Ireland after NAMA

The last couple of days in the media have seen the usual retrospective look back at the year just gone and the forecasting of predictions of the year to come.  Neither have made particularly pleasurable analysis.  2009 was the year that Ireland got its just desserts for the follies of the government, banks and property developers (and it has to be said, the general population who were also caught up in the credit party).  2010 is going to be more of the same, with the situation getting worse before it gets better.  (more…)

David McWilliams writing in the Sunday Business Post issues two cheery predictions for 2010.

First, the two big Irish banks – AIB and Bank of Ireland – will need to either be:

(a)    nationalised by St Patrick’s Day at the latest (he predicts February) due to the massive hole in their capital base (only €90b of the €400b loan book is being taken into NAMA) and high loans-to-deposit ratios (160% in 2008) that means no creditors will invest in the banks, thereby freezing credit and increasing the potential that large depositors will start to withdraw their deposits.

(b)   taken over by a larger European Bank who are in a better position to negotiate with creditors.

He prefers the second option – “giving the two big banks away”.  He argues, (more…)

For those interested in earnings data, and the debate about private versus public sector pay, the CSO has just published its Earnings and Labour Costs report.  The results come from the new Earnings Hours and Employment Costs Survey (EHECS), which covers all sectors of the economy other than agriculture, forestry and fishing,  For the first time this report gives a breakdown of earnings across different NACE sectors.

Average weekly earnings for different NACE groups

The headline figures are that between Q2 2008 and Q2 2009 the workforce shrank by 6.2% (109,500), and average weekly earnings fell by 1.1% from €706.03 to €698.43.

Earnings in the private sector fell by 3.1% compared with a rise of 1.3% in the public sector (although the latter does not include the pension levy deduction introduced in March 2009).  Of course there are all kinds of reasons as to why you would expect differences in public and private sector pay, including differences in the nature of the jobs, employee education and skill levels across job types, structural organization of employment, salary cuts and job losses in the private sector, and so on.

Headline figures really do not really illuminate the issue to any great degree, and the debate as its currently expressed is largely a red herring, designed to divide and conquer and distract attention to the real issue – the mismanagement of the economy over the past ten years and the massive hole in the tax base created by naïve neoliberal policies.  That’s not to rule out per se all forms of structural adjustment given the depth of the financial crisis, but that the argument used to justify such adjustments should have some level of legitimacy and not work to undermine social harmony by pitting different kinds of workers against each other.  Getting ourselves out of this hole will be a lot easier working together and the public/private, zero-sum debate seems largely unhelpful to me.

Anyway, enjoy the xmas break.  There might be a couple of posts next week, otherwise normal service will resume in the new year.

Rob Kitchin

It seems that a new chapter is about to be written with respect to the banking crisis as the cosy relationship between the banks and Fianna Fail politicians starts to come to light.  As reported on Prime Time’s Monday night programme (watch it here), several Fianna Fail senators and TDs were in receipt of bank loans that avoided due process in their granting. The one catching the media attention (see here, here,  here and here) is the €1.6m loan given to former Minister for Finance (and now EU Commissioner), Charlie McCreevy, by Irish Nationwide in 2006 in order to purchase a luxury apartment in the K Club (an exclusive golf resort).  The loan was seemingly given on short notice, avoided the credit committee (which was required for loans worth more than €1m), was processed without the required minimum paperwork, and was approved for a sum €100,000 greater than the price of the property despite the company’s policy of not granting mortgages of 100% or more.  The property is now thought to be worth less than half its original value.  (more…)

Two recent data releases show just how cold the climate has become for both SMEs and home owners.  On the SME side, a report commissioned by the Department of Finance has found that banks are refusing more loans to small and medium businesses than they are reporting. The five banks surveyed – AIB, Bank of Ireland, Anglo Irish Bank, National Irish Bank and Ulster Bank – report refusal rates of 14% but the report undertaken by accountancy firm, Mazars, suggests the real figure is 18%. The report points to inadequate recording of refusals by frontline bank staff as a reason why refusal rates have been underreported. This also raises the question of what constitutes a “refusal” – for example, if a bank offers a borrower a lesser sum than originally requested, or less favourable lending facilities, is this a refusal? The credit situation facing SMEs may be more precarious than headline figures suggest, particularly as SMEs’ revenues continue to take a pounding. (more…)

At present Live Register data are only available at the scale of the 120 or so social welfare offices.  These areas, which have no defined boundaries, whilst telling the story of Live Register at a sub-county scale are quite large in size, and mask the complex patterns of claimants on the ground.  As any local knows, not all places in an area are equally affected by the recession, with some neighbourhoods being disproportionally hit by job losses.  As studies in the UK and elsewhere demonstrate, where data can be mapped at the postcode level, large variations can occur across just a few streets.  Such evidence is important because in a time of declining resources for intervention it is more effective to target those resources at areas of most need.

To date, maps of Live Register data are, at best, mapped at the county scale.  The three maps below, in contrast, show the unemployment rate ranked by area for Dublin mapped at Enumerator Area scale (c. 330 households) for 2008, and Live Register recipients for August 2008, and change in the number of recipients between August 08 and February 09, at the new Small Area scale (c. 100-120 households) for the Ballyfermot/Chapelizod Partnership Area.

Unemployment Dublin EA scale 2008

Live Register recipients Aug 08

Live register recipients increase Aug 08 to Feb 09

In the first map, the areas that are shaded dark brown are in the top decile for unemployment rate.  In the second map, the areas shaded red have the highest numbers of claimants.  With respect to the third map, the areas in red are those that have experienced significant increases in Live Register claimants, whereas those in dark blue show places where people up to Feb 09 have so far retained their jobs.  In general, what the map shows is that existing areas of high numbers of claimants and the areas immediately surrounding them are those areas gaining the most new claimants and that those areas with low numbers of claimants remain relatively low.  In this case, it is in parts of Ballyfermot that claimants have grown, whereas Chapelizod weathers the storm quite well, reflecting the different labour markets that their respective inhabitants are/were employed in.

The study was undertaken by NIRSA working with Ballyfermot/Chapelizod and Northside Partnerships and the Department of Social and Family Affairs (DSFA) and was published by Dublin City Council earlier in the year.  Neighbourhood maps were created for all forms of Live Register claims at the new Small Area scale.  These Small Areas, created by the National Centre for Geocomputation for Ordnance Survey Ireland, will form the micro-geography for the 2011 census.

At present the research remains a one-off pilot study, but it does highlight two things: 1) the geography of unemployment, and the recession in general, is highly uneven and is not affecting all areas equally; 2) that the evidence base for making key policy decisions would be significantly enhanced by these kinds of data.

Justin Gleeson and Rob Kitchin

Just a couple of weeks after the closure of the Kino cinema it’s more bad news for all things good in Cork.  Plugd, the city’s only remaining independent record store, community hub, and general drop-in centre for music addicts of all sorts is closing down in its current location after Christmas.

Plugd Records Cork on Culture Night 2009 (Photo by Barry Walsh)

Run by Jim and Albert, two extremely dedicated, knowledgeable and affable individuals, Plugd does not provide for its patrons only a place to buy music unavailable in the mainstream shops but an invaluable resource for information, events promotion, community building, and a space for local artists and groups to sell their records and develop their craft.

In a post announcing the closure on the People’s Republic of Cork forum last week, owner Jim suggests that “…it has become increasingly obvious over the last while that things are not working out in our current situation…The reasons are straight forward enough – business is down, like most others at the moment – and overheads are staying up”.  Although there is some hope Plugd will reopen in a new location, the store will soon cease to exist in 4A Washington Street where it has traded for eight years.  As the heartfelt comments from customers and Corkonians past and present testify, the absence of Plugd will leave an undeniable dent in people’s cultural and emotional experience of the city.

I think that this closure obliquely hits on recurring themes on this blog.  As the recent budget exemplified, the priority of the Government has been to invest in keeping the property sector artificially inflated and ensuring that banks, corporations, and high earners aren’t scared away from these shores, at the expense of everyone outside of these vested interests.  To put it another way, it’s business as usual for the apparatus of the state.

Brian Lenihan has suggested that NAMA is meant to free-up banking capital in order to offer loans to small enterprises, but if land prices and therefore commercial rents are kept inordinately high many of these businesses are precluded from making a profit anyway.  Moreover, the freeing up of domestic capital was never the aim of NAMA.  In the meantime, Cork loses another highly valuable cultural resource.  The myopic focus on boosting the commercial property market has invariably pushed up commercial rates, to the extent that it is mostly the larger chains that can afford the rents in city centre locations.  Thus, the perpetuation of a bland urban monoscape of shopping centres, franchised restaurants, and cafés.  Places like Plugd may disappear in the midst of this more noticeable transformation of the urban streetscape, but in the prophetic words of the folk singer Elizabeth Cotten:

You’re gonna miss the songs I play
You’re gonna miss me every day
Friends I know you’re gonna miss me when I’m gone.

Cian O’ Callaghan

The Irish Times today (Dec 17th) features an excellent opinion piece (here) by Karl Whelan dispelling the myth of NAMA’s abilility to “get credit flowing”.  A number of recent developments in the “NAMA-story” outlined in the article give a glimpse of how the key actors have been weighing up the odds. In particular, the comments emanating from AIB and BOI indicate that their  interest in NAMA is along the lines of gaining perceived credibility in the eyes of the international financial markets rather than increasing domestic lending, while it seems the ECB wants to see the Irish government take an ECB-endorsed course of  action but without the ECB itself  being called upon to bankroll it. None of this augers very well for the general public, of course. What’s more, as Karl Whelan notes, it seems that the problem of undercapitalised banks (which NAMA was created to tackle) still hasn’t been addressed.

Declan Curran

How can social science researchers most effectively make a contribution to public policy formation?  The recent debates surrounding how best to address the fiscal crisis facing Ireland cast a spotlight on two challenges that confront researchers who attempt to intervene in the wider public discussion.  First, there is a set of problems surrounding the ways in which evidence – particularly quantitative evidence – is mobilized by researchers and taken up by the media and others who shape public opinion.  Second, there is a more philosophical question about whether or not it is possible, or desirable, for social scientists to adopt a value-neutral position. (more…)

Moody’s, the international financial ratings agency, has provided an interesting international comparison of financial misery (as reported by finfacts.ie and LA Times).  The misery index is a metric which adds a country’s fiscal deficit to the unemployment rate, which Moody’s suggests highlights the financial hole that a country finds itself in and its attractiveness to sovereign debt issuers.  (more…)