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Wednesday, January 14, 2009


ireland as the new iceland?

via the ft:

The government is preparing for drastic public service cuts: the kind of measures that are being undertaken to try and preserve the government’s [triple-A sovereign credit] rating. As the Irish Times reported yesterday:

THE MAJORITY of the €2 billion that must be cut from exchequer spending this year will have to come from pay cuts for civil and public servants, unions will be told by the Government next week.

Meanwhile, a public service union leader has warned members that the International Monetary Fund could be brought in if the Government cannot cut borrowing and bring the State’s finances back under control.

Yes, it’s serious enough that the IMF is being banded about as a possible saviour. Idle speculation? No. Here’s the Irish Times today (emphasis ours):

The Taoiseach Brian Cowen has endorsed the warning of a senior trade union official that the State’s borrowing figures are unsustainable and could possibly lead to the International Monetary Fund ordering mass dismissals of public sector workers in the future.

Mr Cowen said the comments of Dan Murphy, the general secretary of the Public Service Executive Union (PSE) were based on the evidence that has been provided by Government in its discussion with the trade union movement.

The IMF could, of course, be being used as a stick to subdue the Unions with. On the other hand, if S&P downgrades Ireland, as they are understood to be considering, then the situation will get rather bad. Borrowing costs will increase further. Not just for the government, but for Irish companies too.

Tension in the eurozone? Watch this space.

as the irish tiger economy unwinds, local economists are warning of 80% declines in housing prices, with predictable effects on large mortgage lenders.

IRELAND WILL see more demolition than construction of houses over the next decade, as the economy struggles to recover from the collapse of the housing market and the emergence of “zombie” banks, UCD economist Morgan Kelly told the conference.

In a presentation that drew several collective intakes of breath, Mr Kelly predicted that house prices would fall by 80 per cent from peak to trough in real terms.

“Construction, but not demolition, of residential and commercial property will fall to zero for the foreseeable future,” he said. ...

“The guarantees of Anglo and [Irish] Nationwide liabilities have a strong chance of being called in over the next 21 months,” he said. Extending the Government guarantee to these two financial institutions was “extraordinarily unwise” and could produce losses that the State cannot afford to repay.

The global financial crisis may have been positive for the Irish economy as it “stopped us dragging ourselves even deeper into our hole,” he said. “If it had taken another year or two, we would have ended up in an Icelandic-shaped hole, which is not to say that we won’t end up in one.”

UPDATE: and more on britain as iceland, a theme i fear we have not revisited yet again for the last time.

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Metropolitan Houston, TX has a million+ more people than the entire country of Ireland.

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