If the Irish government had acted in 2007 when the crisis started...

hatrickpatrick

...Rather than living in denial until more than a year later (I think it was September 2008 when they admitted that our economy was ****ed?) could any of the pain have been averted? If they had acted back then, would the recession have been less severe than it has been, or would it have made no difference at all?

It's just that I see a lot of people saying that a huge reason our economy is in so much trouble is that the government waited until a year after the crunch began to admit that there was a major problem in Ireland's economy, even though to everyone else it was blindingly obvious - with property prices tumbling and share prices going down with them.

Thoughts?

silverharp

it wouldnt have made much difference and everyone would have been more uppity about cutbacks. Bubbles can only be avoided , once they have happened the only response should be to let the market take the losers out and let prices fall to bring back competiveness or do what the gov. is doing which is keeping its head firmly in the sand.

MrMicra

The problem IMO goes back to about 2002 . At that time a recession was avoided by fuelling our economy with domestic consumption.

Essentially there were 2 parts to the boom:

1 Celtic Tiger 1 1993 to 2001 was based on us working for foreigners and them opening factories and call centres here.

2 Celtic Tiger 2 2002 to 2007 was based on borrowing money from the Germans and using to buy houses and cars.
At the end of CT 2 it was based on overpaying public sector workers.

We will get out of this but it will tough enough.

di2772

MrMicra wrote: »

The problem IMO goes back to about 2002 . At that time a recession was avoided by fuelling our economy with domestic consumption.

Essentially there were 2 parts to the boom:

1 Celtic Tiger 1 1993 to 2001 was based on us working for foreigners and them opening factories and call centres here.

2 Celtic Tiger 2 2002 to 2007 was based on borrowing money from the Germans and using to buy houses and cars.
At the end of CT 2 it was based on overpaying public sector workers.

We will get out of this but it will tough enough.

Does that little speech go down a treat i the pub at night? What a load of ****e.

I think it was a little more complicated than you believe.

Sponge Bob

di2772 wrote: »

I think it was a little more complicated than you believe.

What MrMicra said in summation is the truth . I see you have offered absolutely no insight to support your silly assertion which leads me to suspect you are probably a banker

All or nearly all of growth post 2001 was a property bubble where we built and sold grossly overpriced ****e to ourselves until we finally ran out of mugs c. 2007 .

ardmacha

The point in relation to this thread is that the government should have acted to reduce the inflation of the bubble, rather than egging it on.

MrMicra

di2772 wrote: »

Does that little speech go down a treat i the pub at night? What a load of ****e.

Nobody in my local pub is interested in anything other than horse racing and rugby, political discussion is limited to parts of Kildare and Meath and the iniquitous propect of reductions in the subvention to horse racing/ taxation of stallion fees which will lead to reduced wages for grooms and work riders. Any party political criticism is banned.

di2772 wrote: »

I think it was a little more complicated than you believe.

Almost certainly. Please point out what I've missed.

PeteHeat

Hi,

I think 2007 would have been too late to act, the damage had been done by then, I believe we needed a better Government as far back as 1996/7.

So many things were happening with the availability of cheap loans, a population coming of age and the foreign investments actually producing the promised jobs, around that time we became an importer of workers as opposed to depending on the emigration system we were so used to.

If we had real leaders and managers in place instead of Parish Pump Politicians then maybe someone with the power to act would have seen the fundamentals of an economy dependent on stamp duty, a dependence on a growing construction industry for employment and rising levels of debt from consumer borrowing alligned with the demographics of the population are not sound as claimed by our current Taoiseach.

The one argument that can not be used by the government of the time is as a nation "We got what we paid for" because we had the highest paid public representatives in the world who in turn had some of the highest paid advisors.

If nothing else the past proves that the amount of money we spend as a nation does not mean that we got the best.

.

Diarmuid

ardmacha wrote: »

The point in relation to this thread is that the government should have acted to reduce the inflation of the bubble, rather than egging it on.

Even if they did, I think the phrase most likely used would have been "too little too late"

Sponge Bob

2002-2003 would have been the latest time they could have done 'something' and leaft us with a functioning financial system today.

Sadly those idiot free marketeers McCreevy and Ahern and McDowell and Harney were in key ministerial positions at that time and had appointed their bastard spawn, Hurley and Neary , to run the Central Bank . The die was then set

jimmmy

MrMicra wrote: »

2 Celtic Tiger 2 2002 to 2007 was based on borrowing money from the Germans and using to buy houses and cars.
At the end of CT 2 it was based on overpaying public sector workers.

Thats when the real damage happened, 02 to 07. As Michael O'Leary said in yesterdays paper, the government squandered most of the money from those years ( the stamp duty, extra vat tax receipts etc ) on buying off the public sector unions and other handouts....which is why govt expenditure is now 55 billion when receipts are only 33 billion, as things return to normal. Wny was govt expenditure allowed get so out of control? It has bled the country dry.

Fratton Fred

There are two evets that stand out for me as not so much pivotal, but indicative of the head in the sand approach.

The first was Bertie's good old "I don't know why some people just don't kill themselves" comments regarding people warning of a crash. The second is a director from one of the largest estate agents telling people two years ago that the ECB was going to reduce interest rates which would drive house prices up, therefore it was an excellent time to buy. There was no indication of this and in fact the interest rates looked to be ging up.

Bertie's comments were just a sign of sheer incompetance, the estate agents were, in my opinion, not far short of fraudulent.

I'm not sure more could have been done to prevent the recession, but if the correct constraints and regulation were put in place three years ago it would have prevented an awful lot of people from ending up in negative equity and possibly helped reduce the effects of the property crash.

jmayo

MrMicra wrote: »

The problem IMO goes back to about 2002 . At that time a recession was avoided by fuelling our economy with domestic consumption.

Essentially there were 2 parts to the boom:

1 Celtic Tiger 1 1993 to 2001 was based on us working for foreigners and them opening factories and call centres here.

2 Celtic Tiger 2 2002 to 2007 was based on borrowing money from the Germans and using to buy houses and cars.
At the end of CT 2 it was based on overpaying public sector workers.

We will get out of this but it will tough enough.

Exactly as I have posted on many threads over the last copuple of years, the real celtic tiger died in 2001 along with the tech boom.

From 2002 on, we hocked the tiger and decided to spend the money on building houses/apartments, buying the latest consumer gadets or bmws.
Then when the house prices went up, we released the equity gains from our houses and went off and bought more.
We created a mangey alley cat, it was well dressed up in nice designer clothes, but when things got tough we found out we still had an alley cat.

And what did the government do with all the increased taxes from property and consumer spending ?
Well they bought off the unions who primarily represent public sector workers or else they blew it on grandiose ego trip projects such as e-voting or the bertie bowl.

di2772 wrote: »

Does that little speech go down a treat i the pub at night? What a load of ****e.

I think it was a little more complicated than you believe.

Pray tell us more ?

jimmmy wrote: »

Thats when the real damage happened, 02 to 07. As Michael O'Leary said in yesterdays paper, the government squandered most of the money from those years ( the stamp duty, extra vat tax receipts etc ) on buying off the public sector unions and other handouts....which is why govt expenditure is now 55 billion when receipts are only 33 billion, as things return to normal. Wny was govt expenditure allowed get so out of control? It has bled the country dry.

We have major problems in this country all inter relatd to the fact that government allowed property become so vital and so important to the economy of the country.

• The governement allowed costs go too high, (being triggered by huge price of accomodation) and now our competitiveness is shot to s***.
• They allowed too high a number of male workers be employed in a non sustainable industry and when said industry bursted then we had drastic increase in unemployment.
• They hugely increased public sector spending based on transactional taxes from property and consumer spending which was not sustainable.
  This trend of increasing public sector spending, with no returns, was started as far back as 1997.
  All of the above leads us to a point where our current deficit is approx. 20 billion.
• At the same time they failed to regulate the banking sector and now we are left with a banking sector that needs anything upto 90 billion to survive.

To answer OPs question I don't think they could have prevented some of this in 2007. It was too late.
One thing they could have avoided was the stupid decision regarding the bank guarantee and saved us possibly 40/50 billion by allowing Anglo go bust.
Their loan book was somehting like 75 odd billion, most of this was in developer loans.
The picture would be somewhat more rosey if their stinking corpse was still not left lying around for the taxpayers to deal with.

Sponge Bob

jmayo wrote: »

All of the above leads us to a point where our current deficit is approx. 20 billion.

Good summary , I have a small issue .

It appears that receipts this year will only be c. €30bn but that expenditure ( including CAPITAL ) will be c. €60bn . 50% of all government expenditure looks likely to be borrowed in 2009 and that itself is grossly unsustainable. I do not include any NAMA spending in that expenditure figure but do include the handouts the banks got early this year.

The government will actually spend around €64bn as it completely runs down the c.€4bn end 2008 surplus in the Social Insurance Fund in 2009 and will have to make up that €4bn from borrowing next year ( meaning the income/expenditure gap is likely wider than 100%) . I can see maternity and redundancy benefits getting hammered in the budget and ruthless certification of illness becoming quite normal from now on.

The EU wants this deficit back to 3% of GDP ( around €5bn or €6bn at current GDP levels ) and by 2013 .

That is a €25bn gap that needs to be closed in a few years , partly by increasing government income as an economic recovery surely will ...but mainly by cutting out about a third of ALL public expenditure in the three years between 2010 - 2012 , or €20bn .

I would expect capital expenditure to drop from €8bn to €2bn , identifying €6bn from that heading but €14bn must come from current expenditure by my crude reckoning .

jmayo

Sponge Bob wrote: »

Good summary , I have a small issue .

It appears that receipts this year will only be c. €30bn but that expenditure ( including CAPITAL ) will be c. €60bn . 50% of all government expenditure looks likely to be borrowed in 2009 and that itself is grossly unsustainable. I do not include any NAMA spending in that expenditure figure but do include the handouts the banks got early this year.
...

Jaysus bob give us a break.
I got my figures wrong ok :mad:
How often have the Dept of finance got the figures wrong over the last few years ?
They must be using the same system as myself.
Maybe i could get a job there

Sponge Bob

jmayo wrote: »

Maybe i could get a job there

You would be eminently well qualified to be the central bank governor or financial regulator compared to the gob****es that were there for most of the decade J .

But as you were 'understating' the 2009 deficit by at least €10bn I felt had to be pedantic

jmayo

Sponge Bob wrote: »

You would be eminently well qualified to be the central bank governor or financial regulator compared to the gob****es that were there for most of the decade J .

But as you were 'understating' the 2009 deficit by at least €10bn I felt had to be pedantic

sure what's another 10 billion amongst us taxpayers :rolleyes:

jimmmy

jmayo wrote: »

sure what's another 10 billion amongst us taxpayers :rolleyes:

10 billion per year is the difference between what the public service actually costs and what it should cost.

ashleey

The tax system got loaded towards transactions which were sporadic i.e. VRT and stamp duty. They used this to suppress regular taxes like income tax and spent the rest on wages which had to be high because of the high spending taxes and resultant high property prices. A brave and intuitive govt. would have realised this and started tax reform during the boom when it would have been easiest. Now we will end up with swedish tax and mexican infrastructure again when it can be least afforded. Note the fall in capital expenditure but increase in current in the recent figures. The mistakes were made from 2002 on and we'll pay for another 20 years. Try and convince an american company to set up a business after arriving at dublin airport and driving down motorways that finish in the middle of nowhere?

ejmaztec

I wonder what the banks were thinking of in 2007, and how much was handed over to developers by them in 2007/8?

SeaFields

Biffo used the excuse several times on the Late Late show the other night that he didnt act earlier on the property bubble as he was going on the information he was being given at the time.

Now I wonder if those same people are now advising Lenihan on the ins and outs of NAMA and how it cant fail (as it is impossible to get fired from the public service like:rolleyes:)