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Property Bubble Caused By ‘Mistakes’...

The property bubble was partly fuelled by political and regulatory mistakes, education minister Batt O’Keeffe has admitted.

Addressing the Construction Industry Federation (CIF) conference and dinner last Friday night, O’Keeffe said that those in positions of leadership in the construction industry had the ‘‘opportunity to help shape the future of the sector in a way that acknowledges the mistakes of the past’’.

He listed those mistakes as ‘‘the failure of the Central Bank and Financial Regulator to properly control lending practices and the failure of the private sector, including developers and bankers, in amassing wealth without adequately considering the longer term implications’’.

He also admitted to a ‘‘failure of politicians to curb a culture of one-upmanship and target-driven greed in the banking and property sectors’’.

O’Keeffe said that the annual construction industry review and outlook, to be published this week, ‘‘will not make for happy reading’’.

It will show that almost two thirds of the total drop in employment in the economy since the peak of the boom has been in construction.

Direct and indirect employment in construction dropped by 32 per cent from late 2008 to early 2009, according to the review figures.

The value of output in the construction sector fell from €37.4 billion in 2007 to €32 billion last year, and is expected to drop to just under €20 billion this year.

While the cost of living rose by almost 40 per cent from 1998 to 2007, construction workers’ weekly wages rose by more than 80 per cent.

‘‘The harsh reality is that earnings across the economy will now need to moderate in the medium term, as we move to regain our competitive edge," said O’Keeffe.

He also said that there would be ‘‘no easy terms’’ for developers under Nama.

Meanwhile, CIF director general Tom Parlon has described Nama as the best solution to the current liquidity crisis and predicted that it would operate successfully and make a profit.

‘‘It is innovative, novel and brave," he said. ‘‘There is risk attached, but I personally think the government and the NTMA [National Treasury Management Agency] have been conservative in how they’ve set it up. I believe it will be successful and return a profit."

Parlon said that, while there was a view that Nama was ‘‘a bail-out for the developers’’, the truth was that they would ‘‘have to pay back every penny’’ they owed.

‘‘The only solace Nama gives developers is more time to repay loans," said Parlon.

He criticised ACC Bank for pursuing loans to developer Liam Carroll, but said that, ‘‘if it wasn’t for Nama, Irish banks would possibly be acting in the same manner’’.



Report by Niamh Connolly and Nicola Cooke - Sunday Business Post

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