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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.
Up to 40% of our national requirement .. Great progress … Much less to import now
We have to buy it off Shell the same as the imported gas… Either one can up the price and shut-off supply….. We gave it away to a foreign company for nothing with a falso tax rate on profits which shell never seem to make any with this rigs around the world. So little if any tax revenue… The only difference is that we see the offshore rig…. How is this progress?
If we left it for a public / state company to extract and process the gas we’d still be at the stage of overpaid civil servants debating on what colour the logo should be and spending money arm over fist … The state is incapable of doing this
It won’t make any difference Gggordon……….we will still pay the same international prices and any tax revenue to be gleaned by the Government will have to wait until all investment, overheads and ongoing costs are written off against profits…by the time that happens, we’ll be out of gas ….lol.
I what to do, get the state to do it! I hear John Tierney is free
Ireland is a joke, couldnt manage a pi$$ up in a brewery
Really is about time the anti democratic ‘protestors’ who cost the state an absolute fortune just buggered off with themselves. Whingers the lot of them.
anti democratic ‘protestors’ ahahahahhahah…
Oh and just bend over and continue taking accepting that our country is being constantly sold off. Your right.
Where do we start…..our oil, our gas (bord gas), our forests, Guinness, aer Lingus, our fish, our lottery, our roads, our tolls, Irish sugar, Irish steel…..the list goes on. Meanwhile 15% of the population cannot afford heating because these multi national companies push up the price. How dare they protest your right.
Well let’s see. How many ran for the Dail and got in? How many for the local council? They breached court orders, stood in the way of something that the vast majority of the country not only wanted but needed and contributed to a delay of ELEVEN years. They agreed to an independent study of the possible dangers and then ignored it when the American group tasked with the study didn’t report the way they wanted. And they cost us millions of Euro in overtime for police to look after their protest. So yeah, deliberately frustrating the will of the majority? That could be called anti democratic. And one of the Rossport idiots on 6.1 saying that it’s not over yet.
Quite clearly it is. And you should be billed for it, you fool
Well they know who to vote for then , don’t they.
And yet mysteriouslythey don’t.
The Rossport farce had nothing to do with the selling off of state assets. It was pure NIMBYISM. Why do you think their group was called Shell to Sea? Their “concern” about our gas didn’t manifest itself until much later on.
The rest of your list is actually funny. When did the state own Guinness FFS?
She’ll also breached a number of Court Orders, including a District Court Order.
Read Lorna Siggn’s even handed account.
Protest is a form of democratic action, especially when it is by local,action groups.
Shell played a smart game, it bought off the local Church, GAA, An Garda Siochana and some public representatives.
Fortunately Shell killed no one in Ireland, in contrast to Nigeria.
We never owned Guinness and we still own the forestry
Well Fiona as your good friend werejammin/For Connolly would say, “have you a link for all that?”
He’d also be well known as someone who would advise people like yourself, with bona fide information about criminality, to report it to the authorities at your earliest convenience.
After all someone like yourself, who holds other people to the most exacting standards with regard to their comments will, no doubt, have copious documentary and other evidence to back up your most serious allegations.
I’m looking forward to reading about your role in what will no doubt prove to be successful prosecutions for bribery and corruption.
I can’t wait for your reply, which I could write already.
PMSL are your good buddy would say.
Alan, you suffer from a combination of pride and prejudice, a closed mind and a hostility to any form of social activism. The most unfortunate of your attributes is your tendency to invent fictional Referenda and to be viciously insulting of and dismissive of any view which differs from your own.
Read the book by Lorna Siggins. It will inform you on the issues. As a teacher, yiu will understand, I hope, the need to inform yourself.
I have never seen anything positive or supportive you have ever posted other than expressing a pro Government and pro establishment perspective.
I would hate to have a child “taught” by you.
Ken Saro-Wiwa and the Ogoni Nine were unlawfully executed by Nigeria in response to the influence and payments of Shell.
In September! Shell was convicted of intentional contempt of a May 2007 District Court Order. It is a matter of public record, first reported by the Mayo News. Shell intentionally ignored local rights of commonage.
BbC reported on the corrupt payments by Shell to Nigerian civil servants and senior politicians.
Fiona please stop wasting time and report the mountain of evidence you must have against the Church, the GAA, various Gardai and politicians. Your accusations are potentially explosive. Why are you wasting time on here when you have a moral duty to pass on the information you must have (after the accusations that you made) to bring the guilty to justice.
And look up projection on any psychology website. You might learn something!
Another fool with his not in my back garden stance… The idea is to do the job in the safest way which they havent and now have put local people at risk. But you’re not a risk so you just want you’re gas bill from the Irish resource that was given away. You’re a great yes man Alan, pat on the head for you
Perhaps the protest would rather we got our gas from the Russians or the Norwegians or the British ? What’s wrong with using our own gas ? ( no boring answers please )
We already get the gas from Norway and Russia.
We will not see any benefit from Shell and the Government.
The government ?
Jobs?
We might Aswell. If the cost of gas doesn’t reduce and I’m sure future generations will be more in need of are resources than us.
#our
Currently all gas used in Ireland is imported. It is brought in via 2 interconnectors.
The Kinsale Head Gas field is a gas storage facility which is registered in the Cayman Islands and owned by a far east gas storage company.
The gas introduced by Royal Dutch Shell will have no benefit to us other than the fact that more gas will be available.
The government sold our rights via Ray Burke
do boring answers include the truth of the matter or do you care about that?… it is not our “own” gas…
p.s. much respect to you sir for propping your bike up against a national monument!
To be fair Anthony if the price came down people might welcome it a little easier but we know it will prob go up
Shell are British ya clown
Sorry now but Royal Dutch Shell to give it its full name is not British.
As much as you want to believe rhe are british, royal dutch shell is registered in texas, which is in the USA, ya clown.
Anglo / Dutch
headquartered in the Netherlands and incorporated in the United Kingdom
https://en.wikipedia.org/wiki/Royal_Dutch_Shell
[fwiw]
Ahhh boo hoo, All the English trustafarian hippy protesters down there aren’t happy
Shame on ff fg labour for giving away our gas.
Who else could build a gas pipeline? You can hardly expect enda himself to go out and dig it with his bare hands!!
Yes the gas must flow and it must flow now, even if its an asset that will only appreciate in value and that we could have gotten a much better deal on later (ie one that would actually of been of financial benefit to Ireland).
Any idea how poor Norway was before they created their own oil and gas company and pumped their own? They didn’t know who to build it either! Investment in your own country is never money lost. But we got 5mil and gave away billions
It is not our own gas. Ray Burke and cronies seen to that years back.
Great news…. If you think that the exploitation of Ireland’s natural resources and environmental destruction for the benefit of a private energy company is a good thing
It benefits the private company and the state. Without the private company, nothing happens. We don’t have the technology to set up a state owned company with the resources of Shell.
Cal, a bit of sense, thank you. To all of you who object to gas distribution. Simply register your objections by asking esb and an bord gais to disconnect your house. Win win. Save the planet, and show ‘em
Then we develop the tech and do it ourselves problem solved.
The gullible Irish delighted that a global Corporation, paying little or no tax here, extracts Ireland’s natural resources, at little no cost from our government, and sells it back to them. No mention of the damage and upset it does to the local environment and population.
Jobs
We should be lucky we’re not in Nigeria. A few protesters might have tripped and fallen on some bullets. I’m sure the right people got their brown envelopes to make all this happen.
http://www.theguardian.com/sustainable-business/shell-nigeria-oil-payment-corruption-scandal
http://news.bbc.co.uk/2/hi/3796375.stm
F all jobs.
Better than f no jobs
Maybe we should have got the semi state to do it
Disgrace.
A triumph of the powerful over the powerless.
We were told yesterday how a pro shell government candidate (Michael Ring) out polled a shell to see candidate 4 to 1 in Rossport in 2007
Hyperbole at its finest
Whinging and that unique Irish begrudgery at it’s finest.
Begrudging the gift of billions to Shell of our resources at the risk of the local people in the area?? Pat on the head for you
A triumph for common sense.
I’d say there’s a few crates of “donated” booze being cracked open tonight.
Sounds like the crusties haven’t had sense knocked into them yet.
Spoken by a bovine intelligence, George the cow.
To be quite honest I thought it was long up and running by now.
Hallelujah
Will gas get cheaper now..?
LOL
No
Selling off Irelands resources for a song….this crowd would turn Newgrange into block of flats if the envelope was thick enough.
Wholesale gas is currently at the lowest uts been in 7 years.
“an important milestone for the country and….
bring many long term benefits to the Irish economy and consumers.”
Yeah right, sold off for a fist full of sterling and a few crates of booze, another corporate heist compliments of our corrupt system.
Shell Hell
https://www.youtube.com/watch?v=__JEyNMIeBk
That rhymes!!!
Company shell they smell..
Like methane..
Such a beautiful part of Ireland. I really hope that there is no incident in the future that we’ll universally regret, because you can’t turn back time.
When are they going to add those billions to the national exchequer? Ha ha ha ha ha ha ha Ireland’s shame.
With some creative accounting on shell’s part that former Irish gas field is going to make some Americans, Dutch and English very rich despite never officially turning a profit or paying a single cent in tax.
Warai is twenty years since they first discovered the gas, do you not think they’re entitled to some return on their huge investment. If it was up to begrudgers like you, we never would have made it out of the stone age, because the guy making the bronze tools might turn a profit for his work
Let us not forget the active complicity of Shell in the unlawful executions Ken Saro-Wiwa and of the Ogoni Nine.
Great news for North Mayo. Will put Bangor & Belmullet on the map.
For the views?
That is good. The crusty protestors must have cost us a fortune. Message to the sts protestors: now bugger off and get a proper job!
Not in my back garden… Remember this narrow view of yours if the unrefined pipeline goes bang… Without my last statement I bet you couldn’t tell us why they were protesting
Dear Throw9Away,
If the pipe goes BANG, then they will fix it.
Water pipes also leak. Should we ban water supplies?
Electricity faults also kill people.
so do cars.
Mobile phones radiate RF radiation.
so we ban gas pipes, water pipes, electricity wires and cars.
No phones or masts.
Throw9Away, what do you think is OK.?
The problem is the gas in this pipeline, until it hits the onshore refinery, is unrefined… Other elements that corrode the pipe over time are carried onshore with it. How do you inspect for internal corrosion? The other elements add to the combustion of an explosion and make a potentially deadly scenario over a larger area… It’s a massive risk to the locals. Water, electricity and phones don’t explode. Look done is done and I hope nothing happens and it’s a boost for all but the risk taken was not in the best interest of the Irish people at large. Let’s not forget when the 2 junior ministers signed off on this deal it was pre 2007
1) Q:How do you inspect for internal corrosion?:A Ultrasonic NDT. look it up.
2) massive risk to the locals: I didnt think that the pipe was routed through anyone’s house.
3) Electricty substations and transformers certainly do explode.
4) mobile phone and laptop batteries also explode.
5) Gas leaks cause houses regularly to blow up.
6) Cars kill lots and lots of people.
7) RF radiation from your mobile phone fries your brain.
7) Water pipes burst, and the fountains make locals all wet.
Life has certain risks!
You should live in a teepee in a forest.
Radiation and dodgy batteries?! Take off that tinfoil hat and have a pint for yourself man! Its NYE ya suck!
Radiation and dodgy batteries? Take off that tinfoil hat and have a pint for yourself! It’s NYE ya suck!
More of this, more, more, more development and extraction of resources that reduce the need to import from dodgy third world countries like Russia and Nigeria. We get the economic development in terms of construction, operation and distribution, as well as the tax revenue from companies like Shell. A complete win-win.
Having said all that, contracts need to be set up so the state gets a significant slice of the action, especially when prices go back up.
Barn. Door,
We get to pay for the gas, pay for the infrastructure, pay for the maintenance… You know Shell isn’t paying to hook up to the network? 85% is going offshore to other markets so we will not see anything in tax… Correct on better contracts and Shell made a great job of everyone’s drive in the area but in total it’s billions lost
More gas exploration, more fracking exploration, consider nuclear. Less importing of energy from putin and the wahhabis.
Some of you guys need to look at the documentary The Pipe. But I suppose since it’s not in your back yard all is well eh?
Note:
A solar capture farm in the eternally sunlit Sahara desert the size Ireland can provide Europe with all energy necessary forever.
No oil needed.
Who is stopping this?
.
Lunatics.
P.S
By “lunatics” I meant all the gunslingers around that region waving books written in the Bronze Age.
The wind has tens of millions of times more limitless energy than gas or oil.
.
Watch your shed when the wind gets angry.
Pity the wind is far more costly than gas isn’t it, as well as having dodgy looking turbines blighting the pristine landscape.
Turbines bad, explosive pipeline good.
How often do they explode? Genuine question.
Done a bit of study on this in 2008/9. The comparison would be every single unrefined pipeline has exploded at some stage… It was an American ex military guys report
Totally incorrect. Check your facts.
OMG. The pipe has exploded on the first day of operation. Millions of people gassed.
A bit of reading for your ignorant self… But this wasn’t anywhere near you so who cares… https://en.wikipedia.org/wiki/List_of_pipeline_accidents
Yippe!
Thank you Shell for your tenacity, those crusty protestors must have been a pain
Nice to see the reduction in gas prices.http://m.rte.ie/news/business/2015/1229/756666-wholesale-gas-prices/
Free gas for shell I’d say the can’t believe their luck what a stupid country we live in
With a 3.6 billion build cost it’s not exactly free
If the construction of this pipeline and the distribution of gas had been left to the state, it would be like giving it`s management to the HSE.
The idiotic Irish always go the wrong way.
Gas.
Reports of flaring of gas around new years day in mayo it seems the pressure already is too high to cold vent any comments buster brown? Its on you tube.
A big white elephant really…
The crusty protesters have cost the Irish economy €600 million in lost revenue.
It would have been better spent on education, healthcare, welfare or infrastructure.
Shell to Sea campaigners: You have done your country a real disservice.
There is no revenue in it as the government here has given away all the money Shell makes from it to Shell, the government has given it away for free… Dumb SOB’s…
have your say