Cart (0)
business newsUpdate from IMF Land (Formerly Ireland)
By
Simon Kelly Mar 14, 2011 11:00 am
Ireland now has a new government but the problems are still huge and the challenges unchanged.
PRINT
 |
|
There is certainly a huge mood of change post-election and it may be a catalyst for something to happen in Ireland. Fianna Fail got wiped out by the people as a just reward for their economic stewardship that brought the country to this point. The ill-judged bank guarantee certainly guaranteed their fate and sealed the coffin.
The first act of the new government was to cut the salaries of the leader and all cabinet ministers. The cuts over the crisis are hard to track at this point because there have been so many, and the boss is now capped at €200,000 per annum. Everything is in the interest of the nation. National solidarity has finally arrived.
The winds of change are whistling through at a rapid pace, and there is certainly a momentum building up. But the third person in this governmental marriage has yet to pass their verdict. The IMF team are in town this week carrying out a standard review of Ireland's austerity progress, and they will certainly be getting to know their new partners.
The initial proxy war for power and control will be interesting to watch. The good news is that Enda Kenny, our new leader, has started off on his Euro diplomacy tour by having a standing row with the French about our corporate tax rate. At last we are showing some backbone.
"Burn the bondholders" is the chant you can hear from the people and this provides the backdrop to all conversations. The protests in streets never really happened in the end, but the people are seething. The real protest movement here meets and discusses the issues on the internet, in bars, and on radio shows. They are calling for a burning.
The Danish did it, why can’t we? is the question. But much of the discussion fails to recognize the fact that the Danish also gave a haircut to depositors in compliance with their law (and we have the same law).
On main street, the recession is really biting. The contrast between the boom times and the current bust is painfully obvious. It's as if somebody knocked the wind out of the economy with a surprise punch to the stomach. Spending used to the main hobby of the average Irish person, but that has long since changed. The streets are empty and the shops are closing down.
Credit in the economy is a misty memory from the past. Is does not exist. An associate requested a small business loan from the remaining free bank last week, and he said you could cut the atmosphere in the room with a knife. Never speak ill of the dead is an Irish mantra and asking for credit seems to be just that. You are speaking ill of the dead, and the request is dismissed.
Where is the bottom and is it close? That's the real question. The banks' balance sheets are still in free-fall and we haven't hit the pavement yet. The incoming government has promised to deflate all commercial rents which is causing a lot of uncertainty. This will be the final plunge down for the commercial property market and the underlying bank loans.
The meter is really ticking fast now, and the government and central bank (including the ECB) have supported the Irish banking system with over €150 billion at this point; shoveling fast to fill the hole left by fleeing deposits.
We are certainly past half way in the crisis, but there is no end in sight yet.
Starting today and lasting through the end of March, 100% of the donations made to The Ruby Peck Foundation for Children's Education will be channeled to the children of Japan as they attempt to find their footing following this natural disaster; and to kick off this drive, we'll pledge $5000 to get it started. Please do what you can, as it will add up, and thanks.
Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.
No positions in stocks mentioned.
