Positive step but mortgage crisis is the biggest blight

I BELIEVE the endorsement by the people of the fiscal stability referendum is good news for Ireland.

It won’t make things easier overnight, but is a modest step in the right direction as we try to navigate through exceptionally turbulent times.

After Thursday’s vote, it will be back to routine politics now. We in Fianna Fáil will provide robust but responsible opposition over the months ahead. We will play our part in bringing forward solutions to the problems people face.

The Government faces several major challenges to achieve the promised recovery. Confronting two key issues is unavoidable — the mortgage arrears crisis and the scale of bank-related debt we are carrying.

No issue needs to be dealt with more urgently than personal debt which is causing so much hardship for families. Last week’s mortgage arrears figures were stark. Nearly one in six mortgages are in arrears or have been restructured.

The arrears situation is getting worse. As well as being hugely stressful for the families involved, the crisis is depressing the economy. This Government is like a rabbit caught in the headlights. It doesn’t seem to know where to start to deal with the crisis.

Since the Keane report on mortgages in Sept 2011, only a single mortgage-to-rent transaction has been completed. Not one of the promised 100 independent mortgage advisers has been appointed. No effort has been made to introduce some of the more imaginative solutions, such as split mortgages.

Instead, the Government has delayed the publication of the Personal Insolvency Bill yet again. While the recommendations of the Keane report gather dust, families are becoming more and more desperate and yearn to see some light at the end of the tunnel.

I proposed a Fianna Fáil bill in the Dáil last October which would offer practical assistance to those with personal debt and mortgage problems. It proposes setting up an independent debt settlement office with the power to impose binding settlements. This is the action people want to see happen. While the Government did not oppose the bill, neither has it made time available in the Oireachtas for it to be progressed. If the Government had embraced our bill last autumn, we could at this stage have a non-judicial debt settlement system up and running.

The European Stability Mechanism is due to come into force in a few weeks’ time, a year earlier than originally planned. I very much welcome indications it may be given the power to lend directly to troubled banks. This opens a window of opportunity for Ireland. When the crisis hit in 2008, the ECB effectively insisted that no senior bondholder would have losses imposed on them and no bank in the eurozone be allowed to fail.

The ECB would now appear to be implicitly accepting that this placed an unfair burden on Ireland given the wretched state of our domestic banks. I have always held the view that placing the entire blame for the scale of bank debt we carry on the bank guarantee of 2008 is superficial and does not tell the full story. The role of the ECB in Ireland’s banking fiasco should also be front and centre of any debate.

LAST March, when the Government made payment on the promissory note by means of a €3.06bn sovereign bond, Michael Noonan portrayed it as a breakthrough which would be a precursor to an overall restructuring of the bank debt.

Two months on, we are no wiser as to the shape of any overall deal. There is no sign of the much-vaunted technical paper. The issue isn’t really that complicated. The Government should be seeking a very significant reduction of the debt imposed on Ireland to rescue the banks. The fact that the Taoiseach has never even asked for a writedown of our bank debt is bewildering. Achieving this writedown would transform our prospects. It would reduce the pressure on the public finances and free up money for investing in jobs and growth.

François Hollande has made all the right noises since being elected French president. He has struck a chord across Europe with his calls for stimulus measures to work alongside fiscal discipline. We in Ireland should fully support an ambitious Europe-wide investment programme. New sources of funding for such investment, including eurobonds and project bonds, should be pursued and an expanded role for the European Investment Bank examined. We also need to be honest with people and reaffirm that the process of reducing the budget deficit will have to run alongside with any investment package.

Our recovery will not happen overnight but it will happen based on the determined effort and hard work.

* Michael McGrath is Fianna Fáil finance spokesman and TD for Cork South Central