THE "SQUEEZED middle", as outlined in an
Irish Timesseries this week, has been defined as an international phenomenon that has hit a broad section of society affected by inflation, wage freezes and cuts in public spending.
In Ireland, the impact of that squeeze has been magnified by a bursting property bubble; a doubling of unemployment and a collapse in Government revenues. Corrective fiscal measures, demanded by the EU-IMF in return for State funding, made matters worse. So, what can be done?
There is no simple survival guide. For many families, a crucial, practical first step can be to contact the State-funded Money Advice and Budgeting Service (Mabs) or a private agency to get advice on how debt can be renegotiated and bills paid. Those struggling to make ends meet are frequently panicked and and feel unable to cope. Talking to advisers can give them back control of their lives and have a positive psychological impact.
For others, the only way out may be through bankruptcy. Some official measures are being put in place to help the worst affected. Harsh bankruptcy laws that prevented people from re-entering business for 12 years will be modified. Banks and lending institutions are being encouraged to renegotiate repayment terms with struggling customers or to write down mortgage debts. The critical test will be if they engage meaningfully with the new arrangements. This is necessary if people are to be allowed to cope rather than be crushed.
For its part, the Government must help ease the awful burden if spending and growth are to return to the economy sooner rather than later. Special interest relief is being offered to those who purchased homes at the height of the bubble, between 2004 and 2008. This is too little, too late in many instances. But no magic bullet can counteract years of excessive borrowing and spending. Irish people are among the most heavily indebted in the world. Credit cards account for €2.6 billion in borrowings. Not alone is this the most expensive money available, it costs substantially more in Ireland. For those attempting to climb out of a debtor’s pit, avoiding this form of credit makes sense. Similarly, shopping around – for groceries, insurance and services – was the most frequent advice offered by the experts.
Many people are still bewildered by the speed of the economic collapse. Wealth destruction has occurred on an unprecedented scale and the net worth of Irish households has fallen by more than one-third in four years. Emigration has accelerated. But not everyone has been equally affected. Many pensioners and those over 50 avoided the negative equity trap while a younger cohort waits for the property market to stabilise. Upward social mobility and enhanced lifestyle expectations, which became such a feature of the boom years, stalled. Conspicuous consumption has given way to cutting costs and making do.
Evidence of social resilience is, however, emerging as people reassess their values and look to the future. Ireland still offers a high quality of life and prospects for growth. That resilience is a beacon for better times.