RSS FeedNAMA Alternative? ...Anyone?...Anyone?
Posted by Senan
NAMA has been hitting the headlines over the past couple of days. It's become a real political hot potato. Enda Kenny did a media interview on Friday extolling the virtues of Fine Gael's alternative to the bad bank...a good bank no less. By all accounts the prospective future leader of the country didn't do a very good job of explaining how the 'good bank' would actually work. For example, if the good bank takes all the good loans from the retail banks (Allied Irish Bank, Bank of Ireland, etc.), leaving them with only the crud, how would they survive? And how would nationalization fit into all of this? Then over the weekend we had a procession of commentators rub salt in the wound with the line that there simply is no other game in town. And then today I hear more calls from 'economists' for the government to review NAMA and come up with an alternative. Either way, the government certainly will have to earn its stripes over the coming months as they implement NAMA, deal with the Commission on Taxation, and formulate the 2010 budget.
On a positive note, despite a brief respite today, world indices continued their upward march this week, no doubt spurred by the slenderest of data hinting at economic recovery. The fund managers must be buying again. Maybe the threat of inflation has prompted the big boys to put their money into growth prospects rather than safe havens.
Despite positive market movements, and positive data internationally, my feeling is that Ireland will surely lag in any economic recovery for a few reasons:
1) Our exposure to the property asset value adjustment was very significant by comparison to other countries (in particular our European friends). This means our personal net worth has taken a huge hit
2) Despite downward pressures, our wages remain high, and hence our labour market remains uncompetitive for lower skilled jobs such as manufacturing in particular.
3) Our stock market is (or was) heavily weighted towards bank and construction. I don't need to tell you that that's killing us. (market darling CRH announces profits down 82% for H1 2009 and Irish Life and Permanent report a big swing into loss for H1 2009).
4) Our economy is very open. It relies heavily on the US and the UK which were hit heavily by the recession. However, as these countries pull out of recession I expect some level of protectionism to set in (we've already had Barack Obama go after so called tax havens...Ireland possibly being one). This will have the effect shoring up the local economies of these countries at the expense of globalization.
5) More of us need to get off our asses and start working, or start something! There was a worrying report this week on people who have never worked a day in their lives.
6) We're nearly a year on from the Lehman Brothers collapse, and 2 years since the property bubble began to deflate, yet we have as yet seen little significant economic and public sector reform in this country (the pension levy being the exception...but don't get me started on that!).
7) Despite recent deleveraging, as a society we're still overly extended by our debts. As the likes of Germany and French grow we could soon see interest rate rises as consumers get their appetite back, and that's bad bad news for mortgage holders.
8) The Celtic Tiger unfortunately did not deliver us from our infrastructure nightmare as it should have. Roads were built and trains were upgraded, but typically we were not ambitious or forward thinking enough. Nor were we any good at tender and project management. Think the 3rd lane on the M50 and the toll bridge, or the ridiculously expensive leaky port tunnel, or the Luas lines that don't meet, or the lack of a train from Dublin airport to town, or the lack of a dual carriageway between Cork and Limerick. I could go on.
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