They are not too dissimilar in economic terms, Ireland is ranked as 48th on a global scale and Greece is ranked as 37th. The GDP per capita of Greeks is $27,875 (nominal, 2011 est.) and the GDP per capita of the Irish is $37,700 (estimate 2009-2010). There is one stark difference, the ease of doing business in Ireland is measured as 9th globally versus 100th for Greece.
One of the keys to Ireland’s economic growth and business friendly environment was the low corporation tax, currently at 12.5% standard rate. Ireland’s IMF/EU bailout and initial austerity package came before Greece’s, they were regarded as the bailout poster boy, the well behaved pupil who quickly fell into line in order to gratefully bow its head, swallow its collective sovereign pride and accept its medicine for the “good of the nation”. The news with regards to Ireland and how its citizens are coping with the austerity measures is rarely covered in the mainstream media.
Greece’s predicament has shuffled so far down the news food chain you have to ‘Google’ in order to discover the ongoing impact, what are the practicalities of a ‘day to day’ existence? For example tax collectors went on strike in late December, pharmacists and doctors were on strike this week for two days and these actions followed the seven (more general) strikes that occurred in the latter half of 2011, yet the media (at large) ignored the news.
However, by far the most alarming issue concerning Greece is the explosion of poverty which is vehemently and shockingly illustrated by adoption and care agencies in Athens receiving a huge spike in abandoned children, or children given up as families simply lose the will and finances to cope. Poverty has forced 500 Greek families to place their children in homes run by charity SOS villages, according to the leading Greek daily Kathimerini. “We have to give up a little otherwise we’ll give up a lot” was the latest pronouncement from the recently appointed Greek prime minister. As to whether the prime minister meant you should give up your children is a point for debate…
His further pleas for sacrifice to stay in the Eurozone may fall on deaf ears as the austerity measures are quickly reaching fatigue levels amongst the general population. Lucas Papademos told Greeks that cuts in income are the only way to stay in the euro and get more financing from international creditors in order to avert an economic collapse that may arrive as early as March. “Without this agreement with the troika and subsequent financing, Greece in March faces the immediate risk of a disorderly default,” he said.
Despite two years of wage cuts and tax increases, the IMF expects Greece’s deficit to be about 9 percent of gross domestic product last year compared with 10.6 percent in 2010. The economy was expected to shrink by a stunning 6 percent of gross domestic product in 2001 according to the latest IMF estimates.
Pantelis Kapsis, a Greek government spokesman recently stated; “The bail-out agreement needs to be signed otherwise we will be out of the markets, out of the euro. The situation will be much worse.” Greece is struggling to push through tough austerity measures needed to secure the second bail-out. International officials are preparing to conduct a financial inspection in Athens that will decide the terms of the rescue package that was agreed in principle in October. Greece is also racing to clinch a deal with the private holders of its sovereign bonds. Both deals have to be secured if Greece is to avoid defaulting at a major bond redemption in March..
Irish property prices have plunged by circa 69% during the past six years and by up to 65% in Dublin. They’re now down to 2000 levels, a previously unthinkable level during the boom the country experienced in property building and speculation from 2005 onwards.
The respected house price index published by the largest residential sales group, the Sherry FitzGerald Group, found that the pace of deflation has speeded up dramatically, while prices across the country are now at 2000 levels. The group surveys a weighted basket of 1,500 properties said residential property in Dublin is now worth 64.2% less than at the 2006 peak, with a national fall of 58.8%.
Separate surveys by two property websites also found large declines in 2011’s asking prices: myhome.ie said sale prices were down 50% since 2006, while its rival website daft.ie reported an 8% drop in the last quarter alone, calling it the largest ever quarterly fall in house prices in Ireland.
In 2011, just €2.3bn was provided in mortgage finance, according to the Irish Banking Federation, this compares with €40bn at the peak of the property market in 2006. 13,000 mortgages were issued in 2011 compared with 200,000 in 2006. With no signs of mortgage credit returning to the market soon, and unemployment expected to rise past the circa 14% now in 2012 property prices are expected to continue to decline this year.
The state of the market is in contrast to the frenzied of the mid-2000s when property in Dublin was achieving higher prices per square metre than Manhattan. One 550 sq metre house called Walford, in the embassy belt of Ballsbridge in Dublin 4, was sold in 2005 for a record price of €58m some €23m more than the asking price.
As Ireland copes with the austere budget and economic pain activists have taken over empty properties abandoned by banks and property developers across the country. The squatters, linked to Ireland’s Occupy movement, plan a mass occupation of houses and flats owned by the Irish government’s “bad bank”, the National Asset Management Agency (Nama), which took over thousands of properties that speculators handed back after the crash.
There are circa 400,000 properties lying empty in the Irish Republic the country’s National Institute of Regional and Spatial Analysis (NIRSA) warns that the number of vacant properties will keep house prices depressed for years.The 600+ “ghost estates” symbolise the Irish recession. The cost of bailing out the banks that loaned billions to builders and property speculators during the boom has been estimated at losses of €106bn.
The most recent figures from the Republic’s Central Office of Statistics prior to Christmas found that Irish GDP had contracted by 1.9% in the third quarter of 2011. Whilst both Athens and Dublin face incredibly hard times as a consequence of the austerity measures perhaps they are as close to the low as they’ll experience. However, that low may be a stagnation trap that could last decades.