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Dire Straits: Time To Tighten Belts In Ireland...

It's Dire Straits and and new tune called "Time To Tighten Belts In Ireland!"



The Irish Independent reports "Double trouble on fuel, house prices...

Last night economists warned that consumers will have to "tighten their belts" and avoid all luxury purchases if they want to ride out the economic slowdown. Figures from the latest Permanent tsb/ESRI index revealed that house prices fell by 1.1pc in April, bringing the annual decline in property prices to 9.2pc.

And an Irish Independent survey showed that the price of diesel has shot through the €1.40 barrier -- it has now increased by an average of 9c a litre in just two weeks.

Friends First chief economist Jim Power said: "I wouldn't be recommending to anybody to be going out there taking debt on board at the moment or living beyond their means.

"Definitely we are in a belt-tightening environment for the next couple of years. Anybody who behaves differently is being very naive and foolish."

...Jeopardy
Hauliers threatened to stage protests, while school bus operators said up to 600 routes were in jeopardy because of rising fuel costs. The housing gloom deepened with the monthly rate of decline accelerating in April as buyers and sellers decided to stay out of an uncertain market.

The average price paid for a house in April was €278,521, a drop of €28,000 from a year ago. But the fall in new-house prices has been even more severe, falling by 2pc in April or double the national rate of decline.

The pronounced slowdown in the property market was reflected in mortgage statistics yesterday which showed mortgage lending fell to its lowest level in 16 years in April, according to the Central Bank.

Growth in residential mortgage lending fell to 11.4pc, the lowest annual rate of increase since May 1992. April is historically a slow month in terms of mortgage lending due to the usual timing of the Easter holidays, but this did not apply this year as Easter fell in March.

The growth in overall lending in the economy fell also. There was a monthly increase of just under €2bn in private-sector credit in April.

This brought the average monthly change in 2008 to date to €2.4bn, compared with €3.5bn during the first four months of 2007. Economists said the poor lending figures were set to get worse.

Bloxham Stockbrokers economists Alan McQuaid said the fact that there was no immediate prospect of an interest-rate cut from the European Central Bank meant the Irish economy was set to weaken further in the short term.

The data showing a fall in house prices and a further easing in lending came as two more lenders increased their mortgage rates.

IIB Homeloans increased some of its fixed rates, withdrew two tracker rates and changed the lending criteria on other products.

Permanent TSB increased the rates it charges for buy-to-let investors in the housing market.
Friends First's Jim Power criticised what he termed 'official' Ireland -- the Government and various state agencies -- for continuously trying to talk up the economy when employers and consumers were increasingly aware of the harsher reality.


"The Irish economy is going through an incredibly painful housing adjustment and that was always going to be painful because we had become totally addicted to housing as a driver of everything in the economy, from employment to tax revenues to economic activity," he said.

"Things are pretty dire out there in the economy at the moment," he said.

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