Standard and Poor’s puts Ireland closer to Boston than Berlin

These are financially straitened times.  We are seemingly pummelled each day with reports of our financial fragility and there seems to be a consequent need for stringent fiscal policy to assure international investors of our ‘bona fides’.  In such a context, it is interesting to explore the geography of national and regional credit ratings. Despite its flawed analysis of the risk associated with sub-prime assets that contributed to the near collapse of the global financial system, as one of the leading financial ratings agencies Standard & Poor’s  remains an important force in determining Irish fiscal policy. The ratings purport to indicate the risk associated with lending to a country. There are 16 possible classifications ranging from AAA+, indicating an extremely strong capacity to repay debts, to SD/D, indicating that a partial or full default is likely.

 

Farmland prices down, sales up

Houses are not the only property asset to be falling in value at the minute.  As reported in the Irish Examiner,  Leinster Express, and elsewhere Knight Frank Ireland report that the national average price paid for farmland in 2009 was €9,678 per acre, a drop of 43.3 per cent on the average price of €17,081 per acre in 2008 (excluding the Dublin, Kildare and Wicklow region). The biggest fall of prices was in the Dublin/Kildare/Wicklow region where prices dropped by 56.6 per cent, and there were no recorded farmland sales in County Dublin.  Knight Frank Ireland detail that while the number of farmland sales in the midlands (Offaly, Meath, Westmeath, and Longford) rose slightly in 2009 (29) from 2008 (24), the average price dropped from €20,550 to €11,318 per acre – a drop of 45% in a single year.  For small holdings of 20 to 49 acres the 2009 price was €11,298 per acre, for farmland of 50 to 99 acres, the average price was €12,167 per acre, and holdings of 100 to 199 acre, the average price was €9,246 per acre.  As Knight Frank note, the one silver lining from this is that land sales are up, even if the price is down.

 

Battersea Power Station: what prospect for one jewel of NAMA’s crown?

One of the aims of this blog has been to animate the geographies of the NAMA portfolio.  There has been a lot of discussion here recently about the Ghost Estates that will be brought into NAMA.  Of course, such property parcels do not comprise the entirety of the NAMA book, and in terms of ‘market potential’ some sites will no doubt hold more hope than others.  One of the sites being heralded as a potential ‘winner’ is the Battersea Power Station site in London, at the heart of the well-connected Nine Elms area along the Thames River, a prime (re-)development site in a city which horizontal expansion is highly constrained by strict planning regulations that protect London’s so-called ‘greenbelt’.  The site is currently owned by REO, a firm majority owned by Irish company Treasury Holdings (who coincidently are also NAMA’s landlord).  REO bought the 40-acre site in 2006 for £400 million (€532 million), using loans from a variety of banks, of which Bank of Ireland forms the majority share, with plans to develop the site into seven million square feet of mixed-use residential, retail and office space.  As such, this emblem of British industrial heritage has found its way into the auspices of NAMA, serving as indication of the reach of Irish capital into international markets, and of the relational production of urban landscapes in the post-industrial period.

The Battersea Power Station started producing electricity in 1937 and progressively ceased its activities during the 1970s and 1980s.  Since then, the future of the site has been the object of much quarrel and struggle between near-by residents, the local authorities, developers and various people and groups with an interest in preserving the power station and its surroundings for its cultural value.  From the 1980s onwards a campaign has been in place to try to save the building as part of British national heritage.  Seen as an important cultural icon in London, the power station was used on the cover art for the 1977 Pink Floyd album Animals, in addition to albums by a number of other groups, and as an emblem of Twentieth Century industrialism, it has taken its place within the vocabulary of popular culture.  Over the years a number of development plans have commenced for the site, including an early plan to turn it into a theme park around Britain’s industrial history.  Current owners REO hired architect Rafael Viñoly to draw up an ambitious master plan for the site, the biggest ever seen in London.  Central to this plan was the division of the site into ‘character areas’ each with different functions, to utilise part of the power station to produce energy through biomass and waste, and to develop the “first zero carbon office space in Central London”.  Having been refused planning permission on the first go-around, a scaled back application is currently in the consultation phase.

As previously highlighted here 21% of the NAMA portfolio is made up from properties in the UK.   Of this, the Battersea site is certainly one of the most significant.  Speaking of the site’s induction into NAMA, Treasury managing director John Bruder was resolutely positive:

“The good, the bad and the ugly will be going in…There is no shame in being a Nama client no matter how good or how modest your property development loan is, once it is over €5 million…. Essentially Nama will be the only game in town for a period of time. The Irish banks had too much property development loans on their books – they will soon have no development loans.”

NAMA, for its part, will presumably be only too happy to have an iconic development such as this in a portfolio that must contain much in the line of hyper-inflated (and deflated) farmland.  The Battersea site is not devoid of its own set of problems, however.  Since late last year REO have been looking for a partner to invest with them in the site.  While the London market will recover quicker then most, it is likely that investor confidence is still likely to be waning.  The existing infrastructure (mainly made of steel) requires very significant investments to refurbish it owing to damages caused by 20 years of both flooding and vandalism following the removal of large chunks of the roof in the late 1980s when the British industrial history theme park redevelopment project started and quickly came to halt.  Furthermore, the developers face opposition from a strong community group who seek alternative actions for the site.  As a commentator in the Londonist recently stated, after the first REO application was refused:

“Over 25 years since it breathed its last fumes into the London fog, Battersea Power Station remains a blot in the copybook of countless developers and architects, and as yet another scheme is run through and rejected, the building’s gradual decomposition will continue. Perhaps it should be this way, a symbol of the flaws and fallacies of our developmental strategies.”

At the moment, despite its prime location in Central London, Battersea looks much more like an emblem of urban degeneration rather than regeneration.  This is not to say that REO’s plans for the site will never come to fruition.  However, as one of the jewels in the crown of NAMA’s property portfolio, perhaps the Battersea Power Station site is still a long way from realising substantial returns for the Irish taxpayer.

Delphine Ancien and Cian O’ Callaghan

 

Diaspora strategy and uneven regional development in Ireland: How to get from Farmleigh to Donegal?

The Global Irish Economic Forum which met at Farmleigh in September reported back with 37 specific recommendations. These include:

1. Establishing a Global Irish Network consisting of leading business and cultural figures from the global Irish community.
2. Creating a ‘Gateway Ireland’ website to project Irish business, culture, and sport to the world using advanced technology and design.
3. Founding a world class centre or university for the performing arts and Irish culture housed in a landmark building in Ireland, to become a global centre for artistic and creative education, innovation and technology.
4. Launching a Farmleigh Forum Overseas Graduate Programme capable of supporting up to 500 young Irish graduates annually in securing jobs.

These initiatives are very welcome and it is great that things are starting to happen in the wake of the Farmleigh event, but a question which has not been sufficiently considered to date is the extent to which diaspora policies will consolidate, rather than reverse Ireland’s ever growing regional inequality and patterns of uneven development?

A Diaspora strategy has the potential to further consolidate uneven development within countries by channeling resources to centres of population and government, and linking them into global networks.  Yet, paradoxically, given that it is often peripheral and weaker regions that shed populations, it also has the potential to promote balanced regional growth.

Diaspora strategies are most often conceived as being properly located at the level of the nation state.  But they scaled in more complex ways in at least two main ways:

• Firstly, even if set at the national level only, diaspora strategies have different effects on different parts of their respective countries – as a reflection of the different locations of origin of migrant groups and the different business and other opportunities different areas present.
• Secondly, different tiers of state are actively involved in formulating diaspora strategy. This might involve local, regional, national, and supra-national levels of government. Whether different scales are better or worse, more or less suitable, for different functions of diaspora policy making and execution needs consideration.

Perhaps the county which has shown most leadership in formulating a much more localised diaspora policy is County Donegal.  Since 1997 Donegal has been active in establishing a network of overseas diasporeans and keeps in touch via a monthly magazine. It also publishes the excellent ‘Donegal – Community in touch’ ezine. The Donegal Diaspora Network is in fact a model diaspora strategy, focussing as it does on social, cultural, political, and economic connections, and not just business links.

Noreen Bowden, an expert on Irish diaspora policy, has heaped praise on Donegal, pointing to the value of promoting activities such as:

• The launch of “The Fid”, the Moville Emigrant Monument, commemorating the thousands of Irish who went to New Brunswick, as well as a schools programme linking schoolchildren in Moville and New Brunswick
• The MacGill summer school and a related publication
• The first-ever reunion of Falcarragh people from home and abroad
• A new social organisation called Go Irish Boston, comprised of Irish and Irish-American people
• The launch of Fado, a memoir by Irish-American musician Kevin O’Donnel, the child of Donegal immigrants.

But our question is how to get from Farmleigh to Donegal?  If addressing regional inequalities is a productive offshoot of diaspora strategy, then it is imperative more attention is given to the nesting of a diaspora strategy at different geographical scales and the regionally differentiated impacts of national diasporic initiatives.

Somewhat ironically many countries view Ireland as the model country for diaspora engagement and yet the conversation about a formalised Irish diaspora strategy is still in its infancy.  That conversation needs to include, we feel, a focus on regional policies and programmes.

For an international comparison of diaspora strategies, including an analysis of the Irish case, see here.

Mark Boyle and Rob Kitchin

 

Company pensions crisis

IBEC, the employers group, reports that the crisis in company pensions continues, with many defined benefits pension schemes being under-capitalised (see here and here).  Of the 253 employers surveyed 47% indicated that their defined benefit scheme did not comply with the minimum funding standard set by the Pensions Board, and 62% said they had faced difficulties in funding their scheme. Of those schemes that were having difficulties 63% have so far closed the scheme to new entrants.  29% have made a monetary contribution to the scheme to bolster it.  33% have increased employer contributions and 10% more are to do so on 2010. 24% have increased employee contributions.  24% have introduced career averaging for final pension rather than payments being based on final salary.  And 8% have closed their scheme.  At present, the majority of Irish private sector workers do not have an occupational pension.  Whichever way one looks at it company defined benefit schemes are in trouble and the issue needs attention if we are to avoid financial difficulties for workers when they retire, who having paid into a scheme in good faith for many years suddenly find themselves adjusting to a new reality.

 

Dublin Port Company suggests trade stabilising

Whilst trade through Dublin Port fell by 10.5% in 2009, trade volumes in the final three months of the year broadly matched that of the same three months of 2008, leading Dublin Port Company to conclude that trade was starting to stabilise. The reduction in trade over the year was mainly focused on construction related materials and retail goods, and overall trade was down 14% on a 2007 peak, although up 4 to 5 times from 15 years previous.

In addition the DPC note that tourism traffic increased by 18% from 2008, rising from 1.3 to 1.5m, with a 24% growth in the number of cars carried. How much the additional ferry trade are tourists swapping from air to sea, as opposed to additional tourists is difficult to know, but 80 cruise liners visited the port in 2009, carrying 120,000 passengers and crew to Dublin.

To what extent this can be used as a barometer of trade stability for the country as a whole is unclear, but any stabilisation in trade will be a welcome sign for businesses looking for green shoots.

 

Northern Ireland house prices

The Halifax has reported that Northern Ireland house prices rose by 99% over the last decade (end 1999 to 2009).  That seems like very good news for homeowners who have owned their home for a while.  However, whilst house prices have started to show a slight increase across the rest of the UK in Northern Ireland prices were down 11.6%, Nov 08-Nov 09, and the reversion of stamp duty from £175K to £125K has so far seemingly had little effect.  It seems likely that the hiatus in the political process, the shadow of NAMA into Northern Ireland, and its stagnant economy is stifling recovery.  Given the prediction that the economy will be in the duldrums until the second half of 2010, it may be some months or longer before the market picks up the follows the UK market into slow recovery.

 

Ghost estates per county

On Monday we posted an analysis that revealed that there are 621 ghost estates across the country (where a ghost estate consisted of an estate of ten houses or more house built post-2005 where more than 50 percent of units are either vacant or under-construction). What the analysis reveals is that the phenomenon of ghost estates is endemic to every county in Ireland. Simply detailing the number of estates per county, however, can give a false impression of the issue because it takes no account of the size of the overall population. Whilst Cork County (not including the Cork City area) has 90 ghost estates, it had a population of 361,788 in 2006. Leitrim has 21 estates but a population of 28,950. We have therefore standardised the number of estates by per 1000 head of population.

 

Electoral Politics in the NAMA era 2: Who will win the next general election?

Having discussed when the next general election will take place (see below), the next question is: who will win this election? A number of commentators have almost taken it for wrote that Fianna Fáil will lose power after the next general election, while others suggest that the Green Party could lose most, if not all, of their seats in Dáil Éireann. But will this prove to be the case and is a Fine Gael-Labour coalition virtually certain to take power after the next election?  I’d suggest that we can consider a number of potential scenarios here:

The Zombie scenario aka the “It’s Not A Case Of If But When” scenario: This scenario effectively mirrors the situation in the UK in the mid-1990s where John Major’s Conservative government clung to power until the bitter end before getting hammered by Labour in the 1997 election. This sees the current government’s popularity levels continuing to remain low, with Fianna Fáil support ratings remaining in the low-to-mid 20s and Green Party support falling below the 2 percent level. The election proves to be a nightmare for the government parties. Fianna Fáil end up practically losing a seat in every Dáil constituency (bar Laois-Offaly!) and even losing two seats in some constituencies, leaving the party without a TD in some constituencies such as Kerry North, Dublin South East and Dún Laoghaire. The Green Party fails to even come close to holding any of their six Dáil seats, most of which fall into the hands of the resurgent Fine Gael and Labour. With the number of Fianna Fáil Dáil seats left in the mid to high 40s, their only hope of retaining power lies in a left-wing coalition with Labour and Sinn Féin dashed by Labour’s reluctance, even in the face of being promised “the sun, the moon and the stars” by Brian Cowen, to be the party that revives the zombified corpse of Fianna Fáil. Brian Cowen becomes the first ever Fianna Fáil leader to leave his post while the party is in opposition, and the party faces into an uncertain future, facing the prospects of being out of power for longer than one Dáil term.

Likelihood: Given the volatile nature of the Green Party support base and the party’s dependence on vote transfers from Labour and Fine Gael in recent general elections – which are likely to dry up in 2011/2012, the prospects of a Green whitewash at the next general election are real. But, as we get closer to the next general election, I would expect Fianna Fáil support levels to recover on their currently low levels and the 25% level recorded in last year’s local elections.     

The Frankenstein scenario aka the “Sure, It Could Be Worse” scenario: Popularity ratings for the government parties start to improve somewhat during the final years of their term in office, re-electrified by evidence of a recovery in the economy, to the point that, after a competent campaign wherein Fine Gael and Labour fail to delver a killing blow, support levels for Fianna Fáil and the Green Party in the general election are down on their 2007 levels, but not dramatically so. While the Greens lose over half their seats, only retain two of their seats (Dublin North, Dublin South), their electoral performance proves to be better than expected and they also poll respectably in constituencies such as Clare, Cork South Central and Louth, leaving the party with hopes of regaining their lost seats and claiming new seats at a subsequent general election after another period in opposition. Fianna Fáil percentage share of the vote falls in the mid-to-high 30s and, though this represents the party’s lowest share of the vote since they first won power in 1932, the better than expected electoral performance means that they remain the largest party in the state in terms of Dáil seats and the party engages vigorously in post-election negotiations to form a government. While Fine Gael and Labour win a sufficient number of seats to from a government with a small majority in Dáil Éireann, Fianna Fáil manages to stay in power by offering Labour a deal that “they can’t refuse”, including an acceptance of virtually all aspects of Labour’s election manifesto and an agreement to rotate the post of Taoiseach.

Likelihood: Not by any means beyond the realms of the possible, especially given the existence of a residual personal, or localised, for individual Fianna Fáil candidates (“good constituency workers”) even at the worst of times. While Fianna Fáil (at 22%) currently trail Labour (at 24%) in the opinion polls, as we saw with the local elections, when it comes down to the actual voting Fianna Fáil will tend to outpoll Labour significantly mainly because of Labour’s weaker party organisation and the significant areas within the state where Labour Party support is minimal or non-existent. As for Labour going into power with Fianna Fáil, well that’s not likely surely…oh hang on, what about 1992!!!

The Dracula scenario aka the “They Haven’t Gone Away, You Know” scenario: With an unexpected sudden recovery in Irish economic prospects in the lead up to the general election, Fianna Fáil’s support levels improve dramatically over a very short period of time, motivating the party faithful while demoralising the opposition who are left wondering if they will ever manage to get Fianna Fáil out of power. The reinvigorated Fianna Fáil machine manages to capture all the kudos from the resurgence in government popularity, with the Greens lacking the political nous to likewise capitalize, and a strong campaign sees the party’s support levels returning to the levels enjoyed in 2002 and 2007. While the Greens face into the political wilderness, with few or no Dáil deputies, Fianna Fáil is able to form a new government with support from independents and/or Sinn Féin. Fine Gael and Labour are left stunned by yet another electoral reverse, especially after having enjoyed a massive mid-term lead in the polls, and the prospect of permanent Fianna Fáil government starts to look very, very real.

Likelihood: This scenario looks about as likely as a Laois All-Ireland win at the moment, but remember that Fianna Fáil also experienced a mid-term slump in popularity and a bad local/European elections (albeit not to the levels experienced in 2009) during the lifetime of the last government, but ended up winning almost the same level of support in the subsequent general election (2007) that they did in the 2002 General Election. There are two rules to observe here. The first is that most governments experience a loss of support in mid-term, second-order elections (such as local and European elections in Ireland/the UK, or Senate/Congressional elections in the USA) before gaining support again at the following general election. Based on this rule, some degree of a resurgence in Fianna Fáil support in 2011/2012 is likely and the election may ultimately boil down to how skillful the Fine Gael and Labour leadership is in facing/resisting this. The second rule of thumb is the “it’s the economy stupid” and the fact that government survival at general elections ultimately depends on the state of the economy – in which case, a persistently weak Irish economy over the next two or three years will leave Fianna Fáil with little prospect of retaining power, although their support levels will probably recover somewhat relative to their current low ratings.

(A post containing a geographcial perspective on the next general election contest can now be viewed on the companion NUIM Geography’s Eye On The World blog.)

Adrian Kavanagh

 

Electoral Politics in the NAMA Era 1: When will the next general election take place?

The shape of the social, economic and political landscape of NAMA Ireland will be strongly determined by the parties who hold power over the next decade, and in particular by the new government that emerges after the next general election. But when will this election take place? After much speculation of a likely Autumn 2009 in the wake of the potential collapse of the current Fianna Fáil/Green Party/Others government, the government actually managed to survive the three major stumbling blocks that many believed could bring it down – the Fianna Fáil-Green Party renewal of the programme for government negotiations, the NAMA legislation and the December 2009 Budget. It now looks likely that the government will stay in power for the next few years, barring a series of by-election losses. One scenario could envisage an unpopular ‘zombie’ government clinging to power for as long as possible and running the full 5-year term until late May 2012/early June 2012 – another scenario could see a resurgence in popularity for the government with an improving economy leading to the government parties deciding to stay in power for a long as possible to benefit from this, thus running the full 5-year term until late May 2012/early June 2012. So…a Summer 2012 general election is a virtual certainty then? Hmm…

There is one fly in the ointment and that relates to the timing of the next Constituency Commission report. Recently the process of redrawing electoral boundaries for general (and European!) elections has tended to commence immediately after the publication of the definitive population by area census figures (26 April 2007 in the case of the 2006 Census) with the Commission being required to present its report no later than six months after its establishment (the last Commission publishing its report on 23 October 2007, less than five months after the 2007 General Election had taken place). In the wake of the McGrath/Murphy/Molloy High Court case of June 2007, however, the 2009 Electoral Act now stipulates that the process of establishing a new Constituency Commission should commence after the provisional census population by area figures are published – probably in October 2011 in the case of the next Commission – with the Commission being able to carry out its work of revising electoral boundaries during this period and then publish its report once the definitive census population by area figures are released some time in Spring 2012, and some months ahead of a potential Summer 2012. This does not mean that politicians would be fighting the next general election on the basis of newly redrawn electoral boundaries – a nightmare scenario for political parties which would require them to restart the process of candidate selection in some constituencies and for candidates who might find their political base torn asunder by an unfavourable boundary change and without sufficient time to build up new support bases within a new constituency – it can take many months of debate in Dáil and Seanad Éireann for a new Constituency Commission report to be officially ratified. But the government may not wish to fight the election in an ambiguous scenario where the electoral boundaries for the following general election have been published and dark, albeit unfair, murmurings about “gerrymandering” and “cheating” pervade on the part of candidates and parties whose electoral prospects would be significantly improved by the recommendations of this 2012 Constituency Commission report – possibly feeding in to residual anti-government feeling. Based on this, I think a February 2012 date might be a good bet for when the next general election is to be held – a date by which the government junior partners, the Green Party, may also feel that they have achieved as much as they are likely to from their participation in government and pull out in an attempt to distance themselves from Fianna Fáil.

Adrian Kavanagh