It’s raining, but we still need water

This weekend, like the three weekends before, was cloudy and wet in Dublin. Yes there was some sun as well, but the regular heavy showers were a reminder that this is Ireland, not Portugal.

You can't depend on the weather here, my family said accusingly, as they looked longingly through holiday magazines. They blame me for condemning them this summer to a staycation.

We told you it would rain, they said. And they were right.

We had a few weeks of sunny weather at the end of May, while the kids were still in school. But there seems to be an unwritten rule here that once the school holidays start, the sun plays hide and seek with us for the rest of the summer.

It's part of the "charm" of the Irish weather. The grand soft day is code for yet another day when it never stops drizzling and raining. The tourists from scorched places like Arizona love it, and having been over there I can see why.

But it gets to us here sometimes. There's only so much mist, drizzle, rain showers and (like last weekend) torrential downpours from thundery clouds we can take. We put up with it in winter but we deserve a break in summer, and we rarely get one that lasts for more than a few days.

The childhood memories most of us have of golden Irish summers full of sun are false. It's just our memories playing tricks.

We're stuck out on the edge of Europe with nothing between us and the prevailing, moisture-laden winds coming in from the vast Atlantic. So of course it's wet here. Very wet.

So you might think that the one thing we could never run out of in Ireland would be water. But you would be wrong. And it certainly gets to us on long, damp weekends like the one just gone to be told that Ireland is running out of water fast.

The main problem is on the eastern side of the country, in Dublin and the surrounding commuter belt. Thanks to our rapid population growth and housing expansion in the boom years, the water supply in the Dublin area is, to quote one of the engineers in charge, on a knife edge.

We are only barely coping with demand at present, and any interruptions in the supply will mean water shortages and the taps going dry for hours at a time.

So the authorities have come up with a solution that is causing intense debate here at the moment. That solution is to pipe water across Ireland from the Shannon to Dublin.

Fishermen, tourist operators, environmentalists and in fact most people who live near the Shannon are opposed to the idea. They are outraged at the idea that "their" river should be used to solve Dublin's problem.

But people in Dublin tend to see the Shannon as a national resource that belongs to us all and ask why not?

The present proposal is being driven by Bord na Mona, the Irish turf board, which has spent decades harvesting the turf from the bogs in the Irish midlands. That resource is now running out, and Bord na Mona is looking at alternative industries like growing vegetables on the cutaway bogland. And it sees Dublin's water problem as a big opportunity.

What they want to do is create a vast manmade reservoir or lake in cutaway bogland in Co. Offaly, half way between the Shannon and Dublin. Water would be pumped from Lough Derg on the Shannon to the reservoir, held there until needed and then pumped as required the rest of the way to thirsty Dublin.

It's a plan that makes sense for another reason as well. The Shannon has always been prone to flooding during the winter months, and in recent decades as more building encroached on the river's natural flood plains the problem has increased.

This has been made worse by silting from turf-cutting, intensive farming and industry along the Shannon basin. Almost every winter now, there is another flooding crisis along the Shannon, with the TV news showing marooned animals, farmers being rescued from cut-off houses and nearby towns under a few feet of water for days at a time.

Draining the Shannon, one of the oldest unfulfilled promises made by politicians in the region, has become a joke.

So for that reason, the proposal to pump water from the Shannon to Dublin would seem to be a winner for both sides of the country. But of course, it's not that simple -- it never is here!

Some experts have already claimed that the summertime shortages in Dublin cannot be solved by extracting water from the Shannon in winter -- unless the water is going to be stored in the reservoir for months. And they say that the flash flooding that is a problem in winter on the Shannon is water that could not easily be captured -- it would be difficult to extract enough water quickly enough to prevent the flooding.

One can see the point. But it is hard not to feel that a system could be devised to do the job both to the benefit of Dublin and the Shannon region. Since flooding on the Shannon in winter is such a problem, there must be an answer for Dublin somehow in all that unwanted water.

Bord na Mona is dressing up its proposal with an idyllic picture of this vast reservoir in the midlands as a center for boating, fishing and all kinds of water sports, as well as a "water-based eco park," whatever that is.

But the people on the Shannon are not impressed, saying that their river -- and all the under-used lakes in the midlands -- already offers all that. They say that even a few inches of a fall in the level of the Shannon in summer would have disastrous environmental consequences, and that the authorities cannot be trusted on how much water they would extract.

Certainly the water needs of Dublin are enormous. Right now, somewhere over one-third of all the water in the system in Dublin is lost through leaks from the old pipes under the city's streets.

This is because the system dates from Victorian times or earlier. It was built by the British when the city was much smaller, and we have spent very little on it in the decades since then.

It's another one of the infrastructure projects we should have been doing when we had money during the recent boom. But we didn't. We blew the money instead.

Even worse, during the boom we allowed councils in areas all around Dublin to give permission for vast areas of new housing, without an adequate plan on how the water needs of these new housing areas would be met.

Industrial and office expansion in the Dublin region during the boom added greatly to the demand for water as well -- and this is a sore point in the Shannon area where they say the industry and office blocks could have been sited beside water supplies, instead of in Dublin where there was no water.

So what we are left with now is a water crisis. And we sit here in Dublin as the rain drips down, ruining another summer, and ask ourselves why?

Yet again, we’re forced to leave

Here's an image to stop you in your tracks. The number of people who will emigrate from Ireland in 2010 and 2011 will add up to 120,000. And as the business editor of the Irish Independent pointed out last week, that is the figure given by the last census for the population of Cork City.

Think about it. Imagine chopping off Cork and letting it drift into the Irish Sea and then around the corner of the Kerry coast into the Atlantic. Before you know it, Cork would be bumping up against Manhattan.

Well, of course, that's not going to happen. But in another way the effect might be the same, because where is the first place a lot of the 120,000 who will emigrate from here in the two year period will think of heading for? New York, New York, that's where.

The dire prediction about emigration from Ireland this year and next year came last week from the Economic and Social Research Institute (ESRI), the think tank backed by the Irish state, a highly respected independent research organization staffed by our leading economists and social scientists.

According to the ESRI, this year will be the worst with 70,000 expected to leave, followed by a further 50,000 in 2011. And the prediction is that unlike last year, when most emigrants from Ireland were non-Irish returning home, most of those leaving this year and next year will be Irish.

As the construction industry here collapsed over the past two years, a lot of foreign workers -- Polish plumbers, Serbian electricians, Lithuanian carpenters, and so on -- headed home to build new houses for their families with all the money they had made in boom-time Ireland. Or they went somewhere else where the collapse in construction had not been so sudden and so severe (which was just about anywhere else).

Of course not all the foreign workers here have gone back. In fact many of them have decided to stay, even though there is no work for them, which is another problem for us.

As the ESRI report last week pointed out, in the two years 2008 and 2009, the number of non-nationals working in Ireland fell by 87,500, but the number of them still in Ireland fell by only 60,200. The gap can be explained by the fact that welfare payments to those out of work here are three or four times higher than they are in the better parts of Eastern Europe (and in one or two places there is no welfare) -- so why go home?

At the height of the boom there were between 300,000 and 400,000 non-national workers in Ireland out of a total workforce of two million. It's hard to get exact figures, but the indications are that the majority of them are still here, despite our jobless rate of over 13%, and this is increasing the welfare burden at a time when the Irish state has to borrow billions every year to pay its bills.

No one seems to know what to do about this. In fact it's not even discussed because we're all supposed to be part of one big European Union happy family now, with workers from any member country having the right to work in any other.

Which is fine in theory. But somehow the harmonization across Europe has not extended to welfare payment levels. A whole village in rural Latvia can live on what one out of work family gets in welfare in Ireland.

The ESRI expects the number out of work here to remain at around 13% despite increased emigration because of the growth in the labor force due to our continuing high level of school and college leavers.

In my own view, the unemployment level here may even come down over the next year or two but it won't be due to extra jobs. It will be due to even higher emigration than the ESRI is predicting.

I'm basing this on conversations with young people who are finishing college soon. Very few of the ones I talked to intend to stay here, and for that reason I think the ESRI figure for emigration next year is too low.

In addition to that, we know from experience that apart from the ones who go straight away, there are others who delay after finishing school or college and put off making the decision to go. They hang around hoping something will turn up, maybe making job applications for a year or more, before finally biting the bullet and buying their ticket out of here.

The ESRI is predicting a small level of economic growth here next year, mainly dependent on a slight recovery in our export markets. But looking abroad this seems far from certain.

And anyway, any feeling of recovery from recession here is likely to be snuffed out by the impact of the €3 billion package of spending cuts and tax rises which is coming in the December budget and which will further depress spending here.

We can't dodge these cuts -- the next step in an ongoing four-year plan to get our budget deficit down to acceptable levels and stop Ireland going bankrupt.

So it's a tough prospect, no matter how you look at it. There's not going to be much joy in Ireland for the next few years, and today's young people here have already got the message loud and clear.

If they had any remaining doubt about how bad things are, last week's other main headline will have convinced them. This was the one which said that the €440 billion guarantee given by the Irish state to the banks here was not the only option and may not have been the best option. The massive guarantee is so big that it has the potential to sink the Irish state, if it is ever called in.

Exactly what happened in the months leading up to the end of September 2008 when the government made the decision to give this absolute guarantee to the Irish banks has not been revealed before.

But last week the government bowed to pressure and released the documents through the Public Accounts Committee. These documents show for the first time what was going on when the Irish government made its decision to absolutely guarantee all the debts and deposits of the entire Irish banking system.

To give you some idea of the scale of what was done, let's compare it with what happened in the U.S. The Irish government guarantee to the banks adds up to €440 billion. The U.S. government set aside $700 billion (or €560 billion) to buy assets from U.S. banks that were in difficulty.

In Ireland, alongside the absolute guarantee to the banks, the government set up the National Asset Management Agency (Nama) to buy the toxic property loans from them. Estimates on the cost of this run upwards from €40 billion, and on top of that the government is putting €30 billion and rising into recapitalizing the banks.

As the Irish economist Morgan Kelly has pointed out, that is 10 times per head of population the amount the U.S. spent to rescue itself from its banking crisis.

Or to put it the other way, if the U.S. government had done what the Irish government did, it would have had to underwrite $7,000 billion instead of $700 billion for its bank rescue. That would have been some debate in Congress!

But you get idea. What the Irish government has done in terms of Nama and the absolute guarantee on all deposits in the Irish banks as well as all the debts of the Irish banks is so far off the scale that it is almost unimaginable.

If it goes wrong we are finished as an independent country. Even if it goes right it means that this generation and the next will be paying heavily to meet the cost.

If that is not depressing enough, what last week's headlines put into question is whether the Irish government made the right decision on this. In the run-up to the decision, the government hired the U.S. banking consultants Merrill Lynch to advise them. Last week we learned what that advice was.

Merrill Lynch advised that an absolute guarantee to all the Irish banks would enable failed banks to continue when they should be let collapse. They said it could also affect our national credit rating since it would raise issues about our credibility. Everyone would know that if the guarantee was ever called in we would not be able to meet it.

Our triple A rating is now gone as a result and we are paying inflated interest rates for our enormous borrowings. Our budget deficit will be doubled this year as billions are poured into the banks (in fact if you count the money being put into the banks our deficit will be around 20%, which is some kind of global record).

Mind you, this mess was not all the government's fault because we also learned last week that our own experts, like the financial regulator and the Central Bank chief, were insisting that none of our banks faced a funding crisis. It was a temporary liquidity crisis, that's all, the Regulator told the government.

And he was still saying that just days before the bosses of the main Irish banks arrived in Taoiseach (Prime Minister) Brian Cowen’s office on that fateful night in September 2008 to warn that unless they got the guarantee the whole Irish banking system could collapse.

That may go down in Irish history as the most expensive mistake anyone ever made. We will be paying for it for years in higher taxes, lower state services and a long-term depressed economy that will see the return of mass emigration like we have seen in the worst decades since we got our independence. Cork is only the beginning.

Reality bites for golden circle of Irish finance

On Monday of this week a judge in the High Court in Dublin made a decision that will send shivers down the spines of the top developers and bankers here. The former boss of Anglo Irish Bank, Sean FitzPatrick, was officially declared a bankrupt by the judge.

It's not the kind of thing that was supposed to happen to a member of the golden circle, the super wealthy elite who made fortunes during the boom here, largely due to the property bubble.

FitzPatrick was the poster boy for the madness, the ultimate mover and shaker who built the tiny Anglo Irish investment bank on Stephen's Green in Dublin from an annual profit of one million in 1987 to one billion in 2007.

He did it by becoming the bank for speculators and developers, ignoring the basic banking rulebook and pumping out money without adequate security, money borrowed on the international markets. While the boom continued, he appeared to be hugely successful.

As well as being a lender, the bank became a player, often taking a share in the action.

FitzPatrick got personally involved in developments as well, with tens of millions borrowed from his own bank.

And it was that personal involvement that has now sunk him. He owes the now nationalized Anglo Irish around €110 million, and his assets are about half of that. It was Anglo that pushed him into bankruptcy on Monday, although there are other creditors out there and he has a total debt of around €150 million.

Being a bankrupt under Irish law is a humiliating experience, tougher than in Britain or the U.S. Basically it means that almost all his assets and earnings (if any) will be used by a court appointed administrator to pay off his debts.

Any asset worth more than €3,100 can be taken from him at the discretion of the administrator, right down to his fancy watch or golf clubs or his car if the administrator decides he doesn't need it to enable him to earn money to pay his debts.

Even his house is in danger. Under Irish law his wife automatically owns 50% of it, but the other 50% can be sold to pay debts.

Usually the wife is given the chance to buy her husband's 50% from the administrator. Often the bankrupt's private home is left alone by the administrator, but in this case his luxury house has attracted so much attention that the administrator may feel compelled to act.

Any other property and assets automatically transfer to the control of the administrator, as will any earnings or pension payments FitzPatrick gets (the administrator will decide how much he needs to live on).

Bankruptcy here lasts for 12 years. FitzPatrick can't be a company director during that time. He can't even borrow more than €650 without prior approval.

As I said, it's enough to send shivers down the backs of his fellow Celtic Tigers who also owe hundreds of millions. For a man who once seemed to have everything it's the ultimate humiliation, an extraordinary fall from the peak of society into a black hole of relative poverty in just a couple of years.

But there will be little or no sympathy here for FitzPatrick. Anglo Irish Bank, under his direction, was the rogue bank which did more than anyone else to inflate the property bubble.

When the two main banks here (Bank of Ireland and Allied Irish Bank) saw how much Anglo Irish was making from property, they felt they had to match FitzPatrick's tactics to protect their profit levels and share prices. And they piled in as well. Like FitzPatrick, they loaned the developers and speculators hundreds of millions on very little security.

So FitzPatrick carries a significant part of the responsibility for what went wrong here. His bank wasn't the biggest player, but it was the one that led the way in irresponsible lending.

The collapse of the property bubble led to our present economic woes, making the recession here the deepest in Europe and leading to soaring unemployment and severe cutbacks in state spending, cuts which are now impacting on the lives of ordinary people across Ireland.

That's why there will be no sympathy here for FitzPatrick. In fact most people here will feel a sense of satisfaction that at last one of the fat cats is feeling the pain that so many ordinary people are going through as they try to pay their bills and hang on to their homes. FitzPatrick is only one, but like the old joke about what you call a dead lawyer at the bottom of the sea, he's a start.

People here are fed up reading about the billionaire developers whose toxic loans have now been taken over by the state backed National Asset Management Agency (Nama) to stop our banks going bust.

Hundreds of millions in loans given to individual developers by the banks are now owned by Nama, which keeps on saying that it will pursue these developers for all of the money. But we see little sign of the developers being put under pressure.

They may no longer take their helicopters to the races, but they still live in luxury homes, drive limos and enjoy a lifestyle the rest of us can only dream about. A few even turn up at glitzy social events as though everything was normal. One of these developers whose development company has a billion in loans in Nama even took a model friend to Morocco recently on a private jet for a weekend break.
Most of these guys are unable to pay off their loans, and some of them gave personal guarantees when they got the loans to start with. Yet in spite of public admissions that they can't meet their liabilities, they still seem to be able to live the high life.

We have now learned that some of the banks were allowing them to keep rental income on some properties even though they had hundreds of millions in loans they were not repaying. Nama has now said it will put a stop to that.

But we need to see more of them being made to face the reality of the situation they are in and the consequences of their behavior for the rest of us. Because of the way many of the big property developments that have now gone belly-up were financed across several banks with other developments used as security, it's a complicated mess for Nama to sort out.

Nama is "working with" the developers to do this and to finish some of the buildings that may still find a market. But that should not stop Nama aggressively pursuing the developers through the courts for the money they owe. And if they can't meet their liabilities then, like FitzPatrick, they should be pushed into bankruptcy.
As far as most people here are concerned, FitzPatrick is just the start. We have now learned that the next tranche of billions in bad loans that will be going into Nama includes quite a few multi-million euro loans taken out by syndicates of lawyers, doctors and other professionals as a way of minimizing their tax liabilities (in some renewal areas in Dublin you used to get tax breaks for new office blocks etc).

These loans are also non-performing (no interest is being paid) and have gone into Nama but presumably the professional gentlemen (and ladies!) who took out the loans are still making lots of money.

And it's not just the top 20 developers and these syndicates who must be forced to pay the price. There are many medium sized developers and builders around who are also trying to carry on as though their non-performing loans are really someone else's problem (like the taxpayer).

But perhaps the biggest scandal of all is that most of the senior bankers who allowed this mess to develop are still in their comfortable offices getting their telephone number salaries. One of the first things the new Fine Gael finance spokesman Michael Noonan said last week was that they should all be thrown out. And he is right.

It has now emerged that the initial 40% figure the banks gave to Nama for their performing loans (those at least paying interest) in fact should have been 25% at best. The head of Nama said last week that he was shocked and appalled at this, which had to be either incompetence or duplicity by the bank executives.

In either case, they should all be dumped.

The final piece of bad news last weekend was that the amount that Anglo Irish is going to cost the taxpayers here will not be €22 billion, but at least €32 billion. It seems there is a €10 billion loan that the Irish Central Bank gave to Anglo Irish to keep it going that everyone had forgotten about.

Yet another reason why FitzPatrick will get no sympathy, and why the rest of the bankers and developers who caused the biggest economic crisis in the history of the Irish state should be made face a personal reality. It's time for reality to bite in the golden circle.

The Irish recession is far from over

Tesco in Ireland is one of the country’s biggest supermarket chains.

THE big news here last week was that the recession in Ireland is over.

In fact, it was such big news that it even made The Wall Street Journal as well as other important foreign papers and that's good publicity for Ireland. And we need all of that we can get!

The good news came from the release of figures for the first three months of this year showing that Gross Domestic Product (GDP) in Ireland was 2.7% up in that quarter. GDP, the total value of all goods and services produced by an economy, is the internationally accepted measure for assessing how an economy is doing.

But it's not the full story, particularly not in an economy like Ireland, because it includes the production of foreign-owned companies which play such a major role here and which repatriate most of their profits.

The other measure of economic performance is Gross National Product (GNP), which excludes the earnings of foreign-owned firms. And the GNP for Ireland for the first quarter showed that the economy had contracted by a further 0.5%.

The GDP figure which includes the foreign multinationals and which was the basis for the "Ireland out of recession" headlines is important, not least because these foreign companies provide so many jobs.

But because there are so many of them here and their profits are taken out of Ireland and therefore not spent here, many economists think that the GNP figure is a better indicator of how we're doing. On that basis, we're still struggling. Or as my teenagers would say if they were studying their economics like they should be, Ireland is out of recession -- not!

Just this weekend, other statistics revealed that 800 companies in Ireland had gone bust since the start of this year, which is around four a day. That is continuing, and in fact there are indications that it's getting worse as demand in the economy here slows down even more due to all the cutbacks.

Consumer spending in the first quarter was down, not up. Last month the number of people out of a job and getting welfare was 452,000, which is the highest number out of work here since records began.

That's the reality behind the "Ireland is out of recession" headlines. Things may be starting to bottom out, but it sure is a long way back. There could be quite a time lag before we see any effect on jobs here.

On the hopeful side, our exports in the first three months of the year were nearly 7% up on our very depressed exports in the previous three months. The positive interpretation of what's happening is that we are starting to benefit from the slight pick-up in some global markets, and if that keeps going we will see some recovery here.

But as I said, it's a long way back and it will take a very long time to get that scary jobless number down, a number that equates to 13.4% of our workforce (the U.S. jobless figure is currently 9.8%).

In the meantime we have to deal with a lot of crazy stuff that is left over from the boom. Like welfare tourism.

Our welfare payment levels became so generous during the boom that they equate to a very good income for someone living in Eastern Europe. Figures just published show that when the ash cloud closed Irish airports recently there was a sudden fall in the number of people "signing on" here to get their welfare payments.

The explanation is that they are Eastern Europeans who came here to work and then went home when the boom was over -- and now they use cheap flights to get here from Eastern Europe to pick up welfare checks. When the ash cloud closed the airports suddenly, they were exposed. An investigation is underway!

In the good old days of the boom there was so much money sloshing around we didn't care about such anomalies. But now it's a different story.

And it's not just at the bottom end of the scale that reality is starting to bite. It's happening at the top end as well.

Last week for example, the ***2 million in fees being charged by a few leading lawyers here in a personal injury case were reduced by a staggering 80% by the regulator who settles disagreements about legal fees. He said the attempt to charge so much was "disgusting" and bore "no relation" to the reality of the downturn or the amount of work involved. The whole country cheered.

Those greedy lawyers (one of them a former attorney general!) are not alone. There is a whole section of Irish society that has tried to insulate itself from the downturn and carry on as though the boom was still happening.

Mainly they are the professionals -- the lawyers, doctors and so on -- very few of whom have reduced their fees. But it's not just the professionals. It's also anyone who does any work for the state -- the advisors, accountants, consultants and so on.

They don't care that the ordinary taxpayer is in trouble -- they still bang in their bills for hundreds of euro an hour for any work they do for the state. They still see the state as a soft touch.

These people still have not accepted the reality that the days of silly money are gone. They think that the downturn only affects the little people and that somehow they are above it all. An example of that is the behavior of most of the former multi-millionaire developers whose businesses have been taken over by the taxpayer through the National Asset Management Agency that has bought their toxic loans from the banks. These guys are still driving around in their luxury limos and still living in their mansions.

And last week, as so many ordinary people struggled to pay their mortgages and avoid losing their homes, it emerged that the developers have been pressuring the government to allow them to stay on in their mansions!

The hangover from the boom can be seen in more down to earth ways here as well. Like how much we pay for food in our supermarkets.

Last week a shocking report from Eurostat, an organization that tracks and compares prices across countries in the European Union, revealed that Irish consumers are paying 29% more than the EU average for their groceries. This included meat and dairy produce, even though Ireland is major exporter to other European countries of meat and dairy products.

So although you would expect beef to be cheaper in Ireland than in the U.K. where much of our beef goes, in fact you can buy Irish beef in British supermarkets much cheaper than you can here.

Bread and cereals are 48% more expensive in Ireland than they are in Britain. Irish milk and cheese are 42% more expensive here than in the U.K. And on it goes through many other food products listed in the Eurostat survey.

How can this be happening? Part of the reason is that during the boom supermarkets here raised their prices to match the higher incomes that people were earning -- and somehow they have forgotten to bring them back down again. The supermarkets here -- including the giant British chain Tesco -- claim that the cost of doing business in Ireland (wages, electricity, etc.) is higher here.

But there is a real suspicion that there is a lot of profiteering going on. It can only be a suspicion because although Tesco in the U.K. publishes details of their accounts, Tesco in Ireland keeps the information secret. And the other big supermarket chains here also give out as little information as possible about their business and how much they are making on basic food items.

It's all part of the crazy inflated prices that were part of the Celtic Tiger boom. In spite of the recession, the crazy prices are still being charged by those who can get away with it, from supermarket cartels to professional individuals. And the Irish government seems powerless to do anything about it.