Business Irish

Sunday 11 December 2016

Farewell to grim 2010 but future just as bleak

Michael O'Leary, our financial watchdog and a Lotto win were the few high points, says Louise McBride

Published 02/01/2011 | 05:00

From black ice to Black Tuesday, the exodus of Halifax to the state takeover of AIB, a volcanic ash cloud to an ashen-faced Taoiseach after Fianna Fail's annual think-in, it's a wonder we got through 2010 at all. Then to top it all off, we witnessed one of the darkest day's in our country's history when the IMF came to town. Here's a look back at a bleak 2010.

  • Go To

JANUARY

Sub-zero temperatures and snowfalls got the year off to a chaotic start. Motorists struggled with treacherous roads, pedestrians risked their lives on icy pavements, airports closed and households were hit with water shortages after pipes burst countrywide.

January was turning out to be even more miserable than usual. Then developer Bernard McNamara decided to tell us all about his January blues. On RTE radio, McNamara said his head was "on a plate". His comments followed a court judgment against him which ordered him to pay almost €63m to a group of private investors who part-funded the notorious €412m Glass Bottle site deal. McNamara, once deemed too big to fail, publicly admitted he was "broke" -- and that his property investment businesses had run up debts of €1.5bn. He also stepped down as executive chairman of his company, Michael McNamara & Company Building Contractors.

VHI Healthcare also did its bit to deepen the January gloom. Undeterred by the loss of tens of thousands of its members in 2009, it ann- ounced that it would be jacking up its premiums by 8 per cent. The price hike came only 13 months after the health insurer hit its customers with a 23 per cent price increase for 2009. With Aviva and Quinn Healthcare also increasing their prices in 2010, the numbers cancelling their health insurance continued to rise. By the end of June, the recession, along with price hikes, had priced more than 40,000 people out of the market.

Finance Minister Brian Lenihan announced details of an inquiry into the banks. Lenihan said the inquiry would focus on the origins of the banking crisis -- rather than how the Government set about resolving that crisis.

FEBRUARY

Bank of Scotland Ireland (BoSI) announced on February 9 that it would be pulling its retail arm, Halifax, out of Ireland, with the loss of 750 jobs. By June, Halifax branches would be closed -- and by the end of the year, BoSI's business banking arm, would also be gone.

The announcement came only a few days after another foreign-owned bank, National Irish Bank, reported losses of €661m for 2009, describing the year as "the worst in Irish banking history".

Meanwhile, the showdown between Ryanair boss Michael O'Leary and Tanaiste Mary Coughlan provided some light relief. O'Leary promised to bring 300 engineering jobs to Ireland if the Government would pull a few strings so Ryanair could either buy or lease Hangar 6 at Dublin Airport. In the end, Ryanair never got its hands on Hangar 6 -- which is being leased to Aer Lingus -- and O'Leary said he would approach other airports in Europe about the jobs.

Abroad, riots plagued the Greek capital as the government pushed through austerity measures, including public sector wage cuts, to get the country's finances in order. By the end of the month, the European Union was putting pressure on the country to introduce tougher spending cuts and tax increases on top of the austerity package agreed in early February.

European bureaucrats also had their eye on Ireland. In late February, the European Commission gave the nod to the state's bad bank, the National Asset Management Agency (Nama). It would only be a matter of weeks before the first tranche of loans -- initially valued at €16bn -- would be transferred to Nama.

MARCH

On March 18, Sean FitzPatrick was arrested by the Garda Fraud Squad after a dawn raid on his home. The former chairman of Anglo Irish Bank was questioned as part of an investigation into alleged financial irregularities at Anglo. FitzPatrick had stepped down from Anglo in December 2008 after it emerged that he had hidden a whopping €87m in loans for eight years.

Only three months into his job as Financial Regulator, Matthew Elderfield showed he meant business. On March 30, the High Court appointed provisional administrators to Quinn Insurance at the request of the Regulator. Elderfield took the action after it emerged that the strength of Quinn Insurance had been overstated by €450m.

The Quinn Group reacted angrily to Elderfield's move, warning that it would put more than 5,000 Irish jobs at risk. Quinn Insurance would go into permanent administration, 900 job losses would be announced and the troubled tycoon, Sean Quinn, would step down from the board of the Quinn Group.

On March 30, Brian Lenihan announced details of the bank bailout, explaining that it could cost taxpayers at least €32bn. The rescue plan also revealed the toxic loans being transferred to Nama. The average haircut -- the difference between what Nama paid for the loans and the original value attributed to them by the banks -- was 47 per cent. Small wonder the day became known as Black Tuesday.

APRIL

On April 29, the Government went cap in hand to the public -- while AIB signalled that it could be about to do the same with its shareholders. Brian Lenihan launched the Government's National Solidarity Bond that day in a bid to raise money to invest in infrastructure projects. The bonds, which were available from early May, promised a 47.5 per cent investment return after 10 years. Meanwhile, AIB said that it could be tapping its own shareholders -- as well as the State -- for billions in September as the bank sought to plug its gaping capital hole. Then AIB chairman Dan O'Connor also told shareholders at the agm the cash-strapped bank had no choice but to sell its Polish business, Bank Zachodni WBK and its stake in the US bank, M&T.

MAY

On May 10, Nama announced that it had transferred €15.3bn worth of loans from AIB, Anglo, Bank of Ireland, Educational Building Society and Irish Nationwide. As an overall discount of 50 per cent was applied to these loans, Nama had paid €7.7bn for them. A few days earlier, Nama chairman Frank Daly said that some developers were still living the high life. Speaking at an accountants' luncheon, Daly said that "not all of them (developers) have yet abandoned the extravagant mindset of the 2003-2007 era".

The State took control of almost a fifth of AIB after the bank issued shares in return for a €3.5bn recapitalisation. Meanwhile, Bank of Ireland got approval from its shareholders for a €1.7bn rights issue at an egm on May 19.

The long-awaited reports into the Dublin Docklands Development Authority (DDDA) were finally published on May 26. The reports exposed serious failings at the state-owned DDDA as well as huge financial losses. One report found that the DDDA did not get a valuation of the Glass Bottle site before agreeing to join a consortium to buy the site for €412m. The site was worth about €60m last May and that value is likely to have plummeted since. As well as stumping up almost €33m for the site, the DDDA approved the consortium's decision to borrow €293m from Anglo Irish Bank and AIB to fund the purchase. One of the reports found that the DDDA is paying €5m a year in interest to Anglo as a result.

JUNE

Anglo's chief executive, Mike Aynsley told a Dail committee on June 16 that the "lion's share" of the €22bn of taxpayers' money being pumped into state-owned Anglo Irish Bank would "never be seen again". During the meeting, it was also revealed that €550m of the Anglo loans transferred across to Nama in early May had been written down "to zero".

Ernst & Young did its best to cheer us all up with a forecast that our economy was set to turn a corner in 2011. The report predicted that Ireland would be the second-fastest growing economy in the eurozone after Slovakia. Figures released by the Central Statistics Office showed the Irish economy grew for the first time in more than two years.

JULY

Before we got too hopeful about the June economic figures, the Economic and Social Research Institute (ESRI) warned that more than 120,000 people would emigrate by the end of 2011. In a report published on July 14, the ESRI also said it expected the government deficit to rise to almost 20 per cent in 2010 because of the bank bailout. Clearly worried, the Dail had already broken up for its summer recess.

Meanwhile, in late July Arnotts was about to be taken over by Anglo and Ulster Bank. The department store was struggling to pay debts of €260m.

AUGUST

In early August, AIB boss, Colm Doherty, hinted that the bank may need to cut jobs and close branches -- after unveiling record half-year losses of €2bn. Bank of Ireland announced that its losses for the first half of the year had almost doubled to €1.25bn.

Meanwhile, hard-pressed homeowners braced themselves for tougher mortgage bills after AIB, BoI and EBS increase their mortgage interest rates. We almost lost an Irish airline when an interim examiner was appointed to Aer Arann. Two months later, the airline comes out of examinership after the High Court approves a survival plan.

SEPTEMBER

Figures released by the Financial Regulator showed just how hard the recession has hit the ordinary punter. About 36,500 homeowners were struggling with their mortgage repayments by the end of June, according to the figures. Fears grew that the August rate hikes would push 100,000 into mortgage arrears.

On September 9, the pharmaceutical giant Schering-Plough announced that it would cut 160 jobs at its plant in west Cork.

A very hoarse Brian Cowen came on Morning Ireland on September 14 and his performance during the interview prompted Fine Gael TD Simon Coveney to say Cowen "sounded half-way between drunk and hungover". Cowen later apologised, saying he did not intend to disrespect the people of Ireland. The incident even got a mention on the US chatshow NBC Tonight when Jay Leno mocked Cowen as a "drunken moron".

On September 20, the Kerry-based stockbrokers, Fexco, bought Goodbody Stockbrokers from AIB for around €24m.

At the end of the month, the Central Bank warned that the final bill for rescuing Anglo could reach €34bn.

OCTOBER

The last month of autumn manages to cheer our hearts -- albeit briefly.

After over two months underground, 33 Chilean miners are rescued from a gold and copper mine.

Over the October bank holiday weekend, a lucky punter won the €16m Lotto jackpot. The ESRI, however, brought us all back to reality when it warned that the draconian cutbacks expected in the December Budget could push the country back 10 years.

On October 28, the dvd rental chain Chartbusters confirmed it was closing its 16 stores with the loss of 90 jobs. The company blamed the 'severe and unprecedented nature of the current economic downturn'.

NOVEMBER

This became one the darkest months in Irish history.

On November 8, UCD Professor Morgan Kelly depressed the nation in an article which said that Ireland was "clinically dead" and that "every cent of income tax" we pay for the next six years would be spent repaying the Irish bank losses.

Ten days later the IMF arrived in Dublin. After weeks of denials, the Government finally admitted it was discussing a rescue package with the IMF and EU. The package is conditional on the cost-cutting measures in the Government's four-year plan, which was published on November 24. The €15bn plan included a property tax, water charges, a cut in the minimum wage, carbon tax, tax hikes, social welfare cuts, and higher university fees.

On November 29, the IMF and EU agreed an €85bn bailout deal with the Irish Government. The deal, our last chance to avoid bankruptcy, included a penal interest rate of almost 6 per cent -- set to cost the Irish State almost €4bn a year in interest.

As if things weren't bad enough Mother Nature hit us with sub-zero temperatures again. Parts of the country saw their lowest November temperatures in 25 years.

DECEMBER

With the cold snap continuing into early December, the chaotic scenes of early January were repeated. Airports closed, traffic in the capital came to a standstill, towns and villages were cut off as roads become impassable, and businesses complained the big freeze was costing them up to €7m a day in lost business.

Even the sight of Brian Lenihan unveiling his worst Budget ever on December 7 wasn't enough to frighten off the cold snap. The Budget, which included €6bn of cuts for 2011, will leave most people thousands of euro worse off this year thanks to savage tax hikes, cuts in child benefit and the dole, the abolishment of many tax reliefs, cuts in student grants, and pay cuts in the public service.

On December 13, AIB said it had decided not to pay a controversial €40m in staff bonuses. This followed a letter from Lenihan which warned the bank that it would not get any more taxpayers' money if it paid bonuses to staff.

The following day, Lenihan published the Credit Institutions (Stabilisation) Bill 2010, which gives the Government powers to restructure the banking system. It allows the Government to start winding down Anglo and Irish Nationwide and to stop future bank bonuses.

On December 23, Lenihan made a High Court application to inject a further €3.7bn into AIB, which was granted and AIB is taken over by the State.

Days before Christmas, Bank of Ireland customers faced current account fees for the first time ever. With other banks expected to follow suit, 2011 is already shaping up to be another grim year.

Sunday Independent

Read More

Promoted articles

Editors Choice

Also in Business