Ireland’s long nightmare of generational private debt…

If you missed RTE’s Frontline last night it is well worth doubling back on. Anchored in some robust market research from Amarach, the conversation seemed to reveal a generational split between those concerned about the moral hazard implied in mass debt forgiveness and those pointing out the that those who have bought houses in the last ten/twelve years find themselves under an unprecedented collective burden that is simply unsustainable.

A majority, 54%, of those in the Republic own their own homes. But when it comes to those over 55, that rises to an incredible 88%. When it comes to those with mortgages, the proportions are inverse: 89% of those between 35-44 have mortgages, whilst just 27% of those over 55 have exposure to mortgage debt.

The trouble is that this kind of debt is not going to get forgiven by any big deals in Europe; and despite the feverish speculation around Greece, we’re not even sure about how that’s going to happen. Whatever happens, the tougher questions will remain. Personal debt issue is not going to get wiped out in one (not necessarily easy) hit the way developer/bank debt/sovereign debt might.

That is more likely to be restructured through one of three mechanism: direct tax increases; mortgage levy; or a property tax. None of them are popular, with even minority, 43%, of those not owning a property supporting it.

As Amarach note, “the desired end is clear, the means less so…”

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  • Anybody else had difficulty connecting to Slugger over the last few days or is it just my computer?

  • Me too, articles Someone, who shall remain nameless, has fessed up to not paying proper attention.

  • pippakin

    I had problem during the day. I’m not at home this evening so I’m not sure if part of the problem was my system or all Slugger.

  • John Ó Néill

    articles, Joe – this afternoon I thought I’d somehow uploaded some browser hijack adware and spent a good fifteen minutes tinkering with my office computer (which is a piece of crap that is started by inserting briquettes into the back anyway). I really shouldn’t ignore those tweets on my phone…

    As to debt forgiveness – I heard an interview with Declan Ganly last week – he was hinting that the shark fin on the horizon is that a major Spanish bank is expected to go into freefall next month and that the ECB will be facing a European Lehmans scenario. What then happens next is unknown.

  • wee buns

    Practical stuff:

    ‘But in the event of a country falling or being pushed out of the club it will not be long before Europe’s shopkeepers and consumers start looking rather more closely at their banknotes.’

    Where do my euros come from? The code breaker:

    The 11 digit serial number on every note begins with a prefix which identifies which country issued it.
    German notes begin with an X, Greek notes start with a Y, Spain’s have a V, France a U, Ireland T, Portugal M and Italy S.
    Belgium is Z, Cyprus G, Luxembourg 1, Malta F, Netherlands P, Austria N, Slovenia H, Slovakia E and Finland L.

  • Thanks everyone, the problem seems to have been resolved and I’m glad it wasn’t my new computer.

    By the way if that major Spanish bank goes to the wall I definitely think there will be an Inquisition so the truth will out.

  • Drumlins Rock

    Things are looking hairy, it is accepted Greece will almost certainly do a bunk, all the fuss atm is to buy time and prop up the other economies, but plugging the Greek hole has just put stresses on the rest of the dam, if Greece goes Ireland is surely bound to follow, the question is can they save Portugal, then Spain, then Italy, Belgium and dear knows who else in the east, Germany can’t prop the whole thing up. And even though the UK is on the edge its exposure to Ireland’s debt is large enough to cause problems, not to mention the general chaos impact.
    As for the private debt, well the best option might be to leave the Euro and hyper-inflate the debt away! that and a certain number will just throw the keys in.

  • I did not see the programme so I dont know if Irish Bankruptcy Law was mentioned. A person endering bankruptcy in the UK will usually be discharged after one year. In the Republic of Ireland, that period is 12 years.

    The argument for reducing the discharge period is simple. If it is too long, it tends to either stifle a person’s will to become economically active or it drives them underground into the black economy. Neither of these scenarios is in the interest of the taxpayer. From a creditor’s point of view, the 12 year period is a deterrent. It also seems to work, to a large extent. People are less likely there to file their own bankruptcy petition and carry on with impossible burdens until somebody brings them down.

    Ireland came under pressure from the IMF and other international bodies to change the law. My understanding is that the banks have been putting pressure on the Government not to change the laws. The Government seems to have been persuaded that if they reduce the undischarged period by too much, default and bankruptcy will become attractive. The Banks would ultimately lose and the Government will be faced with enlarged bailout issues.

  • Just read about Slugger Otoole going missing in the Irish News, looks like I’ll have to become a tweeter.

  • It was possibly the only “Frontline” programme that has been good.
    I kept thinking of orecedents and “near precedents”.

    The prospect of people “on the side of the road” was taken too literally. There seems people who will be figuratively left at the side of the road in terms of opportunity, career, education etc for generations.
    There was an attitude somewhere between “Im All Right Jack” (with which it was hard to have sympathy for the Selfish) and “The Wise Virgin” (with whom it was easy to have sympathy.
    GREED was at the heart of this.
    Some people are the Victims of Their Own Greed.
    Some people are the Victims of Other Peoples Greed.
    Its near impossible to disentangle.
    And the gut feeling is that the wrong people will be “forgiven”.
    Yet talk of moral hazard……..and there were actually several dilemnas not just one……..has to be coupled with whats right for Society itself.
    Or does a “Society” called Ireland actually exist anymore?

    But seemingly to do the right thing by Society seems to involve a radical re-think of the nature of “property” and ownership.
    Yet there are it would seem “near precedents”. The slightly Jesuitical and circular debate about Taxpayers bailing out Banks who would screw Taxpayers to get back money…..for their shareholders who are …taxpayers.
    Did anyone actually mention (I only saw about 90% of the programme) the TAX AMNESTY of about 20 years ago.
    In my view that was a bad step. A moral hazard if you like.
    Many who availed of that are the loudest critics of “Debt Forgiveness”.
    Yet the Elephantt in the Room is Europe.
    I have never been a fan of anything beyond a Common Market or the stealth (as Garret the Good said nobody would have voted for it…so it had to be done by stealth) with which “Yoorp” has come about.
    The celebrations (ironically in Dublin) to mark the 25 (then) extension seems just sick now. It was several steps too far.
    I actually bought a newspaper last week (well I had a train journey) and Simon Jenkins covered this brilliantly in the Guardian.
    There is no genuine political controlof Europe.
    The Banks control Europe.
    And even those of us not addicted to lefty student rhetoric can surely see that?
    It will be interesting.
    Is it for the greater good that the people of Greece, or Portugal or Ireland or Spain………or Italy make a stand.?

  • Bankruptcy Laws were indeed mentioned.
    That there is a more “judgemental view” taken in Ireland as well as the 12 month period in Britain against 12 years (although I thought the discussion mentioned 6 years)..

    Im inclined to agree with Seymour Major that 12 years is too long.
    But my professional experience of bankruptcy makes me think that a year is far too short.