Wednesday, 29 April 2009

Worst Recession Since 1930s...

We've never had it so bad, ESRI warns...

Recession worst since the 1930s, think-tank reveals

IRELAND is suffering the worst recession of any advanced country since the 1930s, the Economic and Social Research Institute (ESRI) warns in a grim analysis of the economy.

Unemployment could rise above 500,000 as national income (GNP) is forecast to fall by 14pc over the three years from 2008 to 2010.

The fall in national income beats the 11pc decline in the Finnish crisis of 1990 to 1993, when the collapse of the Soviet Union suddenly deprived Finland of its main market.

The ESRI believes this year will be the worst of the crisis, with income per person plunging by more than 9pc in real terms.

But there will be further decline next year, with a 1.2pc fall in national income.

The stark outline comes as new figures will today show that the rate of increase in unemployment has slowed, but that 384,000 people are signing on.

The CSO statistics reveal that an additional 11,000 signed on the live register in April, pushing the unemployment rate to 11.4pc this month -- up from 11pc in March.

The Cabinet was told the latest bleak news yesterday, compounding concerns for the economy on foot of the ESRI report.

The ESRI expects a loss of 190,000 jobs this year and 103,000 next year.

Last night, ESRI senior researcher Alan Barrett said their latest prediction would bring national income "back to the level of 2004".

The ESRI forecast of a 9.2pc decline this year is twice the level it expected in its last commentary just three months ago.

"The rate of job losses in the US in the first part of the year has been extraordinary, with 3.3 million jobs shed in the last five months," the report says.

"The forecast that Germany will contract by 5.3pc is in sharp contrast to earlier expectations that it would escape the worst of the global recession," it also says.

Dr Barrett said Ireland was suffering the steepest recession of all because its own problems came in the midst of the biggest global recession since the 1930s.

"It is frightening, the way global output falls are similar to those of the early 1930s," he said.

"Ireland is remarkably exposed to that, which all comes back to housing and the astonishing level of house building which was going on, when it reached 15pc of the economy's output (GDP).

"It was so far out of line and our hope was that it might decline in an orderly fashion. That was probably a bit of a naive hope, looking back," Dr Barrett said.

The combination of the construction bust and the global recession mean that Ireland will also match another unpleasant record -- that of unemployment.

The ESRI expects that unemployment will reach around 15pc by the end of this year, and then level off at 17pc in 2010.


That would equal the peak of 1986, and includes estimated emigration of 60,000 over the two years.

"It would be wrong to call that a forecast. It is more of an assumption, because migration is so hard to predict."

With employment officially defined as more than one hour's work a week, the numbers on the live register could reach 500,000 on these forecasts.

The ESRI expects a loss of 190,000 jobs this year and a further 103,000 next year.

The report deliberately looks for positives among the general gloom.

It believes the two Budgets since October have begun to get a grip on the public finance crisis, even though the Government will still have to borrow €22bn this year and €20bn next year.

It says the public sector pensions levy was preferable to cutting useful public sector jobs, but Dr Barrett said more would have to be done.

"Our research suggests public sector jobs pay 20pc more than private ones, even though some price ought to be put on their job security.

"Even a 5pc fall in government wages would hardy narrow the gap, if private sector earnings also fall."

The fact that wages seem to be falling is one of the positive signs, he said.

"Restoring competitiveness is the key to recovery, although global recovery still seems just out of sight. It will be a key test of the flexibility we knew we would need when we joined the euro without sterling."

Report by Brendan Keenan - Irish Independent.

Tuesday, 28 April 2009

Back To Basics In Recession ...

How our young will get through the recession...

BASICS: Sewing and baking is key...

THE younger generation is being urged to get back to basics and learn the long forgotten skills of sewing, baking and fending for themselves in a series of classes to be held in Dublin city.

Celebrity chef Darina Allen recently said that elderly people have the know-how to cope with limited budgets, but those in younger age groups may find it difficult to survive in the recession.


"People have been so focused on careers and academia that they are helpless when they lose their jobs," she said. "They don't have money and they realise they don't have skills that would help them through.

"From a small budget, grandmothers were able to feed the family," she added. "They could look in the fridge and make a meal out of all sorts of little scraps. That is a skill that's lost - being able to judge it yourself when food is safe to eat and when it is not. It's a forgotten skill to be able to make a meal, something delicious and lovely out of leftovers."

Darina has appealed to grandparents to pass on cooking skills to their grandchildren and vice versa.

And now Fashion Evolution, supported by Dublin City Enterprise Board, are holding a series of workshops designed to assist people make the most of their limited wardrobes.

The services available at Crafternoon Tea at Smock Alley Café in Temple Bar on May 2 range from basic knitting classes to pattern drafting for designing your own clothes.

There will also be a 'Clothes Clinic', where people will be taught to how to mend clothes as well as ''Upcycling', which involves taking an old garment and transforming it into something new from as little as €10 a class.

The event is part of Ethical Fashion Week 2009, with a whole host of seminars, lessons and to teach people how to get back to basics and appreciate the rudimentary aspects of fashion.

"The recession is bringing out the creative best in people. There is more of a community spirit and people want to take positive actions to find solutions and find similar positive like minded people," said Eibhlin Curley, Assistant Chief Executive, Dublin City Enterprise Board.


And Ms Curley said that there is more of a focus on small networking associations for people to exchange ideas and collaborate on projects.

"There is definitely a backlash into positive mode," she said. "People want to get involved and not become a victim but to be constructive and control their own destiny."

Report by Claire Murphy - Evening Herald.

Friday, 24 April 2009

Greed Is Society's Rot...

How greed is the rot at society's dying core...

OPINION: A PAIR of travel-worn slippers, a brass bowl and plate, round-rimmed glasses and an old pocket watch recently fetched a whopping $1.8 million at a New York auction. The memorabilia constituted just about all the earthly possessions of Mahatma Gandhi, the man Churchill infamously described as the “naked fakir” or beggar. Coincidentally, on the anniversary of the death of Gandhi, who epitomised austerity and simplicity, Seán Quinn, Ireland’s richest man, admitted in an RTÉ interview following the collapse of Anglo Irish Bank to feeling that “we were too greedy”...

It may well be deemed a collective admission from all of us, who in varying degrees, have brought on this global recession. Topping the list will be those whose greed has subsumed the hopes and dreams of generations, to the extent where radio shows that hitherto dished up discussions on caviare and champagne are recommending snail and nettle soup as its recession flavours.

Our children who have grown to expect at least “20 presents” from poor Santa at Christmas, and enough chocolate at Easter and Halloween to warrant dental surgery, may hopefully feel a little remorseful too.

“But not me!” some of us may exclaim – and rightly so. We have 12-hour working days, five daily hours of traffic, murderous mortgages, colossal childcare costs and suffer from extreme time and rest poverty. Besides, we are hardly being “greedy” when all we want is a reasonably comfortable life, affordable education for our children, easy access to medical facilities and employment security.

Had Gandhi been around to respond to this, he may have pointed out that the state of the world is a result of the seven sins that can break the world – “wealth without work, pleasure without conscience, knowledge without character, commerce without morality, science without humility, worship without sacrifice and politics without principles”.

If much of the world is disillusioned with its political systems, it could be attributed to the betrayal of faith and the absence of truth – Shraddha and Satya – the very basis on which the universe exists. Gandhi’s vision of democracy also upholds the virtues of common good. “Democracy,” he said, “must in essence, therefore, mean the art and science of mobilising the entire physical, economic and spiritual resources of all the various sections of the people in the service of the common good of all.” Of what use is the wealth of a nation if its people remain hungry, its children discriminated against and its elderly deprived of healthcare and dignity?

In this X Factor and Dragon’s Den -dominated world, where the sense of “self” is bigger than ever before and material wealth determines the quality of not just life, but even death, it is hard to change mindsets so they shift focus from individual success to one that strives for universal good. We are all thus faced with a perennial moral dilemma, struggling to strike a balance and find harmony.

The behemoth financial institutions and business giants of today shun high ideals in favour of an obsession with bottom lines to the exclusion of everything else – to the extent where they consider the very people and resources that make this success possible as tools that can be dispensed with at will.

Gandhi, who favoured the principles of trusteeship rather than ownership, often drew from the verse in the Gita that considers the needless accumulation of wealth as a vice. The Gita goes so far as to say that using nature’s resources to feed only oneself is nothing short of sin. The fruits thus gained should be through rightful labour and must be shared and not hoarded. The world has enough, Gandhi said, to satisfy everyone’s need, but not everyone’s greed.

Thanks to Al Gore who has pleaded for “the Earth’s security” and several other experts and philanthropists, we are today more environment aware. But the Vedas, arguably the earliest literature available to mankind, have spoken at length on the importance of preserving and revering natural resources, even the need to keep the sun’s friendship, lest we face its wrath. The Shanthi Path Mantra, a part of the Upanishads, Hindu scriptures dating back to the first millennium BC, prays for the five elements including the sky and space, the forests, the earth, herbs and animals and universal peace. Our chronic obsession to mass produce and mass consumption has brought us to a situation where we are on the threshold of grave environmental retaliation. The world we give our children could well turn out to be a place they dread.

At the recent G20 summit, the elite group of the developed, developing and emerging economies, we saw world leaders take their proud places for belonging to the richest and the most powerful. Yet, ironically, these are the very nations who are most responsible for the state of the economy and the environment. Meanwhile, the poorest of the world, who have in some way or the other contributed to this growth remain untouched by prosperity, and most vulnerable, dying by the thousands for a cause that never was.

The Indian-American press widely reported that Obama, who cited Gandhi as a major inspiration in his life, had a portrait of the great man in his senate office. Whether it has found a place in the White House, we may never know – but if the ideals that the Mahatma stood for and his “experiments with truth” become an inspiration for the world’s political and business leaders, on the subject of positive change, we may still be able to say that, “Yes we can.”

Report PRIYA RAJSEKAR - Irish Times.

Sunday, 19 April 2009

Bye-Bye To Bertieland?

Does this finally mean bye-bye to Bertieland?

Just because Brian Cowen et al are proclaiming the end of crony capitalism doesn't mean it's dead yet...

They do things differently in Sweden. Up there, they pull together in crisis. They show a united face to the outside world when the chips are down. They are ideal candidates for a social solidarity pact. Out here on the far side of Bertieland, we don't have the stomach for such happy-clappy stuff.

On Wednesday, Brian Lenihan announced details for the National Asset Management Agency, or, if you will, the bad bank. This agency will take control of the property assets in the country's main banks, thus freeing up the banks to lend money to businesses. The book value of the assets, most of which are toxic, is estimated at €80bn to €90bn. Nobody knows the real value of the assets because at the moment, as nothing is selling, there is no market in which to put a price on them. The process is designed to clean up the horrendous mess caused by greedy bankers forwarding crazy loans to greedy developers.

The midwife for the bad bank is economist Peter Bacon, who pointed out that this agency could be a vehicle to do away with the crony capitalism that exists between banks and developers. He might have added that there was a third leg to crony capitalism – the government which is setting up the bad bank.

Last Wednesday, Eamon Gilmore spoke for many when he questioned Brian Cowen about our shining, new, bad bank. At leader's questions in the Dáil, Gilmore wound up to a question in the following manner.

"For six months now, in dealing with the banks and development, this government has been protecting and cosseting friends who brought down the Irish economy.

"Some of those friends have been investing and dabbling in property abroad. Guess what? They are now going to use the Irish taxpayer and government bonds to bail out the developments, the bad debts incurred for developments in Bulgaria, Dubai, Florida, Latvia and so on, none of which would have contributed anything to the Irish economy."

Brian Cowen immediately mounted a high horse to reply.

"I say to Deputy Gilmore, in all seriousness, I reject with contempt… As I said last night, we have a serious issue to deal with. We can have our agreements and disagreements on the way forward, but I will not accept from any deputy, however prominent, any suggestion that we are doing anything other than seeking to protect the public interest of this country."

In an ideal world, even in a Swedish world, this sort of stuff would not be thrown out for consumption to native or international ears. We are in crisis. We must pull together. Let's not air our dirty linen in public.

That was the way they operated in Sweden in 1992 when their banking system collapsed in the wake of a property bubble. Although there were structural differences in how the government took over the bad debt, the method deployed was similar in macro terms to our bad bank policy.

The centre left Social Democrats opposition in Sweden was not entirely happy about the set-up. They suspected that the government was letting the banks off lightly. But they knew the stakes were high. The world outside was watching.

"The only thing that held back an avalanche was the hope that the system was holding," Leif Pagrotsky, a senior member of the Social Democrats, said last year in an interview. "In public, we stuck together 100% but we fought behind the scenes."

Fissures in the body politic

On Wednesday, Gilmore obviously didn't feel any impulse to show a united front to the outside world. Whether or not it was prudent for a senior politician to expose fissures in the body politic on a matter like this is debatable. But there can be little doubt that he was articulating the feelings of huge swathes of the population.

On one level, Cowen's outrage at suggestions he was feathering developers nests is understandable. There is no reason to believe he is acting in anything other than good faith. The same goes for Lenihan, who a few weeks ago reacted with righteous indignation to similar jibes from Joan Burton. They are not consciously setting up a system to help out their developer friends.

The problem is that back in Bertieland, Fianna Fáil was unable to differentiate between the national interest and developers' interests. It was as if they had borrowed the old General Motors slogan – "What's good for General Motors is good for America" – and adopted it to local circumstances. What's good for developers was deemed good for Ireland.

So it went with emasculation of Part V of the Planning Act 2000, which had stipulated that 20% of all new developments be set aside for social and affordable housing. Noel Dempsey had the guts to bring it in, but he was soon put in his place by his successor, Martin Cullen.

The national interest was served by sorting out developers through watering down the provision. One of the most progressive measures of the planning system was thus destroyed, and the result in no small measure pumped further air into the bubble. So it went with tax breaks. If you wanted to as much as build a cow shed, tax breaks were available on the flimsiest of bases. Hotels were popping up all over the country – and particularly in Dublin – despite an obvious over-capacity pertaining.

Apartment blocks were built in fields in the middle of nowhere, because developers were incentivised by huge, tax-friendly profits to do so. This was all driven by a government policy that saw any construction activity as positive because it generated temporary employment and kept things ticking over.

There was a confluence of interests between the government and developers, and it's difficult to know where senior politicians saw the national interest beginning and that of developers ending.

Three stool legs of cronyism

The same applied to the banks. Light regulation was the order of the day because it facilitated easy lending, boosting bank profits and pumping further money into the property bubble. It was good for banks, and it was good for government.

The three stool legs of crony capitalism prospered in Bertieland. There was a confluence of interests, which, we were led to believe, coincided with the national interest.

Now we know Bertieland was an illusion. We are being asked to believe that Fianna Fáil is leaving old friends behind, that the fog has lifted, that senior members of government can finally differentiate between the interests of their friends and the interest of the nation. We shall see.

A lot of trust will have to be invested by the public in the bad bank. The valuation of property assets to be transferred to it will be crucial. Already, banking people are coming out to talk up the assets. One report from Davy Stockbrokers on Thursday suggested there should be a 15% writedown. That sounds like a mightily bank-friendly estimate in a market that has collapsed below 50% in places.

Staffing will also be crucial. The agency may well have to go outside the state to find property experts who are not both culturally and personally tainted by the demented carry-on of the past five years. Lenihan has said the agency will "go to the ends of the earth" to ensure developers cough up. International legal expertise will therefore be required to ferret out the assets of defaulters, and we know that these people have carefully spread their piles around the globe.

There are some signs that the coarser aspects of Bertieland have been consigned to the past. Peter Bacon who recommended setting up a bad bank is the same Peter Bacon who produced a series of reports on the property market over the past decade, most of which were ignored by the government because they would have involved interfering with the sacred market. Now, the politicians are gathered at his feet, all ears and pleas.

The presence of Alan Ahearne inside the tent also signals some change. He was recently appointed adviser to Brian Lenihan and his fingerprints can be seen on elements of the budget.

Back in 2006, Ahearne was among the cohort of doomsayers whom Ahern wished would kill themselves because their musings might interfere with his chances of re-election.

But a couple of boffins does not a sea change make. The jury of public opinion is still out on whether crony capitalism is now pushing up daisies.

Report by Michael Clifford - Sunday Tribune.

Thursday, 16 April 2009

Ireland's Dream Is Over...

Ireland's dream is over as bankers chase McJobs...

In Dublin, the sushi conveyor belt has stopped turning at one of the city's swankiest Japanese restaurants. In the west of the country, a new McDonald's outlet has been inundated with job applicants, among them bankers, architects and accountants. As signs of the times go, it could hardly be more dramatic.

“It's no joke, I had to do a double-take on the CVs,” Kieran McDermott, the franchisee, said. He removed a “Now Hiring” banner on the site of the fast-food restaurant after only ten days. “The jobs were advertised nowhere else.” More than 500 people applied for the 50 available jobs.

From indulging the latest food fad to flipping burgers, Ireland's fall from economic grace has been dramatic. Europe's most successful economy for more than a decade - the famous Celtic Tiger - became the first of the eurozone nations to move officially into recession last autumn.

Since then, the descent into a financial maelstrom has gathered pace. Unemployment has leapt above 10 per cent, with forecasts that it could reach 14 per cent by the end of the year.

After weeks of denying the need, the Government, led by Brian Cowen, the Taoiseach and Fianna Fail leader, finally bowed to the inevitable and announced an emergency Budget.

The U-turn was prompted by publication of catastrophic exchequer figures revealing a black hole opening up in the public finances.

Tax revenue was down by €1.8 billion (£1.6 billion) for the first two months of the year, compared with a deficit of €124 million for the same period in 2008. It means that there will have to be radical - even savage - cuts in public spending and tax rises.

Economic activity appears to be grinding to a halt, most notably in construction and property, the engine of Ireland's boom, or bubble. Capital gains tax receipts were down 83 per cent on last year.

Moreover, bewilderment about how Ireland has got into this mess so suddenly is turning to anger.

About 120,000 public sector workers, including police officers, took to the streets of the capital to protest. In their sights were Fianna Fail, Europe's most successful political party with a record 27 years since it lost a general election, and the banks that poured petrol on the roaring bonfire of the property boom with their reckless lending practices.

Not far behind were the property developers, Ireland's home-grown “masters of the universe”.

Paddy Kelly, one of Ireland's biggest builders who once boasted, when looking out across Dublin's crane-dotted skyline, “most of them are mine”, has admitted he is facing bankruptcy. “My liabilities exceed my assets,” he told Dublin's Commercial Court.

The country's property developers are a group of sometimes flamboyant, largely self-made men in the vanguard of Ireland's New Rich.

Johnny Ronan celebrated a planning battle victory by flying 50 of his friends to Italy, where Luciano Pavarotti sang for them in the gardens of his villa.

Sean Mulryan, whose company Ballymore once claimed to be Canary Wharf's largest landowner, hired Debbie Harry, of Blondie fame, to sing at his 50th birthday party.

In 2004 Derek Quinlan, a former tax inspector, paid £750 million for the Savoy Group of hotels in London. In Ireland it was a source of national pride when the Irish tricolour was flown from the hotel's mast.

Sean Dunne is perhaps the most colourful. His plans to create a Dublin “Knightsbridge” in the leafy suburb of Ballsbridge set price records for land in 2005 when he paid €55 million per acre for two sites comprising the landmark Jurys and Berkeley Court hotels.

The final investment was to have been about €1.5 billion for the development, including a 37-storey “diamond-cut” tower. The dream lies in ruins. Mr Dunne told The New York Times in January that he “could be considered insolvent”. The site he bought is probably worth a quarter of what he paid.

Yet lower down the rungs of the property ladder are scores, perhaps hundreds, of smaller developers who now blame the banks for making it so easy for them to borrow.

Austin Cripps, who owned a shoe business but had branched into property development, took his own life in Dublin in March. John O'Dolan, another developer, was buried in Galway in February: the body of the 51-year-old father of three was discovered in a shed on his property.

Police said they were treating his death as “a tragic accident”. Patrick Rocca, who invested in office buildings in London and in an Argos distribution centre in Bedford, shot himself in Dublin in January.

The mood has swung in Ireland. Even U2 is not immune. The Edge, the band's guitar player, said: “People didn't want to deal with it while the party was going full swing, but now the music has stopped. We've lost a fortune, but it's all on paper ... We still have our jobs.”

The U2 Tower, designed by Lord Foster of Thames Bank, which was to have given Dublin a distinctive new landmark in its docklands, has been shelved.

Emergency budget

— Ireland was resort to €3.3 billion (£3 billion) of tax rises and spending cuts this year to rein in surging government borrowing, despite the deepening scale of its economic slump.

—The austerity moves in an emergency Budget came even as Ireland sharply downgraded forecasts for its prospects, underlining the scale of the economic woes in the once-booming republic.

— Brian Lenihan, the Finance Minister, unveiled plans for an agency to buy up toxic assets from the country's banks, to be swapped for Irish Government bonds in a new bailout.

— Ireland now expects its economy to shrink by 7.7 per cent this year, having previously expected an already vicious 6.75 per cent contraction.

— In 2010, the Government is projecting a further 2.9 per cent slump before a return to growth, of 2.7 per cent, in 2011.

— With Ireland reeling in the face of soaring unemployment, a housing market crash and a collapse of consumer spending by a fifth, the emergency budget became inescapable as public borrowing headed towards 12.75per cent of GDP for this year.

— Even after the hardline measures, the public deficit for this year will still hit 10.75 per cent of GDP. In future years, Ireland will pursue a return to sustainable finances with spending cuts set to rise from €1.5 billion this year to €4.2 billion by 2011. “If we fail, refuse or neglect to address this structural problem, we will condemn our generation and the next to the folly of excessive borrowing,” Mr Lenihan said.

Report - Irish Times.

Saturday, 11 April 2009

Garda & Army Ready For Riot Control...

Will your lifestyle survive?...

THE GARDA and the Army have been refreshing their riot-control skills in recent times. Clearly, the fear is that the Irish might emulate their French and Greek counterparts and stage a peasants’ revolt. But even Opposition party members are taken aback by the “rather eerie silence” around the constituencies in the wake of the emergency Budget...

“The only flashpoint was the Pat Kenny show with Brian Lenihan,” says one Fine Gaeler. That programme featured a 51-year-old teacher on €63,000 who stood to lose €800-€900 a month. Although she might be considered better off than most, she claimed to understand “how people go home and hang themselves”.

The main sense was an absence of hope. Some households stood to lose a third of their income, yet there was no sign of economic stimulus. And what was it all for?

As Caroline, a mother of four, told The Irish Times : “It’s to pay for the smart gambles hatched in the Galway tent. And the only hope they can offer us is ‘if you think it’s hard now, wait till December’.” With “no obvious bugbear to coalesce around” – as one observer put it – the resulting search for a scapegoat has divided citizen from citizen: bitter eruptions between the already poor (those on benefit lamenting the Christmas bonus) and the new poor (the middle-paid on decimated incomes); a ratcheting-up of the battle between the public and the private sector; rising indignation against “foreigners” claiming benefit.

MEANWHILE, IRENE WINTERS , a Fine Gael councillor in Wicklow town, notes the swelling number of “asset-rich” self-employed (disqualified from benefits) reduced to living on food parcels left on the doorstep. “They are the new poor,” she says. “They can’t eat their bricks and mortar. A big part of the problem is that property values are so over-rated by estate agents and the banks, who can’t afford to reflect the worthlessness in the balance sheet. If people think it’s bad now, they really have no idea of what’s coming down the line.

“The first thing that has to happen is that the Department has to sit down and review how they do their assessments. We need a new system for the new poor.

At every stratum of society, the sense of betrayal is acute. Amy and Robert are both 45, probably at their earnings peak on a joint income of more than €200,000 a year, with two children – one on a gap year and another in fifth year. Their mortgage has just been paid off, replaced by one for a holiday home down the country.

“We’ve both worked our butts off all our lives for what we have,” says Amy, “and now here we are, facing into a drop of about €35,000 a year, between pay cuts of 10 per cent and Budget hits. By the time our daughter goes to college in September 2010, it’s likely college fees will be back – and we will also be paying fees for our son.”

The original plan was to wind down when they both hit 50, to move out of Dublin and pursue other avenues. “But with the pay cuts, the levies and the possibility of more hits in the next five budgets, this plan is shattered. Our pension funds are shattered too, and a few investment properties we have for our retirement have devalued by up to 50 per cent. We felt we were well set up for early retirement and the future after all our years of hard work. After breaking our backs, this is what we’re left with.

“We know we’ll be fine, and it’s all relative, but we will be cutting back on the fancy weekends away, eating out at the drop of a hat and all that. We’ll be spending less in an effort to put away money for the college fees and retirement, given that the pensions will be so poor and the investment houses not worth what they were. And needless to say, we’ve already started shopping in Lidl and Aldi, when before we didn’t think twice about shopping for food in Marks and Sparks, Avoca or the local deli.”

Meanwhile, Caroline, a mother of four from Castleknock, Dublin, is reeling at the prospect of further inroads into her family’s income. “I was a civil servant; my husband is a guard. We’re a well-educated couple. I would always have felt we were middle-class; our aspirations were always middle-class. We planned to send our girls to Mount Sackville [a private secondary school near Phoenix Park].

“I would certainly have wanted them to go to college. I would never have thought of the swimming lessons and the music lessons and the Gaeltacht in the summer as luxuries – just part of a normal rounded education. But that’s all gone now. If one of our children goes to university, I’d be surprised.”

But they were “already poor”, she says, even at the height of the boom. “Even then, we qualified for the GP medical card, because our income was so low.” Their mistake four years ago was to buy “an ordinary four-bed semi” on the basis of two apparently stable salaries. But she had to leave work in the absence of affordable childcare, and rising interest rates sent a manageable mortgage of €800 a month ballooning to €1,500. In desperation, they opted for a fixed-interest deal. They are now trapped with monthly payments costing €300 more than the market. Release would incur a €6,540 penalty from EBS.

They survived by relentless cost-cutting. The child benefit goes towards the mortgage. Her husband’s salary goes into a Garda budgeting scheme, which deducts and pays the bills. This leaves them with €120 a week to feed and clothe a family of six. They run one car. Their one weekly pizza outing has stopped. She goes to Newry for the nappies and has learned to shop around for groceries, mainly in Lidl. There was a time when she donated to the St Vincent de Paul shop in Blanchardstown; she now gets her clothes there.

“We would have managed if my husband’s salary hadn’t been cut and cut and cut. If child benefit had been cut on Tuesday, we’d have been on our knees; it’s part of our income. I can’t bear to think about the new levies. Honestly, we would be better off now in a council house on the dole. When I was in the civil service, I worked in an area where the cleaners were always going off on weekend breaks and sun holidays and I wondered how they could do it. And then I realised it was because they all lived in council houses. I know how this sounds. I know nobody is going to feel sorry for me because of my aspirations for my children and because we’re both well-educated.

“I suppose what really grates is that we will not be a penny better off for having coped and worked hard all our lives. I’m only 38 and my aspirations are all gone. I feel the life has been sucked out of me. I’m passionate about doing the right thing, but what reward is there? People like us – the good little civil servant and the good little guard, the good little coping classes – have no voice. I feel like I’m screaming in a glass jar.”

IF CAROLINE STRUGGLES with what it now means to be “middle-class”, Ruth is unquestionably in that bracket. Ballet and piano lessons and private healthcare costing €2,000 a year are part of the family fabric. She is a mother of three, aged from 12 down to six, living in Co Wicklow with Peter, who pulls in a basic salary of €76,000. In a good year, bonuses can bring this to about €100,000. She has a part-time job as a school supervisor, which brings in another €5,000-€6,000 a year, and she also gets €535 a month in child benefit. They were lucky to get a “bargain” house for €459,000; a year later, a neighbour sold his for €725,000. Now the same houses are going for about €600,000, “so we’re not in negative equity yet”, she says cautiously. By any standard, Ruth and Peter should be in clover.

Yet, she says, they already work to a “very tight budget”. Their social life is “non-existent” and the annual “budget” holiday is looking “very, very unlikely” this year.

“We don’t go to the pub or go out for meals but we’re prepared for that to pay for extra things for the children. It’s giving them the opportunities that is the problem. The children’s allowance allows us to save for school uniforms, books, clothes and shoes. I’ve managed to cut the shopping bill from €200 a week to €130 by shopping mostly in Lidl and SuperValu. Together, diesel for the car and the shopping for the week are now down to €175. But then you have to take two children to the doctor and suddenly it’s €200 for the fees and antibiotics. My eldest is coming up to sixth class and I’m told that free dental care ends then, so that’s something else.”

For Ruth and Peter, the real problem is nervousness about the future. “We would be very reluctant to spend any money, such as on a summer holiday.” Theirs is exactly the bracket, she says, that will be crushed by last Tuesday’s Budget and by what lies ahead. In addition to the levies, which will probably take €5,000-€6,000 out of the household, the threat of higher tax rates, means-tested child benefit and probable loss of her part-time job – the only kind that allows her to accommodate her children’s timetables – will combine to “absolutely screw” them, she reckons.

“And this is only the beginning, we’re told. You could lie down and cry. There’s a sense that we have to keep pulling back. Life won’t be any fun. I know people will be reading this and saying ‘what have they to complain about?’, but it’s all relative. My husband really has to work very, very hard to maintain what we do have. We’re just peed off that in spite of all the hard work, we’re seeing less and less benefits.”

LIKE CAROLINE, SHE feels they were “lulled into a very false sense of security. I’ll be 40 later this year. We’ve had a very good standard of living. We think that’s normal. Our parents might say they had nothing and made do with a lot less, but back then the banks didn’t just hand out the money. Our parents weren’t able to get credit or loans. The banks were very happy to give us the money so to us it was normal. But I also blame the government. I do think that during Bertie Ahern’s tenure, things were starting to crumble well before we realised and they should have seen it coming. As a nation, I think we’ve been ignorant; we should have been stopping to think for ourselves. I feel, in our case, we should have been more careful and saved more. But it will be the middle classes who will pay for it all in the end.”

EVERYTHING IS RELATIVE, of course. All of these women are quick to acknowledge that. In Waterford, Jim, a 45-year-old father of one, working in manufacturing, is on short-time work – one week in four is on the dole, when his weekly gross of more than €700 comes down to €200 – and also has a fixed-interest mortgage for a house bought six years ago, “before the madness, but still mad”. His lender, KBC, is demanding a fee of €8,000 to release him from the fixed term. The planned summer holiday to Lanzarote has been cancelled. The car – a two-year old Honda when he bought it – will be kept for another five. His wife works a part-time job and is “brilliant” at money management, “but we are definitely struggling as a family. We know that consultants have been called into the factory and the job is not secure. We used to shop at Superquinn – they’re Irish – but now it’s Aldi and Lidl. And I don’t like them, the stuff is thrown at you – but it is cheap. We go to the butcher’s for meat. We used to get a Chinese takeaway twice a week; we got one meal yesterday and shared it. We might have gone out for Sunday lunch – that’s all cut out now. A full [satellite] package with Sky that was costing €100 a month, I’ve brought down to half. Before, we might have gone for weekends away to Dublin or Cork every few months but that’s gone too.”

Jim has no doubt that people went “a bit mad borrowing” in the good times. “It had to be the latest plasma, or CD or dishwasher. People were changing things for the sake of it, getting the house painted – things you certainly wouldn’t be doing now – and went into debt for it. The Credit Union was brilliant but I think they make it too easy; you just ring up for the loan and it’ll be there for you. And I see they’re still advertising loans ‘for your special occasions’ – like Communions and Confirmations. I think that’s a bit of a disgrace.”

His experience is echoed by Tracey from Ballyfermot, a qualified chef married to a warehouse worker, with three children, on a joint income of about €65,000 a year and a 30-year mortgage of €165,000. Between them, last Tuesday will probably cost them at least 2,000 a year. Their jobs are not secure. They may be facing a wage cut. They are already anticipating the effect of restored college fees on their teenage daughter, and the probable fall-out of means-tested child benefit. The days of rambling around Liffey Valley shopping centre, buying a few children’s outfits, going to the cinema every week followed by a Big Mac are over for Tracey and her family. “Now you’re watching everything. It looks to me like if you’re not on a good wage, you might be better off not working. I’ve always worked and I like to work, but a lot of people are saying that if you’re out of a job you get half the mortgage paid for, a fuel allowance, a bin-charge waiver, a back-to-school allowance. Where’s the incentive to work hard? I know we’re very lucky. We both still have jobs. But then you hear that fellow on the TV talking about having ‘only two million a year’ to live on.” As they say, everything is relative.

Woe by numbers

- 50 per cent Reduction to jobseeker’s allowance for under 20s, bringing it to €100 a week.

- 100 per cent Increase in the income levy, bringing the new rates to 2 per cent, 4 per cent and 6 per cent, with the new entry points reduced to €15,028, €75,036 and €174,980.

- 25 cent Increase in the price of 20 cigarettes.

- 50 per cent Reduction to the monthly early childcare supplement from May 1st, with the payment to be abolished entirely at the end of the year.

- 100 per cent Increase in the health levy rates, bringing them to 4 per cent and 5 per cent.

Report by KATHY SHERIDAN - Irish Times.

Thursday, 9 April 2009

Irish Emergency Budget...

World reaction to Budget...

The reaction to the Budget from European and US websites was wide ranging, with news organisations throughout the globe reporting on the new measures introduced by the Government.

The story was picked up not only the usual large media organisations such as the BBC and the Independent, but also by papers less familiar to Irish taxpayers, such as Canada's Toronto Star.

The Times online carried a short video clip about the emergency budget and what it would mean for Britain's economy. Describing it as a "bust budget", the video said Minister for Finance Brian Lenihan was delivering his second emergency Budget in seventh months, describing it as a grim task for any finance minister.

However, it pointed out that Ireland had some advantages over Britain, with a smaller national debt, and said that markets would now be looking to Britain's fiscal position.

The accompanying article described the measures as a way to address the "runaway" fiscal deficit, with Mr Lenihan predicting a budget deficit 10.75 per cent of gross domestic product (GDP), down from 12.75 per cent.

The BBC website said the Budget was the second in six months to deal with what it described as a "rapidly contracting economy". The article highlighted a large rise in taxes, spending cuts and the formation of an independent agency to take over banks' bad debts in a bid to restore lending. The BBC said the country is dealing with a "deepening recession" and correcting the "worst deficit in Europe". According to BBC economics editor Stephanie Flanders, there is "method to his madness", warning there were lessons for the UK - mainly that as a country gets deeper into debt, fiscal stimulus loses some of its power.

The Financial Times led with the higher taxes that are to hit "the middle classes" of Ireland, with the establishment of the national asset management agency following close behind.

The same paper carries a second article focusing on the establishment of the government-controlled agency to tackle the banks' bad debts. The plan has already been criticised by the main opposition party as a “big time bomb” for taxpayers, it said. This will make Ireland the first European country to offer to take over the toxic assets of privately owned lenders. It points out that similar proposals elsewhere have been deemed too difficult to value the assets.

The Wall Street Journal's website carried a brief article from the Dow Jones newswire that said the European Commission has reacted positively to efforts to control the growing budget deficit, praising the efforts made. published a similar article from Reuters saying the European Commission viewed the new measures as "decisive action" to contain the rising deficit. It said a preliminary assessment was that "decisive, broad-based action" had been taken in the budget. It also confirmed that the Government had consulted with the Commission before announcing plans to create the agency to deal with impaired assets from banks.

A short piece appeared on the website of the Toronto Star, describing the measures as "hefty hikes in income tax and service spending cuts" in a bid to restore confidence in the "shaky finances of debt-stricken Ireland". It is not yet clear if the Irish taxpayers agree with its assessment of the Budget as a "painstakingly negotiated plan".

The Independent had a more gloomy take on things, describing the current situation as "the dismal business of adjusting to a generational drop in living standards with the end of the Celtic Tiger boom and the prospect of a new era of austerity".

It said the Budget lived up to fears it would be the toughest in Irish history. The paper drew attention to the cuts in expenses and pensions for TDs, and the loss of five junior ministerial posts. It said the package of cuts and tax hikes was aimed at impressing Irish voters and international opinion, both of which have been less than bowled over by the current Government. It also commented on the "loadsamoney" culture that has developed among many Irish young people, most of whom have never experienced hardship felt in other generations.

A cartoon in the opinion section, meanwhile, shows a caricature of Brian Cowen measuring up an already dead Celtic Tiger, declaring that it has to go on a diet until it is healthy again.

Report - Irish Times.

Saturday, 4 April 2009

A Godly Land Of Broke But Merry Alcoholics...

The Orphans of Ireland...

DINGLE, Ireland — Under a sky that looks like a late-winter coat of sheep fleece, the island of saints and scholars falls away in a sheer drop to the Atlantic. The next parish over, they say from this far western edge of Ireland, is Boston.

It is reassuring to an Irish-American on a first-time visit to find the wellspring of poets and balladeers as advertised: those emerald fields, those ruddy-cheeked fishermen warming pub seats, a land of stone and cold wind that produced a lyrical people and a music embraced more than ever by the young.

But it is also jarring to see this ancient landscape littered with empty monuments to the kind of excess that helped bring down the global economy. For a time, the Irish thought they would never fall off those cliffs into the sea; a nation of barely 4 million people could defy gravity.

If Barack Obama, the president with roots in County Offaly, were to skip across the Irish Sea this week he would find a big part of what afflicted much of the western world during a mad era.

Houses prices quadrupled in less than a decade.
Every village that had seen nary a rock wall or a cottage window unchanged suddenly had a cul de sac of insta-homes and a half-dozen O’Mansions. Anyone with a mortgage could get rich in little more time than it took for a head of Guinness to settle.

The crash was sickening, and much like Ernest Hemingway’s description of going broke: slowly, then all at once. Throughout Ireland, more than one in eight homes now sits empty. The skyline is crowded with idle cranes towering over roofless apartments. Property prices have plummeted across Ireland. And as the government plans drastic service cuts, people worry that Ireland will follow Iceland into insolvency.

Just outside of this wonderfully brooding town, where David Lean filmed “Ryan’s Daughter,” the sod was peeled back for the worst kind of Southern California housing developments. These were houses intended as holiday getaways for the new Princes of Dublin and Galway. Now they’re orphans — abandoned, and not even a nationalized bank wants them back.

“The Celtic tiger that transformed a beer-soaked backwater into the envy of every small nation with a thirst for a makeover is dead,” The Sunday Times noted last week, in a story with the kind of sneer that only a paper, owned by Rupert Murdoch, from still-hated England could produce.

They quoted an Irishman, John O’Keeffe, who moved back home in the midst of the boom: “I left a godly land of broke but merry alcoholics and came back to a place where people who used to dig potatoes were buying luxury apartments sight unseen and driving Porsches.”

If the rush to riches was very un-Irish, this country is now back to something more familiar — a state of misery. It was that greatest of Irish poets, William Butler Yeats, who described the indigenous character trait as an abiding sense of tragedy that sustained people through temporary periods of joy.

Hope is a thing of sporting miracles — the national rugby team last week winning a European title that had eluded Ireland for 61 years — and that new American president whose maternal ancestors came from a village with an oddly-prescient name for our times, Moneygall.

The Irish are looking to Obama, wrote Kate Holmquist, a columnist for the Irish Times, “as if he’s not just America’s but also our president.”

Ireland is not on the itinerary for Obama’s travels this week. When he does come here, I would recommend a visit to the west: for inspiration, and for a cautionary tale woven into the land.

Clinging to the bony shoulders of Dingle Peninsula are beehive huts, the stone igloos once inhabited by Celts 1,500 years ago. You huddle inside the small space of those homes and marvel at a people burning peat to stay warm against blustery Atlantic winds.

You walk along Dingle Harbor past a forlorn rock tower, Hussey’s Folly they call it. It was a 19th century stimulus project, a jobs generator for starving people at the time of the Great Famine.

And then, in the green folds of a peninsula holding the greatest concentration of archaeological sites in Ireland, you see the latest and largest of artifacts — the empty houses built at the peak of the Celtic tiger period.

If they stand as long as the beehive huts or Hussey’s tower, the orphans of Ireland will prove to be instructive. The huts are a testament to perseverance. The tower is a monument of hope against despair. And the empty new homes tell a story of greed.

A traveler, 100 years down the road, may wonder what a traveler of today ponders in the presence of the older sites: what were they thinking?

Report by Timothy Egan - New York Times.