Global News Journal
Beyond the World news headlines
Irish literature and legend is full of boasts, like the claim by Christy Mahon in Synge’s “Playboy of the Western World” that he has killed his da with a loy (Irish for spade), only to have the old man track him down in another town.
Perhaps that’s the way to view Irish Finance Minister Brian Lenihan’s announcement two years ago that the state-backed guarantee scheme to rescue the country’s troubled banks, hit hard by the collapse of the property market, was “the cheapest bailout in the world so far”.
It seemed too good to be true. And it was.
On Thursday, Lenihan, who has spent the last two years scrambling from one fiscal crisis to another, announced that, actually, the cost for cleaning up years of reckless lending was “horrendous” and in a worst-case scenario the price tag would be over 50 billion euros ($68 billion).
The bill will shackle Ireland, once the EU’s fastest growing economy, with a public debt burden of nearly 99 percent of gross domestic product.
Ireland’s now crippled economy, meanwhile, has done everything but recover. Unemployment is stubbornly high, property prices remain depressed, taxpayers face years of cutbacks and, in the second quarter, growth again went into reverse.
Maybe what Lenihan said two years ago was wishful thinking, or perhaps it has taken this long for Ireland to wake up to just how colossal a hole its one-time high flying property tycoons have dug for themselves, and for every Irish taxpayer, even though much of what they were up to is so big as to be unmissable.
Take, for example, the Battersea Power Station in London, which is Europe’s largest brick building and has been derelict since it was decommissioned as a coal-burning power plant about a quarter century ago.
In 2006, a firm controlled by two Irish property magnates, Johnny Ronan and Richard Barrett, bought the building and land surrounding it for a staggering 400 million pounds ($750 million) — even though previous plans to develop it had all come to nought.
The boys, as they are referred to in some of the Irish press, had ambitious plans for a new, exclusive, “Knightsbridge”-class development for office, commercial and residential space, including an extension of the Northern Line branch of the London Underground.
Four years later, the site is still derelict, promoted, perhaps a bit desperately, as a location for lavish weddings held inside a marquee, and most recently as the venue for a Red Bull-sponsored high-jinx, daredevil motorcycle show.
Ronan and Barrett’s property empire, meanwhile, has seen some of its loans earmarked for the Irish government’s National Assets Management Agency (NAMA) — Ireland’s “bad bank scheme”, which was established to purge lenders of commercial property loans, many of them non-performing.
Battersea is at the top end of the scale of Irish property investment during the decade of the Celtic Tiger boom, but replicate it at a lesser level all the way from Eastern Europe to the holiday beaches of Spain and out to Asia, and it becomes clear why Lenihan has had to change his tune.
A historical footnote: a Reuters feature informs us that the Battersea Power Station was used during World War Two to burn 120 million pounds worth of banknotes that had to be disposed of to stop enemy forgeries.
Something to boast about then. Comparatively small change now.
Whichever way you look at it, Germany is in a bit of a quandry.
For the past 11 years, since the launch of the euro single currency, Europe’s biggest economy has enjoyed steady current account surpluses as it has exported its manufactured goods around the world, while keeping labour costs down and productivity steady at home.
Its economic growth may not have been stunning in recent years, but it has experienced none of the huge budget-deficit and debt problems of its euro zone partners, particularly those in southern Europe such as Spain, Greece, Portugal and Italy. And it has none of the nagging competitiveness issues that all those countries also face.
After five months of struggling to stay afloat in the quicksand of a debt crisis, Greece has finally asked the European Union and the IMF to throw it a lifeline.
Some might think that’s the end of it — Greece now has access to up to 45 billion euros in special funds, it can finance its deficit and refinance its debts at better rates, and speculators (who have metaphorically been stepping on Greece’s head while it thrashes around in the quicksand) have to beat a retreat.
The 16 countries that share the euro single currency have agreed they will help Greece out if it needs. So far so good. But only now is the nitty-gritty of how member states will go about paying for their contributions being hammered out. And suddenly things are getting a little complicated.
Italy announced on Tuesday it would have to issue government bonds — known as BTPs – to raise funds for its part in any Greek assistance.