NAMA’s Killinascully economics

YOU don’t need to be an expert to get to grips with the Killinascully economics of NAMA.

The Irish banks borrowed billions off the European banks — money deposited by people like Hermann from Hamburg — and loaned it to the golden circle to develop “commercial” and “investment” properties to flog to you and me at vastly inflated prices.

Unfortunately they got caught with the last batch (mostly in fields in Offaly) still on their hands when it all crashed. Still, the European banks want their money back because, unfortunately, Hermann and Co have deposit guarantees which need honouring — so the European banks, via the ECB, are going to lend the Irish Government the value of this debt. The Government is going to give the cash to the Irish banks who will repay the European banks, who will honour Hermann’s deposits.

Now the Government has the wonderful task of extracting a €54bn (plus the interest it will pay on any bonds it issues) in taxes from you and I because, ultimately, the ECB wants its cash back.

In return, the Government will get to try and extract the assets from the clutches of the developers and own them on our behalf (bear in mind that a High Court case and appeal and two Supreme Court appeals are currently being fought over a “mere” €131m).

The debts were incurred at the peak and represent €77bn. They have “dropped” to €47bn but are “worth” €54bn. That is about €50,000 per household. So to all those who for reasons of probity or poverty didn’t or couldn’t avail of the banks and developers hard-sell investment opportunities in 2006/7, I have good news for you. The Government has signed each and every household up for a mortgage to buy into a share in a shopping mall in Birr or an estate in New Ross which at its peak was worth €70,000.

That is in addition to the homes we bought for €400,000, which we are also still paying for and which, if we could sell them, just might bring in €230,000. Never mind, the banks got to offload the last tranche of “investment property” they could no longer find willing buyers for. We are now the ultimate nation of property-owners.

Dr Stephen Grimmer

Rathura

Schull

Co Cork