Just five short years ago Ireland was awash with the ‘nouveau riche’ of the Celtic Tiger. Brash young Irish men and women and many not so young Irish citizens were basking in the realization that their time had come. Now they could enjoy the good times as a result of their labours which yielded vast wealth through their exploitation of market opportunity and the encouragement of an enlightened government. The heavy hand of their colonial masters had long departed and with all the goodies which the European Union had directed Ireland’s way, how could the natural enterprise and ingenuity of the Irish race fail to succeed?
That was then – up to circa 2006 or 2007, the year of supposed ‘soft landing’ and this is now – 2011. The good times are over. Recession stalks the land and depression stalks the people. If there was only one traumatic event to deal with there would be grounds for optimism. Alas, almost every activity and enterprise is drowning in negativity. The banks are bankrupt; the government is bust; property values have dropped by sixty percent and are still dropping; employment stands at fourteen percent; young educated Irish citizens are emigrating at an estimated rate of a thousand a week; small business is on its knees; credit has dried up even for successful and viable small businesses; evidence of political corruption going back many years is being exposed; Fianna Fail has been destroyed by the people in a democratic revolution; public services are being cut; the minimum wage has been reduced; social welfare payments have been cut including payments to those who care for the old and sick in their homes and the blind; the bloated and grossly overpaid civil service groans under the weight of its own inefficiencies; mortgage interest rates are increasing; negative equity is widespread and growing; the number of people in mortgage arrears is increasing exponentially; homes are being repossessed by sub-prime lenders; mortgage terms are being extended and modified to fit what people can afford to pay and not what was contracted for and government moratoriums have temporarily postponed the tide of repossessions which are expected to start kicking in during the next year or so. And so on and so on.
So is there any good news? Well, the new Fine Gael & Labour coalition government has brought energy, enthusiasm and optimism to the leadership of the country. They are also regarded as honest, open and transparent without the stigma of corruption which clings to the last three-in-a-row Fianna Fail led governments. The Irish economy has also shown some signs of improving its competitiveness, helped by a degree of deflation over the last few years. However energy costs have begun to rise again and the public service is stoutly resisting any further reduction in pay levels.
It appears increasingly likely that Ireland will be forced to default on repayment of its massive borrowings from European banks, the EU, the ECB and the IMF. The massive Irish Diaspora scattered around the world display lots of goodwill towards Ireland but it appears that relationships between Ireland and its EU partners exhibit a massive deficit of goodwill which is largely attributed to the weak efforts of recent Fianna Fail governments to work in co-operation with European partners. Time now almost stands still for the poor Irish, almost as if citizens are helpless to control the rush of the tidal financial tsunami that engulfs the country.
Almost forgotten in this quagmire of sovereign debt and insolvency is the consumer who finds himself or herself insolvent and is unable to repay unsecured debt let alone secured debt such as a mortgage or car HP. The mountain of unsecured debt is like a giant floating iceberg with only the tip of the problem visible. With the arrival of the recession and the credit crunch the size of the problem has begun to emerge. At least 2.5 million credit cards were issued by Irish institutions and prior to the credit crunch, 90% of credit card companies failed to check the income of applicants. Spending in Ireland on credit cards is estimated at Euro12 billion per annum and it is estimated that private sector credit supply is of the order of Euro375 billion. To put this in context, mortgage lending is just Euro150 billion.
An increasing number of Irish consumers now find themselves to be insolvent with quite a diverse range of contributory factors triggering this state: a relationship break-up; unemployment (currently 14%); underemployment due to only part-time work being available; freeze on overtime or on shift working; illness – self, spouse, partner or child; business failure; fall in house prices & therefore insolvent on the basis of asset value; lack of credit such as working capital & therefore insolvent on a cash flow basis. Like the recession itself, these ‘life events’ are usually unforeseen, not anticipated and therefore not planned for.
Individuals feel the impact of such debt as they suffer from increased stress, aggravated health problems, shame and stigma, loss of profession and even an increased risk of self harm.Families have to endure the consequent strain with the risk of break-up, separation and divorce.
Society loses out with increases in poverty and crime, reduced productivity and work performance and the inhibitions, obstacles and barriers to the development of an entrepreneurial society.
People are looking to the government to put in place a framework to enable them to address their unsecured debt problems and to be able to do so in a finite period of time which is short enough to give hope and to be meaningful and is not a life sentence as at present. The hope is that the government will implement the recommendations made by The Law Reform Commission of Ireland (LRCI) in its final report on ‘Personal Debt Management and Debt Enforcement’ which was published in December2010. Until appropriate legislation is drafted and enacted, the insolvent consumer can only look with envy at the legislative regimes in the UK and other EU countries where a large number of modern enlightened solutions are available and which do not cost the consumer the earth to avail of. Can the new poor of Ireland survive until the government acts in relation to personal debt or will government inaction give birth to another famine – a financial famine this time – a mere 166 years since the Great Famine of 1845-1847?