His hand swooping gracefully upon the moving tray of filo-pastry prawns, the chief financial officer of one of the Republic's leading companies was off the record, but on a roll: "I'll tell you the main difference between here and England. When the crash came there, and people were stuck with negative equity, they trudged along anyway. Here, people will just put the key of their house in an envelope, send it to the bank, declare bankruptcy and start again."
Could it happen? As the highend hors d'oeuvres circulate faster and faster, are thousands of Irish people so stretched on their loans that a downturn would push them into bankruptcy? And if so, could the banks be left with millions of euros of bad debt?
Earlier this month, the former deputy head of banking supervision at the Central Bank, Mr William Slattery, painted a grim picture of the future. Writing in Finance magazine, he warned that people are borrowing 30 per cent more this year than last, and that the level of credit could result in systemic problems, and a house price crash.
In the dry language of its most recent quarterly report, the Central Bank has also expressed its concern: "A further indication of easy monetary policy has been the very large increase in the monetary aggregates - credit and deposits - of the order of 25 per cent a year. This is in stark contrast to the 4.5 per cent reference value for the growth in the broad money stock set by the European Central Bank for the euro area."
Behind the scenes, the Central Bank has spoken to the main lending institutions twice in the last year about the level of loans. But the Central Bank's primary function is not to protect individual borrowers, but to ensure that the banks do not become insolvent.
In December, the Central Bank asked all of the lenders to carry out and report a "sensitivity analysis" - a projection of what would happen to business in several hypothetical scenarios, such as a jump in interest rates or a slump in property values. The hope is that this exercise would force the banks to regulate their own borrowing.
This month, the chief executive of the EBS, Mr Pat O'Reilly, said he was gravely concerned about the level of indebtedness. Most first-time buyers top up their mortgage with funds borrowed from other sources, such as credit unions or family, he said, which raises long-term issues in terms of their capacity to service their debts.
"We find ourselves in a dilemma. We are worrying about people who won't be able to pay their debts while we also don't want to be in a position where we are repossessing houses," he said.
There is anecdotal evidence that some people have borrowed very heavily indeed. Aside from the fact that some banks have relaxed the 21/2-times salary rule for mortgage lending, customers are taking more car loans, holiday loans and home improvement loans.
On top of this, some people have credit union loans, furniture purchase loans, store card debt and perhaps a running credit card debt too.
Economic change can happen fast, and it is not difficult to imagine a scenario that would cause great pain to such individuals. A significant slump in the technology sector, for example, would see redundancies in the Republic, massive reductions in the bonuses of the workers left in this sector, a devaluation of their shares, a knock-on impact on house prices in general, and especially in areas such as Leixlip.
Most Irish people have friends or relatives in England, and the house price crash there has cast a long shadow over attitudes here. Personal insolvencies in Britain were running at less than 2,500 a year in 1990; by 1992 there were more than 8,000, and close to 10,000 by 1993. And these were just the tiny minority that threw in the towel.
Britain is still living with the horror of that crash. This month, the country's Society of Practitioners of Insolvency said the numbers of personal insolvencies was at an annualised 5,300, rising again despite a buoyant economy.
The reason is simple - many creditors did not foreclose on debtors when house prices were in a slump, knowing that they would not receive anywhere near a full settlement. Now that prices are climbing, however, they happily send individuals to the wall to recover the old debts.
But some observers say there are key differences between the Britain of the early 1990s and the Republic of today. Firstly, the lending institutions here insist they are still only lending around 75 per cent of the value of each home, leaving a comfortable gap before negative equity could occur. Secondly, while the British economic boom was driven by deregulation, the Irish has been more fundamental, with massive growth in productivity and the industrial base.
Also, some of the lending institutions point out, if people are borrowing record amounts they are saving with equal gusto, investing in everything from tracker bonds and Eircom shares to Government bonds.
However, if there is one thing that we know from economic history, it is that economists are weak at predicting when things will go wrong. Some look to the retail sector for signs of imminent collapse, hailing a glut of shops that sell only socks as proof that people now have more money than sense. Others point to the number of new cars being registered, or the presence of mobile phones in school satchels.
In the meantime, most people will just try to grab as many of those filo-pastry prawns as they can before the waiter disappears.
smaccarthaigh@irish-times.ie
