The incompetence of politicians, Europe-wide, has exacerbated the financial crisis and brought many eminent economists to the conclusion that debt forgiveness is now inevitable.
Against the backdrop of a summer of political inertia, putting a stop to the collapse in house prices is seen as the only way to avoid a second worldwide recession by ensuring the return of consumer confidence, increasing spending and creating jobs, economists now believe.
As American economists called for "capital adjustment" (debt forgiveness) in house prices and the Spanish government put measures in place to halt the drop in house prices, the call for debt forgiveness in Ireland intensified with one leading economist describing the mortgage distress now being experienced by thousands of homeowners as the "biggest crisis the Irish economy is facing".
Last night, Dr Constantin Gurdgiev rowed in behind radical UCD economist Professor Morgan Kelly's proposal that the mortgage debts of thousands of struggling families be either written down or -- in the most extreme cases -- written off.
The economists' demands were echoed by financial experts with Peter Brown, a former senior bond trader with Barclays Bank, pointing to debt forgiveness at "sovereign level right down to individual level" as the answer to the broader, worsening national and global financial crisis.
His comments came at the end of yet another traumatic week on the financial markets, the impact of which saw the second wipeout of private sector pensions in three years. Up to 20 per cent has been knocked off the value of pension funds held by Ireland's private sector pensioners.
Documents prepared recently for Finance Minister Michael Noonan show that upwards of 80 per cent of defined benefit pension schemes are now technically insolvent, with the total deficit estimated to be in the region of €15bn.
But while those close to retirement fear increasingly for their future, the crisis facing the younger generation buckling under the weight of massive mortgages on homes still plummeting in value was being identified by Dr Gurdgiev as the single most important issue the Government needs to address as a "matter of urgency".
"It [debt forgiveness] will have to be done simply because the Irish economy will not be able to function properly at all levels if we keep the levels of debt as they are. So far, we have spent four years of this crisis loading more debt on to the shoulders of already heavily indebted households and families. It is unsustainable," the Trinity College economist told the Sunday Independent.
Pointing to the direct impact the servicing of this massive debt was having on the middle class, whom he described as the "main productive part of the economy", he added: "We will have to simply allow these people to write down their mortgages to closer to the level of the prices of the homes that these mortgages have been written against. It has to be done very robustly at the level of the middle class. The reason why, is that the middle class is being the hardest squeezed by tax increases at current levels and future ones. They also bear the most burden in terms of debt, but also they are the main productive part of the economy."
Commenting on the assessment given by Morgan Kelly to the Irish Society of New Economists conference in Dublin last Thursday that the cost of debt forgiveness to the taxpayer could be limited to between €5bn and €6bn were it to be introduced, Dr Gurdgiev pitched his estimate at the lower of these two figures. "I tend to think that around €5bn would do. It depends on how you do it and to what level you do it," he said.
Asked for his response to the argument that debt forgiveness would give rise to moral hazard, Dr Gurdgiev said anyone who thought this needed "to have their head examined".
"The biggest moral hazard by far magnified by hundreds of times is not the moral hazard of forgiving household debt, it is the moral hazard of the entire nation's resources being thrown at insolvent banks," he said.
Dr Gurdgiev said that moral hazard was "not a problem of something being done today" to address the crisis, but could only arise in the future if financial regulators failed to introduce reforms in the banking sector.
"If our regulators are so concerned about moral hazard, have the regulations going forward.
"Introduce non-recourse mortgages like they have in the United States of America and load the risk pricing on to the shoulders of the banks. Let the banks police properly who they give mortgages to in the future. That would eliminate moral hazard completely and totally without destroying completely the real productive part of this economy, the ordinary people of this country," he said.
He claimed that much of the household debt for which he was now recommending debt forgiveness had been acquired through "the erroneous and perhaps even in some cases fraudulent selling of leveraged products such as 100 per cent mortgages to households" to people who could never repay it.
Dr Gurdgiev also said that debt forgiveness, were it to be introduced, should not be applied to the wealthy and would have to be limited exclusively to family homes.
Sometimes, we really do forget the bleedin' obvious. For instance, I once spent 20 minutes looking for a badge I needed to gain access to an important press conference. I eventually found it: dangling around my neck. Stupid or what?
DID you see the good news? Apparently, we're out of the woods. As the Irish Independent headline put it: "Resilient Ireland plays cards right to ensure happy ending." And the Irish Times: "Markets are making the wrong call on Ireland's debt." And the Financial Times: "Ireland's unexpected economic comeback."
On this date, August 21, 1914, a squadron of the British Expeditionary Force's 4th Dragoon Guards quietened their mounts as they neared the village of Casteau in Belgium. What they did not know was that they were about to be the first British troops to engage in combat on the continent of Europe since Wellington & Bonaparte's guns fell silent over the field of Waterloo some 99 years earlier.
IT is sometimes said that one of the reasons nothing ever improves in Sicily is because, to quote Giuseppe Tomasi di Lampedusa's The Leopard, their vanity is stronger than their misery. They see no reason to improve themselves because they think they are perfect.