Saturday 19 October 2019

Crisis? What crisis? Let's party!

With falling share and property prices, and probable tax hikes in the Budget, the middle classes are under the cosh. But the spending goes on. Kim Bielenberg reports

Kim Bielenberg

Kim Bielenberg

On the shares trading floors of the Irish Financial Services Centre on Wednesday afternoon, the scene was described as nothing short of a "bloodbath".

Vast fortunes were lost in the blink of an eye as the computer screens turned from blue to red like a crimson tide -- the distressing sign that the Irish stock market was tumbling.

"Ireland is just loveless at the moment,'' said one apparently heartbroken market analyst, as foreign financiers gave the thumbs down to Ireland Inc. Another trader said he had never seen anything like it: "I come in every day expecting to see a bounce, only to find the market has tumbled another two or three per cent.''

By the middle of this week, doom-laden statistics showed that Irish shares have fallen nearly 20 per cent in just two months.

For pension holders, who have spent decades building up a nest egg, this threatens to be an annus horribilis, with the values of life savings plummeting day by day.

The middle classes are under the cosh; and the upcoming Budget is unlikely to offer them refuge.

There is mounting speculation that PRSI will be increased for upper income earners (which is effectively a tax hike) and there is also the prospect of punitive green taxes for those so bold as to drive a big car.

With falling house prices and daily news of redundancies, there are growing fears that the 10-year party for the middle classes is over.

Are we truly seeing the much-anticipated "last days of the Celtic Tiger''?

The news may be financially apocalyptic. But over in Erik and Michelle Robson's popular Ely Wine Bar in the heart of the IFSC, customers seem quite unfazed. They are continuing to knock back Carlingford oysters, washed down with a cheeky little Pinot Blanc, to beat the band.

George Lee of RTE may predict an economic Armageddon twice nightly on the news, and billions may be going down the Swannee faster than a speedboat down the Liffey. But that is not going to destroy our almost insatiable appetite to party like it's 1999.

"There is a lot of scaremongering around, and it is easy for people when they see the news to be pessimistic. But we are still seeing 200 people coming in for lunch every day, and lots of companies are booked in with us for big Christmas parties," says Erik Robson.

Junior staff in the banks around the financial services centre may be concerned that their jobs are insecure as a result of the banking "credit crunch". But the more senior managers are much more sanguine.

"The people in upper management do not seem too concerned," says Robson. "They have seen these kinds of fluctuations before, and they know that they can survive them. The Irish economy is not built on sand.''

Erik and Michelle Robson are typical of the enterprising breed of business people who have enjoyed success on the back of the Celtic Tiger.

Starting out with a small wine bar at Ely Place on the Southside of the city, they now have a chain of three wine bar/restaurants. Their bars in the Dublin docklands are hugely popular with the legions of well-heeled office workers in the area.

Erik is concerned about speculation that middle income earners will be hit in the Budget at the start of next month.

"The government lost out on stamp duty. So, they will probably try to raise taxes in other ways, by increasing PRSI.

"I think the increase in car taxes on bigger cars would be unfair, because they are not necessarily the ones that cause the most pollution.

"We don't want to go back to the Seventies and Eighties, when they taxed everybody out of existence and killed the economy. We don't want to kill the goose that laid the golden egg.''

The news from the shares and property markets may be bleak, but that does not seem to have curbed our rampant spending habits. Economists agree that there is little sign that consumers are tightening their belts this Christmas. The latest retail figures show that spending is up on last year.

The shares crash came on the same day that it was reported that over 170,000 Irish people were flying to New York to shop in the run-up to Christmas, stuffing their suitcases with over €170 million of new clothes and consumer durables -- surely the biggest shopping airlift in Irish history. Numbers have surged by 15 per cent since last year.

The festive inclination to flash the credit card in the Big Apple will come as little consolation to Irish store owners, angered that business went elsewhere, with the customs authorities initially taking a hands-off approach.

When the going gets tough, the tough go shopping -- not to mention whooping it up on some sun-drenched foreign shore.

"If you look at the numbers booking foreign holidays, there is no sign of a downturn,'' says Tony Brazil, head of Limerick Travel. "People are booking foreign holidays for after Christmas. So it still seems that people have money."

In a way, it is this ability to live it up in the face of adversity that keeps our economy ticking over, according to Alan McQuaid, economist with Bloxham Stockbrokers.

"The great thing about the Irish is that we can laugh even when times are bad, and that will see us through these troubles.

"We tend to have a carefree attitude to money. We spend today and worry about it tomorrow. People are in a festive mood now, and are in good form. So they are still spending a lot of money."

But there may be a reckoning. McQuaid says we have one of the highest levels of personal debt in the Western world: "We should have a better of idea of the health of the economy in January, when people tend to be more gloomy and the credit card bills come in. The sales of new cars in January will be seen as an indicator of financial health.''

Economists take comfort from the fact that unemployment continues to be relatively low.

"So long as people have their jobs they can be reasonably optimistic,'' says McQuaid. "If there is a significant increase in unemployment that would really spell trouble.''

At the end of our decade-long spending binge we may ask ourselves what we spent our money on.

To borrow a phrase from George Best, 90 per cent of our money was spent on foreign holidays, fancy frocks, overpriced restaurant meals and fast cars -- not to mention the booze. The rest we just wasted.

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