Inside the world of business
Sour aftertaste of the debt forgiveness sound bite
DEBT FORGIVENESS is a tasty sound bite. It conjures images of beleaguered homeowners suddenly freed from the cruel yoke of oppression into which they were placed by heartless “fat-cat” lenders.
As with so many sound bites, the truth is altogether more complex – as are the solutions.
It is interesting to see who has been making the running on this issue. It hasn’t been the members of the expert group on mortgage arrears and private debt, who have considered and rejected such a proposal. Equally, the Financial Regulator sees issues with such an approach. Even Opposition politicians have been forthright in their view that debt forgiveness poses almost as many problems as solutions.
The major proponents of debt forgiveness for Irish mortgage holders come from the ranks of our economists. In fact, most appear to be either based in academe or have connections with the property sector.
The bottom line is that debt forgiveness is unlikely. Even if UCD economics professor Morgan Kelly is right in estimating the cost at between €5 billion and €6 billion, that is still a significant bill for a country seeking to minimise the extent of the bailout it requires to continue paying its bills.
As it happens, the Central Bank’s estimate of the outstanding pool of mortgages on main family homes is roughly twice the level projected by Kelly – presumably meaning the bill for forgiveness would also double.
Then there are the logistical issues. Notably, the expert group on mortgage arrears said it had not come across any mortgage debt forgiveness programmes internationally in the course of its work.
To Cantillon’s knowledge, neither Kelly nor any other proponent has outlined in detail how such a scheme would work.
Producing a detailed practical proposal – both workable and fair – would seem to be a required first step in the face of the practical and political objections, and the false hope it raises for people in financial difficulty.
Kingspan’s royal results
KINGSPAN YESTERDAY published interim results that came in well ahead of market expectations and showed that three of its four business divisions grew during the first six months of the year.
The Cavan-based group is exposed to the construction industries in Europe, North America and Australia. The signs are that the sector is taking its time to recover. However, Kingspan has continued to grow its business against this background. Given that its two biggest divisions are focused on energy-saving insulation products, which accounted for more than €570 million of its €736 million sales, it is well placed to benefit from any recovery that does arrive.
Kingspan chief executive Gene Murtagh says the big disappointment in the industry has been the fact that the recovery has yet to materialise. However, he believes it has reached the bottom and is at this stage stable.
He sees no relationship between what’s happening on the ground in the real economy and the recent volatility in financial markets. Interestingly, he pointed out yesterday that in 2008 Kingspan could see business slowing ahead of the upheavals of the autumn of that year.
This time around, it has seen no such parallels in its own business, which, if anything, indicates it is going to continue growing, albeit at a slower rate than in the early part of the year.
The company’s own results statement kept it prudent yesterday, saying the pace of growth is likely to ease in the second half of the year.
The first missives fired off by market analysts yesterday morning show they have the same view. There was little in the way of downside in their analyses, apart from the risk of increased interest and tax repayments. There is also the possibility that Kingspan could make further acquisitions. There is nothing on the horizon, but the group’s cash position is strong and this could be a good time to pick up something at a value price. All in all, it looks like everything at Kingspan is pointed in the right direction.
Injection of good news
WITH THE markets in full tumult and a daily clamour of concern about the future of the euro, good news can sometimes struggle to get on the radar.
Two announcements in recent days give cause for optimism, at least in relation to the critical pharmaceutical and biotech sectors, to which our economy is so indebted for exports.
Over the weekend, it emerged that Amgen, the world’s largest biotech company, is looking to add as many as 100 jobs to the 280 positions it saved when it acquired the former Pfizer operation in Dún Laoghaire.
The jobs will come in 2013 and the importance Amgen is attaching to the project was underlined by news that its director of capital projects worldwide has moved to Dublin to oversee the development.
Yesterday, a second US biopharma operation, Sangart, disclosed that it would double the numbers it plans to employ at a new plant in Carrigtwohill, Co Cork. Only last month, IDA Ireland unveiled the Californian company as the latest US group to choose Ireland for its expansion into Europe. At the time, the 120 jobs the business expected to create when the plant was built in 2013 were warmly welcomed.
Now it appears Sangart, headed by Cork-born chief executive Brian O’Callaghan, anticipates providing work for as many as 250 staff.
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TODAY
More light will be shone on the extent or otherwise of the export-led recovery in the Irish economy when the Central Statistics Office releases external trade figures for June
