Former Taoiseach Brian Cowen came out of the political wilderness this week, and – never one to mince his words – let the European Union have it with both barrels.
Cowen, who has kept quiet since he left office after the routing of the Fianna Fáil-Green Party coalition government in the 2011 general election, said the State’s paymasters had “forced” the Republic to bail out international bondholders when the banks were on the verge of collapse in 2008.
Speaking at Dublin Castle after being conferred with an honorary doctorate by the National University of Ireland, Cowen, who led Ireland into the troika bailout programme in late 2010, accused the EU of a “lack of solidarity with small countries who were in difficulty”.
“Europe forced certain countries such as Ireland to implement inappropriate decisions such as protecting international bondholders,” he said, before also expressing regret in relation to the number of people who lost their jobs (some 250,000).
He did mount a defence of his personal record in government, as well as that of the administration he led. The “required action” had been taken to stabilise the public finances in full knowledge of the political consequences.
“We knew that the required action would understandably be more unpopular than almost any policies in recent Irish history and that this threatened the survival of the government and our hopes of election,” he said.
“However, we also know that to avoid taking the decisions would mean that future recovery could be put off by decades.”
Repossessions
While many are busy shimmying the cork out of the champagne as the economic recovery continues to gather momentum, thousands of people are still dealing with the legacy of the crash. However, there was some good news in the Courts Service’s annual report this week, which showed a sharp fall-off last year in the number of house repossession cases before the courts.
New possession cases fell 32 per cent compared with 2015. “Hopefully this is a sign that the effects of our great recession are fading, and that the alternative mechanisms for dealing with personal debt are successful for many,” outgoing Chief Justice Susan Denham said.
Of course, people struggling with mortgages make up just one facet of our dysfunctional property market. Renters are having a rough time of it also, and it has emerged that the State’s biggest private landlord now requires two months’ rent from tenants for security deposits.
Irish Residential Properties Reit charged an average of about €1,500 a month in rent on its property portfolio last year, so that means finding €3,000 up front as a deposit along with about €1,500 in rent for the first month before turning the key in the door.
The problem with rising house prices and spiralling rents can largely be attributed to a lack of supply, and the Construction Industry Federation (CIF) has said the number of houses built this year will be just over half what is needed annually to meet demand.
The Economic and Social Research Institute suggested last month that housing demand in the economy was now in the region of 30,000-35,000 units a year, up from its previous estimate of 25,000.
The CIF expects just 18,000 new homes to be completed this year, with the figure likely to increase to about 20,000 units in 2018. That compares with 12,666 units in 2015, representing an overall increase of 42 per cent between 2015 and 2017.
Presuming there are no more strikes by crane drivers – nine building sites were picketed on Thursday.
Another issue the CIF has highlighted is how insurance premiums are placing an “unsustainable” burden on construction firms. Builders have reported “disproportionate” increases in employer liability and public liability policies.
Flotation
Meanwhile, US private equity giant Oaktree Capital Management is lining up former National Asset Management Agency executive John Mulcahy to chair a new housebuilder that it is preparing to float on the Irish Stock Exchange in the coming months.
The flotation is expected to be a €350 million transaction, according to sources, who also said the new company would initially hold as much as €100 million of assets, including land, property and distressed Irish loans that it snapped up over recent years.
It’s not just Irish families affected by the housing crisis either, with knock-on effects expected in terms of luring post-Brexit business here from the UK.
Kevin Nowlan, chief executive of property group Hibernia Reit, warned that the squeeze on accommodation, particularly in Dublin, could hit efforts to attract investors as workers hired by multinationals are having real difficulty finding places to live.
“The priority has to be on the delivery side,” he said. “There is a massive demand for residential stock but there is nobody building any.”
South Korean investment group Mirae Asset Financial Group is one company that seems to be on the way after it registered a Dublin subsidiary as part of plans to set up a global trading centre in the Republic.
The group, which has more than $100 billion (€85.9 billion) of assets under management, indicated in a Korean newspaper last month that it plans to base about 20 traders in Dublin, relocating staff from London, Hong Kong and other cities.
It is understood the company will also seek to hire some staff locally, including back-office employees.
Separately, the Brexit vote's effect on sterling contributed to a 6.4 per cent drop in visitor numbers to Ireland from Britain between April and June. Figures from the Central Statistics Office show there were 949,200 trips by British residents in the three months compared with 1,013,600 trips in the same period of 2016.
Should that trend happen to reverse, though, there should be no shortage of hotel rooms in Dublin, as the construction industry indicated there will be another 3,000 in the city by 2020.
Construction Information Services, which monitors projects in development, said the capital’s hotel room stock would rise 15 per cent over the next three years as new hotels in the docklands, near Dublin Airport and in other parts of the city open their doors.
AIB
It has been an exciting if hectic couple of months for AIB as it readied itself for listing on the Irish and London stock exchanges. There was more good news this week as the bank reported a 12 per cent rise in profit during the first six months of 2017.
Operating profit rose to €814 million from €729 million for the same period last year, even though the level of bad-loan provisions freed up in a recovering economy fell to €19 million from €211 million.
The bank also confirmed to The Irish Times that it has U-turned on offshoring certain IT functions to India as part of its five-year outsourcing arrangement with Wipro. It is understood that AIB decided it was too risky in the current environment.
Separately, AIB Real Estate Finance dished out a €155 million loan to refinance the Jervis Shopping Centre, one of the top retail outlets in Dublin city centre. The seven-year loan was extended to a company controlled by Paddy McKillen and Pádraig Drayne.
Over at Permanent TSB, shares plunged as much as 16 per cent on Wednesday as investors fretted about the bank's plan to resort to loan sales and repossessions as it grapples with €2.68 billion of mortgages.
The 75 per cent State-owned lender reported that its net profit shrank 55 per cent to €36 million in the first half, as it took a €6 million charge against bad loans.
PTSB has the highest ratio of non-performing loans among Irish banks at 28 per cent. "It is now right to acknowledge that the bank has an untreated book," group chief executive Jeremy Masding said.
Ultimately, he said, the goal was to get the bad loan ratio down to less than 10 per cent over the medium term.
Bank of Ireland was the last of the three domestic institutions to report results, and it had a better story for shareholders. The bank has set aside €70 million for a likely return to shareholder dividend payments early next year.
