Since I moved to Australia, or perhaps even before, I was continually suspicious of the rocks which the purported 'Celtic Tiger' was built upon. In reality, this articles first three paragraph nail my suspicions almost exactly.
Two statements from Bank of Ireland on Friday underscored the crisis that continues to engulf Ireland's banking system. The first came in court, where the bank was trying to pursue unpaid loans from a developer.
First, though, I should note, I'm NOT an economist, nor am I a financial expert. What I do know is that the accelerated rate of Property Value I noticed in the 3 or 4 years before I left Ireland took off even more in the 5 or 6 years following. Each time I went back the prices of basic housing seemed to have increased by a factor of whatever.
Perhaps it was the ready availability of cheap credit as we have already seen hammer previous sufferers such as the US and the UK. Perhaps it was with Irish peoples obsession with owning their own house. Either way as resources shortened (despite the influx of Economic Immigrants from Eastern Europe - the irony!) and the people got 'richer', so the prices went up.
I know of many people who lost large deposits on houses off the plan when developers started to go belly up three or four years ago. They weren't alone in then
having to extend themselves further in order to complete the house when a new "developer" took over the housing estate development. All facilitated by the nice people at the Bank of Ireland, AIB and others.
When I was first thinking of buying in Ireland in the mid 1990's, these same banks wouldn't give you a peanut. The most you'd get was one and a half times annual income of the property holders. On the wages which most Irish people earned back then, unless you had plenty of equity to nick off your parents, you were ending up buying a hole in the ground or else relying on the "Council's waiting list". I'm not sure of the stats, and maybe it was the nature of my Socio-Economic Background, but there always seemed to be plenty of people getting a Council House. Kind of like they were going out of fashion.
Back the Credit Crisis. We already know Ireland is considered more at risk by some Economists than any other country in the OECD - even Greece (according to David McWilliams, the amount the Banks are out in Ireland hasn't been fully counted until now). I'm pretty sure some people in the US and UK will disagree, but at least they had some form of underlying alternative economy to fall back on. A statistical breakdown of the Irish Economy in early 2008, before the storm is revealing - an equivalent from 2010 would show clearly the impact of the 'downturn in the secondary, construction sector' Some more recent information can be gleaned from the Economic and Social Research Institute in Ireland.
Aside from Pharma/Life Sciences, there probably isn't much in the way of modern economic sectors keeping the country's underlying future positive now that Financial Services and Property Speculation has died. In many ways its a good thing that Pharma Factories are a long term investment, otherwise with the acceleration in costs of employment in Ireland in the last 10 years or so, they'd probably have headed east just as the Dell's of this world have done.
In short, while Ireland has had some long term investment in its future during the 10 years prior to the collapse which began two years ago, with Tax Revenue the Irish Government must have taken in during that period and the money invested by the EU in the same period more must have been expected.
If Ireland were a Private Company, the Administrators would probably be in sorting the mess out. Instead the Management team which has helped dig the hole the country now finds itself in is doing the work and there are probably more of them per head of population (1 for every 20000 people) and they are better paid than most other countries in the OECD.
I for one hope my pessimism is unfounded, and in fairness, there seems some optimism in recent months. But the double whammy of what has been highlighted by the Courtcases referred to in this article, plus the upcoming NAMA, probably means more pain is still to be suffered and I fear for what that means.