Grabbing global headlines for the wrong reasons
Key international watchdogs such as rating agencies and big lenders worry we have failed to come to grips with the banking crisis and that the mounting debt caused by this fiasco will cause us to default in the next few years.
Ireland as the next Greece is again being touted in the world’s press, and despite our best efforts the mess is getting worse, according to outside observers.
Our problem now is that many overseas believe the banking crisis is so large that it could lead us to default on our debt within the next five years.
This is a serious worry given so much effort has been put into getting NAMA up and running and that so much taxpayers’ money has been wagered on the banks and the economy getting back on track.
Some now believe NAMA is part of the problem and has taken far too long to organise given that the crisis for the banks and the economy erupted in September 2008.
Two years on and the debt transfer to NAMA is still dragging on, giving the markets more reasons to speculate that Ireland, after Greece, is going to be Europe’s next basket case.
Anglo Irish Bank’s mounting losses have added to our woes and continue to ensure the problems of this economy stay the focus of international attention.
Particularly worrying is the growing perception that due to our small size the events of the past two years may prove insurmountable.
While NAMA has done its best to ensure taxpayers are protected from the bailout of the banks, the excessive scrutiny of loans has meant the saga drags on, and the clarity being sought by international investors about where the banking system stands has not been forthcoming.
The concern lingers that this economy will be dragged down by the level of debt associated with the bank bailout, while new estimates suggest the national debt will finally peak at €200 billion.
Taxpayers were meant to be protected from the worst of this crisis, but the truth is this banking calamity leaves the whole country vulnerable and talk of debt default is becoming too frequent for comfort.
In the good days our total debt was about €30bn and we were so well off that we had enough in reserves to pay the whole lot down if we wished.
The downgrading by S&P last week is just further testament of how far we have fallen from financial grace in the past two years.
This is bad news given so much effort has been put in to resolving the bad debts of the bank to allow them return to normal functioning.
The Government was under huge pressure after the crisis to effect a resolution of the banking problem and to ensure the bailout of the financial institutions would not put the taxpayer in hock for decades.
So far it has failed to achieve either goal.
Outside observes say this is because the crisis is so big, not just on a financial basis, but in the broader economic sense also, that we are about to, or have lost, command over our economic and fiscal destiny.
This week the Financial Times and The New York Times have raised doubts about the country’s financial status. The FT, no friend of Ireland anyway, said nobody knows whether NAMA is working or not, or how well it will manage the €80bn-plus of assets it is taking on from the banks.
The FT said, however, NAMA has not become a “creature” of the banks and that is to its credit.
In more damning assessment the New York Times said that Ireland was in real danger of becoming the next Greece and the chances of it defaulting on its debt has gone from 0 to 25% in recent months.
