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SEVEN YEARS AGO when the Celtic Tiger’s asset price bubble began to grind to a juddering halt, the government of Ireland owed its creditors €44bn.
Today that number is €206bn, equivalent to 124 per cent of GDP.
Today, December 15, may be the day we recover a part of our lost sovereignty. It is a good day indeed.
But we are still accountable in many ways to external forces. And the problems we face are bigger than ever before.
Just how sustainable is our programme of debt management? Right now global interest rates are on the floor and, after years of tight management and austerity, the government can borrow long term capital at an interest rate of under 4%. But there is no guarantee that this will remain the case.
Either way the burden of servicing existing debt means that next year we will pay our creditors €8,190m in loan interest. This is more than four times the interest bill of €2,000m which we incurred in 2007.
State revenue earmarked for interest payments
For the foreseeable future a large part of government revenue is going to be earmarked for interest payments even before it is collected. And that ignores the whole question of capital repayments.
Like any sensible borrower the government has been doing its best to string out the process of repaying the sovereign debt.
The ‘average maturity’ of loans provided to us by the European Financial Stability Fund (EFSF) under the bailout programme is 21 years, for example. The NTMA will go on trying to push out the date on which capital repayments are made, rolling the debt forward where possible.
But ultimately our capacity to repay our debts must depend on the extent to which we grow our economy.
The recent growth record is not good.
Ireland’s economy contracted by 2.2% in 2008, by 6.4% in 2009 and by a further 1.1% in 2010.
After growing by 2.2% in 2011, it began to contract again: by 0.2% in 2012 and again by an estimated 0.2% in 2013.
The government hopes that the country will grow again by 2% next year. But there is no guarantee that this will be so. Among our sixteen partners in the Eurozone only the Germans are growing at a respectable pace. And our economy is hugely reliant on exports as a source of growth.
Setting the scene: The early 1990s
In previous periods such as the early 1990s we were lifted out of the mire by a combination of lower taxes and cheap credit. The government brought down the top rate of income tax from 65% to 40% while, for the first time, borrowers had access to a flood of cheap European capital. This created a buoyant local economy in which jobs were plentiful.
Today we are back where we were in tax terms, taxing modest incomes at marginal rates of 52% or even 55%. And the banking system, which we rescued at a cost of €64bn, has largely shut down as an engine of credit creation for ordinary households and therefore of growth in domestic demand.
Finance Minister Michael Noonan signalled Friday that the tax issue is now his top priority.
Asking single workers on €33k a year gross to pay 52% in PAYE, PRSI and USC is clearly daft. It is also sending out all the wrong signals to overseas investors who will be sending key executives to work in Ireland and seeking to recruit skilled staff from other countries.
So it is vital that he finds the resources to pay for a very big widening of the standard rate income tax band.
Deadbeat banking system
But the real sickener for Noonan and for his cabinet colleagues lies in our deadbeat banking system. Instead of lending more to business and to households, the banks are lending less and less. They don’t think small firms are a good risk. And, apparently, they don’t think that mortgage loans should be given to ordinary people either.
Into the future they may be thinking of a completely different type of banking model.
Consider the following. At some of our biggest banks the rate of default on existing buy-to-let (BTL) mortgages is currently approaching 30%.
You might imagine that this horrific, almost unprecedented, bad debt experience would scare banks away from BTLs altogether. Yet in recent days banks have begun cutting the rate charged for BTL loans as they drum up new business. Simultaneously there are reports that global capital funds are creating new lending vehicles for Ireland which will specialise in BTL lending.
Have the banks taken leave of their senses? Again?
Vulture funds and global property investors have also been snapping up blocks of apartments in Greater Dublin.
Why is this happening? Have the banks taken leave of their senses, again?
Clearly the banks and the professional investors believe that there is a big future in the rented property market in Dublin and other urban centres. If young people, especially those in fixed contract employment, are not going to get mortgage loans in the future then they must, by definition, become permanent renters.
Already rents are rising sharply in Dublin. The BTL market may actually be the place to be for the banks and capital providers of the future. If the borrower is affluent enough to put up a substantial part of the cost of a property in cash, then the risks in new BTL lending are acceptable.
Similarly, the pillar banks are beginning to offer new five-year interest-only credit to property purchasers provided they can put up half the cost of a property in cash. The target borrower in frequently a high net worth individual living overseas.
‘Professional’ investors v owner-occupiers
The view in the top echelons of banking seems to be as follows. The banks have gone through a terrible time losing pots of money on tracker loans. The 12% default rate on ordinary home loans has pumped up average loan losses. But there has to be a future in lending for bricks and mortar provided you de-risk the lending sufficiently.
This means much lower loan to value (LTV) ratios, completely flexible lending rates and much more rapid methods of dealing with default. This in turn may mean a bank chooses to deal with ‘professional’ investors in property as opposed to owner-occupiers.
If, in the process of changing the lending strategy, you pump up the price of the existing stock of property then so much the better. Ultimately, you may recover some of the capital you thought was lost during the boom.
This may be one of the most important legacies of the boom and the crash. The banks haven’t gone away. They may simply re-invent themselves as property lenders in ways that alter human behaviour quite significantly.
As regards lending to small business, well that’s another day’s work altogether.
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If Danny Rae hadn’t spent years of his life studying climate science, I wouldn’t listen to him at all.
@Vonvonic: *Healy Rae.
@Vonvonic: same with Michael Fitzmaurice. If eamon Ryan had a few diggers maybe he’d get it.
@Vonvonic: double negative is a bit confusing
Easy on Danny, he has 9 businesses to run.
@Hughie O’Donnell: Who are you talking about….his brother Michael!!!! They have no problem selling imported German briquettes in their shops while BNM have said that they’re producing the same amount as last year and will continue up to 2024!!! Thank God there’s some progressive farmers around who are proving that family farms can be “Green”, viable and profitable and are not listening to the self serving, ill-informed nonsense coming from some of these “rural” TDs.
@Jerriko17: oh okay
Roderic o German doesn’t represent me nor does sleepy Ryan, but the Healy rae might be criticised by the lefties on the journal , but their nothing if not hard working for the people they represent!!
@Liam O Connor:
Healy raes only represent themselves. It’s always about them and their own business interests.
Minister was right when he said they’re all about cheap headlines
@Liam O Connor: ah stop it. They are a shambolic pair.
@Liam O Connor: the healy raes are the definition of parochial politicians, who’s primary concern is their own back pocket.
Shocking if you can’t see through them at this stage
@Liam O Connor: boil yer head.
@Liam O Connor: the Rae’s are a total joke.
On one hand they are critical of the government for Irish water, on the other they are delighted to be paid for contracting work they carry out for Irish water.
They only care about what benefits them, after that it’s sound bites
@Liam O Connor: they are like their father. Hard working is not what I would call them .
@Liam O Connor: you need to read up on what the Healy Raes actually do represent and you’ll find out it isn’t their constituents.
@Liam O Connor: The HRs don’t represent forward thinking farmers, willing to change, who see no future in the present system…. Very few family farms are viable on their own and a new way of thinking and working has to happen. Farmers are the experts on their own environment and should be paid to look after it sustainably. Money from Europe is there for the taking for all these projects… We should use it in order to keep our great farmers on the land and have something to pass to the next generation.
@Ciaran Burke: First-class gombeens. Totally embarrass ing
Jaysus its like listening to Darby O’Gill
Its the little people the fairies moving the roads
@Liam Clyne: it’s an accent. There are a lot of people in rural Ireland that can look past an accent and see that they are decent, hard working politicians. People are constantly making fun of rural politicians because of how they speak but without them, rural Ireland would be totally forgotten about.
@Eoghan P O’Leary: no its their policies, like allowing drink driving in rural Ireland because they own a pub, that means no one takes them seriously.
@Eoghan P O’Leary: With regard to the Healy Raes, its not how they speak that people are making fun of, its what they say. They have zero answers to our problems except to ask for more money and less oversight. They opposed water taxes but earned profit providing services. They think its okay to drink and drive (perhaps because they own a pub?). The climate is being looked after by God apparently. Farcical and moronic. You seem to think that the bar to set for our politicians is being “decent and hardworking “. Its not, its being competent, responsible and progressive. They are none of these. Of course the Haely Raes didn’t seem to have much of an issue siding with FFG policies when they were getting roads built and grants. They are an embarrassment to Irish politics and thats saying something when you think of what went before them and what’s currently sitting in that chamber. The lack of talent and leadership is startling. This is not a Dublin v Rural issue. Its a can and can’t issue and the Healy Raes can’t. Making a song and dance about not having a copy of a speech that is being read into the Dail record and not bothering to listen and debate the content is a tactic for a Six-One news sound bite. Nothing more.
@Eoghan P O’Leary: I’ve only heard them talk on TV once and the rest is on print. I actually love the accent, but I have the anti science and self interests. I’m not a fan of Ryan either
I’m aware Michael is a hard working man. But Danny? Ha! If there was work in the bed he’d sleep on the floor.
@Vonvonic: clearly you don’t know Danny
It’s easy to see that we are primates sometimes.
I do believe there is merit in the Healy raes argument. Picking one point the reduction in the national heard. The problem with this is people will still eat meat. Will this result in the Irish food market having to import beef. If that is the case the knock on affect will be food miles placed on that import creating further carbon. And at the end of the day the animal that produced that beef will still have lived and breathed (passed gas) on this planet which is after all what we are trying to save. I’m no supporter of the Healy raes and I do believe most of what they cause a fuss about serves their own pockets. If they didn’t play the fools for so long and if they could deliver their points without resorting to the behaviour seen today, maybe people could take them seriously.
@Andy mc Laughlin: Look at the numbers Andy. Look at the amount of animals and meat being exported to other markets (because the sale price is higher and we produce far too much for our own use). We are damaging our environment to put meat on dining plates in other countries. The water usage and effluent output of meat plants is staggering. Its just not environmentally sustainable any longer. Yes, we absolutely need to put incentives and assistance in place to help transition away from that model but there is no long term future in the current model. Parts of our agricultural sector are already at odds with each other because there is no joined up plan. The cattle born every year in order to keep dairy cows producing milk are sold to the meat industry and help deflate the prices for farmers producing beef and not dairy which then requires government subsidy. We are subsiding farmers so the meat industry can keep prices low and make more money, its total madness. The employment generated at farm level producing meat is not large and the jobs created in the meat industry are modern day slavery. Why do we think its worthwhile trying to maintain this system. Its broken at all levels.
@Andy mc Laughlin: The people mocking the Healy Raes are also the ones moaning about getting taxed into oblivion by the greens. I agree that they should probably pick their battles a bit better, but also that there is merit in a lot of their points. It doesn’t make sense to close down business in Ireland and then import the same things from elsewhere. We need sustainable alternatives for our economy and people. It was the same sh’te on an earlier article using Michael’s briquettes argument for a sensational headline, when that wasn’t the point he was making. I’m all for a cleaner greener environment, but not for show when we just move the problem to another country at a cost to our own economy
@Gerard Smith: you havent really got a clue what you are talking about do you?
@Maco Maco: Well done debating each point
@Gerard Smith: that’s a fair point. I don’t claim to be an expert on the subject but I do like to engage to try and educate myself. What I am saying is if they had a bit of cop on and actually had an input on drafting this legislation, then people might take them seriously. If the chance was there at the time when these things where being drafted to have their say and they didn’t take the opportunity any argument after the fact is only a show. It seems to me they don’t know how to play the political game at all.
@HectorPickaxe: This is a myth…. Greens taxing us to oblivion!!!!! Every party, including the Shinners jumped on the “Green” bandwagon at the last election and some had even more radical plans than the Greens themselves!!!! In case you forgot…. I’ve been working for the last 40 years and I have been taxed “into oblivion”…. not by the Greens. Most car manufacturers won’t be making petrol or diesel cars any more…. WHY??? Those cars are screwing up the very air we breathe, damaging us, our environment, our grandkids futures. Taxes on petrol, oil and diesel make SENSE and are here to stay in the short term whether the government is Green, FFFG, LAB, SF, PBP, SOCDEM… ETC… GET USED TO IT!!!!
@Jerriko17: so your a green I get it now!
@Jerriko17: Calm down Jerriko and read my post again. I never said that we were being taxed into oblivion by the greens, I said that people were moaning about it. I also work and am taxed, which I don’t mind once services are provided for said tax. Alternatives are required to switch over to sustainable energy use, and as yet these are few and far between for heavy goods vehicles, agriculture, fishing, shipping, aviation, and even retrofitting homes in a cost efficient way. As for the motor industry which I didn’t mention, I am well aware of the manufacturing trends and I SUPPORT IT, however we are a long way off having a SUSTAINABLE electrical network in this country to charge EVs.
@Andy mc Laughlin:
What u mean is if the DAIL was ORGANISED to exercise its powers under the constitution by the TD elected to it e.g to sack a govt that does not implement budget.
500 million of last years health budget never used.
Not one TD mentioned it as govt borrowed to fund lockdown.
u need a budget to implement a policy.
Green policy is good but cant be implemented if resources not there for farmer to diversify.
Ryan talks of money being allocated by budget, That govt not implementing health budget and most nb DAIL not monitoring is not at all encouraging.
The parliamentary budget office set up to serve td and senators with all they need to know to do so they are not doing it but then if people do not expect them to ?.
And no amount of general elections and new govt will change anything if people just ignore power of DAIL to be exercised by TD who come back to us.
Ireland is slave to the awful terms of that loan that was incorporated into an international agreement made between euro member state never laid before the dail for its approval But that may yet have to go hand in hand with a decision by people that eu membership is not worth the cost.
M Noonan Minister was hemmed in by deal B Lenihan struck why cos the money drawn down and needed, (B Cowen thought cheaper to borrow from the commission and do what ECB told him to or they would withdraw support to banks and it the same forces at work ?? ), .
@Patricia: Just a realist. Interesting to find out what you think being “a green” is? As I said, ALL parties have a “green” agenda….. Even some of the so called “rural” TDs like Dennis Naughton.
Dear Eamonn and Mother and Baby Home Report Architect Roderic,
Rural Ireland looks forward to seeing in the elevated Dublin areas which are most suited to this, we are so fortunate to have wind and elevated sites in South and North Dublin all so nearby to a major supply market Dublin itself.
Yes 180m turbine farms Eamonn all around Dublin. But we all know this won’t happen Roderic and Eamonn unfortunately like there cuppucino’s powered elsewhere but to be drank around unspoiled views while pontificating.
Rural environments are defending themselves relentlessly with high court action after high court action. Only one type of Green seems to matter.
@Albert Brennerman: sure don’t Bord na Mona have loads of bog land on the plains of the Midlands that they have no use for anymore. Surely these could be turned into wind or solar farms now?
@Albert Brennerman: you do realise that rural Ireland is one of the largest polluters in the country? Windfarms are placed where there is good year long wind and also where the price of land means the investment is more cost effective. Rural Ireland uses the same electricity as the rest of us except it takes far more money to deliver it because of the infrastructure required. We can certainly build wind farms all around Dublin to fund our coffee habit, but if that’s the logic you want to use then while we are at it why don’t we bill accordingly for the actual cost to deliver services like electricity and gas to rural Ireland. Imagine your broadband bill if the 6bn being spent was added to the users bills. Thats a very limited argument you have put forward.
@NotMyIreland: “Surely these could be turned into wind or solar farms now?”
The whole point of ending peat harvesting is to allow the bog lands to recover as the unique natural habitat that they are, not fill them up with wind turbines.
@Gerard Smith: “you do realise that rural Ireland is one of the largest polluters in the country?”
Nonsense statement. You realise ‘rural Ireland’ encompasses everyone who lives outside the main cities and towns. I assume you mean farming.
Healy Raes are prime examples of why we need to move to a list based electoral system.
@Stephen Kearon: do explain?
@Stephen Kearon: A list based electoral system favours large parties and corporate money. We’ve had enough of the Punch and Judy show that is FFG without giving them even more advantages.
Apparently we the tax payers paid tens of hundreds , thousands of euro for a defunct photocopiers that doesn’t even fit in the government buildings or wherever it should be so I’m assuming it’s In Cold storage again costing the tax payer more money surly someone maybe those hard working lackey ushers who you see getting TD’s glasses of water or distributing photocopies could surly have ran around to Reid’s on Nasssu Street & photocopied Ryan’s Climate Tax speech for the Rural Deputies
@Eire: or….. they could have shut up and listened, then they wouldn’t have needed the written copy as badly.
Up the kingdom
@Bill William: Right Up Danny’s A. hole
The Greens don’t seem to understand that there are even people in Co Dublin not close to any form of public transport, not connected to natural gas, rely on traditional solid fuel, etc.Their agenda is great for Dublin city but it will be a hell of an unheval for someone who burns briquettes and only sees the Luas on the news.
@John Kelly: How do we expect to help those people access less damaging and cheaper sources of heating and alternative transport without a plan?
I’m happy to support this via my taxes even if they have to increase, are you?
I’m also happy to help fund the development of innovation in energy and food production in rural areas, housing retrofit schemes and EV charging infrastructure across rural areas so that the focus is not just on Urban ireland.
Now is the time to invest, while change is needed in how we use energy. This will lead to a long term reduction in energy poverty, higher building stock quality as well as a more energy independent Ireland.
Eamon Ryan and the rest of the greens are fantasy merchants that dont live in the real world. Net carbon is a fantasy that is impossible to achieve. Its the latest trendy buzz word but just isn,t possible unless we eliminate all animal farming, all fossil fuel use and all construction. Now to a whole generation of lefty, Dublin based, well educated elites this seems more important that any thing else in reality. However they fail to fully mention the devestation their policies will cause for future Ireland especially rural areas. There simply are no current or known future alternatives for many Co2 based activities. For example construction creates Co2 through using concrete. Are people suggesting we cease all building in the future? Animal farming and our agri export industry, the greens talk about a just transition, thats just pr speak for ceasing beef and dairy farming! The reality is we have a healthy export industry based on producing export products something left, urban based ignornant greens havent a clue about. Doesnt matter to them if this all ceases to reduce carbon emissions, so they can sleep soundly at night. Ship and air transport, no current alternatives exist to fossil fuels unless we go back to the age of sail? And as great as wind or solar sounds, its not realiable all the time and requires a base load as a backup. So expect power cuts by the mid 2020s due to increased demand and lack of a diverse generation capacity thanks to the greens. At the end of the day like them or hate them the healy raes are right about the greens, a bunch of upper class, arrogant, obnixious, over educated, city based types who care nothing for anybody else. Totally self obsessed with climate change to the detriment of everything and everybody else. The greens are like a virus they have not problem wrecking Ireland for their agenda. They will tax us to the hilt, stop house building and construction, eliminate vast parts of the agri and transport sector, put millions into heating poverty, stop the vast majority from using much transport and create an unstable electric supply. Yes the greens will progress us, but progress us back to the 1950s and reduce our standard of living to do it. The greens are the single most dangerous threat to irelands standard of living in the history of the irish state and need to be totally eliminated at the next local and general elections. Failing that, areas outside the m50 seriously need to look at breaking away from Dublin into a semi independent state to preserve the future of rural Ireland. Something I honestly at this stage have no issue with.
@Maco Maco: wow….just wow, your actually clueless as to what carbon neutral actually means, the functionality of our beef and dairy industry and its major issues, and our import export relationship with food and the damage it creates. But yeah have a little rant about Dublin lefties! And I’m as rural as they come so don’t put me in that box, just so you don’t have to have your views challenged by one of your own.
@Maco Maco: I suggest you look up what carbon neutral means and educate yourself
@Maco Maco: That was a good demonstration of not having a clue what you were talking about. Are you a Healy Ray by any chance?
@NotMyIreland: apart from been a geography teacher, and actually knowing what im talking about, true carbon neutral never has existed and never will exist useless you stop all production but by all means follow eammon and his gang over the cliff, just dont make the rest of us follow you, and fyi ireland compared to the rest of the worlds co2 emissions is next to nothing. But like all true arrogant lefties you dont care about normal people.
@Maco Maco: Excuses don’t cut it anymore, it’s the students in your classroom who will live with the results of them.
I’ve done my bit and retrofitted my home (supporting builders from rural Ireland) and made lots of changes to my life that reduce my impact and leave more money in my pocket I can spend in Ireland (mostly rural) rather than sending it overseas to pay for oil or coal.
Investment in retrofits and renewables will lead to a reduction in energy poverty, higher building stock quality as well as a more energy-independent Ireland.
I’ll bite, as one of those Dublin based well-educated lefties. I’m happy to help fund the development of innovation in energy and food production in rural areas, housing retrofit schemes and EV charging infrastructure across rural areas so that the focus is not just on Urban Ireland. I’m from the country and have no issues with paying higher tax if it is invested in these sorts of things rather than subsidies high carbon industries.
When you innovate you can replace damaging practices with lower impact materials, energy sources and practices.
You say there are no alternatives, that’s an opportunity for a country like Ireland to develop and export solutions.
The way we use power is changing and the demand will level out over the day as we have more grid and home storage, EVs and lower energy homes. Watch Chris Harris talks EVs with Graeme Cooper from the National Grid on the Top Gear YouTube for a nice explanation of this.
As we reduce meat consumption, vegetable alternatives will be needed, that’s also an opportunity for rural Ireland.
Eamon Ryan is too busy growing his salads on south facing windows
@LadyBMW: ——-And looking for wolves to control the overgrown deer-herds!
Who votes these sideshow Bob’s in every election? They are pure theatrics.
Luv it when dim two Kerry men get all you keyboard warriors so upset it means they are are having the desired effect good on them ha ha ha still laughing
Get on your bike and leave the car at home. Everyone then plays their small part in solving the Climate crisis.
A bunch of overpaid
Bumpkin
They don’t speak for modern rural Ireland. That being said, neither does the government. The big problem about bills like this is the inability to see beyond the Pale. Modern rural people would love to leave the car at home, but there is the fundamental problem of transport infrastructure being not up to par, the fact that people are always going to have range anxiety when it comes to electric cars that a solution would be that forecourts be given a grant to convert to electric as much as possible. There is also the issue of some waste companies being unwilling to freely provide their customers with composting bins. The only thing that is attainable is cutting meat and dairy production and even with that, no alternatives are promoted to doing anything differently than the “norm” re:farming
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