Ireland’s fear is palpable as prospect of bailout looms
by editor | 2010-11-12 9:28 am
Fear of a new wave of domestic debt sweeping the country is the main cause for concern in everyday life
It didn’t help that the Financial Times referred to Ireland as a place with an “end-of-the-world feeling” in one of its many gloomy pieces about the outlook for the country this week. The fear in Ireland is palpable, and all the FT did was confirm to the public the bleakness that is infecting all parts of work and home life. “People are at their wits’ end,” said David Hall, who has just set up a free legal aid scheme to help those facing repossession. “They don’t know what to do,” He has had hundreds of calls and emails from people seeking assistance since he set up his service 10 days ago. It is this fear of a new wave of domestic debt sweeping the country that is the main cause for concern in everyday life. Consumer confidence is down, spending is down and anyone who has money is keeping it on deposit – recent figures showed there is an estimated €100bn (£85bn) locked up in personal savings. Emigration is at levels not seen since the recession of the 1980s and graduates have little choice but to leave. Peter Casey, 26, who works at the Guinness group, Diageo, in Dublin, will wave goodbye to his girlfriend on Saturday. She is quitting for London to work at Urban Outfitters. Four of her group of eight college friends have already gone. “I have another 10 months on my contract here,” Casey said, “but I would definitely consider leaving. I know we are the country’s future but at the same time why should we stay and pay for someone else’s mess?” There is a widespread feeling that worse is to come. Last week, one eminent academic, Morgan Kelly, warned a new wave of toxic debt was on the way, this time in the form of mortgage defaults. Yesterday, nine economists joined him in an appeal for the introduction of debt forgiveness for ordinary householders, warning that there may be as many as 200,000 already in negative equity, with mortgage debts bigger than the value of their homes. “The bursting of the boom has left tens of thousands with debts they will never be in a position to repay,” they told the Irish Times. “Individual households in debt do not spend, they do not invest, they attempt to pay down debt and where they can, they hoard cash.” If their fears become reality, the economy will be just where finance minister Brian Lenihan said it would not be three months ago: in the “deep freeze”. One area synonymous with Ireland that is bearing the brunt of the cash freeze is the pub trade. One publican, who asked not to be named, said business was now dead on Mondays, Tuesdays and Wednesdays. “Last Tuesday all I sold was a packet of cigarettes, that’s how bad it is. I was lucky on Wednesday – if you could use that phrase – because there was a mass for a boy who had committed suicide in the church across the road. So we had about 30 lads in after the mass. But an hour later it was empty.” Gerry Mellett, who runs a rural pub in the village of Ardathan and who is president of the Vintners Federation Ireland, blames the government. “We are in a very bad place as a country. It is a sad reflection on the inaction over the last two years by our politicians. We are all let down by our government – by Bertie [Aherne, former taoiseach], Cowen [Brian Cowen, the present taoiseach] and Neary [Patrick Neary, a former financial regulator]. We are going to pay a high price,” he said. Pubs and restaurants feel they are at the sharp end of the recession – people are not dining out midweek and are cautious with their money at the weekend. One restaurateur who runs a high-profile business in Dublin says that there is still a credit squeeze despite the recapitalisation of the banks. “Before, if you wanted an overdraft, you could just make a call to the bank. Now you have to do due diligence before you’re even considered. And even then it goes to a credit committee,” he said. “There is a feeling that people are just running out of money, that they are running on reserves. I think between now and Christmas it will be OK, because people will go out, but it’s the last hurrah, and God knows what it will be like in January.” The country is braced for swingeing cutbacks in the December budget, with pensions possibly cut, social welfare elsewhere slashed and further cuts to the public sector. The number of people having their electricity cut off is on the rise and the stories of hardship are harrowing. This week an inquest concluded that an elderly woman died in a house fire probably caused by a candle after her son-in-law cut off the electricity because he said he could not pay the bill. But not everyone thinks a bailout would be a bad thing. “I think the IMF [International Monetary Fund] is absolutely a reality,” said Peter Fitzpatrick, who runs a property management firm in Dublin. “The IMF came into Britain in 1972 and it didn’t really affect them. People go bankrupt and they bounce back. Countries also go bankrupt and bounce back. It might be better for us to face it head-on that have a long, slow death.” Big business is also bursting to get a positive story out. Allergan, one of the many multinationals in Ireland, says people need a reality check. It is positive about the future and does not see the IMF as a big threat. Managing director Pat O’Donnell said: “There is no positivity reflected in the news – comparing it to Armageddon as if we haven’t been here before. I started work in 1980 and I remember 16% and 17% mortgage interest and an effective tax rate of 60%. We were getting fleeced.” He says Allergan is investing $25m (£16m) every year in the local plant in Westport, which is responsible for the world’s entire supply of Botox. “Allergan is here because we have a good track record over the last 33 years. We have an educated workforce – 50% of staff have third-level qualifications and I know that if Allergan makes a new acquisition we would have a very strong chance of having it here in Westport.” O’Donnell is not asking for the IMF to sort Ireland out, but he believes it might achieve what the government has been afraid to do politically: impose bigger cuts in the public sector. “The downside would be the callous way it would be achieved. There would be no debate. Just a matter of the bottom line.”
Source URL: https://globalrights.info/2010/11/irelands-fear-is-palpable-as-prospect-of-bailout-looms/