Top ten of 2010
IT is the plan that has been devised to see the country through the tough times. On Thursday November 25 the Government announced the details of the National Recovery Plan, which it said will restore order to public finances and boost competitiveness.
The plan set out €15 billion worth of corrections which will be implemented over four years. Public expenditure would be down €10bn while taxes would be up €5bn.
One of the main sighs of relief came when the Government said Ireland’s very attractive corporation tax rate would remain at 12.5%. Multinationals rejoiced and said that despite the country crumbling around them they are happy to stay for now.
One area that was hit hard was social welfare which would be cut by €2.8bn by 2014, while the Government also said that it was cutting the minimum wage by €1 to €7.65 per hour.
Shoppers were also hit with VAT will rise to 23% by 2014 while homeowners, many of whom are struggling to pay their mortgages would be hit with a property tax in 2012. They would also face domestic water charges by 2014.
The Government also said health spending is to fall by €1.4bn over the term of the plan.
The plan also includes “full implementation of the Croke Park deal” while new entrants to public service will face a 10% pay cut and public service pensions would be cut by an average of 4%, they said.
However, while this plan set out such big ambitions for the next four years, it’s hard to take any of it too seriously given that a new government can renegotiate it. And the likelihood of a new Government being in place next year — we’ll say no more on that.
THIS was the budget that was to be the harshest one of our times. Speculation mounted as to when the budget would be announced but as planned the Government stuck to its original plan and Minister Lenihan announced the plans for Budget 2011 to the Dáil on Tuesday December 7.
There were no major surprises in the budget given that the Government had already laid out its plans in the Four-Year Plan.
However, it did introduce a Universal Social Charge, which saw more people come into the tax net.
It also increased petrol and diesel costs, reduced the travel tax to €3, set new rates for child benefit, scrapped some tax reliefs and made changes to stamp duty.
WHAT a busy year it has been for liquidators and it seems 2011 is not going to be much different. A recent credit analyses of 122,000 actively trading companies found that more than a third are likely to fail, resulting in €288 billion in bad debts.
Many businesses struggled through 2010, clinging onto examinerships or receiverships as a way to survive. Nobody was safe. Big businesses and smaller firms all became victims of the downturn.
Around four companies a day went out of business in 2010 and the total figure for this year is expected to be higher than 2009 and is likely to hit 1,500.
Ah the banks. Where to start. How the mighty did fall.
The minister said recently that banks’ loan losses are “unforgivable” adding that from 2008 to 2012, the total loan losses of the Irish banks are expected to reach €70 to €80bn, equivalent to about half of 2010 GDP.
Having accepted €3.5bn from the Government in 2009, AIB and Bank of Ireland found themselves very much at their mercy. They were forced to go on a selling spree and off-load whatever assets they could.
In April AIB announced that the Government would receive a stake of 16% or 17% in the bank and this was followed by another announcement in September that the Irish Government had effectively nationalised the bank. News emerged that AIB required €3bn on top of the previous €7.4bn requirement. In November the bank sold its 22.5% stake in US-based, M&T Bank.
Just last week it emerged that AIB would be getting a further €3.7bn from the Government. The bank, which was once the country’s largest, will be effectively nationalised, bringing four of the country’s six banks under Government control.
Bank of Ireland meanwhile did not find itself in as bad a state as AIB. In April, however, the European Commission ordered the disposal of Bank of Ireland Asset Management, New Ireland Assurance, ICS Building Society, its US Foreign Exchange business and the stakes held in the Irish Credit Bureau and in an American Asset Manager. The Government now owns about 40% of Bank of Ireland.
As for nationalised Anglo Irish Bank, it just continued to gobble up Government funds. In March the bank reported a loss of €12.7bn for the 15 months to December 2009 — the largest loss in Irish corporate history.
Irish banks are slated to undergo new stress testing in the first half of 2011, starting with the six biggest banks followed by credit unions and subsidiaries of foreign banks.
THEY were there for us in the good times and have now been there for us in the bad.
When the Irish Government realised that it could not go on without some outside financial support it had to go calling on its European friends.
However according to the IMF Ireland’s financial woes pose “significant” spillover risks that could affect Greece, Portugal, Spain and other euro-area economies.
There was public outcries in Germany particularly against propping up fiscally reckless countries.
But whatever the rest of Europe thinks of Ireland, we are not alone. Ireland followed in the footsteps of Greece in seeking aid and experts say Portugal will likely need aid in the first half of next year when it must pay down or roll over €20 billion in debt amid weak economic growth.
IT was a horrible year for homeowners. They not only saw the value of their properties plunge month by month, many also saw their mortgage payments increase.
Banks took it upon themselves to hike interest rates on standard variable loans despite the European Central Bank (ECB) keeping interest rates at a record low 1%. House prices are also down in value by about 40% since their peak. Figures show that an estimated 70,000 mortgage holders are now in serious arrears or have been forced to reschedule loans.
Attempts were made to help homeowners in difficulty but the Government failed to produce any substantial rescue package for homeowners struggling to pay loans.
Mortgages are likely to remain a big issue in 2011. Interest rates are expected to continue to go up while home values plunge.
Homeowners have been advised to talk to their banks if they are having difficulty paying their mortgage but the banks are struggling too so unless the Government steps in with a concrete plan for struggling homeowners, this problem is only likely to get worse.
The National Asset Management Agency (NAMA) finally came into being in late 2009 to absorb risky loans from lenders. It said recently that it applied a 58% discount to €71.2bn of loans it bought from five banks.
NAMA acquired 11,000 loans from 850 debtors from the lenders, including AIB and Bank of Ireland. The agency paid €30.2bn to the five lenders.
Irish Finance Minister Brian Lenihan created NAMA in 2009 to cleanse Ireland’s banks of souring assets after the country’s decade-long property boom collapsed.
The agency plans to acquire further loans from AIB and Bank of Ireland with a nominal value of as much as €16bn, a condition of last month’s €85bn rescue package from the European Union and IMF.
NAMA has approved the sale of an estimated €1.6bn in property assets held by borrowers to pay down debts and the agency has completed a due-diligence review of about 60% of acquired loans by the end of 2010 and will value the remainder of the loans in the coming months. Any overpayments or underpayments will be calculated then.
NAMA also bought loans from Irish Nationwide Building Society, Anglo Irish Bank Corp. and EBS Building Society.
IT started with the freeze in late 2009, then came the floods in early 2010 followed by another big freeze recently. Businesses would be hit badly from the adverse weather conditions as people found themselves housebound.
Insurance companies also faced massive payouts which would inevitably lead to higher premiums for homeowners.
The country’s largest insurance company, Aviva Ireland, said it will pay out a record €100 million to 4,500 customers affected by the floods and freezing conditions — and that was before the latest freeze this year. Axa Insurance also confirmed that its €16m payout for weather-related events, linked to the inclement weather, was also a record.
The Irish Insurance Federation (IIF) has said the two earlier periods of severe winter weather were the two single most expensive weather losses in the history of the Irish market. It estimated that total payouts from claims could hit €500m.
ON a bleak Sunday in November the European Union agreed to give €67.5bn in bailout loans to Ireland. The IMF contributed €22.5bn to the rescue effort with European authorities.
The rescue deal was approved by finance ministers at an emergency meeting in Brussels. Ireland took €10bn immediately to boost the capital reserves of the banks. Another €25bn was to remain in reserve and earmarked for the banks. Ireland would contribute €17.5bn from the National Pensions Reserve Fund.
The rest of the loans will be used to cover Ireland’s deficits for the coming four years. EU chiefs also gave Ireland an extra year, until 2015, to reduce its annual deficits to 3% of GDP, the eurozone limit. Ireland has 10 years to pay off the IMF loans.
And the reason for all of this? Well according to Taoiseach Brian Cowen Ireland had no choice but to take help.
Analysts and economists have since said that the country, however, is taking on a bill that it won’t be able to afford to pay. Only time will tell how all this will pan out.
THE darling of the Irish economy. The one bright light amid all the gloom are exports.
According to the IMF, exports will continue to lead Ireland’s recovery and no matter how bad things got the Government always reassured us that the export sector would see us through.
Ireland’s economy resuming expansion in the third quarter was credited with a growth in exports that countered a continued slump in building and consumer spending.
Finance Minister Brian Lenihan said the figures show that the economy has stabilised and is now on an export-led growth path. Thank God for exports say you.
CONNECT WITH US TODAY
Be the first to know the latest news and updates
