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Irish report Irish report
by Euro Reporter
2012-04-19 07:39:58
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Banks still a worry as troika review starts

Ireland faces its sixth review under its bailout program as the euro-zone’s best hope for a successful return to the international bond markets following a bailout. As yields on Spanish and Italian government bonds have risen sharply in recent weeks in an indication that the currency area’s crisis is intensifying, yields on Irish government bonds have been steady, and significantly lower than they were a year ago. But officials from the European Union, the International Monetary Fund and the European Central Bank who arrived in Dublin Tuesday will find that not all is well with the nation dubbed the “poster child” for euro-zone austerity. And the main source of concern is an old one — the nation’s stricken banks. The cost to the government of rescuing the banks stands at €64 billion, equivalent to 40% of its annual national output. But with the economy recovering more slowly than hoped, bank losses on mortgage and other loans may be higher than anticipated when international experts assessed the four surviving lenders last year.

“The overall concern will be about economic growth and the banks,” said Alan McQuaid, chief economist at Bloxham Stockbrokers. “The big risks are the mortgage books and that unemployment, at 14.2%, is higher than they anticipated last year.” The government was forced to borrow €67.5 billion from the IMF and the European Union in late 2010 after bond investors withdrew their financing, largely due to uncertainty about the cost of rescuing the banks. The banks continue to be heavily reliant on the ECB for funding, although that has eased in the last three months. In previous reviews, the IMF, European Commission and ECB — known as the troika — has praised the government for sticking to its budget deficit targets by pushing through a harsh austerity program. Speaking to The Wall Street Journal last week, Budget Minister Brendan Howlin said the government will plot with troika officials over the coming days ways of getting the bailed-out country back to full market funding. Despite “pressures” on the country’s economic growth outlook, the government will meet its targets and the banks will not need more government hand-outs, he said.

The possibility that weak economic growth will lead to higher-than-expected bank loan losses are likely to worry Troika and Irish government officials, said Dermot O’Leary, chief economist at Goodbody Stockbrokers. “I wouldn’t say that this [latest review] is more or less important than other quarters, but there are some issues that are particularly important and they are mainly around the banking sector,” said Mr. O’Leary. With Irish economic recovery held back by the euro zone debt crisis, there is evidence that some of its bank loan losses have risen. Analysts believe the Irish and troika authorities will find ways to avoid pumping in even more cash — money that the government does not have — if the home loan losses were to soar. The results of a second round of tough stress tests on the Irish lenders will be announced in November. Troika officials will also discuss the delayed sale of the nationalized Irish Life unit of Irish Life & Permanent Plc, and the future of the mortgage bank, analysts said.


IMF praises Ireland and calls for cuts in European interest rates

The International Monetary Fund has praised Ireland’s efforts to address the budget deficit and called on the European Central Bank to cut interest rates in a bid to boost growth in the region. Calling for “unconventional” ways to push the eurozone out of the crisis, it also praised Irish policies designed to improve the country’s finances.

Comparing Ireland with Portugal in a new report, said that Ireland “has a well-established institutional framework in place when the crisis hit, strengthening the country’s capacity to deliver on targets and providing firm control over local government spending.” The IMF said that both countries’ programmes have placed the burden on the wealthiest in society.

The IMF’s Fiscal Monitor analysed the budgetary positions of governments worldwide.  It added that Ireland’s “public finance management, revenue administration and the debt management agency have been proactive, anticipating problems and implementation challenges, and recalibrating policies accordingly”.  According to the IMF, Ireland will see positive growth of 0.5pc this year and 2pc in 2013 – one of the highest forecasts for a eurozone state.


A major increase in suicides "by economic crisis"

The suicide rate in Ireland jumped 16 percent between 2007 and 2009 as the economic crisis hit. The New York Times reports that suicides that have increased in Europe, especially in countries such as Ireland, Greece, and Italy, where economic struggles have become a fact of life over the past few years. “Suicide by economic crisis” is the phrase being attached to the recent rise in European suicides. Small-business owners and entrepreneurs are among those in the increased rates of suicide.

The New York Times reports that, “In Ireland, the phenomenon has been linked to what some therapists call Celtic Tiger depression, the period after 2008 characterized by an influx of middle-aged male patients who complained about sleeplessness and a lack of appetite in the aftermath of that nation’s destructive boom-and-bust real estate market.” Ella Arensman, director of research at the National Suicide Research Foundation said that a study in Cork reached out to people who had lost relatives to suicide. The study found that “The victims were predominantly men, with an average age of 36. Almost 40 percent were unemployed, and 32 percent worked in construction as plumbers, electricians and plasterers.”

She added that generally, those who took their own lives “suffered from a constellation of problems: financial struggles, unemployment, broken relationships and loneliness.” While some opt to take their own life in relative privacy, others choose to make a political statement of it. April 4 saw a 77 year old retiree shoot himself outside of the Greek Parliament, a clear message of the highly vulnerable economic state the country is in. “A complete picture of the phenomenon across Europe is elusive, as some countries lag in reporting statistics and coroners are loath to classify deaths as suicides, to protect surviving family members.”In Ireland, this is a particular problem as the stigma of suicide is still thriving and there lacks standardized reporting procedure for death by suicide.

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