The European Commission yesterday cleared the way for the National Asset Management Agency (NAMA) to take toxic loans from financial institutions as an important step in restructuring the financial sector.
NAMA is expected to purchase impaired loans with a nominal value of €78bn at a cost of €54bn from five different financial institutions – Allied Irish Banks, Bank of Ireland, Irish Nationwide Building Society, Educational Building Society (EBS) and the nationalised Anglo Irish Bank.
It undoubtedly amounts to the greatest gamble in the history of the State. Experts may argue over the specifics of the best way forward, but there is no doubt that the Government must act, and the success of NAMA is, therefore, in the national interest.
Young people – the future of the nation – have been hardest hit by the current economic downturn. Unemployment among those under 25 years of age has trebled in the past three years. Half of these young people have lost their jobs, compared with just 10% of the rest of the population.
One in three young men are now unemployed, which is the second-highest rate of youth unemployment in western Europe. We are faced with another wave of emigration. In recent years, our economy invested heavily in the younger generation; they are one of our greatest national assets. We are in danger of losing that asset, so this is a real crisis.
It is ironic that on the day that NAMA finally got the clearance from the European Commission, the Central Bank in this country published figures indicating the rate of bank lending has continued on a downward spiral. The decline in private sector lending for January was 4.3%, compared with 3.1% the previous month.
During January 2010, home mortgages fell by €269m. As a result, the amount being repaid on existing mortgages actually exceeded the amount being lent in new mortgages. The figures also indicate that consumers repaid €83m more on their credit cards than they spent during January.
The Government provided the bank guarantee and recapitalised Bank of Ireland and Allied Irish Banks with an injection of €3.5bn each last November to facilitate the banks to increase lending, but the Central Bank figures clearly indicate the rate of lending has actually been dropping. This is unacceptable.
The nation has invested enormous amounts of money in helping to rescue the financial sector so that it would lend to businesses and ordinary people to stimulate the economy and protect employment. NAMA is designed to ensure a viable banking system that would support such people, but the most recent banking figures do not inspire confidence at a time when confidence is crucial.
“The only thing we have to fear is fear itself,” the American President Franklin D Roosevelt famously declared during the Great Depression of the 1930s. The Government demonstrated confidence in the banks by coming to their rescue. The banks must now similarly show confidence by lending money to the people who have essentially mortgaged their futures in support of what is actually a national rescue plan.
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