IMF on Ireland - No-nonsense warning is a reality check

It may be tempting fate to put an Irish context on the Cyprus experience but in the wake of yesterday’s no-nonsense warning from the IMF on the state of this country’s finances, that grim spectre can no longer be ignored.

In a darker assessment of Ireland’s economic situation delivered in a long time, the IMF’s warning will strike fear into the hearts of families struggling to make ends meet. Essentially, the blunt message is that repossession of the homes of people in mortgage arrears will now have to be accelerated as an integral part of the ultimate solution to Ireland’s deep financial problems.

In an ominous comparison with the mortgage situation in Britain and the US, where repossessions are running at about 3.25%, it points out that in contrast, repossessions here have been unusually low, estimating the toll at a mere 0.3% of the country’s total mortgage arrears in 2012. Effectively, despite the Taoiseach’s assurances that mandatory penalties would not come into play, the IMF has reloaded the gun with live ammunition for the Government to fire.

In a country where home ownership ranks among the ultimate goals, it is an extremely worrying outlook that could affect tens of thousands of property owners, many of whom were seduced into borrowing beyond their means by unscrupulous bankers, developers and politicians in the far distant era of the long-dead Celtic Tiger.

Looking at the broad economy, the assessment that brings the Cypriot crisis into clearer focus here is the IMF’s warning that the country’s debt could be in danger of becoming unsustainable if growth forecasts are wide of the mark. The Government will argue that to a large extent this situation is outside its control and likely to hinge more on global economic performance than on the domestic scene.

However, long before the IMF turned its gimlet eye on this country, there has been widespread concern over the chronic lack of employment growth in the face of the on-going malaise of long-term unemployment and, in particular, the continuing emigration of young people seeking work abroad. This can no longer be glibly dismissed and gives the lie to Government claims of making significant progress on the jobs front.

Already propped up by borrowing and losing money heavily even before putting aside cash to offset bad loans, the banks have again come in for trenchant criticism over the “inadequate progress” of how they have dealt with non-performing loans. The unspoken question in the minds of savers is whether the money which has been deposited in accounts in those banks could one day be raided in the manner witnessed in Cyprus?

The troika has also turned the spotlight on the Department of Health, where budgets have run out of control, resulting in wholesale cuts to services for those who can least afford it and now causing widespread anxiety among the most vulnerable people on the fringes of Irish society.

If Ireland is to have a successful exit from the bailout programme, the EU will eventually have to come to this country’s rescue, something it failed to do when the economic crisis erupted. Ultimately, the deal must involve ensuring the survival of the troubled banks, injecting fresh impetus into the economy and protecting the savings of ordinary people whose pensions have already been diminished by a smash and grab raid carried by the Fianna Fáil government of the day.