environment and remain firmly of the view that early, constructive communication between the borrower and the lender is the best way to deliver mutually-acceptable outcomes."

Report by Charlie Weston Personal Finance Editor - Irish Independent

Sunday, 20 December 2009

Times Uncertain...

The times, they are uncertain...

The past year was characterised by harsh economic truths and a grinding dilution of hope, especially for people on the margins of society and those who saw their lifestyles – and livelihoods – dissolve

IT WAS the year of uncertainty. Of waiting, and waiting, and dreading. The dominos of society collapsed one by one – the see-no-evil bishops and priests, the senior gardaí who colluded with them, the invincible developers, swaggering bankers, procrastinating judges, grasping politicians, language itself – and trust fell off a cliff.

More than two out of three people declared they trusted no-one, in a monthly poll on the mood of the nation. Loss of trust was a theme of the year, says Carolyn Odgers of Chemistry Advertising, which commissioned the poll from Amárach Research. It was confirmed by The Irish Times /Behaviour Attitudes social survey last month . Only three in 100 will be bothered to look more closely at Government and in the event of another recession, even fewer at untrustworthy bankers. Overwhelmingly, we are back to self-reliance. Save more, spend less, ignore the wizards behind the curtain. Trust only in yourself.

And so this year, whenever another financial wizard uttered that great Wall Street dogma, “we are where we are”, at least we knew what he meant: he hadn’t a clue where we were. Worse, it probably meant we were being whipped by some faceless hunt master towards somewhere uncharted and probably not good. But one thing we knew for sure: the dogma of “we are where we are”, aka “taking the medicine” (in five budgets, all told, this year), was a synonym for soaking the little guy. What else could it be? Who would you trust to tell you otherwise? “Uncertainty” was the mot du jour in the slow-burning nightmare of the early January headlines. Invariably, it presaged the worst. “Uncertainty” about Anglo Irish Bank meant nationalisation within days. “Uncertainty” about Waterford Wedgwood prefaced the disappearance of an Irish icon. “Uncertainty” about Dell collapsed into the loss of 1,900 jobs and a savaging of 10,000 more.

People cried out for a leader, any kind of leader. Michael O’Leary was starting to look attractive. The January inauguration of Barack Obama was almost cruel in its timing. Here, at the new year’s dawning, was a tough, confident, attractive, intelligent leader offering harsh medicine and hope, placing Americans’ challenge in the context of their forebears’ toil and sacrifice, articulating with curled lip and righteous gaze the people’s disgust at bankers and lobbyists and their cheerleaders.

MEANWHILE, AT HOME , we waited and yearned for that decisiveness, that same independence of mind, someone to brew the bloody medicine and get it over with, but who was equally offering a vision beyond the sour, gauche “it’s brutal and will get twice as brutal for years and years”, someone to articulate the hope of a more noble, more sustainable nation at the other end, whenever that might be.

In its absence, a fairly average speech delivered by Brian Cowen to the Dublin Chamber of Commerce in February was hailed as a piece of oratory not far off Martin Luther King’s “I have a dream . . .”. In the vacuum, instead of hope, courage, unity of purpose, there came the new sectarianism: private against public sector. The intrinsic value of work was also a theme of the year. What price a banker’s bounty against a firefighter’s? A television star versus a nurse? A back-bencher versus a carer? And all the while, the official drip-drip of uncertainty and dread continued: Christmas bonuses gone, childcare supplement dead, job-seekers’ benefit period cut back – all made immeasurably worse by the dour, repetitive promises of worse to come.

A bemused world’s press gathered to watch us scramble over our hubris to placate the previously-despised “faceless technocrats” of Brussels and go bald-headed for Lisbon. Meanwhile, the more intrepid foreign journos took the well-worn path to Limerick and Tallaght. Some even made it to busted housing estates in Longford and Leitrim before, inevitably, trying for an interview with Sean Dunne, whose wife had opened a grocery shop in one of Dunne’s previously-despised hotels.

They asked about Nama. “It is good, it will save you, ja?” We don’t know, mate. No-one does. Is it best represented by Nama, the folk hero who built an ark to save his family from a flood? Or by the crater called Nama, waiting to swallow some unwary soul on one of Jupiter’s many moons? Is it yet another “uncertainty” or a big, fat, calculated “risk”? Behavioural economist Dr Pete Lunn of the ESRI distinguishes between “risk” and “uncertainty”, because experiments show people instinctively react differently to each. Risk is when you know the odds you are up against; uncertainty is when you don’t. A risk is playing roulette; uncertainty is playing roulette without knowing how many red and black numbers are on the wheel.

And all the while, the fall-out from the economic roulette was worming its way inexorably towards the surface in the form of hundreds of thousands of lost livelihoods. Among the hardest hit – though least heralded in the statistics – were the self-employed, the small café operators, the boutique owners, estate agents and architects as well as those about whom some trade unions agitated noisily during the boom: the carpenters, bricklayers and labourers, left with bad backs and no security.

Some had chosen to be self-employed; after all, the roulette game would never end. For others, the “self-employed” label was just a means for employers to evade their responsibilities. Many of the same “self-employed” were among the Breakfast Roll boys, the lads given first dibs on “discounted” apartments and houses-to-let on the bosses’ own developments. Now, in the worst of all worlds, there was no work, plummeting rentals or no rentals at all. Negative equity and disappearing migrants collided to wreck the dreams of more than fat-cat developers.

When RTÉ aired a profoundly sad documentary called The Sheriff and Me , a central character was a Co Offaly builder, fighting depression and unemployment. His was a world away from the champagne-swigging, helicopter-hopping masters of the boom. “We used to go for breakfast in Banagher on a Saturday, then on to the toy store,” said his young wife wistfully. Another exhausted couple struggling to rear six children in a decaying hardware shop in Clondalkin described the paralysing misery of a visibly withering living. The sheriff’s man stood by, eying up their assets.

People who had always regarded themselves as proudly self-sufficient suddenly found themselves in unfamiliar territory. A beautician tells of a woman sitting having her usual rather expensive nail and facial treatments, while musing worriedly that her husband had probably lost his job – there were ominous signs, including an injunction not to ring him at work – but hadn’t yet told her. Worryingly, the Chemistry/Amárach survey suggests 30 per cent of respondents believe their relationships are suffering due to the recession.

Savings gone, some – the ones who were able to think straight – might have found themselves seated before a person such as Teresa McCourt, development manager with the Co Westmeath Citizens’ Information Service. Trying at last to front up to reality, to opening the post, to breaking the agony of uncertainty, they would discover that the lot of the work-less self-employed is a meagre one.

‘THERE IS A huge difference between this year and last year,” she says, noting that it’s not so long since three-quarters of their queries were related to employment law, such as employees’ rights around holidays or pay. This year, the top five queries among the 2.5 million visitors to the website related to social welfare (39 per cent), employment (26 per cent), travel (14 per cent), health (11 per cent) and moving country (8 per cent).

“You would see a lot of sad situations among the self-employed, a lot of men who worked in construction . . . I’ve had men sitting in front of me practically crying. One told me he’d gone for a job with the HSE as a caretaker but was told he didn’t have the qualifications. And they become very angry. I would have experienced that anger. They might just have started out with a normal query, then they get on to something else. They rarely come in angry, not initially.” The staff have had to start “minding themselves”, she says. This year, that anger and sense of despair have surfaced often enough for staff to take courses in suicide intervention. “Now if people say ‘I’m going to end it all’, we’d pursue it. We’d ask them if that’s what they mean and get help for them.”

She reflects for a moment, then returns to that word, “uncertainty”. “A lot of it is about that. That and no hope. That has been the theme of the year.”

It’s not an image outsiders have of the Citizens’ Information Service (CIS). Teresa’s boss, Tony McQuinn, CEO of the Citizens’ Information Board, which oversees the CIS and the Money Advice and Budgeting Service (Mabs), tries to see the glass half full. On the one hand, online help and services didn’t exist during the 1980s recession. Nor did Mabs; now there are 50 Mabs centres in the country. People are also better educated now, have more experience of employment and of the possibilities on offer and so are starting from a different base.

On the other hand, he says, back in the 1980s, people weren’t used to wealth or choices. Their expectations were lower. But now, for the young unemployed with no experience of hard times and burdened with debt, he says, there is no clear picture of where hope is to come from. Who would have thought, a couple of years ago, that his agency would be running websites called or And yet . . .

Many would argue that the media has been remiss, even obstructive, in ignoring the positives. Carolyn Odgers of Chemistry suggests that there is a general obsession with the recession here that is not observable in other hard-hit countries such as Spain or Britain. Is it because Irish under-35s – unlike their British peers – have never known recession in their working lives and are in greater shock? Or is it because this is also a middle-class recession of severely shocked 30- and 40-something architects, solicitors, engineers and marketers, who may well be more vocal and articulate? Has talk of pay cuts in the private sector been exaggerated because the media industry was among the first to suffer?

THE GOOD NEWS is that half of the population has no borrowings. A torrent of money is flowing into savings accounts – driven by uncertainty, to be sure, but also by hard lessons well learnt. Some 88 per cent of the working population are still in jobs.

Brian Lenihan sees light somewhere down the economic road (although it’s fair to note that many others don’t). The recent poll by The Irish Times /Behaviour Attitudes also showed that people had moved beyond anger and the blame game, probably ahead of the media. The Chemistry/Amárach polls also reflected everyday positives such as relief that the pressure to keep up with the Joneses was off; it’s okay to wear the same outfit twice. They talk about reassessing their lifestyle, switching loyalties and brands (a huge trend in June), about retraining in safe, solid jobs such as computers, nursing, teaching, medicine, engineering, hairdressing, going back to what matters, to volunteering (though there is anecdotal evidence that overwhelmed charities are now looking for money rather than volunteers), frugality and simple lives. More than a third are cutting their spending by “a lot” for Christmas. Then again, is it not the media’s duty to reflect the facts as they are, rather than how people wish them to be?

Last week, for example, a report from the British think-tank, the New Economics Foundation (NEF), challenged the notion that high pay doesn’t matter as long as poverty is eradicated. It argues that high pay is often generated by big businesses that destroy other parts of the economy or fail to pay the full costs of their activities. The NEF concluded that, all things considered, financial workers, advertising executives and tax advisers destroyed value, while hospital cleaners, childcare workers and staff in the waste recycling industry gave much more to the country than they took out. So it calculated that, for example, tax accountants were the most destructive, burning £47 of value for every £1 they created. The biggest bankers destroyed £7 of value for every £1 (on the basis that jobs and tax contributions are offset by the cost of the current crisis and the negative impact on public finances), and advertising executives £11 for every £1 (they promote over-consumption). On the other hand waste-recycling workers generated £12 for every £1 spent on wages, childcare workers up to £9.50 for every £1 and hospital cleaners £10 for every £1.

Roy Foster, professor of Irish history at Oxford University, writing about Ireland's rise and fall in the Guardian, ended on a positive note. “But what remains of the years that the locust has eaten? Ireland, if poor again, is still younger, sharper, less deferential (particularly to the Catholic Church) and more entrepreneurial . . . The government may have to rediscover Swift’s dictum that the wealth of a country is its people. How far the ‘people’ forgive the government for the way it has treated them remains to be seen.”

Report by KATHY SHERIDAN - Irish Times

Tuesday, 15 December 2009

Scarey Shadowland Ideas For Ghost Estates...

Architects offer ideas for country's 'ghost estates'...

IT IS a future where empty housing estates are used as crematoriums and there is a scrappage scheme for ugly one-off country homes.

As the National Asset Management Agency (NAMA) prepares to begin operations in the new year, a group of architects have put forward suggestions for what can be done with the unfinished constructions and 'ghost estates', legacies of the economic downturn.

From an unfinished hotel which has been handed over to the community, to a 'two-for-one' scheme for unsold houses, the 'Shadowland' exhibition which opened in Dublin yesterday floats some realistic and some more improbable ideas.

Among the suggestions are a 'City of Dead', where abandoned or unsold houses are used as crematoriums and chapels.

FKL architects, which organised the exhibitions, have also suggested a scrappage scheme for houses. One-off homes would be knocked down and the residents rehoused in towns, while trees are planted on the old site.

The same company has suggested using empty estates as schools, and a scheme where buyers can get two homes for the price of one, using the extra space for family space.

"The leftovers of the boom-time take the form of half-finished projects, 'ghost' housing estates and land zoned for development in inappropriate locations nationwide," said organiser Michelle Fagan of FKL.

"Under NAMA, the same people who created the issues in the property sector will be charged with resolving them.

"Decisions must be made regarding the future of these sites and this process must involve taking into account the impact on communities, as well as financial and economic outcomes."

Visitors to the exhibition have been asked to contribute their ideas via post-it notes on the exhibits.

A full report will be completed at the end of the exhibition, held at Dublin City Council civic offices.

Report by Shane Hickey - Irish Independent

Thursday, 10 December 2009

Budget 2010...

Budget 2010: Brian's bitter pill...

FINANCE Minister Brian Lenihan yesterday chose to avoid new income taxes by instead slashing social welfare payments and public sector pay.

But he insisted "the worst is over" after delivering his third Budget in 14 months.

However, there is plenty more pain to come as Mr Lenihan last night revealed plans to achieve €2bn more in cutbacks in 2011 through water charges, a property tax and public sector reforms.

The Government is also planning a radical overhaul of the PRSI, income and health levy system, which will also widen the tax base.

Mr Lenihan cut €4bn from spending in Budget 2010 and introduced carbon taxes and stealth charges in the health sector.

But his Budget was branded as lacking fairness as it hit those on low incomes in the public sector and those dependent on social welfare.

The salaries of Taoiseach Brian Cowen and his ministers were reduced by 20pc and 15pc respectively -- but this included the previous 10pc voluntary cut a year ago.

As a result, the opposition parties claimed the ministerial pay cuts were "a sham", with ministers taking the same 5pc cut as the "cleaner in their offices".

The pay cuts in the public sector will be tiered upwards, with a reduction of 7.5pc on the next €40,000 of salary and a cut of 10pc on the next €55,000. Higher-paid public servants will be hit with salary cuts of up to 15pc.

The decision not to exempt any lower-paid public sector workers from the cuts was seen as particularly harsh, as a pay cut of 5pc will apply to the first €30,000 of salary.

Mr Lenihan said the country could not tax its way out of a recession.

"The worst is over. The international economy has exited recession. Recent indicators suggest that economic activity in this country is turning the corner, and my department is now expecting a return to positive growth within the next six to nine months," he said.

The main points of the Budget were:

* Child benefit cut by €16 a month, with a compensation top-up for welfare-dependent families.
* Social welfare payments reduced by 4pc, except for the old age pension which wasn't touched.
* The job-seekers' allowance was reduced for under-25s.
* Tax exiles will have to pay €200,000 a year, if their assets in this country are above a certain level.
* A carbon tax seeing petrol rise by 4c a litre and diesel by 5c a litre last night.

But the minister added in some sweeteners:

* VAT reduced to 21pc.
* Excise duty on alcohol was reduced by 12c on the pint, 14c on a spirit shot and 60c on a bottle of wine.
* A car scrappage scheme with €1,500 tax relief on new fuel-efficient cars in return for trade-ins of bangers at least 10 years old.
* Measures to encourage first-time home buyers to enter the market, by setting a deadline for claiming mortgage interest relief.

Taoiseach Brian Cowen said he was "confident enough" the Government could get through the Budget vote. And last night, it appeared he was well able to count on a majority.

Before TDs go home to their constituencies for the weekend, crucial votes will be called today and tomorrow on the more controversial measures, such as the child benefit cuts and the slashing of public servants' wages.

Environment Minister John Gormley said the introduction of the carbon tax was a "proud day" for his party as he defended the Budget.

"Given the difficult choices we had to make, I believe this Budget was by and large fair. It also creates 14,000 jobs in water service and house insulation projects," he said.


Fine Gael accused the Government of presenting a "jobless and joyless" Budget, which would prolong the recession.

The party's finance spokesman Richard Bruton said the draconian plan forced those who had no hand in creating the current crisis to bear the brunt of the pain.

Rebellious TDs who put a price on their support last night rowed in with the Government. The Coalition easily won the first in a series of Budget votes by a comfortable margin of 88 votes to the opposition's 75.

The sizeable majority was owed to the support of independent TDs Michael Lowry and Jackie Healy-Rae, independent Fianna Fail TDs Eamon Scanlon, Jimmy Devins and Jim McDaid, and former Progressive Democrats TD Noel Grealish.

Report by Fionnan Sheahan - Irish Independent.

Sunday, 6 December 2009

Repossession Of Homes

Pressure on State to stop repossession of homes...

There is a "substantial" number of new mortgage holders who should never have been approved for the amount of money they borrowed and repossession orders should not be granted to their lenders, proposals to Finance Minister Brian Lenihan and the Oireachtas committee have urged.

A group, whose aim is finding a way to assist thousands of families who face the "very real threat" of losing their homes because of mortgage arrears, said the terms of loans should be amended to what the borrower can afford.

The Prevention of Family Home Repossession Group has made submissions to Mr Lenihan and the Joint Oireachtas Committee on Finance and Public Service on a variety of measures to deal with the problem.

They have also warned that many families will find themselves in a poverty trap with a deteriorating economy, spiralling unemployment and the prospect of interest rate rises.

"This has the potential to lead to catastrophic social difficulties throughout Ireland which would cost society and our nation dear," the group, which comprises Senator Marc MacSharry, businessman Ignatius Beglane, general manager of Sligo Credit Union Barry O'Flynn, accountant Cathal O'Donnell and solicitor Dermot McDermot, said.

They point out that over 20 per cent of households are already in arrears with an overdrawn bank account, credit card balance, mortgages, rent or arrears on other bills, with mortgage arrears being the most prevalent.

And they said although the European Central Bank indicated that key interest rates will remain unchanged well into 2010, it seemed certain that mortgage holders in Ireland will see an interest rate rise as banks and building societies seek to increase their margins to boost profits.

The group believes that the repossession of a family home due to mortgage arrears should not be allowed without a detailed independent analysis of repayment capacity, an examination of the quality of the mortgage application and consideration of a range of alternative actions.

They have recommended a range of options: Interest-only payments not exceeding four years; permanently extending the mortgage period without penalty; renting the property back from the lender, giving him an income from the house; giving mortgage holders breathing space to clear debts; fixed rates -- addressing a problem debt at a lower current rate, and redrafting mortgage terms to what the borrower can afford.

They stressed that an order for repossession should not be granted until the court is satisfied that the loan was properly granted and that analysis of the capacity of the borrower to repay had been carried out, and that there should be an independent analysis of the current position of the borrower to repay the debt.

Report by Don Lavery - Sunday Independent.

House Prices Drop More...

House prices drop 1.8% in October...

Dublin: House prices fell the most in six months in October, extending a real-estate slump that has pushed prices to their lowest in six years.

Prices dropped 1.8% from the previous month, the most since April, Dublin-based Irish Life & Permanent Plc said in a monthly report today. From a year earlier, prices dropped 13.9%.

House prices have fallen in every month since March 2007 and are now 27% below their peak in the early part of that year, according to the Irish Life/ESRI index. The average price of a house in Ireland was €228,347, the lowest since October 2003.

Report - Irish Examiner.

Thursday, 3 December 2009

The Lost Decade: Prices At 2001 Level...

The lost decade: prices now back to 2001 level...

The property industry felt it could walk on water during the first half of the noughties, but after 2006, it all began to go terribly wrong.

SO HOW did it all go so wrong in the property market? For a while there, mid-noughties, people in the property business felt they could walk on water. Now, with almost a decade of growth wiped off the value of Irish homes, both buyers and sellers are asking, how low can we go? Are we still in freefall, bumping along the bottom, or seeing the beginnings of recovery? Nobody wants to make the call.

Surprisingly, they were asking the same questions back in 2001. “Now that the boom is over, everyone wants to know what is going to happen to property prices. Is now a good time to buy, will values drop even more in the spring? Should sellers wait?” this supplement asked in December 2001.

After six consecutive years of growth since the mid-1990s, and the euphoria of the millennium, 2001 proved a tough year with a nasty sting in the tail. The dotcom bubble had burst, and the horror of 9/11 had blanketed the world with gloom.

House prices fell back by 15-20 per cent and pundits were predicting an even more difficult year ahead. At the same time, lending rates had fallen to their lowest level in decades and, unlike now, money was freely available.

First-time buyers were getting younger, with Irish Permanent reporting that a surprising 13 per cent of first-time buyers were aged between 20 and 24.

Auctions halved in 2001, though by comparison with today, auctioneers were busy, holding over 800 auctions that year, down from a peak of 1,804 in 1998. In 2009, just 17 properties were auctioned in Dublin.

And the prices in 2001? Two-bedroom apartments and houses in Lucan could be had for €120,000 to €140,000, much like today; three-bedroom terraced houses in the area of the South Circular Road were selling for around €370,000, while in Monkstown, Co Dublin, one of the houses at Trafalgar Terrace was asking €1.71 million. Today, there’s a slightly smaller house for sale on the terrace at €1.575 million.

Builders were in trouble, as buyers dropped off. Investors had been taken out of the picture by market-cooling measures introduced back in 1998 on foot of the Bacon Report.

They petitioned the Goverment to help and it obliged with Minister for Finance Charlie McCreevy re-introducing mortgage interest relief in investment property in the December budget of 2001. New homes agents were back in business.

Meanwhile, the Government extended Section 23 tax reliefs and introduced new incentives to build and buy holiday homes, student accommodation and nursing homes,

By 2003, the gloom had lifted and there was more competition than ever for both starter homes and trophy homes, with redbrick Victorian houses on the big Ballsbridge roads, Shrewsbury, Ailesbury, Herbert Park and St Mary’s, making around the €5 million mark.

Competition began to hot up between estate agents for a share of the lucrative new homes market. “A round of applause for the hugely successful launch of the coolest location on the northside”, ran one full page ad that September for Drynam Hall in Kinsealy, north Co Dublin, where no less than 110 sales were agreed at the launch weekend.

Three-bed semis were flagged as a dying breed by estate agents who said that apartments would be the preferred option for local authorities who wanted to stop the spread of housing estates.

By 2004, boom times were taking off again despite more grim economic forecasts. A staggering 77,000 new homes were built, outdoing the previous two years, with 16,000 of those in Dublin.

The high level of sales was triggered by attractive mortgage rates with a typical tracker rate of 3.1 per cent available to borrowers. Lisney warned of “the rise of tenant power” saying tenants were becoming demanding. The reason: plenty of choice with the buy-to-let market busy.

Big houses got even more expensive, with a detached five-bed house on Temple Road in Dublin 6 leading the list of the top selling houses at over €9 million.

Meanwhile, Irish investors were dominating the UK investment market, with some of them buying up entire apartment developments. London agents said that bulk buying at early stages was what differentiated the Irish from the rest of the punters.

And the mania for buying properties abroad that had begun even before 2000 continued unabated:we’ve bought at least 150,000 properties abroad by now, if a figure quoted by Bertie Ahern in a recent radio interview is accurate.

People invested in properties from Provençe to Portugal, Bulgaria to Barbados, Turkey to Dubai, where a property bubble to rival our own burst last week. Cheap flights, cheap mortgages and sizeable equity in our own homes fuelled the foreign purchases.

House prices at home rocketed in 2005, and by the end of that year, several Dublin roads had seen their houses double in value in two years.

A stratospheric €58 million was paid for Walford, a house on two acres on Shrewsbury Road said to have been bought in the name of Gayle Dunne, wife of developer Sean Dunne, though he has denied this.

The house has remained idle and was recently valued at around €20 million. Still in 2005, another canny seller was one Professor Gerald Doyle, brother of the late hotelier PV Doyle, who sold his Carrickmines home on over eight acres, Barrington Tower, for €36 million.

The canniness of the Doyle family was to emerge that year too, when they sold the three Ballsbridge hotels to Sean Dunne for a record €260 million.

The peak of the market was fast approaching, but few could see it. Significantly, both AIB and Bank of Ireland were getting ready to off-load bank branches up and down the country, which they then sold for hundreds of millions.

Young people continued to pile into the new homes market, including a new group of buyers – foreign nationals. Between 2002 and 2005, there was a 40 per cent increase in the number of foreign nationals living in the State. One new homes agent, Ronan O’Driscoll of HOK (now Savills) reckoned 30 per cent of his customers were non-nationals in 2005, up from 5 per cent in 2003.

Meanwhile the price of good suburban homes was soaring. A five-bed bungalow in Mount Merrion was sold at auction for €2.33 million. Today it might make just over €1 million.

Frenzied buying at auction and in the new homes market through the spring of 2006 can be seen now as the final throes of the boom. Prices rose between 12 to 25 per cent in the first three months alone. The number of auctions was high, over 1,400 in the year.

Auctioneers were by now bound to use a new system of auction guide prices, called the Advised Minimum Value (AMV), i.e. the price below which the vendor would not sell. However, these did not help: a two-bedroom Stillorgan house sold for €1 million, when the agent expected €650,000; a house in Dalkey made €6.3 million, nearly twice its €3.5 million AMV.

A family home with land in Foxrock was bought by developer David Arnold for €31 million, €11 million over the AMV.

There was a spending spree on redbricks, with seven houses on Ailesbury Road in D4 selling in 2006 for prices between €9.6 million and €15 million. In Take 5 we featured a detached Donnybrook redbrick for €2.5 million versus a château on 284 acres near Vichy in France for the same price.

It couldn’t last and it didn’t. When a glut of similar houses came on the market in autumn 2006, most did not sell. New homes sales were beginning tail off too. Over 90,000 new homes were completed by the end of 2006, at least 20,000 of them in the Dublin area.

Tánaiste Michael McDowell caused a furore in late 2006, declaring that stamp duty needed to be reformed and that the state did not need the €2.6 billion that had been raised that year. The property market stalled for the remainder of the year.

Rising interest rates, uncertainty over stamp duty reform and ebbing confidence in international money markets confirmed the downturn early in 2007. Sales by auction dropped by 72 per cent over the year and property values fell by up to 20 per cent in some areas.

Still, rents went up, also by 20 per cent – although by year’s end, they were slowing too.

Unsold apartments were piling up, however and one developer in Ashtown, D15, broke ranks in December 2007 by offering discounts of €100,000 on units that had been €400,000. A rival builder offered to buy his stock privately rather than destabilise the market with price cuts. It was the beginning of the discount trend.

Still, some people got lucky, including former taoiseach Albert Reynolds who managed to sell the house on Ailesbury Road he had bought in 1996 for £600,000 for a staggering €14 million. He promptly moved into an apartment in the Four Seasons Hotel.

“Cutting price the only way to sell in a sluggish market” was the advice we gave in 2008; sellers were not in a mood to listen.

The whole industry was in denial and soon in dire straits as the Irish banking crisis followed the global financial crash.

The number of unsold new homes continued to rise, and developers opted to rent their empty apartments out instead, causing a a glut in rentals.

Rents dropped and vacancy rates rose dramatically. Banks began to tighten up on lending. Even those who did want to move, couldn’t get the money. Selling their existing house was a big problem. The auction system all but died, and prices fell by an estimated 40 per cent according to the Douglas Newman Good agency.

Things were so bad that Edward Carey, the then president of the auctioneers’ association, advised people who did not need to sell to pull their homes off the market.

Some of the 35,000 new homes overhanging the market, he said, would never sell because they were built in the wrong places.

By 2009, only those who genuinly needed to risked the market. Executor sales – the owner being dead - attracted attention and generally have sold well. Other sales stemmed from business failure, marriage break-ups and the loss of jobs.

However, sales activity was poor all year, with some activity under €500,000 and virtually none over €1 million. All thoughts of making a fortune in property have collapsed but interest hasn’t. Most agents say that viewings are strong, that people still want to buy, but with banks still stalling, the market has yet to show a bit of bounce.


Saturday, 28 November 2009

Where Do We Go From Here?

IRELAND TODAY: IT’S JUST over a year since Wall Street and its Irish cheerleaders chanted “We are where we are” while Main Street reeled. Since then, every wrong-headed, populist Government economic policy, every catastrophic failure of the Financial Regulator, every rampantly greedy, short-termist instinct of the financial institutions and builders/developers has been exposed...

A year ago, commentators were predicting something akin to the end of capitalism as we know it. Citizens were demanding humility, apologies, accountability, a purpose of amendment, radical reform, fewer tax breaks, an end to the bonus culture and a fairer share-out of the tax burden. So how is your head now, a year on? Still looking for other heads on plates?

There is a lot to rage against.

Only this week, headlines announced that banks are being “forced” to pay bonuses. But how long can a people sustain a condition of mass, impotent rage while remaining relatively sane and healthy? A few weeks ago, 1,200 people packed out the National Concert Hall at €25 a head to hear four journalists (“Four Angry Men”) give their scathing take on the culprits of the crash.

But when this reporter conducted a straw poll beforehand, it was evident that many people had moved on; they wanted to hear more about the future, less about the past. And yet, the bestseller lists are dominated by these men’s books. UK writers have produced similar works but failed to colonise the top five. So, clearly, Irish people continue to search for explanations – but what does that say about their state of mind?

In the past week, a broad-ranging social opinion poll, Ireland Today , conducted for this newspaper by Behaviour Attitudes, provided some answers – among them, the rather surprising one that the nation has indeed moved on. Emphatically so. That’s despite the fact that half the participants believe the economy will be in a worse state this time next year. Asked to name the biggest personal lessons learned from the recession, overwhelmingly and unprompted, they said they should have spent less and lived within their means.

Just one in eight said it had taught them to beware of poor government and corrupt politicians, and even fewer blamed bankers. As for arming themselves against future recession, the aim is self-reliance; save more, spend less. Just three in 100 will approach the next recession by looking beady-eyed at government and corrupt politicians; only two in 100 will focus on untrustworthy banks, the same number who plan to be positive and take one day at a time.

This was no surprise to Dr Pete Lunn, a behavioural economist with the ESRI and author of Basic Instincts: Human Nature and the New Economics. “It’s very rare, when we take the biggest economic decisions or purchase of our lives, to get direct feedback. We never know what would have happened, for example, if we had taken the other option . . . Psychologists would tell you that if you want learning to be quick, what you need is direct feedback and make it salient. And that’s what’s happened here. It’s taken the biggest recession in 70 years but a whole generation has got direct and salient feedback about their behaviour . . . Everyone’s got a whacking slap in the face.”

AND NO-ONE could accuse the survey respondents of being uninformed. Nearly two-thirds said they keep up with what’s going on in the business world. The same number pay more attention to the news than they did a year ago. Even more believe the recession here is worse than in most other European countries. Successive opinion poll results suggest that voters are doggedly intent on a change of government.

The survey’s finding that nearly 70 per cent have not had a pay cut or had their working hours reduced, though backed up by CSO figures, has met much quiet scepticism on the part of economists. Dr Lunn is one of the exceptions, saying it backs up solid evidence that for morale and productivity reasons, most company managers prefer to sack people than make pay cuts across the board.

The question of whether people are working longer, harder hours for the same pay was not addressed in the survey. Whatever the truth, the salient fact is that that some 800,000 people in this small country have seen someone in the household lose their job and one in five have had their hours reduced by an average of more than 40 per cent. Unsurprisingly, CSO figures reveal one in five households is in arrears.

Yet despite all that, three-quarters of those surveyed say they are content with their way of life. Even more impressively, 84 per cent believe Ireland needs to start believing in itself again.

Gerard O’Neill, chairman of Amárach Research, characterises this as “private contentment and public anguish”. It’s all about family, he says. “Family features massively in the Irish psyche. Irish satisfaction with family life is among the highest in Europe.”

That’s the private contentment. As for the public anguish, O’Neill suggests people are prepared to leave their warm homes to listen to the likes of Four Angry Men because they are seeking new channels through which to vent concern – and to find new ways to deal with uncertainty. “If you talk to charities, or look at the community response to the floods, people are rolling up their sleeves and coming together.”

But are we somewhat amnesiac when it comes to the axis of politicians, bankers and developers? “I don’t think people will forget what they’ve been through. They will carry huge levels of personal debt into the next decade in the form of negative equity, business loans, investments that went pear-shaped.” But remember, says O’Neill, “88 per cent of the workforce is still in employment, that’s something to keep in mind.”

Dr Maureen Gaffney, psychologist and chair of the National Economic and Social Forum (and currently writing a book on these matters) was another who wasn’t remotely surprised by the sense of positivity and desire to move on.

“The Irish are temperamentally cheerful, which is great,” she says, but we are in danger of being ground down by the pessimists.

“It’s an incredible tribute to our temperament that we are not so afflicted by all the pessimism around us. We have evidence on this ever since we started conducting polls on wellbeing and happiness; the Irish have consistently come out in the top four and that dipped only slightly in the last recession. The tragedy is that cometh the hour, cometh the pessimists and they are now the overwhelming voices.”

ISN’T THAT dangerously close to suggesting we stop analysing the forces that got us here or the high-stakes solutions on offer? “No, it’s not. In an evolutionary way, we need optimists and pessimists – and I don’t mean optimists in a Pollyanna way. We clearly do need that realistic assessment of the challenges, but we also need to believe there is a way to overcome them and that’s the way of learning, personal happiness, experimentation, economic prosperity. The evidence for this is overwhelming and while it’s appropriate to point the finger, it’s gone way too far . . . There is a whole other story about accountability and that one hasn’t been resolved. But where is this downward spiral going to end? The fact that people believe in the future isn’t surprising, but as many implications flow from that as from the doom-laden figures in the news.”

Dr Gaffney’s passion for the subject implies a scepticism on the part of others that psychology has a vital role to play in the nation’s recovery. Dr Lunn points out that the British treasury department just released a document by behavioural economists, outlining the lessons learned in recent years.

While he and Dr Gaffney might approach this from different angles, they are both adamant the psychology of human behaviour is as important as anything traditional economists might have to say. “We should be putting all our energies into finding ways to maintain this positive spirit because without that, we won’t be able to collectively keep going,” says Dr Gaffney. “I just think people are completely underestimating that you need a particular psychology to prosper . . . When you set out to do something, you have to believe you’re going to achieve it. The nature of a big challenge is that you don’t have all the information. You have to take a stance. The evidence is that the most fundamental thing to have is belief.”

Her frustration is palpable – and not only with the pessimists colonising the media. “The biggest, most serious lack facing this country now is that there is nobody at senior level in Irish society articulating a persuasive vision – that word is so overused – or scenario of the kind of Ireland that we can build. Nobody is totting up the things that are still right with us. Think of the people who have to deal with the most appalling personal adversity – in the face of the most awful challenges, you have to pick yourself up and begin again in a new way. Obviously, we have to know the pain ahead. But when was the last time you heard an account of what Ireland will be like in 2015, one that we can all relate to?”

Dr Gaffney detects a “huge hunger” out there for this persuasive vision. But who should articulate it? “It should be coming from political leaders on all sides of the House, from civic leaders, from anyone who has an influence on Irish society and opinion. We all have a responsibility.” So where does that leave the Four Angry Men and their ilk? “I think we should be drawing up a panel of optimistic women – no, okay, optimistic people,” she says with a wintry laugh. “And if I can’t get a panel together, I’ll do it myself.”

Article by KATHY SHERIDAN - Irish Times.

Thursday, 26 November 2009

Celtic Tiger Makeover...

How do you solve a problem like Clongriffin?

The bubble burst leaving the new north Dublin suburb in the lurch. Now designers and architects are figuring out what can be done to create a sense of community...

SO WHAT do you do with a place that’s merely a fragment of what was planned? Clongriffin, on the north fringe of Dublin, was supposed to have a population of 30,000 to 40,000, with all the communal facilities they would need. But construction ground to a halt when the bubble burst, leaving the area’s residents high and dry.

Enter Designing Dublin, a unique initiative by Design 21st Century, founded by Jean Byrne and Jim Dunne, who are both members of the Crafts Council of Ireland with backgrounds in business. Dunne was inspired by an exhibition at the Chicago Museum of Contemporary Art about how design could address current challenges.

They brought in Vannesa Ahuactzin, a young American architect who did a year’s programme at the Institute Without Boundaries in Toronto, which specialises in design innovation and inter-professional collaboration.

“We see the designer as a problem solver with the ability to effect positive change for humanity,” says its website.

The outcome was Designing Dublin: learning to learn , a pilot project to show how it’s possible to bring together people from different backgrounds to work together intensively for three months – an experience that would be transformational for them and “could transform this country in the next five years”, according to Jean Byrne.

“A lot of people are now volunteering to work overseas, but we need to get things done here as well. Unemployed architects and engineers could get involved in this kind of work all over the country, building and shaping a whole new way of doing things. If we could get even 10 per cent of those unemployed, it could really transform Ireland.”

With the support of Dublin city manager John Tierney and former Accenture chairman Terry Neill, who’s now on the board of CRH plc, the project developed legs. More than 100 people applied to take part, and 17 – divided equally between the public and private sectors – were selected following the personal ordeal of a day-long interview.

The chosen theme of the project was to “find the hidden potential of place”, and the challenge was to apply this to Clongriffin, a place that barely exists. Apart from all the new apartments, its main “boulevard” has just five businesses operating – a Chinese takeaway, an off-licence, a chemist, a hairdressing salon and (what else?) a Centra.

All of the remaining retail units are vacant, giving the boulevard a desolate air. “We realised there was a lot of wastage in this country during the Celtic Tiger years,” says Vannesa. “So in working on Clongriffin, we wanted to see what is there to tap into, to engage residents in taking ownership of area, make it more interesting.”

The 17-strong project team, ranging in age from 21 to 53, set about trying to understand the place by talking to the people who live there. Not surprisingly in a new area, many of them felt isolated – but many were also keen to get involved in building a community spirit, especially as they are now pretty well locked into living in Clongriffin.

Working with kids (no less than 13 nationalities are represented there) in the two prefab schools, the team gave them a series of images of things in the area, asked them to draw a picture of their favourite place, and ended up with a series of paintings that were put on exhibition in a vacant shop which was turned into a café for a day.

“We only had Thermos flasks and paper mugs, but it was very, very successful,” Jean recalls. “Parents came along, of course, and even curious teenagers walked in and started participating. In no time we had all these conversations going about what they’d like to see happening in Clongriffin.”

One thing the locals are very proud of is Father Collins Park, which Dublin City Council opened last May, with five wind turbines to generate electricity.

At 52 acres, roughly twice the area of St Stephen’s Green, it was designed by Argentinian architects Abelleyro + Romero, who won an open competition for the €20 million project in 2003.

“The park is a huge asset, people are really inspired by it so that’s very good at building optimism,” says Vannesa. But the Designing Dublin team found that the children also wanted access to “wild nature” – like the pond with swans in it half-way along an unfinished pathway to the coast. For them, this is a magical place.

One of the five projects selected for detailed study by a sub-group is to complete the missing link of 300 metres, so that Clongriffin residents can make use of the trail.

The aim is to get them directly involved in the project, even designing it themselves, so that the community will have a sense of ownership of this potentially important amenity.

Another project is called Hothouse – essentially, a community centre where people can meet. Prototype designs for this much-needed facility, on a site just south of Father Collins Park, are being worked up by local residents with the aid of four architectural technicians from the DIT School of Architecture. The final scheme might even be built.

Other projects include Grow Local, which aims to help budding entrepreneurs by providing space for them to develop their ideas, using one or other of the many vacant retail units as a base.

Gerry Gannon, who owns most of the development land in Clongriffin, is said to be sympathetic to the idea of making premises available.

Another sub-group is looking at Local Expression, which is essentially about enlivening the area and perhaps even transforming some of the areas of wasteland left over after the boom came to a sudden end. This might include painting hoardings around the sites and turning them into art objects, like the gable murals in Belfast.

Finally, residents felt there was a need for a “communications exchange” to let people know what’s going on.

They already have a website ( and big billboards packed with local information, but the more innovative ideas include messages in the sky, given that it’s visible on the approach to Dublin Airport.

End-of-project activities this Saturday from 11am to 9pm include a “60-minute makeover”, transforming an empty shop beside Centra on Clongriffin’s main street into a prototype community “hothouse”, an exhibition of models made by local children showing how they see the future, and to cap it all, an an “imagination celebration”.

Report Environment Editor FRANK McDONALD - Irish Times.

Wednesday, 25 November 2009

Selfish Strikes By State Workers...

Strikes no answer to crisis...

AT A time when social solidarity and a sense of personal responsibility are needed as never before, employees in the most protected sector of the economy have behaved selfishly. A one-day strike by a quarter of a million State workers – and the threat of more to come – has damaged our international reputation and made the task of economic recovery even more difficult. When all the rhetoric and special pleading by trade union leaders is stripped away, what is left is the unattractive face of mé féinism.

Public sector workers can argue they are not responsible for the recession and that they have already been forced to pay a pension levy. But their anger at the banking sector; at the Government’s mishandling of the situation and the various regulatory failures that contributed to our current difficulties is shared by workers in the private sector and does not exempt them from the tough fiscal actions that are now required to correct the public finances. Just as their colleagues in the flooded regions of the west and south continued to work yesterday in order to help threatened communities, they also have a duty of care to the citizens of this State. The threat posed to the future welfare of Irish society by a €25 billion shortfall in the public finances is as immediate and fundamental as the rising waters of the Shannon.

This is a time of national emergency. There is no point in vested interests demanding that others should carry the burden of financial repairs, while seeking immunity for themselves. Every individual and group should be required to contribute according to their means. Next month’s budget will represent just the first step in an extended recovery programme that will, inevitably, involve reform of the taxation base and a restructuring of the State’s public services.

The Government and the main Opposition parties have acknowledged the need for a €4 billion cut in public spending next year. And while they disagree on how those savings might be achieved, they accept it will be necessary if public debt is not to spiral out of control. The Government plans to save one-third of this amount on the public pay and pensions bill. It has invited public sector unions to discuss the issues today. For their part, union leaders have offered to consider changes in work practices and reductions in numbers. They have urged delay in repairing the public finances. And they have threatened further industrial action if pay cuts are imposed. On the face of it, it would seem impossible for the Government to achieve its proposed savings without confrontation.

Strike action solves nothing. It sows the seeds of division at a time when we need to work together. It is being used here to defend the existing pay and conditions of a privileged group of workers. If the Government backs off, additional cuts in services and welfare benefits will be required. The most vulnerable sections of society will be affected. That would be neither equitable nor fair in current circumstances. If social partnership means anything, it should involve discipline and responsibility. This will be its ultimate test.

Report - Irish Times

Friday, 20 November 2009

People Struggling To Keep Roof Over Their Heads...

Over 77,000 now behind on mortgage or rental bills.

Figure twice previous estimate...

AT LEAST 77,500 households are in arrears on their mortgages and rent payments.

This is more than twice previous estimates of the numbers of people struggling to keep a roof over their heads. It is a clear sign that the country is now gripped by a mortgage and rental crisis, experts said.

Also, one in five households are struggling to pay credit card bills, credit union loans and overdrafts. Higher-income families are more likely to owe money to credit card companies and to be overdrawn.

The major study of incomes and living standards by the Central Statistics Office indicates that thousands of homeowners and those who rent are so deep in debt that many are at risk of losing their homes.

The frightening figures underscore the mortgage misery in the country and stress the need for a rescue scheme for heavily indebted families, mortgage experts said.

However, a leading economist said last night the arrears figures may be higher as the CSO study relates to last year. Since last year there has been a 30pc rise in the average numbers joining the Live Register every month.

The CSO figures also lay bare the extent that Irish families are mired in all sorts of debts, apart from housing loans.

One fifth of households are now in arrears on a range debts, with higher-income people more likely to have arrears on credit cards, overdrafts and mortgages.

Lower-income people are struggling to pay utility bills for ESB and Bord Gais.

The report also shows that overall household income rose last year, largely due to payments like child benefit.

This was largely become more than one-fifth of the average income of households now comes from social transfers such as state pensions, child benefit and other welfare payments.


This is likely to bolster arguments to cut social welfare payments in the Budget.

But it is the mortgage and rent arrears figures that are most likely to cause a stir.

Previous estimates from the Economic and Social Research Institute (ESRI) and housing charity Respond had estimated that the numbers in arrears on their mortgages could be as high as 35,000.

But the CSO's Survey of Income and Living Standards says that 4.9pc of households are in arrears on mortgage repayments and rents. It does not separate out figures on mortgages arrears.

There are 1.58m households, according to the CSO's assistant director general Siobhan Carey. This means that 77,513 people are in arrears on their rents and mortgage repayments. There are 645,000 residential mortgages outstanding.

Goodbody economist Dermot O'Leary said that the situation for cash-strapped households was likely to have become more difficult this year.

On average an additional 13,000 people are signing on each month this year, compared with 10,000 joining the Live Register last year, when the CSO study was carried out.

Mortgage adviser Karl Deeter of Irish Mortgage Brokers said the CSO report showed the country was suffering a mortgage crisis. The courts are seeing an average of around 100 repossession orders a month for homes. However, few of these cases end in repossession orders being granted.

Earlier this week the Cabinet decided it would fast-track a scheme to rescue mortgage holders at risk of losing their homes.

The issue is being pushed at cabinet level by Energy Minister Eamon Ryan following agreement in the Programme for Government to put in place a mortgage scheme to avoid families being forced out of their homes.

The new scheme is expected to be agreed within weeks, with new measures in place by early next year.

Yesterday's CSO report also showed that one in 10 families had an outstanding balance they owed on their credit card, with many of these owing more than €2,850.

Most families reported that they were falling behind with their payments on mortgages, rents and utility bills. Almost one in 10 families were struggling to meet mortgage or rent and ESB bills.

Report by Charlie Weston - Irish Independent.

Wednesday, 18 November 2009

State Should Print Money To Rescue Economy...

State should start printing money to rescue economy...

Did you know that our country's housing wealth has shrunk at a rate of €142.8m per day since the peak of the boom in 2007? This is a catastrophic figure because housing wealth was one of the key drivers of spending, and domestic spending is what kept the dole queues so low in the boom years.

Without this housing "feel-good factor" we will continue to spend less. And the housing situation is getting more alarming. In January 2007, the total value of all our houses and apartments was €550.64bn and today that figure is €411.69bn. According to the latest report from, rents are collapsing back to 1999 levels. Many people believed that, even in the worst case scenario, the housing market would bottom at 2003/4 levels. This now looks optimistic.

The more rents fall, the more house prices fall too and this is because the rents are a leading indicator of what is happening to real housing demand. There is such an overhang of houses in the system and such a lack of demand that house prices will continue to tumble.

The problem is that it is getting worse by the day. Not only is the housing market not stabilising, it is getting weaker.
This fundamental weakness in our balance sheet is one of the main reasons that we have to be cautious about the positive spin we are hearing this week from some stockbrokers and the spectacularly useless forecasts from the Department of Finance.

Like almost every economic problem of the past two years, all roads lead to the banks. In a situation where house prices are falling, the banks will not lend because the banks' balance sheets are mortgaged to the very houses and properties that are now falling in value. As this process leads to defaults, the bad debts of the banks will rise, reducing their capital base and causing money to leave the banks. With investors unwilling to plug the gap until the full extent of the bad loans becomes apparent, the forced nationalisation of one of the big banks is clearly a distinct possibility.

Yesterday, we heard that the serial delinquent Irish Life and Permanent -- an outfit whose loan to deposit ratio reached a ludicrous 260pc -- is now trying to gain deposits again. But if it gets its deposits up, then to get the loans to deposit ratio down it has to lend less. Here again is evidence that credit in the economy is drying up.

Shrinking housing wealth brings into focus what is happening around the country and explains why hundreds of thousands of us have stopped spending and borrowing. Why would you borrow when prices are falling by 6pc and the banks are charging 5.5pc at least in interest? This is a real interest rate of 11.5pc. What company or individual, when faced with falling incomes, will contemplate borrowing at these rates? More crucially, when faced with real rates of interest of this magnitude, banks will not lend to businesses because these levels of interest rates increase the risk of bankruptcy.

This is the monetary environment we are faced with. In economics this situation is called a liquidity trap. It describes a situation where the banks are unwilling to lend to risky businesses, so business gets starved of cash and people are unwilling to borrow because they are crippled by the servicing costs of debts they took out in the boom.

This credit crunch is felt most drastically in much higher unemployment than is necessary. Unemployment, for anyone who has experienced it in a family, is a most destructive force. The shock is not only financial, but the psychological and emotional cost as well as the stress associated with unemployment is enormous. If you want to see this, ask your local doctor; doctors are seeing people presenting to them who never visited a surgery before.

The only way out of this liquidity trap and the rise in unemployment -- according to mainstream economics -- is now to bypass the banks. If the banks are not lending the money which the European Central Bank is giving them, then bypass the existing ones. This means one of two things. Either the State sets up a new bank, deals with the creditors of the old banks and gives these creditors some equity in the new bank; only a new bank will start to lend again and this is how our system works.

Or, more radically, the State could follow the moves of every country that has found itself in this dilemma in the past -- it could print its own money free of any constraints to get things moving again.

This idea of pumping new money into the system seems radical until you examine history and see that extraordinary times demand extraordinary responses. This is how the US, for example, got out of the Great Depression following the collapse of the economy and the banking system in 1931.

On April 18, 1932, within weeks of coming into power Franklin D Roosevelt, ignoring the advice of his economic advisers, took the US off the gold standard and allowed the Federal Reserve to print as much of these "new dollars" as was necessary to get the economy going. The effect was almost miraculous. The financial markets jumped 15pc on the announcement and in a matter of months the US economy rebounded, with industrial production rebounding.

We need the same sort of political courage now to do something radical because if we leave the economy to its own devices and continue to cut spending when the people are petrified and the present banking system is in tatters, the wealth of the country will just keep on shrinking.

Report by David McWilliams - Irish Independent.

Tuesday, 17 November 2009

Boom Buyers Seethe As Prices Now A Third Less...

Boom buyers seethe as units now three for price of one...

HOUSEHUNTERS in a busy commuter town can now get a two-bedroom apartment for just €110,000 -- a third of the original asking price.

It's a case of 'three for the price of one' at the exclusive Capella Court apartments in Newbridge, Co Kildare.

When the gated development first opened in 2007 -- buyers forked out prices starting at €322,000.


But now they will be seething at the prospect that newcomers can buy three apartments for the money they handed over at the height of the boom.

Residents at Capella Court who bought in 2007 will be paying three times the amount in monthly mortgage repayments of their new neighbours for apartments of the same size and specifications.

The attractive price tag comes as receivers have been appointed to re-launch the apartments.

Dwellings are finished inside and lighting, footpaths and landscaping are in place. The two-bedroom apartments are set to attract investors, with average rents in the capital's commuter belt at €733, according to the latest property survey by popular website Daft.

David Browne of HT Meagher O'Reilly, who was appointed by Simon Coyle of Mazars accountants to handle the sale, said a number of units were sold at the initial launch in 2007.

Prices started at €322,000, but in April 2008 when the houses were re-launched, they dropped to €299,500.

Capella Court, which has 63 units in total, is laid out in three blocks, one of which is completely occupied. But of the remaining two towers, just four units are occupied.


HT Meagher O'Reilly are releasing just 20 units in this phase, with a view to releasing the rest of the unoccupied units at a later date.

Units range in size from 65-80 sq m and come with balconies, fully fitted kitchen units, tiled floors and fitted wardrobes.

Capella Court was built by developer Hugh Heskin, who was also responsible for the upmarket conversion of the Estoria cinema in Galway into apartments; and the mixed-use Yew Tree scheme in Clane, Co Kildare, both of which sold successfully.

Report by Yvonnne Hogan - Irish Independent.

Saturday, 14 November 2009

€500k Antidote To Recession...

€500k Christmas lights 'an antidote'...

The capital's Christmas lights this year have cost a staggering €500,000, but are being offered as an "antidote to the recession".

The launch of the Christmas lights may be one of the most honoured traditions of the festive season, but this year's half-a-million-euro price tag has raised eyebrows.

Funds for the lights, which will be launched in the capital next week, have been provided by the Dublin City Business Improvement District (BID) and Bord Gais, in partnership with a number of retailers on Henry Street.

Although spending is tight as the country spirals further into recession, and costs are cut everywhere, this seasonal tradition is one that Dubliners will not have to say goodbye to.

Richard Guiney, CEO of Dublin City BID said: "Christmas in Dublin is a magical experience.

"The enchanting atmosphere is unmissable and is something that people travel from all over the world each year to enjoy and experience. It is, of course, a substantial investment, but the lights are all energy-efficient.

"We're using LED lights, which last up to 10 years, and if it's taken over a period of time, it's quite good value for money."

Mr Guiney went on to say that the investment is part of an incentive to remind people of more spirited times.

"Times are tough, there's no doubt about that," he said. "We want people to come into the city and be happy.

"It's something of an antidote to the recession."

Bord Gais will also be paying for the electricity costs.

David Bunworth, the managing director of Bord Gais Energy said: "We are delighted to be involved in the Christmas festivities.

Given the very successful year that we have had with the Big Switch campaign, we felt that it would be nice to give something back."

Report by Caitlin McBride - Evening Herald.

Thursday, 12 November 2009

What Recession??????

Public to ignore recession with festive spending...

IRISH shoppers will spend twice as much as their European counterparts on presents, food and socialising this Christmas despite the recession.

Households will fork out an average of €1,110 during the festive season – almost double the €600 that will be spent in Europe.

This is despite shoppers saying they will spend 30% less on gifts, 6% less on food and 22% less on socialising this Christmas, according to figures compiled by accountancy firm Deloitte.

Irish people plan to spend three times more on socialising than those in Germany and Italy this Christmas. An average of €180 per household will be spent at pubs and restaurants, which is the highest spend in Europe.

In an attempt to lure shoppers, retailers said they plan to begin their sales earlier than ever this year, according to chief executive of Retail Excellence Ireland (REI) David Fitzsimons.

"You’ll find a lot of nervous retailers out there who are keen to convert stock into cash. The Irish are a big nation for occasions, so it’s not surprising that they spend so much at Christmas.

"Expect to see a big drop in the sale of gift vouchers this Christmas as people will be keen not to give gifts that have a monetary value," he added.

The most recent figures show how far consumers have cut back. The average spend per transaction fell to €45 in the last quarter compared with €63 in the same period last year, according to REI.

Irish consumers have traditionally been the biggest Christmas spenders in Europe but they have fallen to second place this year behind Luxembourg, where households will spend an average of €1,150.

Three out of four respondents to the survey said they have less to spend this year and two-thirds intend to buy gifts that are on sale.

Consumer business partner with Deloitte Susan Birrell said the Irish consumer is now more rational.

"The focus is on practical, useful gifts. Customers will look for promotions and attractive prices. The retailers that don’t offer these to consumers will be the losers this festive season."

The survey, which questioned 500 people last month, found:

n42% of adults would like to receive cash as a present.

* One in five will give a cash present.

* One in five also said they will be cutting back on gifts for work colleagues.

* One in six will not buy a present for somebody’s else child.

* A third of shoppers said they will buy gifts on the internet to avoid crowds.

Also nine out of 10 people believe the Government has not reacted properly to the financial crisis, which is the highest dissatisfaction rating in Europe.

Just 40% of Irish people believe their employment to be secure, which makes Ireland the most pessimistic country in western Europe.

Report by Niamh Hennessy - Irish Examiner.

Go Christmas Shopping at:


Tuesday, 10 November 2009

Thousands Seek Mortgage Help...

1,000 a month seek help to pay mortgage...

MORE than 1,000 people a month are turning to the Government for help to pay their mortgages.

But as many as half of them are being turned down some months.

The dramatic rise in the numbers who cannot afford to meet their monthly mortgage repayments has underlined the scale of the crisis affecting a growing number of desperate homeowners.

The mortgage interest relief supplement is designed to cover the interest portion of the home loan. Those seeking aid have to show they negotiated to reschedule the mortgage payments with their lender. They also have to be means tested. And both husband and wife must be out of work.

The increase in applications comes at a time when mortgage interest rates are at record lows. Expected rises in the next year are likely to push substantially more people to the financial brink.

Figures obtained by the Irish Independent reveal that the Government expects to have to spend €60m this year helping homeowners to pay their mortgages. This is double the amount spent on the mortgage interest supplement scheme last year.

About 400 households a month are now getting an average of €367.40 every four weeks from the State to help them cover part of their repayments, the Department of Social and Family Affairs admitted yesterday. A total of 14,136 people are now receiving the mortgage assistance. This is expected to increase to 15,500 by the end of the year.

New figures show an average of 1,000 people a month are applying for the mortgage supplement, with up to 2,000 applying some months. However, large numbers of families are being refused the payment because of strict rules on who can qualify.

A report obtained by the Irish Independent reveals 2,116 people had claims for the mortgage interest supplement registered in May this year, but just 1,644 of these were granted assistance. This means close to 500 were turned down for State help that month.

The largest number of applicants was in the eastern part of the country, with the south-east also heavily represented in the figures.

Consultants who help people to appeal refusals for the state assistance said up to one-third of applications for the mortgage supplement were being turned down every month.

Director general of the Free Legal Aid Centres (FLAC) Noeline Blackwell said thousands of people were being refused assistance every month as the rules were so strict.

The supplement is designed to cover the interest portion of the home loan only, not capital payments.

It is assessed by community welfare officers, who are part of the Health Service Executive, but the funds are provided by the Department of Social and Family Affairs.


To have a successful application, people seeking the supplement must show evidence of having negotiated to reschedule the mortgage payments with their lender. They also have to be means tested, and both the husband and wife must be unemployed.

The rules also specify that a homeowner must have been in a position to meet the repayments when the home loan was taken out.

But many community welfare officers are concluding that anyone who took out a mortgage during the housing boom that was between five and six times their income could not afford to repay it, so the mortgage assistance is being refused.

Applications are also refused if the level of arrears is regarded as unreasonable.

People who re-mortgaged during the boom on the basis that their house increased in value are also finding themselves shut out from the scheme.

Ms Blackwell said thousands of people who took out mortgages with sub-prime lenders such as Start, but had since lost their jobs, were finding that they were not qualifying for the mortgage interest supplement.

Minister of State at the Department of Finance Dr Martin Mansergh told the Dail last week: "Applications to the scheme are lagging unemployment by some months and the rise in numbers is expected to continue for some time."

The Department of Social and Family Affairs said last night it was reviewing the operation of the scheme. This is to see if the scheme "can better meet its objective of catering effectively for those who need short-term assistance when they are unable to meet their mortgage interest payments".

A spokesman for the State-supported Money, Advice and Budgeting Service (MABS) said a huge proportion of its clients were people having difficulty paying their mortgages.

Some 69pc of people who seek help from MABS are either in a job, have recently lost their job, or are self-employed.

Only one-third of those seeking MABS assistance are social welfare recipients.

Traditionally, the majority of those going to MABS were social welfare recipients.

Report by Charlie Weston - Irish Independent.

Sunday, 8 November 2009

Handing Houses Back To Banks...

Homeowners handing their houses back to the banks...

HOMEOWNERS who can no longer afford to pay the mortgage are voluntarily giving up the keys to their property as they see no other way out of the debt
, according to a housing charity.

Respond warned that many people in negative equity did not think it was worth trying to sell the house to repay the debt as there was no market for it.

These people are simply handing their houses back to the banks, the charity said, with some leaving the country and others moving back home with family.

Respond spokeswoman Aoife Walsh said figures for repossessions in the courts did not accurately reflect what is happening on the ground.

"Many people are feeling hopeless because of the collapse of the housing market. They are simply handing back the keys of their home to their lender as there is no prospect of selling the home to repay the debt," she said.

"These cases are rarely reported and we suspect there may be far more ‘voluntary surrenders’ taking place than anyone is aware of."

Ms Walsh said Respond was receiving calls from people enquiring about their eligibility for local authority housing.

"These people are worried if they will be eligible for local authority housing or not.

"It is up to the discretion of each area, but they are generally accepted."

However with more than 50,000 people on the housing list, Ms Walsh said they could be waiting a long time.

"In the meantime they are moving in with family, or looking for cheap rental accommodation," she said.

Ms Walsh also said many were leaving the country.

"There was 18 repossession orders in courts this week.

"None of the property owners were in court and neighbours were saying they had simply left – some had left the country."

Report by Jennifer Hough - Irish Examiner

Friday, 6 November 2009

House Price Crash Gets Crashier...

That 40% drop - it's already happened...

Economists have predicted that house prices have to fall by at least 40 per cent from their peak of 2006 but house builders say that’s already a reality...

NEW HOMES agents have supported a claim by the Irish Housebuilders’ Association (IHBA) that selling prices for newly built houses and apartments have either bottomed out or are close to that stage in the price cycle.

Dominic Doheny, chairman of the IHBA, said earlier this week that prices across the country have dropped by an average of over 40 per cent and that the level of unsold stock was between 35,000 and 40,000. He said that there are 9,000 new homes overhanging the Dublin market – a figure well below other estimates which put unsold properties at 15,000.

Ken MacDonald of Hooke MacDonald said yesterday that judging by the magnitude of the price cuts and the increased number of enquiries and viewings in recent months, there was room for a guarded optimism that the market had bottomed out, particularly in Dublin. “There is now the expectation that we could see the start of a gradual return to an increase in sales activity in the early part of the new year.”

To illustrate the fall in prices, Hooke MacDonald is marketing two-bed apartments at the former Phoenix Park Racecourse in Castleknock. They originally sold at €425,000 and are now 44 per cent lower at €239,000. Two-bed units at Carrington in Santry, first on the market at €375,000, are now down 43 per cent to €215,000. The developers of two-bed live-work apartments at Hyde Square on the South Circular Road have cut prices from €540,000 to €275,000, a drop of 49 per cent. In Rathfarnham, four-bedroom houses at Stocking Wood are back 40 per cent from €695,000 to €415,000.

Sherry FitzGerald New Homes has also noted a pick up in sales since prices were reduced earlier this year. This is particularly true at Wyckham Point in Dundrum where it has sold more that 60 apartments in recent months. One and two-bed apartments are down by 39 per cent, from €560,000 to €339,000 for the larger units, and from €410,000 to €249,000 for one-bed homes. The joint agents are Hooke McDonald.

Eoin O’Neill of Sherry Fitz-Gerald New Homes said there was clear evidence of a recovery in sales where prices had been substantially reduced, in many cases by up to 40 per cent. He noted that some buyers were offering less than the asking price and, depending on their ability to complete the purchase promptly, they were getting the homes.

Deals have been done on a wide variety of schemes, including those at the top of the new homes market, such as the Bloomfield development in Donnybrook where prices are back by at least 40 per cent since the launch in September 2006.

The renewed interest in the top end of the new homes market has led to renewed sales in Castleknock where large five-bedroom townhouses in Farmleigh Wood have been reduced in price by 40 per cent – from €1.75 million to €1,050,000.

In Delgany, six-bedroom houses in Churchfields are now available at €895,000, a drop of 42 per cent on the original price of €1.55 million.

Sherry FitzGerald is also selling one of the lowest priced one-bedroom apartments in the greater Dublin area, a well finished unit at Dunboyne Castle for €129,950, a drop of 54 per cent on the September 2006 price of €285,000.

Ronan O’Driscoll of Savills said that two-bedroom apartments at Clare Village on the Malahide Road in Dublin 17 are “flying” since Albany Homes cut prices from €375,000 to €170,000, a reduction of 55 per cent. In the last month alone, 50 of the apartments, complete with full fit-out, had been sold.

Also going well is Capel Development’s Waterways scheme at Ashtown where the price of two-bedroom apartments has been reduced by 45 per cent, from €450,000 to €248,000.

O’Driscoll confirmed the IHBA view that prices had bottomed but said that, with around 15,000 unsold homes currently available in the greater Dublin area, most builders were selling below cost and it was unlikely that any new building operations would begin until prices bounced back by at least 20 per cent. Gemma Lanigan of Douglas Newman Good’s new homes division said it was obvious that prices in several of their new developments had bottomed out and the homes were selling again. In one scheme, Waltrim Grove in Bray, two-bedroom apartments – originally priced from €440,000 – were now selling at €225,000, a drop of 49 per cent. Three-bedroom apartments are down 47 per cent to €299,950.

Douglas Newman Good has also had considerable success with large family homes in Rathfarnham.

The four-bedroom semis at Butterfield Avenue sold out in one weekend in September after prices were cut from €1.2 million to €599,950.

Not all housing developments in the Dublin area have introduced price cuts. Several developers are holding firm on prices after selling a substantial number of homes off the plans in 2006 and 2007. However, many of the sales have yet to be completed with the now reluctant buyers attempting to pull out. Completing the deals immediately would put them into negative equity.

Report by JACK FAGAN - Irish Times

Thursday, 5 November 2009

Get A Move On Lads...

For God's sake get a move on...

THE message from the OECD is clear. Translated into the vernacular, it is: "For God's sake, get a move on, lads" The secretary general of the helpful international body warned that cuts in public spending should begin immediately.

In other words, the idea that a restructuring, spread over three to five years, would solve the crisis in the public finances is misguided. Mr Angel Gurria was probably too diplomatic to say as much in public.

Instead, he looked Brian Lenihan in the eye and told him: "The problem is that you may not have time, Mr Minister . . . The markets are zeroing in on countries."

The "markets" are loaning this country €2bn a month so that the Government's pay cheques for public and civil servants will not bounce, and so that the 160,000 private sector workers who have been thrown out of work in the past year will at least have some euro to buy food for their families.

Yesterday's lowering of Ireland's credit rating, due to our continuing problems, including what is seen as an "exceptional" rise in our debt levels, is likely to make it more difficult and more expensive to source those borrowings. The markets will also have been zeroing in on the Government's repeatedly stated commitment to firm and decisive action and the lack of evidence of such.

Despite much talk about spending cuts, government spending will rise by about 7pc this year and the State will have borrowed about €23bn to fill the gap between revenue and spending. The McCarthy recommendations on savings in the public service and the report of the Commission on Taxation were released amid flurries of good intentions, but that was that.

Ministers who supposedly support the principle of public service reform poured scorn on proposals which threatened to impinge on their own departments.

The result has been continuing inaction.

It was Colm McCarthy, at the recent Kenmare economic conference, who warned that what happened in the 1980s is happening all over again. We have apparently learned nothing from the mistakes of the late 1970s when delays in fiscal adjustment cost the country years of subsequent economic misery.

The markets will no longer be appeased by good intentions. They are the paving stones to hell.

Report - Irish Independent