Empire Avenue

Wednesday, May 4, 2011

The damaged Celtic Tiger - one perspective

Anyone with friends in emerging economies will have a very interesting perspective on Ireland today.

We are very lucky and we should remember that when our media over egg our situation.

Ireland is effectively bankrupt. The balance sheet is shot.

This is due to an extreme bubble in property prices and a criminal lack of control of our banking sector.

Ireland is a democracy. We have voted those in government who were responsible out of office.

We are not an open society when it comes to wealth and powerful self serving groups. No one in business responsible for the destruction of our economy has spent a day in prison or faced any other punitive action.

Trade Unions have not faced up to their responsibilities. They are insisting that those in the public sector get theirs - regardless of our country's ability to maintain these conditions.

Our asset classes have not been allowed to clear as they might in a liberal economy like the US.

Just as our country is bankrupt so too are many of our families. There is no chance that many can ever pay down their debt.

This is being ignored, the can is being kicked down the road.

Unlike in liberal economies, bankruptcy is a major stigma in Ireland. A bankrupt in Ireland will remain so for 12 years - compared to 1 year in the UK.

We do not have banking. What is worse is that the banking sector produce statistics to suggest that debt is available to business and families. Its not.

The celtic tiger reinforced the truth that our people are as good as any other.

Irish companies and individuals raised their game - aimed to be outstanding, to be world class.

Our people remain outstanding productive members of society.

Our exports continue to grow at a very aggressive rate.

Our companies and Foreign Direct Investment companies are growing fast, competing effectively with their competitors on a global scale.

On the P&L - Ireland is on a positive trend. Construction and Banking are destroyed as sectors. Most other sectors not dependent on domestic demand are doing well.

So there is a lot to fight for.

What do we do next?

Well - I am not sure to be honest.

I know what outcomes we need to bounce back:

- We need to reduce our public costs.

- We need banking to re-start.

- We need education and health systems that will retain the best and most productive people in this country.

- We need to get unemployed people back into work.

- We need to write down the value of assets, property, bonds and mortgages. We need to do this fast to re-start the economy and investment activity. Failure to do so will recreate the stagnation that Japan created by not being aggressive post their asset bubble.

With no currency revaluation possible, we need to drive down all costs - including salaries. There has been some work done in this respect - but Ireland is still an expensive place to live and work - Iceland has been lucky in this regard. Revaluing their currency made this re-pricing automatic. We need to replicate this outcome.

There is a lot outside of our own control.

How the EU views itself and its responsibility to its citizens is perhaps the most important input into our countries future.

What is obvious to me having visited ex-communist countries like Romania is that humans have an exceptional ability to survive and to prosper.

Talking to people who lived through the '90's in the Balkans reminds me as an Irish person just how much we have going for us.

I am optimistic. This too will pass.