Ireland looks like being hit harder than the UK

While Gordon Brown and the British economy are far from out of the woods yet, there’s a striking difference between the cautiously favourable comment on the British bank rescue and the previews of tomorrow’s Irish budget. Searing criticism of the Ahern and Cowen regimes pours out of the industry website Finfacts which rounds in the government for years of improvidence.

“The results of political failure will be thousands of damaged and destroyed lives while in or out of office, the political masters will remain in clover”.

The latest Davy forecasts are grim:

“The decline in construction activity will continue. House completions will slip to 25,000 from 50,000 in 2008.

The unemployment rate may reach 8.5% by the end of 2009.” (6% forecast for the UK)

In the budget preview

“.. a country that is more dependent on US inward investment than any other (90% of exports are made by foreign firms) cannot afford to embed the impression that the once lauded Celtic Tiger economy, is out of control.”

The Irish Times reveal the extent of public fear. “Nearly 80 per cent of employees have said they fear that their jobs are not safe in the current economic climate.”
Forecast are immediate spending cuts cuts in tomorrow’s budget – (watch how these may affect NI projects and political sweeteners) and income tax rises that take the Republic’s income tax to higher levels than than the UK’s, at least for the time being, until the projections in next month’s UK pre-budget report. “Speculation focused on an income levy of 1 per cent, with a possible 2 per cent for high earners, rather than an increase in the top tax rate of 41 per cent. An income levy would bite deeper into taxpayers’ pockets and bring in more revenue than an increase in the rate. Any levy would come on top of the 2 per cent health levy currently in place.”

Good news, sort of.. “As a consequence of lower consumption, good news, sort of “Inflation will decline to 1%”

The EU Commission has approved the Irish Bank guarantee scheme (Seems like old news already; and what choice had they?)

And good to see that our dear old Ulster Bank is sheltering under the protection of Her Majesty’s Treasury.

We’re in the eye of the storm at the moment and pressures may settle down in a month or two. Right now though, the extent of the crisis has wide if as yet unknown implications for Irish politics, relations with Europe and Irish prosperity and optimism.

  • Greagoir O’ Frainclin

    “Ireland looks like being hit harder than the UK”

    I’m sure some folk in NI are only hoping too!

  • finn

    Interested to hear opinions on which economic regions slowdown will affect NI the most, obviously NI’s funding is from GB however there are alot of NI people working the other side of the border, and people going in the other direction to shop and buy property.

    How much have crossborder bodies increased interdependancy?

    If the executive was meeting would the DUP acknowledge the interdependancy of both ecomonies I wonder?

    Can the DUP say (honestly) they have taken every opportunity to have an influence on the crossborder economy and how it affects NI?

  • Ann

    They were too economically tied to America and Britain , and lets face it – it’s Britain Ireland and the US that are being hit harder than anywhere else. Many other European countries like Germany and France weren’t hit so hard, and when they were hit they were better placed to tackle it because they were better regulated.

    Blame Brown in Britain, mainly for his setting up of the tripartite banking system which has failed so publicly, blame the conservatives for not doing a proper job while in opposition, and its difficult to point the finger at exactly who in the states since imv they were all at fault.

    And the greedy bankers who have shown not one iota of remorse for their greed based decisions…

    The electorate should be angry, but we’re too worried about our own financial situation, but when the dust settles vote the bastards out and vote in those who will staunchly regulate the markets and take back our hard earned money asap.

  • Ulster McNulty

    The plebs have to share some of the responsibility for this.

    Ireland, the UK and the US were definately to the forefront of debt-driven voodoo economics. Leaving aside the Ireland and the US, if Blair/Brown had at any stage told the plebs:

    “Hold on, you’re borrowing far too much money, you’re getting carried away with what you think your house is worth, we’re going to seriously hike up interests rates to make it much more realistic and painful for you to borrow, which will have the effect of slowing economic activity…”. The plebs wouldn’t have elected them in the first place.

    Nobody held a gun to Joe Soap’s head and said “You have to borrow ridiculous amounts of money”, that was a personal choice made by millions over the past 10 years. Also, there was no political opposition to this economic madness, because Joe Soap liked what was happening. The banks couldn’t have pulled it off without the rest of us, and our mistaken impression that you might actually be able to get something for nothing in this life.

  • runciter

    The plebs have to share some of the responsibility for this.

    Except that my neighbour is not accountable to me for his actions.

    On the other hand the government, which failed to regulate properly, should be held to account.

    Furthermore, responsibility is commensurate with influence. Therefore those charged with the running of multi-billion dollar institutions must bear more responsibility than the man in the street.

    It seems likely that “the plebs” – whether they were individually irresponsible or not – will pay a high price.

    Will those who had greater responsibility also pay a greater price?

  • Ulster McNulty

    Ann

    “The electorate should be angry, but we’re too worried about our own financial situation, but when the dust settles vote the bastards out and vote in those who will staunchly regulate the markets and take back our hard earned money asap”

    The electorate needs to get a bit more sophisticated than this. It wasn’t “hard earned” money. It was money borrowed on mortgages, credit cards etc, to pay ridiculous prices for houses, kitchens, plumbing, 4×4’s, BMWs, eating out, Irish art, etc etc.

  • George

    This is only the beginning so it might be too early to say which country is in a bigger mire.

    Granted Ireland is leading by a nose at the moment, already in recession, budget deficit of 5.5% for 2008 despite moving the budget forward to October, and a deficit of over 7% forecast for 2009.

    But the UK didn’t have as big or as long a boom, is heading into recession, is expected to have a budget deficit of 4% in 2008 and has a larger national debt as percentage of GDP. It also doesn’t have a national pension reserve fund to pillage.

    We haven’t even seen the credit card debt issue rise yet either. While the Irish levels have dropped for the last two months, the UK levels continue to rise.

    But, of course, there’s always the Irish developers and considering the national private helicopter fleet has gone from one of the largest in Europe to virtual non-existence in a year, who knows how bad things could get on this side of the Irish sea.

    The way things look, both of our geese are cooked.

  • Ulster McNulty

    runciter

    “Except that my neighbour is not accountable to me for his actions”

    No, but you’re now accountable to government on behalf of the banks for your neighbours actions.

  • Harry Flashman

    “It’s Britain Ireland and the US that are being hit harder than anywhere else.”

    I think there are a few Icelanders, Russians and Spanish who might not entirely agree with you there.

    One small, and for me rather amusing, element in all this is that we might finally see an end to all the braggadocio and bloviating from Scotland about independence. The sight of a Scottish prime minister and a Scottish Chancellor having to hand over eleventy gazillion pounds of English tax-payers money to shore up the two mighty Scottish banks that would supposedly be the backbone of the bright shiny new independent Scotland brings the term ‘schadenfreude’ to a whole new level. Reykjavik on the Forth.

    It’s the Darien expedition all over again.

  • Comrade Stalin

    The plebs have to share some of the responsibility for this.

    I don’t think it’s that simple. The banks kept on and on relaxing their lending criteria and increasing the salary multiple upon which they would provide mortgages. Competition forced the more sensible banks to stoop to the level of the more carefree banks. It ended up being a runaway train. The government couldn’t say “this can’t continue”, because then they’d have been blamed for the inevitable crash.

    That said, a lot of amateur investors who bought second houses to rent out are going to get their asses kicked. I don’t care about them. But I’m horrified at the idea that working/middle class people who have not been greedy, but who just worked hard to own their own small home, may end up in serious trouble. Likewise anyone who is around 4/5ths of the way towards drawing on their pension.

  • runciter

    The sight of a Scottish prime minister and a Scottish Chancellor having to hand over eleventy gazillion pounds of English tax-payers money to shore up the two mighty Scottish banks that would supposedly be the backbone of the bright shiny new independent Scotland brings the term ‘schadenfreude’ to a whole new level.

    You’re assuming two things:

    1. That the Scottish government would have failed as badly in its regulatory role as Westminster has.

    2. That the Scots would not have ownership of North Sea revenues to support their economy.

  • runciter

    The government couldn’t say “this can’t continue”, because then they’d have been blamed for the inevitable crash.

    It is the government’s job to make sure the train does not get out of control.

    Early intervention could have prevented the worst of this situation developing.

    Although our dependence on the US economy means that some part of this was always outside our control.

  • Harry Flashman

    “That the Scottish government would have failed as badly in its regulatory role as Westminster has.”

    Like their friends in Iceland whose economic success story they pledged to emulate?

  • Ulster McNulty

    rinciter

    “It is the government’s job to make sure the train does not get out of control.”

    It’s also the individual’s responsibility not to get carried away (on the runaway train). The problem goes the whole way down to the electorate.

    An example, if you have picked up an Irish newspaper over the last decade you’ll be familiar with colourful property supplements with 3 or 4 bedroom houses priced at x millions of UK£STG. How can a roof over your head be priced at millions of pounds? It’s impossible. How believed that shit? Plenty did. And who is calling for all the journalists to be sacked for their obvious dereliction of duty? Rather than talk up ludicrous property prices they could have highlighted the fundamental and blatantly obvious problems in the Irish economy – that information has always been in the public domain.

  • Dave

    Ulster, contrary to what fantasy that glossy supplements may inspire, the average price paid for a house in Ireland is €273,000 and the average industrial wage is €33000, so the average multiple is 8.

    A sensible multiple would be 3, with the lender providing a maximum of 70% of the market value of the property. Alas, this level of sense would make private home-ownership unobtainable to the average worker and would create a property-owning elite in the private sector (the landlord class) and place a huge burden on the taxpayer to provide affordable housing via the public sector, so those socialists who now advocate that ‘sense’ be regulated into the banks will change their fickle minds about such regulation in due course.

  • Ulster McNulty

    Dave

    “Alas, this level of sense would make private home-ownership unobtainable to the average worker and would create a property-owning elite in the private sector (the landlord class) and place a huge burden on the taxpayer to provide affordable housing via the public sector..”

    Did I miss something or is this not exactly what happened last week? Were does “would” come into it?

    “…so those socialists who now advocate that ‘sense’ be regulated into the banks will change their fickle minds about such regulation in due course.”

    You’re losing me here, were our suspicions (formed several years ago) not confirmed last week, that if you leave the markets unregulated they will inevitably invent a gigantic pyramid scheme which eaves everybody bankrupt (like what has just happened)?

  • runciter

    It’s also the individual’s responsibility not to get carried away (on the runaway train). The problem goes the whole way down to the electorate.

    There are two fundamental differences, as I have already pointed out, between individual responsibility and governmental responsibility.

    1. The government has institutional responsibility commensurate with its level of influence.

    2. The government, unlike the man in the street, is supposed to be accountable to you and me for their actions.

    There are others – within the media and financial institutions for example – to whom the first point applies.

    The second point should also now apply to those who have sought ‘bail-out’ funds from the taxpayer.

  • Dave

    to be fair, you should really use the average wage of homeowners, not the average wage. Take renters out of the sample and I’d imagine the average would rise a touch.