Credit blight could spread to Europe
Irish banks are starving people of money despite recapitalisation, writes Marc Coleman
Published 30/10/2011 | 05:00
God sent the blight, the English sent the Famine. Bitter though they were, John Mitchel's diagnosis of why the famine happened wasn't wide off the mark. Queen Victoria's adviser at the time, Nassau Senior, opined that while the Famine might kill a million people it would be "scarcely enough to do any good" and even Charles Trevelyan -- the man sent to organise relief -- was of the view that the Famine was sent "to teach the Irish a lesson and that calamity must not be too much mitigated". In a country full of food, millions of people starved during the 1840s as the government guarded ships with hulls groaning under the weight of grain and livestock destined for export: by the utilitarian Whig values of the day, landlord profits mattered far more than human life.
Similar values prevail today: last Wednesday's summit concluded that our banks need no more capital, we have one of Europe's highest savings ratio with Olivier Blanchard, of the IMF, saying last Thursday that we could be returning to the bond markets by next year. Yet despite Ireland being a country whose banks have ample funds for lending, we are -- as balance of payments figures show -- exporting capital while viable businesses and families are starved of credit. Housing market activity is now so low -- thanks to lack of lending -- that house prices are meaningless and recovery impossible. As a result, negative equity remains a far bigger crisis than it should be, and this is
killing jobs and spending: as September retail sales show, sales volumes are down 2.9 per cent and 0.8 per cent in the month. And as Constantin Gurdgiev pointed out, the heaviest falls are in sectors most influenced by credit conditions, such as the huge 11.7 per cent fall in furniture sales.