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Desperate in Dublin: citizens grope in a ravaged economy

Not politicians, bankers or developers but the indomitable average Irish will take the country out of its financial pain, reports Gautam Chikermane.

business Updated: Nov 09, 2009 20:47 IST
Gautam Chikermane

For a country that ranks 11 in terms of its $45,000 per capita income (more than 15 times India’s) the credit crisis-hit Ireland is, like its November weather, a gloomy-grey picture of government mismanagement and banker-developer greed. The victims: average people — laid-off workers, scrambling small businessmen, conservative shoppers. The 43-year-old Peter O’Hara (name changed) is the dark face of everything that has gone wrong in this island nation.

The O’Hara story: I was a manager in a design company. In our company 60 per cent of the 300 workers are unemployed. The large profits the firm was making turned to no profits and then to losses. The sector was a major employer and we were building 100,000 homes a year. The government continued giving tax breaks to developers who got almost free money from banks.

Ireland’s construction industry, which is experiencing an unprecedented contraction in output following an unprecedented speculative surge that peaked in early-2007, is a case study victim of the global credit crisis. And O’Hara, who lost his job last month, is bearing the brunt. “The largest decline in employment was recorded in the construction sector where the numbers employed fell by 86,000 (-35.6 per cent) over the year,” noted a September 2009 report by the Central Statistical Office (CSO).

O’Hara is one of 35,200 people who joined the ranks of the 264,000 unemployed women and men in the country. But the biggest layoffs have hit the young (age group: 20-24 years) workforce — almost one in four are unemployed compared to one in seven for the age group 25-34 and one in 18 for the 60-plus.

The O’Hara story: The people with the biggest problem are those in the 25-35 age group. They have mortgages at high prices and children in school. They are the ones who are leaving the country. I know about 100 people who have left the country. It is difficult for me to leave. I have a mortgage. My wife has a business — it is down 50 per cent.

The CSO noted that the number of emigrants from (Ireland) in the year to April 2009 is estimated to have increased by over
40 per cent from 45,300 to 65,100. Its September report on ‘Population and Migration Estimates’ said there was a net outward migration of 7,800 for the first time since 1995.

But emigration is merely the tip of a depressing iceberg. The heavier mass comprises suicides — 106 people took their lives in January-March 2009 — a 43 per cent rise or more than one suicide a day. Paul Kelly, founder of the non-profit Console that works with families bereaved through suicides was quoted as saying that callers using their helpline “were distressed over the economic downturn.”

On the streets, however, reactions are mixed. Brannwen Kavanagh, 18, a student of art, though not depressed was “not optimistic”. Playing her guitar and singing on Dublin’s upmarket Grafton Street, she had been looking for a part-time for two months. “But I have not been able to get any,” she said. But she shrugged off pessimism: “Generally, it is difficult for artists to make money.”

Richard Farrell, 24, a sound engineer who sings for a living in restaurants and bars, was singing on the street too. He was to begin living on his own the next day but said he would go on social welfare only if he didn’t get work. I met, heard and spoke to three other young musicians on Grafton Street. The last — Daithi, the flautist of a fine Irish folk rock band called Mutefish Muteation — said the credit crisis did not affect the band. “It’s the weather.”

The O’Hara story: I am now thinking of starting my own business. Everybody believes this to be the way out. Architect firms are now looking to outsource work to India, China and Eastern Europe. They design a hospital here but get their plans drawn up in India. Maybe I’ll do that.

Entrepreneurship has become a survival toolkit that many older workers are being forced to take up. Bags in the City is a three-week-old shop run by Leo Lalor, 54, and his two children in an upscale shopping centre, is one such. Laid-off as a general manager from a similar operation that went into liquidation in June, he said he was taking a calculated risk. “I’m familiar with the location, the unit, the business and the trade,” he said in the shop with no customers. “I am optimistic.”

Home to “Dublin’s most upper-class shopping area”, and the “nicest-looking street in the city”, Grafton has few shoppers in the mornings or in the afternoons; the evening sees a small trickle of people returning from offices; the nights are haunted. Even a relatively smaller shopping centre at Lokhandwala in Mumbai or Select City Walk in Saket has more shoppers.

Customer footfalls have been washed on the sands of the financial tsunami. “Sales are down by 30 per cent,” said Naomi Leeson, 49, who has been running a men’s clothing and shoes shop Raider for the past two decades. “This is the worst year I’ve ever seen. Our loyal customers come once in six months instead of three and buy one item instead of two.”

In its October 16, 2009 report, CSO noted that retail sales have fallen by 9 per cent. While motor trades are down by 29.1 per cent, household equipment sales have contracted by 11.4 per cent. The saving grace: pharmaceuticals, medical and cosmetic sales, which are up 3.3 per cent.

If sales have eroded on one side, rentals are squeezing businesses on the other. “Rental rates have not come down,” said Jerry Graham, 50, who has been running a men’s clothing shop Bertoni for 27 years. “Property prices are down by 25-40 per cent but not rentals.

So, what you see on almost every street of Dublin are “To Let” signs but no respite in rentals. Credit has almost dried up and NAMA or the National Asset Management Agency Bill 2009 that proposes to takeover the bad assets of banks so that the latter can begin lending is all set to be mired in controversy, though political observers say the bill will pass, “with a thin majority”.

A report this week by Fitch Ratings cut the country’s sovereign credit rating by two notches to AA- from AA+. “Gross government debt including NAMA liabilities will rise to over 110 per cent of GDP by the end of 2010,” the report said. It also forecast that property prices will be down 45 per cent from their 2006 peaks.

The rating cuts follow an Organisation for Economic Cooperation and Development report, released on the same day, that revealed the dangerous state of Ireland’s public finances. Titled Economic Survey of Ireland 2009, it forecast a GDP contraction of 7.5 per cent in 2009 and 2.4 per cent in 2010, with fiscal deficit rising to 12.2 per cent of GDP in 2009 and 11.3 per cent the next year.

The O’Hara story: I think our government created the problem. It spent money foolishly by giving tax breakers to developers and fuelling an artificial boom. They did not save money for hard times like these.

In its October 2009 report, the government’s National Economic and Social Development Office said there are five dimensions to Ireland’s crisis —a credit and banking crisis, a fiscal crisis, an economic crisis of competitiveness and job losses, a social crisis of unemployment and income loss, and a “reputational crisis”. The latter, when translated into numbers, means the country in the short term will have to pay higher yields on its government bonds, “as bond markets demand higher spreads to hold what are seen as riskier assets”.

People are angry but there is nobody to listen to them. Bankers have disappeared from public discourse and when I tried to speak to some of them, they politely declined to speak on the issue, and pointed me to other bankers who declined as well. By their conspicuous absence, it seems all property developers have emigrated from Ireland. Politicians are reworking the country’s finances and attempting to salvage their reputation, now in shreds. The exploits of all three — politicians, bankers and developers — are being enshrined in bookshops, and at least five new books on them have turned into high-priced bestsellers.

But to see the real story of Ireland’s crisis, you will have to go beyond the creators of the crisis (politicians, developers and bankers) and talk to people who are braving the cold winds of uncertainty in a country heading into a colder, wetter, gloomier winter. “People who are prepared too work on the business themselves will survive, not others,” said Leeson of Raider. “This is not the end of the world — the 1980s was worse,” said Graham of Bertoni.

They are right. And, if the prams of curious and hopeful bright-eyed infants dotting the streets and malls are any indication, it is the indomitable will of the Irish that will pull the country out of the morass that the Celtic Tiger got caged in two years ago.