Wise Analysis of Our Woes
Deaglán de Bréadún
Plenty of common sense in a piece today by the distinguished commentator Martin Wolf . He sets out clearly and concisely the background to our economic woes and the high price ordinary people are paying for sins they did not commit.
He shows how the property bubble developed, only to burst in smithereens all over our lap, leading a “panic-stricken” government to guarantee bank debt in September 2008.
A new government’s freedom of action is limited: “Ireland is doomed to fiscal stringency for decades, given its poor growth prospects, at least in comparison with its Tiger years.”
There should be a reduction in the rate of interest on Ireland’s borrowing and, more importantly, a writedown of existing subordinated and senior bank debt.
The European Central Bank and the EU partners have vetoed a writedown, for fear of “contagion” in other member-states. But Wolf argues that for taxpayers to bail out senior creditors of massively insolvent banks at such risk to the solvency of the State is ”both unfair and unreasonable”.
The new government should “firmly” make the point that, if the rest of the EU wants to protect senior creditors, then it should share the cost of doing so. Irish taxpayers are being penalised for the behaviour of private lenders and borrowers.
There may be a way of getting access to this Financial Times piece on www.ft.com and the heading is, “Ireland needs help with its debt.” I need hardly add that our own paper has also had truly excellent economic and financial coverage and analysis of the crisis, from colleagues such as Dan O’Brien, Simon Carswell and others.
Looking back on it all now, I was telling a friend today about a house belonging to a relative in a Dublin suburb which sold for 57.5k Irish punts in 1994 and was then being re-sold ten years later at an asking price ten times that figure.
Another memory that stands out from that time is of a middle-aged woman ahead of me in the queue at the Thomas Cook travel agency which used to be on Grafton Street. She was buying a foreign holiday for her nurse daughter and policeman son-in-law, because the money they had raised was insufficient for a deposit on the modest house they wanted.
Speaking in a Newstalk radio discussion shortly afterwards, I made an observation along the lines that, “If house-prices are gone so high that a Garda and a nurse cannot afford a down-payment on the modest residence they want, then we’re in trouble.”
Then there was the debate, completely mad in retrospect, about stamp duty in the last general election of 2007. Hard to think of anybody who emerges with much credit out of that.
The more one hears about the last days of the outgoing government, the more it appears like a broken reed, demoralised and no longer capable of dealing with a situation that was spinning out of its control.
A new administration, whatever its composition, will at least be fresh and new and have the energy which had seeped away from its predecessor. The public is prepared to give new faces a chance but will be expecting results in fairly short order.
My prediction, while I’m at it is that Fine Gael will have enough seats to form a single-party government, possibly with the support of Independents. However, the party may decide to go in with Labour anyway, for the sake of “stability”.
This is new territory but, then, the situation is entirely unprecedented.