Thursday, 31 March 2011

The State Was A Bad Parent...

I’VE OFTEN referred, half in jest, whole in earnest, to the likelihood that the blame game would get underway and that everyone would start suing everyone else until eventually, the Irish State would have to accept responsibility for the bank crash. And, it looks as if that might happen if the Irish Property Council (IPC) gets its way, as last week it announced its intention to take the Irish State to court.

The IPC is an organisation, which represents a broad range of people in the property business, including builders, developers and investors. (And, before you go into hysterics; this organisation represents everyone from the small guy with one little investment property, to the much-hated big-time developers who once owned vast property portfolios.)

The IPC’s main bone of contention is that borrowers are the only ones being held responsible for the Irish property crash. Bankers, the financial regulator and the government appear to have got away scot-free, despite the fact that they were “the creators of the collapse”. Many of them have admitted this and some have even apologised for it but none has suffered because of it.

The IPC is in no way trying to exonerate borrowers from their share of responsibility for the property bubble but it emphasises the word “share” and its members believe that it is grossly unfair that so far, neither the banks nor the government have accepted any “share” of blame, whatsoever.

Indeed, the council clearly states that it considers that the borrowers should be at the top of the list of those responsible. However, it proposes that a court case is required “to identify to what extent the banks are responsible through their reckless lending and the (Irish) State is responsible through their lack of regulation and (their) incompetence”.

Now, before the “anti-property-investor-brigade” amongst you go into a complete spin about how property people deserve to be hammered and you remind us for the umpteenth time how well the same people did during the boom, let me remind you that the vast majority of the people the IPC represents are very ordinary individuals, who were enthusiastically encouraged to invest in property by both the banks and the Irish State.

Also, you might just consider for a moment that although you may not have invested in property over the last decade or so, many of your family, friends and acquaintances did.

Why, one might wonder, did so many Irish citizens suddenly become such enthusiastic property investors? If you believe that the answer to that question is that the nation became greedy, avaricious and materialistic, you might well be correct. But, how did that suddenly happen? What brought on the sudden rush of greed?

It happened because it was allowed to happen. Banks happily lent to all those who wished to borrow and the Irish State condoned all this borrowing, indeed it actively supported and encouraged it.

Is it not the responsibility of the State to protect its citizens from others and indeed, on occasion, from themselves? Is the State not expected to act with due care and diligence?

Take the example of parents (the Irish State), who had shares in a fast-food business (stamp duty) and permitted their child to eat a lot of junk food, indeed, facilitated its consumption by providing little else for the child to eat and compounded it by giving bad example, regularly indulging in fast food themselves.

Imagine if the parents were fully aware of the fact that this unhealthy food was also readily available in their child’s school canteen (the banks) and they never bothered to check with the school principal (the Financial Regulator) to make sure that their child wasn’t eating too much processed, pre-packed rubbish.

Then picture the situation where the children become so obese they all become ill, attendance levels drop and school fees increase. The fast food company no longer sells as much junk food and in turn, the parents’ shares in the company become almost worthless. In addition to subsidising the school fees, the parents must also pay for school games instructors and nutritional therapists.

So, the parents decide that the quickest and cheapest way to get their child back to “normal” weight is to starve it, despite being fully cognisant that their unfortunate offspring may not actually survive such extreme deprivation.

A ridiculous analogy perhaps, but in effect, this is what happened. The Irish State behaved like an irresponsible parent to its children, the Irish citizens. Having fed them nothing but junk food for years, they are now starving them to death.

And now the Irish Property Council is looking for a perfect example of a starving child (a plaintiff); “someone who has lost everything through participation in the property market, either through construction, development or investment” in order to take a class action in the High Court against the Government, the Financial Regulator and the banks over their roles in the collapse of the property market. I doubt they’ll have a problem finding one in the long lines of starving children which make up the country’s dole queues.


Sunday, 27 March 2011

Feckless State On Brink Of Default...

The ordinary citizens of this State would be well entitled to ask if there is some point in the near future when we will stop being burnt by the great ongoing bonfire of the vanities of our former Celtic Tiger masters.

They would be right, for such now is our 'state of chassis' that the Moriarty Tribunal ceased to be the central issue of public discourse after little more than two days. But when it comes to issues of survival, ethics will always come second to economics.

Yet ethics is not unimportant either, for the issues Justice Moriarty dealt with cut to the heart of the colossal political failure of the first Irish Republic. Once again, another tribunal has revealed that we as a State are utterly incapable of governing or policing ourselves.

And unfortunately this failure even extends to a tribunal which after 14 years of investigation has only provided us with the prologue to the resolution of the controversy about the mobile phone licence.

The outside world, on whose charity we are now shamefully dependent, could not be blamed for looking with utter contempt at our feckless ability to get ourselves into the most squalid of messes and our equally consistent inability to resolve it. And when it comes to the failed social experiment of Irish Home Rule, they could hardly be criticised either for wondering if it is right or wise to continue to subsidise a polity which is so politically, morally, and fiscally incontinent.

The consequences of the latter trait were cruelly evident last week, for the vast carelessness of the recent FF/PD coalitions means that Ireland is part of a little herd of states lingering on the window ledge of the EU. This is not good news, for in the chilling words of one EU diplomat, when it comes to the bond market "Ireland, Greece and Portugal are on their own".

Last week, one of our many masters, Jean-Claude Trichet, almost sounded like President Barack Obama as he claimed that when it came to solving our fiscal and banking crisis "Ireland can do it". But the mailed fist that was lurking behind the velvet rhetoric swiftly followed as Mr Trichet claimed "Ireland will do it". In truth the sentiments of Mr Trichet suggested Ireland does not have much of a choice, but the increasing interest rate for Irish long-term bonds suggests the market certainly doesn't think we will.

As we tip ever closer towards the great unknown of a sovereign default, it is now evident that the ongoing crisis in our banks is a dead hand which stymies and enervates any sense of purpose or confidence within the country. Ireland is now in the worst place it has been since Independence. On one side the cheerleaders of austerity can only promise us blood, sweat, tears and ultimate defeat. Meanwhile, those academics who urge us to default are like the man sending a canary into a smoking coalmine, for unilateral default is the child of the sort of soft thinking that has got us to where we are today. Ireland is not Russia . . . or even Argentina.

Before we start shaking our fists at Germany or shouting that Europe must help us, we should realise it would of course be better if Europe was to help us -- but they do not have to do so. And they will only give us a hand up if we begin to help ourselves.

In that regard one modest proposal might consist of the immediate abolition of privilege days where the civil servants of a Republic continue to celebrate the birthday of the King of England.

Report - Sunday Independent

Thursday, 24 March 2011

Brace Yourself...

Brace yourself...€200m cuts and tax rises on way.

IRISH taxpayers are being warned to brace themselves for further hardship with over €200m in increased charges and spending cuts on the way.

Finance Minister Michael Noonan said his 'mini-Budget' would include more cuts and tax hikes.

While the Programme for Government contains a pledge not to increase income tax, there are many other indirect taxes which could be increased instead.

These include charges for State services -- for example A&E charges.

The Government has promised a 'Jobs Budget' within the next three months which will cost €220m to implement.

But it has to raise this money in other ways to ensure that the funding from the EU-IMF bailout deal continues to flow.


In the Dail yesterday, Mr Noonan confirmed that the Government would need money to pay for measures such as reversing the cut in the minimum wage, halving the lower rate of employers' PRSI and reducing the lower rate of VAT from 13.5pc to 12pc.

"These costs will have to be counterbalanced by offsetting measures to reduce expenditure or raise revenue," he said.

It means that the Government is facing the prospect of having to raise €220m through either tax increases or spending cuts, which will be implemented by bringing in another Finance Bill.

Mr Noonan said he would be examining the options available to him over the coming weeks -- and did not provide any further details.


He was quizzed about the impact of the measures by Sinn Fein finance spokes-man Pearse Doherty, who said that they would cost up to €779m in a full year. But Mr Noonan said the actual cost would be €220m this year and €640m in a full year.

Mr Noonan again stated that there would be no compromise on the 12.5pc corporation tax rate when Mr Kenny met other EU leaders at today's crucial bailout summit.

He said that around 14pc of tax revenues will be required to service the interest on the State's national debt this year, rising to 18pc by 2014.

"While this is undoubtedly significant and high, the level of tax revenue devoted to servicing the debt in the 1980s was higher," he said.

Report by Claire Murphy - Evening Herald

Irish Property Invertors To Sue State...

Property Council to sue State, banks over collapse:

AN ORGANISATION representing property investors and developers is to take a class action in the High Court against the Government, the Financial Regulator and the banks over their roles in the collapse of the property market.

The Irish Property Council (IPC) is to outline its plans today for the court proceedings which will set out to apportion responsibility for the collapse.

It says the ruination of the property market has been caused “by the reckless lending of our banks, lack of regulation by our Government and the disregard of prudent advice on fiscal policy by the Government in power”.

The council is to invite developers, house purchasers or investors who are now “total casualties of the collapse” to put forward their names for the court action and a claim for compensation.

The IPC was set up last year to provide support for small builders, developers and investors who have run into financial difficulties following the bursting of the property bubble.

“Property owners are being ruthlessly scapegoated by Government and the banks through the court without any responsibility in this catastrophe.

“The IPC requires a willing plaintiff that can be supported in a court action. We are not looking to get the borrower off.

“We are simply seeking fairness in how that responsibility is shared and a recognition that responsibility exists within the Irish State.”

The IPC’s legal adviser, Paddy Fitzgerald of Ferry solicitors, said the reality was that the IPC would have to succeed.

“We can’t continue in this vein because “everyone involved in commercial property and experiencing negative equity will have a judgment and there will be nobody left to continue the business.”

About 10 per cent of the country’s 790,000 mortgage holders are either more than 90 days in arrears or have negotiated revised payment terms with their banks.

Many of the additional 100,000 residential investors have also fallen behind with their repayments and are facing an increase in mortgage interest charges in the near future.

Others are also threatened with the ending of interest-only repayments arrangements with their banks.

Report by JACK FAGAN - Irish Times

Sunday, 20 March 2011

Irish Property Recovery Is Crushed...

Tiny green shoots of property recovery brutally crushed by our Central Bank...

Our leaders are facing the mother and father of all political and diplomatic battles in Brussels.

'I'M not happy with the idea that some governments obviously find some pleasure in torturing Ireland in the meetings and outside. I don't like this way of dealing with serious problems."

These words are not those of Michael Noonan but of Luxembourg Prime Minister Jean-Claude Juncker, chairman of the euro group of finance ministers. Juncker criticised the link between a lower interest rate on bailout loans and pressure to increase corporate tax.

Again, they are words that could have been written by Noonan -- and my guess is that they were, in fact, inspired by Limerick's master of the soundbite.

Only a few months ago, Noonan was bitterly critical of the Government for its failure to nourish our diplomatic relations with small EU countries such as Luxembourg, Denmark, the Netherlands, and Belgium -- our allies from the early EEC days in the 1970s.

My hunch is that Noonan lost no time in restoring some of those neglected alliances, and his tactics are already paying off.

The hubris of the Celtic Tiger years seduced us into losing the run of things and we liked to think of ourselves as anybody's equal, including Germany's. We hung on to Germany's coat-tails in the delusional belief that we were heavy-hitters.

Now our people are being crucified on the altar of German monetarist dogma which, it seems, we daren't challenge.

Why is it unthinkable that we should even contemplate the idea of leaving the euro or, heresy of heresies, quit the EU altogether?

I'm not proposing that we take such action, but why are we not even allowed to express the thought?

Such suffocating dogmatism is redolent of the time when the church was at the height of its power and when to challenge its teaching, however tentatively, was to risk banishment into the dark void.

The EU has grown into one of the most powerful empires in history and its dogma is intended to protect power and money, the fundamental pillars of imperial-ism. Its grip, however, does not rely on armies, navies and air forces but on something more insidious: the perpetuation of the biggest bureaucratic gravy train in history, which has at its heart a Faustian Franco-German pact.

Recently, a senior eurocrat remarked: "France needs Germany to disguise its weakness, and Germany needs France to disguise its strength."

If I might put it less elegantly, Nicolas Sarkozy is 'on the take' from Angela Merkel, and she uses him to hide the fact of Germany's ruthless economic hegemony, a feat that requires at least one major collaborator, and who better for this role than France?

By now, it would require a leader of the iron willpower and fanaticism of Charles Stewart Parnell to rescue us from our desperate status as a puppet state of the Frankfurt-Brussels axis.

We need greatness as we have rarely needed it before, even in the darkest times in our history.

But superficially, at least, there appears to be hope in the air lately with the change in government and the arrival of spring. One otherwise sensible person told me last week that he thought the recession was coming to an end.

"Most people had a good time on St Patrick's Day, we have a new Taoiseach, most people like him, including President Obama, we had a great Cheltenham, and both the queen and Obama are coming. It will be a wonderful boost for tourism. Something good is definitely happening. Feelgood is a real thing, maybe people will spend more money," he said.

Only a sadist -- or the Central Bank -- would destroy his illusions, particularly last Friday as thousands took 'bridge day' leave between the bank holiday and the weekend to enjoy the sunshine.

Only 48 hours previously the Central Bank had issued a self-fulfilling prophecy of a further collapse in property prices as well as forecasting negative economic growth.

The tiniest green shoots of a property recovery were brutally crushed instantly, for who in their right mind would buy anything against such a forecast of doom?

Over the past few years I've become a convinced conspiracy theorist, in that I detect the hidden hand of the European Central Bank in most of our economic policy decisions. I believe that Frankfurt-Brussels wants to keep consumer demand depressed in this country, to keep property values falling, and to allow businesses to close and jobs to be lost in pursuit of the Holy Grail of cost competitiveness and export-led recovery.

The fact that people's lives are blighted and sometimes ruined is neither here nor there as far as they are concerned. Every war causes collateral damage.

To the unblinking Teutonic eye we have made a dog's dinner of managing our own affairs, and if we are to be bailed out it will be on their terms.

We still don't know the full story of the notorious bank guarantee of September 28, 2008, brought in after the ECB had given vast loans to Irish banks stricken by the flight of deposits, and at a time Frankfurt wanted Irish taxpayers to guarantee its exposure.

There is a huge amount of blame for our debt mountain that we cannot but lay on our own shoulders, such as our chronic failure to control public spending culminating in the surreal Croke Park agreement.

But the mammoth debts our taxpayers have taken on to save the banks are not of our doing, but instead can be blamed on the ECB and its efforts to protect itself and its masters from the consequences of reckless lending by European banks to this country during the boom.

We are now facing the mother and father of political and diplomatic battles for economic survival.

Already, appeasement is in the air in some quarters.

The Irish Times, in a defeatist leading article last Monday, warned: "Mr Kenny has a very weak hand. His trump veto is simply unplayable"'

Parnell and his party went into the House of Commons -- the heart of the British Empire -- and filibustered their way, against powerful intimidation, into a position of critical influence.

We need such independence of thought and spirit, and such steely determination, every bit as much today as we did in 1875.

Report by Aengus Fanning - Sunday Independent

Friday, 18 March 2011

Brits May Buy Irish Ghost Estates...

British housing associations may buy ghost estates...

HOUSING ASSOCIATIONS in Britain are considering buying ghost estates in Ireland after meeting former minister for housing Michael Finneran last month before he left office.

Mr Finneran travelled to Britain with representatives of the Housing and Sustainable Communities Agency in a bid to get them involved in his social housing leasing initiative.

The initiative was introduced by Mr Finneran in 2009 as a solution to the lack of funds available to local authorities to build social housing. But take-up by Irish organisations has been slow.

Under the scheme, British associations would buy ghost estates in Ireland from developers or from Nama and they would rent the properties out to provide social housing in Ireland for the estimated 130,000 households on waiting lists.

In return, local authorities would pay the associations 92 per cent of market rent for the property and they would also receive a rent from the tenant.

Historically, local authorities received a 100 per cent capital grant from the Department of the Environment to build social housing.

In a statement, the Housing and Sustainable Communities Agency said Ireland did not have the capital funding to provide social housing.

“We now need to encourage investment in the provision of social housing,” a spokeswoman said.

British housing associations would have the scope to raise finance and Ireland could offer them an opportunity to expand their stock.

She also said one major housing association in Britain was considering investing in Ireland. “Their intention would be to partner with an Irish housing association who would manage the housing,” she said.

There were also inquiries from investors in Britain and elsewhere.

Among the companies that met Mr Finneran was Places for People, one of the largest property management, development and regeneration businesses in Britain. It confirmed it had been in discussions as part of investigations into “new business opportunities and markets”, but said it did not wish to comment further.

John Rogers, head of property with Irish housing charity Respond!, said they had been striving to engage with Mr Finneran since he announced the leasing initiative in 2009.

A report prepared for the outgoing government found that almost 350 unfinished estates were in need of urgent work to ensure the safety of residents and the public. Some 52 of these estates were in the Cork County Council area, 34 were in Cavan and 23 in Donegal.

Report by FIONA GARTLAND - Irish Times

Thursday, 17 March 2011

Irish House Prices Falling More...

House prices could fall 13.4% this year in bank test scenario...

HOUSE PRICES could fall by a further 13.4 per cent this year and 14.4 per cent next year before recovering in 2013 under a scenario considered by the Central Bank to stress test the banks.

This would represent a 55 per cent decline in house prices from the peak of the market in 2007.

But under a worst-case scenario, house prices may fall by 17.4 per cent this year and 18.8 per cent next year, which would be a decline of 60 per cent from the peak.

The Central Bank, which published details of the scenarios yesterday, is testing the lenders to see how much of the €35 billion set aside in the EU-IMF bailout fund for the banks will be needed.

Minister for Finance Michael Noonan acknowledged yesterday that more than €10 billion may be required, but said he had “no idea at this stage” how much more was needed.

He was speaking after he and Minister for Public Expenditure and Reform Brendan Howlin met senior officials from the IMF and the EU to discuss the new Coalition’s programme for government.

The bank tests are being applied to AIB, Bank of Ireland, Irish Life and Permanent and the EBS and the results will be published on March 31st. The Central Bank is not testing Anglo Irish Bank and Irish Nationwide Building Society as they are being closed down over time.

The tests are aimed at determining the scale of further losses at the bank and whether they have sufficient cash to cover the losses and remain above a higher minimum level set by the Central Bank.

The next €10 billion to be pumped into the banks will bring the total cost of bailing them out to €56 billion, though this is likely to increase further as a result of the stress tests.

Mr Noonan and Mr Howlin said the IMF and EU officials did not raise any objection to the programme for government, even though it contains proposals that run counter to the conditions in the €85 billion rescue package agreed with the previous Fianna Fáil-led government.

The two Ministers met the mission chiefs from the three international bodies concerned: European deputy director of the IMF Ajai Chopra, ECB chief economist Jurgen Stark, and Istvan Szekely, a senior official with the EU Commission.

Mr Noonan said the “troika” of bodies had agreed in principle that the conditions laid down in the memorandum of understanding agreed last November could be changed to accommodate the new programme for government as long as the overall targets remained unchanged.

A separate European battle came to a head yesterday as the Commission pushed ahead with the publication of long-delayed legislation to establish a common consolidated corporate tax base, an initiative seen by Taoiseach Enda Kenny the “back door” to tax harmonisation.

Dublin fears the plan would dim the lustre of Ireland’s heavily contested tax regime by lessening scope for large multinational companies to maximise the profit they record in Ireland.

But taxation commissioner Algirdas Šemeta made light of criticism from Ireland, saying much of it was based on false assumptions about the initiative. “I don’t understand why some of us are so worried about it,” he told reporters.

Publication of the draft law comes as Mr Kenny faces intensive pressure from France and Germany to make a “gesture” on corporate taxation as a condition for a lower interest rate on Ireland’s bailout loans.

In Brussels last night, Minister of State for Europe Lucinda Creighton expressed cautious optimism about the prospects for a resolution.

“There’s scope for manoeuvre and dialogue with the Germans in the next few days. I think it has to be clarified that one country is not the European Union,” she said.

“The French have always had a problem with corporation tax, have always been on this agenda. Mr Sarkozy is now making a major issue of it, probably for domestic reasons.”


Wednesday, 16 March 2011

Growing Dole Queues In Ireland...

Growing dole queues expose fragility of Irish economy...

Unemployment figures show Ireland cannot afford to lose a single multinational – but this is not stopping France and Germany trying to force it to raise corporation tax:

Sometimes you have to wonder if the rest of Europe understands the fragility of Ireland's economy.

Do the Germans and French not understand that there is a prospect of zero growth in the economy in the next three years and that forcing multinationals out of the country could finish Ireland off altogether?

Their constant attacks on Ireland's low corporation tax rate have even got on the nerves of Ryanair's Michael O'Leary, who has warned that any increase will jeopardise the country's ability to pay off its debts.

Figures out on Tuesday showed a surprise rise in unemployment. Yet Ireland swiftly came under attack again for its low corporation tax of 12.5%, as if this was any part of a fix for the challenging times ahead.

German finance minister Wolfgang Schäuble said US treasury secretary Timothy Geithner had complained that too many American companies were investing in Ireland for tax purposes.

According to Arthur Beesley, the Irish Times's Europe correspondent, Schäuble did not elaborate, but told reporters at an EU finance ministers' meeting that Ireland's 12.5% corporate tax rate "can't stay like this".

Solidarity was not a one-way street, he added. Referring to corporation tax, he said "if Ireland wants something additional from us, then we can raise that issue".

But what he didn't say was that Americans express gripes about Ireland's tax regime for other reasons - their own regime is one of the most uncompetitive in the world.

This week the Tax Foundation found that America was soon going to have the highest corporation tax in the world, overtaking Japan with a headline rate of almost 40%.

But that too is irrelevant. Ireland is now, says one tax accountant familiar with multi-national tax structures, the "Delaware of Europe" because it enables companies to shuffle profits around a network of subsidiaries and reduce tax obligations as a result.

Ireland desperately needs the multinationals

...Multinationals don't pay anything like 12.5% tax. Google, one of Ireland's biggest employers, pays less than 3%.

Google has in effect reduced its corporate tax bill to 2.4%, saving $3.1bn (£2bn) in the past three years. It would have paid 35% in the US. The process is entirely legal and Google is far from alone in exploiting it: more than 400 multinationals are now established in Ireland.

But to lose any of them now would be a hammer blow to the Irish economy. They are responsible for about one third of the country's corporate tax take and responsible for employing around 100,000 locals.

And Ireland desperately needs these jobs.

Any hope that the economy had stopped deteriorating was dashed on Tuesday with new figures showing unemployment in Ireland at 14.7% – the highest rate in 17 years.

The Quarterly National Household Survey figures are a dreadful reminder of the challenging times Ireland lives in - nobody expected the unemployment figures to rise beyond the 13.5% at the end of last year. If anything, the figures were expected to fall, taking into account emigration of about 1,000 people a week.

Young people are being hit hardest. The number of teenagers between 15 and 19 in work has fallen by almost 60% year-on-year while the number of employed in the 20- to 24-year-old age bracket fell by almost half.

The picture is worst for the long-term unemployed. For the first time, the number of those unemployed for more than a year was higher than the number of people who were out of work for less than a year.

Separate figures released by the Organisation for Economic Co-operation and Development (OECD) showed that unemployment rate in Ireland is now the second highest in Europe, after Spain and ahead of Slovakia, Estonia and Greece. The UK incidentally is 12th, between Sweden and Denmark.

On Tuesday night former head of the National Treasury Management Agency, Michael Somers, painted a bleak picture of Ireland's future. "The awful thing is there are figures out there that show no growth for the next three years … the problem is what happens after that." Given the tax rises and pay cuts in last year's budget, "you wonder how are we going to get out of this mess … we are in a downward spiral," he told RTE.

The next two weeks will be critical for Ireland as Europe edges closer to finalising its plan for an expanded bailout fund.

For Enda Kenny, the bleaker the picture Somers paints of Ireland the better, as it all chimes with Fine Gael's new mantra that the bailout as currently configured is "unsustainable".

In other words, the closer we get to default, the stronger the chance of a renegotiation.

The IMF's Ajai Chopra, who has returned to Dublin, will certainly get a flavour of the challenges ahead today when he is briefed on the bank stress tests. These are expected to show a further black hole in AIB.

Back in Europe, Ireland got some much-needed support on Tuesday from Luxembourg's prime minister, Jean-Claude Juncker, who said he did not think a link should be made between the corporate tax rate and more lenient bailout terms.

"As the prime minister of Luxembourg, I don't like this link between the corporation tax issue and the so-called Irish package," he told the Irish Independent after a meeting in Brussels.

In a swipe at France and Germany he added: "Some governments obviously find some pleasure in torturing Ireland inside and outside [EU] meetings.

Any premier of Luxembourg, which operates on the most tax-friendly regimes in Europe, would say that. But right now Ireland will take comfort from wherever it can.

Report by Lisa O'Corroll - The UK Guardian Newspaper.

Debt Masters Part In Irish Downfall...

European debt masters must study their part in our downfall...

Stony-faced IMF and ECB officials touched down in Dublin yesterday as they make yet another attempt to solve the Irish banking crisis.

This crisis is now almost three years old if you take the starting point to be the so-called 'St Patrick's Day massacre' of 2008 when Anglo Irish Bank's stock price plunged by 15pc.

Despite plans to spend 36pc of everything Ireland produces on this one segment of the economy, all policy interventions to date have not only failed to shore up the system, but in some cases have made it even more unstable.

While the primary responsibility for this failure must lie with our outgoing Government, wider culpability stretches in a southern direction to Brussels, then onward to Frankfurt.

Last year economists Klaus Regling and Max Watson, in a key report, made it very clear the causes of Ireland's financial crisis were primarily homegrown, but deep involvement of European institutions in trying to solve the problem is undeniable.

As reported previously in this newspaper the president of the ECB, Jean Claude Trichet, has been intimately involved in attempts to stabilise the Irish banking system right from September 2008.

In fact, former Minister for Finance Brian Lenihan phoned Mr Trichet on the night of September 29 to inform of him of how the Irish Government was planning to help the banks here to starting funding themselves again -- by providing a guarantee scheme, with apparently no upfront costs.

Since that date the European and Irish authorities have been locked arm-in-arm in trying to bring the crisis to an end with European involvement coming in many forms.

The ECB has provided liquidity of €117bn according to the last set of figures, while the EU's competition directorate has nodded through a series of capital injections into banks, the most expensive being Anglo Irish. This part of the EU's apparatus also gave its seal of approval to NAMA.

The most crucial of all interventions from Europe is the most secret. Last November when it was reported the Irish authorities were negotiating with the Commission about a rescue package, the EU and ECB are believed to have vetoed far-reaching restructuring of the banks that would have involved some portion of senior bank debt being restructured.

The concern, though again not publicly voiced, was that such restructuring -- across even the smallest institution -- would cause "contagion'' for other European banks trying to raise money from the bond market.

This idea that contagion would erupt across European markets if Ireland acted unilaterally over its own banks has been at the heart of the European response to the Irish banking problem.

But it makes sense to look more closely at precisely what is meant by this concept of contagion. What countries would be impacted by market contagion in an Irish context?

According to data released by the respected international organisation, the Bank of International Settlements (BIS) last year German banks were owed some $138.5bn (e99bn) by Irish banks and the Government, while French banks were owed $43.5bn (e30.8bn).

While these figures can be distorted by lending to IFSC banks, there is little doubt that key German and French banks have (and continue to have) huge exposures to the Irish bank system.

While it may not be the key component of European banking policy in relation to Ireland, the protection of German and French creditors has been one of the key by-products of policy over the last two years.

Equally, one of the reasons a future restructuring (effectively a reduction) in Irish bank or government debt may not be feasible is because the German and French banks simply don't have balance sheets strong enough to withstand the kind of damage. (Complex questions over whether such an event is actually necessary is a debate for another day).

For example this year alone €9.7bn of Irish bank debt comes due. Most of the holders of this debt will be paid in full as most of it is not junior (or subordinated) in nature. Based on the size of the German banking sector much of it will be repaid to that country's lenders, followed by UK and French lenders. Next year another €16.6bn of bonds come due and yet again most of the investors holding these assets will get paid in full, including both their principal and their interest payments (coupons).

Many argue this is as it should be -- the principle of senior debt remaining free from government imposed write-downs is central to the whole funding system for banks worldwide. But equally, what of those who funded dangerously under capitalised and risky banks like Anglo Irish and Irish Nationwide, many of them German and French banks?

The interest rate on Anglo and Irish Nationwide bonds was attractive during the boom, often stretching between 4pc and 4.5pc. Anglo and Irish Nationwide were always seen as "good payers'', as one analyst said yesterday.

The appetite of German banks for Anglo Irish bonds for instance was extremely strong in 2007, just as the crisis was brewing. That year some 37pc of those who took an Anglo bond, maturing in 2012, were German or Austrian. Ironically the entire bond issue was sold into the market by French banking giant BNP Paribas.

But do these investors now deserve to be repaid no matter how much risk they took investing in banks with lopsided balance sheets and what is known as mono-line business models i.e. a heavy reliance on property?

These lenders financed Anglo Irish on a European basis, using the eurozone's advantage of no currency risk. Even the names of how they funded these banks makes this abundantly clear -- they funded them under "European medium term note programme''.

But the crucial question is does Ireland have the capacity to make good on these debts? Many argue not. If you accept that assertion then the Irish banking problem becomes a European banking problem, a French banking problem and a German banking problem.

It is now time for that to be recognised by those arriving in Dublin today.

Report by Emmet Oliver - Irish Independent

Sunday, 13 March 2011

Ireland's Celtic Tiger Excesses...

'Bang twins' may never get to run a business again...

POST-boom Ireland is awash with cautionary tales of Celtic Tiger excesses, as a rattle around the carcasses of fallen property developers and entrepreneurs will show. Few can compete with the so-called Bang twins for youth, glamour and tasteful extravagance.

Simon and Christian Stokes, the 35-year-old identical twins behind Bang Cafe and exclusive private members club, Residence, saw their entire business go bust with debts of €9m, €3m of which is owed to the tax man.

The debt may be in the ha'penny place compared with the eye-watering billions owed by some of their former customers. But their fall has been arguably steeper and more damning than some of the country's richest tycoons.

Last week, further humiliation was heaped on them with revelations that even as their businesses were going under, the twins spent €146,000 of company money in 18 months on designer shopping sprees, five star holidays and sumptuous Michelin-starred meals.

An 18-month analysis of credit card statements showed that the spending splurge continued up to June 2009, months before their businesses crashed and burned. Even worse was that while ploughing company money into their back pockets, bills, including taxes, went unpaid.

The twins, who prided themselves on their work ethic, were absent from the High Court last week. They are keeping their heads down, according to one acquaintance, grafting away in their father's restaurant business to keep things ticking over.

With an eye for a good suit, the Stokes twins were always going to be high maintenance but last week's disclosures in the High Court astonished even loyal supporters of the impeccably groomed pair.

They were paragons of boom-time prosperity. Their path to success was smoothed over by beautiful and high-achieving parents. Their father is male model-turned restaurateur, Jeff Stokes, who ran the Unicorn; their mother is Pia Bang, a Danish interior designer. The twins graduated from private school (Wesley College) to private business colleges and at 24 -- fashionable, polished and well-travelled -- they opened Bang, close to the Unicorn, on Merrion Row.

By their own admission, neither were academic but both are blessed with good looks, charm and an interest in fashion. Bang took off, thanks to a good chef, trendy clientele and corporate types keen to soak up some of the restaurant's cool factor.

Their next venture was the Clarendon Bar, purchased in 2002 for €2.7m. An expensive face-lift followed. They sold the building (to Bernard McNamara), leased it back and when the contract ran out, they walked away.

They owe McNamara's company €550,000.

In May 2008 they opened Residence, their private members club in a period house on St Stephen's Green.

Plenty were willing to pay the €1,600 annual subscription, including Johnny Ronan, who owned the building, fellow property developers, socialites and politicos.

According to social watchers, the twins didn't seem the types to get sucked in by the madness. Not for them choppers and race horses and 'come all ya's' in the sweaty Fianna Fail tent. They exuded Scandinavian cool, tied their neck scarves Continental style, and enjoyed holiday retreats from which they emerged with naturally golden suntans.

Neither smoked or got drunk. They have listed their off-duty activities as shopping, golf and cars -- Christian once bought a Ferrari rumoured to have been owned by David Beckham. Their private lives were settled and constant.

Simon married his wife, Conach, in 2003. Christian had a more circuitous route to marriage. He had a long term girlfriend followed by a romance with Christine Bleakley, the GMTV star who shares a couch with Grainne Seoige, before settling down with his wife, Louise Delaney, a jewellery designer, whom he hooked up with in New York. Both twins live with their families in Mount Merrion.

Simon sounded eminently sensible in sharing his financial habits in an interview some years ago: "I have two Visa cards, one for business and the other for pleasure. If I had a Brown Thomas card, I would be forever in debt so I have no store card. The business Visa is paid off monthly, but I'm not half as efficient with my personal one."

He may have had his own personal Visa, but he also used his business card for his pleasure. Liquidator Tom Murray analysed credit card statements charged to Mayfair, the company that operates Bang Cafe.

Simon emerged by far the bigger spender. He dropped €2,421 at the luxurious colonial-style retreat, the Coral Reef Club in Barbados and almost €2,000 at Blakes, the London hotel designed by Anouska Hempel.

He left the Gucci Store in New York €4,425 lighter and spent €2,621 in Brown Thomas in Dublin. He also supported the family business, spending €6,494 with his mother's business, Pia Bang Interiors in Dublin.

Christian Stokes, who was not as extravagant, spent €26,000 on personal 'stuff' such as €12,440 on Aer Lingus flights, €3,835 to Ashford Castle and Skovshoved Hotel in Denmark.

Simon once said that he believed he would never have to worry about money because their investments were so strong. But the truth was that their investments were walking wounded, making their shopping splurge all the more staggering. At the time they were cladding themselves in Gucci, their companies were haemorrhaging money.

They ploughed €3.4m into refitting Residence but the club never turned a profit since it opened.

It had cash flow problems so they used the PAYE and PRSI docked from the wages of 58 staff to keep the ailing company going.

They engaged in a series of inter-company loans that were later referred to corporate investigators.

The game was up in January last year when Residence's parent company, Missford, went into receivership with debts of €4m -- €1.2m to Revenue -- after Zurich Bank moved to recover a loan.

The twins were filleted by Mr Justice Peter Kelly who called the twins "delinquent directors" and suggested they had been engaged in "a form of thieving" by using tax money to trade.

Mayfair, the company that operates Bang Cafe, collapsed soon afterwards with debts of €2.4m. Auldcarn, which operated the Clarendon, was liquidated with debts of €2.3m, with more than €900,000 owed in taxes.

The financial discrepancies were so serious that in the High Court hearing last week, Thomas Murray, the liquidator for Mayfair, asked the court to disqualify the brothers from ever again running their own company.

The twins could be in serious trouble. They have been accused of trading while insolvent, could be prosecuted for alleged breaches of company law, and could be held personally liable for some of their companies' huge debts.

A bailout is unlikely. Their father's business went into liquidation a fortnight ago with debts of €2m.

Springmanor, the company behind the Unicorn, which he ran with Giorgio Cassari, ran up debts after investing heavily in another restaurant, Il Segreto. The Unicorn, the jewel in the business, survives; it was quietly transferred out of Springmanor to another company, linked to Giorgio Cassari, last year.

In an interview in 2003, Simon Stokes said: "We were 24 when the restaurant was launched and. . . we had little experience in book-keeping."

Apparently they never did get the hang of it, the longer they ran the business.

"I think it's a classic case of losing the distinction between what's your money and what the company money is. They are actually nice guys, fine guys to deal with but (there is) a lack of cognisance of the fact that the company and yourself are two different entities," said a source.

One of Residence's biggest supporters, Michael O'Doherty, the publisher of society magazine VIP, said he's done defending them.

"Simon and Christian are still friendly, polite guys, but what they did was inexcusable," he wrote last week.

"Perhaps they were living in complete denial, desperately trying to shut their mounting losses out of their minds. Or perhaps they simply didn't care, and had utter contempt for the people their companies owed money to. We'll never know."

Simon once said. "Even though it is hard to live without money, it is not the be all and end all," he said, a mantra they may have to keep chanting, but with feeling this time.

Report by Maeve Sheehan - Sunday Independent

EU Taxes 'Suicide' For Ireland...

'Suicide' if we give in to EU on taxes...

'No surrender' insists Enda Kenny. 'Stand up to Merkel' says McDowell.

An overwhelming majority of Irish people have endorsed Taoiseach Enda Kenny's refusal to budge on Ireland's corporation tax rate during intense clashes with German and French leaders Angela Merkel and Nicolas Sarkozy.

Any climbdown by the Taoiseach on the issue would represent a case of "economic and political suicide", Michael McDowell, the former Progressive Democrat leader, said yesterday.

According to the latest Sunday Independent/Quantum Research Poll, 78 per cent of people think Mr Kenny was absolutely correct to refuse to offer "a gesture" to Mr Sarkozy in terms of our corporation tax rate in return for more favourable rates on the €85bn IMF/EU bailout.

People polled on Friday night saw the Irish corporation tax rate as the 'bedrock' of our multinational employment base and export figures.

Further details of the heated exchanges during the meeting emerged yesterday. Mr Kenny played heavily on his huge mandate from the Irish people that no move on the 12.5 per cent corporation tax rate was acceptable to the Irish people.

One senior government source said Mr Kenny "fought back against Mr Sarkozy's disingenuous arguments" and that he will "stand tough" no matter what pressure is brought to bear.

Mr Kenny made it clear that the "targeting" of Ireland in this manner was "unfair" and that Ireland required assistance to ensure its recovery.

Michael McDowell in today's Sunday Independent writes: "Sarkozy deserves a gesture -- but a gesture involving two digits and no other numbers.

Mr McDowell said that any relenting by Mr Kenny and his Government to the pressure from Europe would be disastrous.

He added: "The attitude shown by Sarkozy and Merkel is predictable. France and Germany want to impose a uniform corporate tax regime across the EU. It is simply a question of exercising a demand for more power.

"Corporate tax harmonisation would attract more and more corporate activity to the heart of the union and away from the geographical periphery like Ireland," he said.

But political observers believe Mr Kenny will need all the support he can get on the issue in the wake of the Franco-German-led attempt to persuade Ireland to increase its corporation tax in a trade-off for easing the crippling terms of the IMF/EU bailout.

"It is a unique attack on a newly elected national leader," said one government minister yesterday, who described it as "an onslaught from the Franco-German alliance."

"Sarkozy just can't dictate to Ireland; our low corporation tax rate has created thousands of jobs in this country" said junior minister Michael Ring.

MEP Marian Harkin described it as a "lot of hot air" and said that France's "effective" corporation tax was actually lower than Ireland's.

Leading figures in business have also called on Mr Kenny to defend the corporation tax rate at all costs, and say he should threaten to leave Europe if they continued to exert pressure.

International aviation tycoon Ulick McEvaddy said it was crucial for Ireland to retain one of the few competitive advantages it had.

"We are a small island on the edge of Europe, we need some advantage in order to attract companies here," he said.

"We need to stand up and realise we have an excellent hand to play in the negotiations. The interest rate should be 3.2 per cent, not the rate it is (5.8 per cent on the EU part of the bailout loan).

"The corporation tax rate was one of the main reasons I opposed the Lisbon Treaty the first time around. We then got the guarantee on it.

"But let us also remember who our biggest trading partner is. Britain, and we are one of theirs. I'm sure they would be willing to bring us back into the sterling area," he said.

"We should examine linking back in with sterling if they continue to go after us. The bottom line should be 'treat us properly or we're out of here into the sterling zone'."

UCD economist Karl Whelan said: "It would not be the end of the world" if the Irish corporate tax rate went up by 2 or 3 per cent. The real danger would be if all European rates were made the same -- leaving Ireland at a very big disadvantage.

"The worry is if they harmonised with the rest of Europe. But we are asking a lot from them too, so something will have to give," Mr Whelan said.

The Sunday Independent/ Quantum Research Poll has found that a huge majority are against conceding on the corporation tax rate.

"It is a disgrace that large, powerful countries such as Germany are putting pressure on us.

"The question we have to ask ourselves is: How much control will Germany have over Ireland? This is a truly terrifying notion," said one respondent.

It is also one of the few things the Government "has full control over", having already ceded functions such as setting interest rates to the EU.

The poll found that 22 per cent felt the Government could concede on the corporation tax rate in return for concessions on the bailout terms. They believed it was the only "gambling chip" left in our attempt to restructure the debt.

"We might have to let it go, otherwise we will be in recession for 20 years trying to pay back our debts," said another respondent.

Report by JOHN DRENNAN and Daniel McConnell - Sunday Independent

Saturday, 12 March 2011

Irish Emigration Exaggerated?

Expert says Irish emigration wildly exaggerated...

IRELAND IS in the grip of a “media, moral and public panic” about emigration that is not justified by the number of Irish people leaving the country, a migration expert has said.

Prof James Wickham, director of the Employment Research Centre at Trinity College, told a conference yesterday that during the general election campaign politicians and the media wildly exaggerated emigration rates.

“During the election we were told every day how 1,000 Irish people were leaving the country every week. The only problem with that is that a substantial number of them are returning immigrants,” said Prof Wickham.

The most recent estimates published by the Central Statistics Office indicated 27,700 of 65,300 emigrants recorded in the year to the end of April 2010 were Irish.

Prof Wickham said there is a very real danger that the “media, moral and public panic” surrounding emigration could become a self-fulfilling prophecy.

“The rhetoric that is being used in the current discussion of this in the media is that of the emigrant wake like the 1950s.The emigration we are experiencing is much more like the emigration of the 1980s rather than the 1950s. The 1980s represented a turning point for Ireland, and many of these educated people returned in the 1990s bringing new skills and money,” he said.

He said Irish emigration was not yet at the mass emigration levels seen recently among young people in Poland and Spain.

The test of whether Irish migration would become mass emigration would occur this summer, when a new generation of students will leave university, he said.

“We should learn lessons from the recent mass emigration from Poland, when people were treated as traitors for leaving. This created dissatisfaction. But I’ve seen no sign of that in Ireland, which has a good record of welcoming back emigrants,” he said.

Prof Wickham said the concept of a “brain drain” caused by emigration is giving way to a more modern concept called “brain circulation”, whereby people tend to move countries more often before returning to their home state.

He said migration is now a fact of life for different generations, including retirees living in the south of Spain and young people who form relationships with people from different countries.

“There has been a huge growth in so-called love miles, people following their girlfriend or boyfriend and living in their country,” he said.

He said emigration should not be treated as an “unmitigated disaster” but effort should be put in to encouraging educated people to return with skills later.

Prof Wickham was speaking at a research symposium at Trinity College, “Employment and the Crisis: Work, Migration, Unemployment”.

Report by JAMIE SMYTH - Irish Times

Friday, 11 March 2011

The State Of Ireland...

Census to answer questions about state of nation...

ARE WE losing our religion and getting divorced more often than before as the recession tightens its grip? How many of us are moving abroad to find work and escape the economic crisis?

These questions and many more will be answered by Census 2011, which takes place on Sunday, April 10th, and will provide researchers with a treasure trove of statistical data to pore over to determine the state of the nation.

Some 5,000 staff working for the Central Statistics Office (CSO), who are called enumerators, will begin distributing green Census 2011 forms to all 1.8 million households across the State from today.

Everyone who is in the State on Sunday, April 10th, must fill in one of the 24-page forms, which include a range of personal questions designed to create a comprehensive picture of the social and living conditions across the State.

The green forms ask for basic information about the occupants of a household such as their age, marital status, ethnic background, religion and occupation. They also ask detailed questions about people’s housing, health, education and the languages they speak.

Aidan Punch, assistant director general of the CSO, said a new question included in this year’s census on a person’s general health could provide important information on health needs.

“For the first time we will know the health of the nation,” he said.

At a Census 2011 function yesterday, NGOs representing groups such as Travellers and the elderly agreed the census could provide valuable information.

“We have to make sure that old people answering questions are honest about their ailments,” said Maireád Hayes, a member of the Irish Senior Citizens Parliament.

“If they have a gammy knee they need to say so to ensure services are provided,” she said.

Anyone who provides knowingly false information or refuses to complete the form is liable for a fine of €25,000 under the Statistics Act.

Mr Punch said a handful of people had been prosecuted under the Act. He said it was important to complete the forms to enable the Government and local communities to make informed decisions on where to allocate services.

People who are not at home but are on holiday or business in Ireland staying at hotels or guesthouses must fill out the form and alert an enumerator as to where they will be on the night.

People who are on holiday abroad or are on business overseas on April 10th do not have to fill in the Census 2011 forms and should tell their enumerator when they drop off the forms.

Mr Punch said the census should highlight important trends on emigration but he guessed the population had continued to increase. “I’m guessing 4.5 million but let’s see,” he told journalists.

The last census provided interesting snippets of information such as the growth in followers of Islam and a boom in jobs for roofers and bricklayers. It also charted the surge in immigration during the Celtic Tiger era.

Reflecting the multicultural nature of the country, census forms will be available in 21 languages.


The population was 4,234,925, up from 3,917,203 in 2002. It is the highest figure since 1861

There were 420,000 foreign nationals living in Ireland from 188 different states, including Tonga, Vatican City and Lesotho.

The highest number of foreign nationals were from Britain, 112,548; Poland, 63,276 and Lithuania, 24,628.

The number of Muslims living here grew 70 per cent to 32,500, compared with 2002.

The number of people who said they could speak Irish was 1.66 million, up from 1.57 million in 2002.

The total number of cohabiting couples was 121,800 in 2006, up from 77,600 in 2002 – by far the fastest-growing type of family unit.

The number of road workers almost trebled from 2,980 in April 2002 to 8,802 in April 2006. The number of pipe-layers, bricklayers, crane drivers, roofers and plasterers all increased by over 70 per cent over the same four-year period. Source: Census 2006

Report by JAMIE SMYTH - Irish Times

Thursday, 10 March 2011

The Storm Is On Its Way...

I’M WAITING for the implosion. I feel it in my gut and over many years I’ve learnt to trust gut instinct. Something just doesn’t add up.

Why are so few houses on the market these days? You might be fooled into believing there is a glut of properties for sale, until you actually go out to look, whereupon you soon realise the turnover of property is so slow that you are looking at the same selection each week.

Indeed, so few houses are coming on the market, particularly at the upper end, that the few potential buyers out there are now frustrated, as the choice is so limited.

Why are people not selling? It makes no logical sense given what we now know about the vast numbers of mortgages in arrears.

Estate agents say that homeowners at the middle to upper level are not selling because property has lost so much value of late they would prefer to hang on until the market improves.

Which is all very logical and reasonable assuming these owners can hang on – but are we talking about casually hanging on until the time is right or hanging on by their fingertips?

Unfortunately, I suspect it is very much the latter. Sure, I can believe hanging on is not a problem for a certain number of older people, who’ve owned their respectable redbrick semi-detached family home for 30 years or so and have long since paid off their mortgage and who never made the mistake of remortgaging their home in order to release equity or buy a retirement property in the sun.

I can even believe it might be true of some middle-aged people, who, despite having paid top dollar for their dream home at some stage over the last 10 years, have an income level that has miraculously remained high enough to sustain their mortgage repayments and who were among the very few who resisted the temptation to purchase an investment property or a frontline villa on a Portuguese golf course.

And no doubt there are a number of people who are lucky enough to be involved in businesses which are still successful and who are riding out this recession virtually unscathed.

But what I find difficult to understand is how, after a decade or more of volatile property sales, which included a vast number of investment properties as well as those purchased as primary residences, there are not more distressed properties on the market. Well, not yet, but soon – I strongly suspect we are experiencing the calm before the storm.

And it may be one hell of a thunderstorm, as the word on the street is that our financial institutions, having dealt with the big builders and property developers, are now turning to those on the lower rungs of the property ladder – the smaller players, with a few investment properties.

And I’m not just talking about professional landlords with a string of rental units but the average Paddy and Mary who bought an apartment as part of a long-term pension plan or a small house in the city for their children to live in while they attend university.

Lenders are currently dispatching letters in their thousands, to all those whose loan facilities are due to expire this year. And, as the typical interest-only loan arrangements were for a maximum of five years, the numbers due for renewal are now high, as so many bought properties in the last few years of the boom.

Lending institutions are putting an end to tracker deals because they themselves can’t borrow funds from the ECB at the low rates they’ve been charging their tracker-deal customers. And as ECB borrowing rates are so high, Irish lenders are attempting to recapitalise their institutions the cheaper way, by forcing customers to repay capital as well as interest on their loans.

Unfortunately, while it sounds logical in principle, the reality is that for many borrowers capital-and-interest repayments would prove impossible to service and the move would force them into defaulting on their loans.

Some lenders are now reported to be offering alternative arrangements to their customers, including new interest-only loans that are based on standard variable rates.

But be warned, these rates can be adjusted upwards by the lender at any time over the duration of the loan facility. So, whilst initially it may appear an attractive option, it could prove to be far more expensive in the long-term than starting to pay off capital now.

That is, of course, if the unfortunate borrower can afford to hand over one cent more than they are already paying, which many just can’t. Unless lenders wake up and recognise that many people are now in the “can’t” rather than “won’t” category, and negotiate a sensible deal, the numbers defaulting on their loans will escalate to unsustainable levels. Invest in earplugs and earmuffs – it will be a big bang.

Report by Isabel Morton - Irish Times.

Wednesday, 9 March 2011

Property Crash Homes For Sale...

Hundreds of repossessed homes in Ireland to be sold by auction...

UK property consultancy Allsop to hold auction in April at Dublin's Shelbourne hotel:

Flats in Ireland that could have fetched €150,000 in the Celtic Tiger years are to be put on the market for as little as €25,000 (£21,000) in the country's first ever mass auction of repossessed homes.

And, in a sign of how wide the property crash is, the latest item to turn up in liquidation sales in Dublin is a job lot of 15 cranes, including a pair towering over Anglo Irish Bank's half-built headquarters in the city's docklands.

"Tower cranes were among the most sought-after heavy plant and machinery 10 years ago," Ricky Wilson of Wilsons Auctions says. "You couldn't buy them quick enough. Now they are left idle for two or three years on sites."

He has 15 cranes worth €500,000 going on sale on 26 March, with German, Dutch and Polish buyers expressing interest.

But it is the auction of flats and houses that is causing the bigger stir in Dublin. The UK property consultancy Allsop will shortly publish its catalogue of 80 lots in the residential sale, which will include everything from stylish apartments in Georgian houses to new flats in Dublin's docklands to family homes in sought-after parts of suburbia.

For the cash-rich bidder, there appear to be bargains everywhere. At the top of the range are homes in the Dublin 4 districts of Sandymount and Ballsbridge, which commanded premium prices in the boom. One property – a two-bed, two-bathroom flat in a "prestigious block" in central Dublin – was formerly on sale for €900,000. It now has a reserve price close to €220,000.

At the other end of the market is a flat in Limerick city centre with a reserve of only €25,000.

Up on a notch on the price ladder are two-bedroom flats in midlands towns such as Athlone and Portlaoise going for just €30,000.

In Wexford, in Ireland's south-east corner, a job lot of six flats and several commercial units are listed.

Other lots include a four-bedroom family home in south Dublin with a price tag of €400,000. Allsop is not revealing details but estate agents say even modest homes in this part of the city would easily have fetched €2m in the good times.

The property auction is to be held on 15 April in the Shelbourne, one of Dublin's top hotels. Gary Murphy, a partner at Allsop, says that his "phone hasn't stopped ringing" since word got out at the weekend.

Most of the lots were previously owned by property investors who have gone into receivership or simply handed back the keys to the banks.

Allsop hopes the auction will inject new life into the moribund property market, which has been paralysed by fear that house prices, which are already down 45% from their peak, may have still further to drop.

"It will restore confidence in the market. That day has to come to Ireland," Murphy says.

"You can look at all the economic analysis, but you get no better feel for the market than when you are on the rostrum, calling on buyers to part with their money," he adds. "To do that 80 times, you soon find out if the market is strong or weak. We hope this will establish the floor."

But for those who bought in the boom, the auction will stick in the craw.

"If you bought for €300,000 and you see a similar property selling for €50,000 to €60,000, your first reaction is going to be, 'I'm in negative equity for €200,000 to €300,000,'" says Ronan Lyons, an economist with the property website

However, he says homeowners should not panic: "It's unlikely that prices for two-bedroom apartments will settle at €40-€50k. It's too cheap in relation to rent."

Report by Lisa O'Carroll - The Guardian.

Tuesday, 8 March 2011

Struggle To Pay Bills To Get Worse...

Struggle to pay bills is about to get much worse...

With a swathe of EU interest rate hikes coming our way, mortgages will shoot up by thousands of euro a year:

THE President of the European Central Bank (ECB), Jean-Claude Trichet, shocked us all last week when he suggested that the next ECB rate hike could be as early as this April. There are already 60,000 homeowners struggling to pay their mortgages.

With a raft of European interest rate hikes on the cards, many of them will find it even harder to pay their mortgage in a few weeks' time -- and tens of thousands more homeowners will share their fate.

We all knew that the ECB interest rate -- which influences the amount of interest you pay on your mortgage -- was on its way up. Yet surging oil prices and a pick-up in eurozone inflation mean this rate hike will now happen a lot sooner than we ever expected.

Some economists believe the ECB rate could increase four times this year.

As the ECB rate has been at an all-time low of 1 per cent for the last two years, this will be a big shock for many homeowners. Indeed, by the end of next year, the numbers struggling to repay their mortgage could be a far cry from the 60,000 cited last week by the Central Bank.

Homeowners with standard variable mortgages now face a double whammy of interest rate rises as the ECB hikes will come on top of those already unleashed by their lenders over the last 19 months.

Homeowners with tracker mortgages -- who have escaped the latest spate of standard variable interest rate rises -- will also see their mortgage bills increase as their interest rate tracks the ECB rate.

The only homeowners who can avoid ECB rate hikes are those on fixed rate mortgages -- but cheap fixed rates are like gold dust today.


Ulster Bank's chief economist Simon Barry expects the ECB rate to hit 1.75 per cent by the end of this year.

Alan McQuaid, chief economist with Bloxham Stockbrokers, believes the ECB rate could hit 1.50 by the end of this year and 2.50 per cent by the end of 2012. He expects rates to then peak at between 3.25 and 3.50 per cent in 2013.


Those on expensive standard variable rate mortgages will be the most affected by the ECB rate hikes. As tracker mortgages are cheaper than standard variable, the hike won't be as steep as it will be for those with a standard variable mortgage.

Tracker mortgages are no longer available but if you're on an expensive standard variable rate, it could be worth your while switching to a cheaper lender before the ECB starts to increase its interest rates.

However, your chances of doing so could be slim. Neither AIB nor Ulster Bank allow you to switch your mortgage to them. Bank of Ireland, EBS Building Society, KBC Bank, National Irish Bank and Permanent TSB still accept switchers, however -- although certain conditions must usually be met.

"You need to be careful about switching to another lender as some of the rates offered by lenders are prohibitive," warns Michael Dowling, spokesman for the mortgage brokers, the Independent Mortgage Advisers Federation.

If you're coming off a cheap fixed-rate mortgage, you might still be able to get a tracker mortgage -- if that tracker was part of your mortgage contract.

"If you're on a discount mortgage interest rate which is coming to an end, check your mortgage offer as you may be entitled to a tracker rate after the discount rate expires," says Dowling.

"Even though tracker rates are no longer available, if you're entitled to a tracker rate under your loan offer, you may still be able to get one. Your bank should let you know if this option is there for you -- but you shouldn't assume that it will."

If you're lucky enough to be on a tracker mortgage, don't give it up. Fixed interest rates are currently more expensive than tracker mortgages -- and this is unlikely to ever change. Your lender cannot force you to give up your tracker mortgage -- even if you fall behind on your mortgage repayments.

When contacted by the Sunday Independent last week, most Irish lenders said they would continue to honour tracker mortgage contracts for existing customers -- and that they had no plans to withdraw tracker mortgages from them. KBC Bank, however, has a clause in some of its mortgage contracts which suggests it could withdraw a customer's tracker mortgage if interest rates move in a certain direction. The lender refused to say last week whether or not it had enforced that clause on any of its customers -- or if it planned to use the clause to withdraw tracker mortgages from existing customers.

KBC said it had 20,000 tracker mortgage customers. "All home owners enter into a contract with their mortgage providers for the provision of a loan to purchase their home," said a spokeswoman for KBC. "As with any contract, this outlines the terms and conditions which must be met by both parties -- both the lender and the borrower."

Reoprt by Louise McBride - Sunday Independent.

Monday, 7 March 2011

The House Of Pain...

WELCOME TO THE HOUSE OF PAIN: The ECB headquarters in Frankfurt...

What will the ECB rate rises mean to your mortgage?

THE Independent Mortgage Advisers Federation (IMAF) has done the sums to show how much more you will pay for your mortgage if the ECB rate rises.

The figures assume that the ECB rate increases by 0.5 per cent to 1.5 per cent by the end of this year -- and by another 1 per cent to 2.5 per cent next year. The figures also assume that lenders pass on the full extent of the ECB rate rises to standard variable customers. (ECB rate rises are automatically passed on to tracker customers.)

€200,000 MORTGAGE

€2,200 a year more

If you've a 25-year standard variable mortgage of €200,000 with Permanent TSB, your mortgage repayments work out at €1,191 a month.

If the ECB rate increases by 0.5 per cent, your monthly repayments will increase to €1,251 -- another €60 more a month, according to Michael Dowling of IMAF. If the ECB rate hits 2.5 per cent by the end of 2012, the interest rate on your mortgage will soar to 6.69 per cent. This will push up your mortgage repayments to €1,374 a month -- €183 a month more than you're currently paying. At that rate, you'll pay almost €2,200 more a year for your mortgage.

€200,000 TRACKER

€1,836 a year more

The average tracker rate is about 2 per cent, according to Dowling. Under that rate, the monthly repayments on a 25-year mortgage of €200,000 work out at €848.

If the ECB rate increases by 0.5 per cent this year, your tracker rate will increase to 2.5 per cent -- and this will push up your monthly mortgage repayments by €49 to €897, according to Dowling. If the ECB rate increases by another 1 per cent to 2.5 per cent by the end of 2012, your monthly repayments will increase to €1,001 -- €153 more (or an extra €1,836 a year) than you're currently paying.

€600,000 MORTGAGE

€6,588 a year more

If you've a 25-year standard variable mortgage of €600,000 with Permanent TSB, your monthly mortgage repayments are currently €3,574, says Dowling.

If the ECB rate increases by 0.5 per cent this year, your repayments will jump to €3,753 -- €179 more a month. If the ECB rate hits 2.5 per cent by the end of 2012, your repayments will climb to €4,123 a month -- €549 more than you're currently paying, says Dowling. So an ECB rate of 2.5 per cent could increase your mortgage bill by a whopping €6,588 a year.

€600,000 TRACKER

€5,532 a year more

If you've a 25-year tracker mortgage of €600,000 and the interest rate on your loan is 2 per cent, your monthly mortgage repayments are currently €2,542.

If the ECB rate increases to 1.5 per cent this year, your monthly mortgage repayments will increase by €149 to €2,692, according to Dowling.

If the ECB rate increases to 2.5 per cent by the end of 2012, your monthly mortgage repayments will increase to €3,004 -- €461 a month more (or €5,532 a year more) than you're currently paying.

Report - Sunday independent

Sunday, 6 March 2011

Ireland Is Banjaxed...

Voter betrayal: FG/Labour to ditch pledges on economy...

They will brazenly follow Fianna Fail's four-year austerity plan as Labour protects public sector.

The Fine Gael/Labour coalition Government is to implement in detail the outgoing Government's four-year austerity plan as approved by the EU-IMF, the Sunday Independent can reveal.

In what will amount to the most barefaced breach of election promises ever perpetrated by an incoming Government, the coalition partners' programme for government will cause uproar when it is published today.

While an attempt will be made to dress up the programme as a new plan by a new Government, when it is analysed it will be seen for what it is -- the continuation of the economic policies of Fianna Fail and the Greens, virtually in minute detail, as laid down by the EU-IMF.

If anything, Fine Gael will be seen to have capitulated more as it is handing over responsibility for reform of the public sector to Labour, whose core support is drawn from the public sector.

The programme envisages no more than 22,000 voluntary redundancies in the public sector, a long way short of Fine Gael's election promise to reduce the numbers employed by 30,000.

Fine Gael is expected to defend this U-turn by stating that 2,500 voluntary redundancies have already taken place in the public sector since January 2010.

However, the Fine Gael decision to hand reform of the public sector to Labour will provoke fury among many Fine Gael TDs, and cause uproar among the huge numbers who voted for Fine Gael.

Furthermore, it reduces the Government's chances of re-negotiating the EU-IMF bailout since our public spending excess is seen as a chronic problem in Europe.

The new Government will place heavy emphasis on its intention to renegotiate the bailout plan, as imposed on the outgoing Government, but the possibility of such a renegotiation is at least two, maybe three years away.

The omens are not good in this regard as the incoming Taoiseach, Enda Kenny, has already prepared the ground to pull back from his demand for "haircuts" on senior bank debt, saying other ways must be found to cut the cost of Ireland's bank bailout if losses are not imposed on bondholders.

"There is no way we are going to survive as a country unless we successfully renegotiate the EU-IMF deal," a senior Fine Gael source, familiar with the negotiations to form a Government, told the Sunday Independent yesterday.

The new Government will cite briefings on the dire state of the economy, and the banks to explain its decision to slip into the straitjacket imposed by the EU-IMF, just vacated by Fianna Fail and the Greens.

Yesterday, however, a well-placed Fine Gael source did not even attempt to disguise the fact that the new programme for government represents a rip-off of the outgoing Government's four-year plan as signed off on by the EU-IMF.

"Yes, we are going to have to stick with the four-year plan, at least for two or three years, and maybe even go further and deeper than the austerity measures envisaged in that plan," he said. "There is no getting away from that. I cannot deny it.

"The country is banjaxed, worse than we ever imagined. We have no choice."

In effect, the programme for government negotiated between Fine Gael and Labour will represent a middle-ground compromise on the respective election promises of FG and Labour, particularly in relation to the economy.

However, Fine Gael has ceded to Labour the issue of reform of the public sector, which is certain to anger the hundreds of thousands of private sector workers who voted for Fine Gael in the General Election.

An analysis of voting patterns carried out by the Sunday Independent reveals that only 16 per cent of Fine Gael voters gave their second preference to Labour candidates, while Labour transfers to Fine Gael amounted to just 35 per cent.

The analysis, therefore, shows that Fine Gael voters made it clear that they were not supporting a Fine Gael/Labour coalition; while there was greater Labour support for this form of Government, a majority of Labour voters did not favour coalition with Fine Gael either.

In the Sunday Independent today, Independent TD Shane Ross, who had offered up to eight Independent TDs to support a minority Fine Gael Government, writes: "These guys fell into each other's arms months ago.

"Any observer of the camaraderie in Leinster House over the years knows that their 14 years in the political wilderness of opposition have united them in one common mission: power. To hell with policy, it is time to divide the spoils. Spoils first, policy later."

However, it is the specifics of policy, as contained in the programme for government, which are now certain to provoke the anger of the electorate.

In the election campaign, Fine Gael promised to reduce numbers working in the public sector by 30,000, through a scheme of voluntary redundancy, under the Croke Park deal. But Labour said a voluntary reduction of the order of 18,000 would suffice.

The Sunday Independent has learned that the new government programme commits to reducing employment in the public sector by, at most, 22,000 through the Croke Park deal, a concession by Fine Gael which represents a huge victory for Labour.

Yesterday, a senior Fine Gael TD who is not party to the negotiations said: "If we hand over the public sector to Labour the game is up, we will be finished before we start. It is one of the most central issues, if not the main issue. This will lead to deep divisions in Fine Gael."

Another Fine Gael TD told the Sunday Independent: "Already today I have had two businessmen on to me about this. If Fine Gael lets Labour have the public sector, it's over for us, game, set and match."

The Sunday Independent understands that the new government will embark on a programme of the sale of non-strategic state assets, ostensibly to provide for a job stimulus package as promised by Fine Gael in the election campaign.

However, there is growing concern within Fine Gael that the sale of semi-states will take place to spare greater savings in the public sector.

In relation to the economy, both Fine Gael and Labour have compromised their election promises to, in effect, bring them closer to the commitments of Fianna Fail's four-year plan.

For example, the new programme for government commits to reducing the national deficit to three per cent of Gross Domestic Product by 2015: in the election campaign, Fine Gael said its aim was to reduce the deficit by 2014 and Labour said by 2016.

Fine Gael will claim victory insofar as the new programme commits to no new or increased taxes on work, not even on those who earn in excess of €100,000 a year, as proposed by Labour during the election.

However, a raft of stealth taxes will be contained in the government programme, such as water charges and property taxes. Other, more obscure stealth taxes are also expected.

It is also understood that Fas is to be abolished and its functions absorbed into the workings of the Department of Social Protection.

The issue of public sector reform will move centre stage when the new Government is in power. The credibility of Fine Gael and Labour on this issue, however, will be damaged by a decision not to cut the number of ministers of state.

While the new government programme contains a range of proposed political reforms, the Sunday Independent understands that all 14 junior ministers are to be retained.

Further briefings indicate the possible make-up of the Cabinet: the Fine Gael contingent will include Enda Kenny (Taoiseach); James Reilly (Health); Phil Hogan (Environment); Alan Shatter (Attorney-General or Justice); Richard Bruton, Michael Noonan, Leo Varadkar; Simon Coveney; and Frances Fitzgerald. Sean Barrett is expected to be made Ceann Comhairle.

The Labour contingent will include Eamon Gilmore; Joan Burton; Brendan Howlin; Ruairi Quinn; and Pat Rabbitte. The Labour portfolios will include a new department for public sector reform; and Foreign Affairs, Enterprise & Employment and Education. It is expected Labour will also have a 'super-junior' minister at Cabinet, either Jan O'Sullivan from Limerick or Sean Sherlock from Cork.

The Fine Gael parliamentary party is to discuss the programme for government tomorrow; the programme will also go before a Labour special delegate conference in Dublin today.

Shortly before 10pm last night, Fine Gael's chief negotiator Phil Hogan emerged from the talks to say that the parties would reach a deal by the end of the night. He said that there were just "three or four policy issues" remaining to be sorted out, and added that the shape of the Government -- meaning the dividing out of the ministers' portfolios -- had yet to be agreed upon.

Sources close to the talks said that negotiations were prolonged into the early hours because Mr Gilmore was demanding six full ministers at Cabinet table -- while Mr Kenny was adamant that Labour could only have five, plus one "super junior".

Coming close to midnight, both sides were still deadlocked on the issue.

Report by JODY CORCORAN - Sunday Independent

Saturday, 5 March 2011

EU Migrants Face Destitution In Ireland...

'My business closed and I couldn't find long-term work'...

LAST MONTH Helena gave birth to her daughter Anna. Four weeks later, she faces the possibility of eviction from a homeless hostel in Dublin with Anna, her two sons Ondrey and Patrick, and her husband Stefan.

The family, who are originally from the Czech Republic, are just one of hundreds – and possibly thousands – of EU migrant families experiencing destitution as the recession tightens its grip.

Stefan and his family arrived in Ireland in 2006 to find work and create a new life. He worked for several months as a self- employed painter, but work dried up as the economy slowed. He picked up sporadic work here and there but ended up relying on benefits.

“My business closed and I couldn’t find any long-term work. They have now stopped our social welfare benefits and want to send us back to the Czech Republic,” says Stefan, who is a member of the Roma community.

“I dont want to go back to the Czech Republic. There is no work in the country for me and there is discrimination against the Roma. My children will get a better education at school here in Ireland.”

The Health Service Executive (HSE) has ruled Stefan and his family are not eligible for social benefits because he doesn’t satisfy the habitual residence conditions.

Stefan says the family has now been told to leave the hostel by Monday.

The HSE has referred the family to the Reception and Integration Agency for a return flight. But Stefan says he doesn’t want to go back.

“Roma face discrimination in the Czech Republic and we have nothing to go back for,” he says.

But with no access to social welfare payments and facing possible eviction from their Dublin hostel, the family have very few options to pursue their life in Ireland.

In a statement last night, the HSE said “the family concerned are and will be accommodated so therefore it is not correct to suggest that the family were requested to leave by Sunday.”

Report by JAMIE SMYTH - Irish Times