The Reality of Austerity in Ireland Today

Alan Brady

Bob Geldof, the often outspoken rock star from the Boomtown Rats, on a recent trip to his native Dublin related the story of a conversation he had with a taxi driver on the deplorable state of the domestic economy. The pair apparently chatted for a time before the taxi driver summed up the situation with a sigh of resignation grumbling that “we Irish were never meant to be rich”. Geldof was somewhat amused, but also clearly irked by this remark. To him it seemed that nothing had really changed from the Ireland he had bitterly left in the late 1970’s where chronic unemployment, corruption and cronyism were rife and the entire nation was hung out to dry by the political establishment.

Indeed, if anything, the situation facing most of the Irish population today is far worse than it was in the 1970’ and 80’s, at least financially. Since the Irish economic and banking collapse in Ireland in 2007, severe financial distress has become something of a national epidemic. An austerity programme imposed on the Irish, in large part dictated by the German led European Central Bank, continues to have a devastating impact on the lives of much of the population. Yet the consensus among the many people I speak to on a daily basis is that the current Irish government are completely out of touch with the average man and woman. They appear to blithely dismiss the increasing plight of ordinary families and seem to be more concerned with portraying Ireland as a country coming through the worst. But on the ground, the reality and effects of ongoing austerity are far different. 

Like many others of my generation, my wife and I are what are referred to in Ireland these days as the ‘squeezed middle’; that is to say the category of debt-burdened, middle-income, working households who have had to bare the brunt of seven successive years of austerity measures.

My wife is a public servant who on the face of it has an above average salary. But in recent years she has endured close to a 20 percent net pay reduction. On top of this, we have, like others, had to absorb increasing food and fuel prices and a whole range of new taxes and local government charges that have been introduced in recent years.

As a family, our weekly household budget is becoming severely constrained. What little savings we had have long since disappeared. Increasing taxation and other charges, coupled with a reduced household income, mean that we often have little or no cash to spare at the end of any given month. Tellingly, a recent survey conducted by the Irish League of Credit Unions found that a quarter of the population (1.1 million people) have less than 50 euro ($68) a month of disposable income left after paying essential bills.

We buy little or no luxuries for ourselves. We seldom purchase clothes either – the children get first priority when it comes to clothing and footwear, and only then when a purchase is absolutely necessary. We don’t dine out, and only see our friends mainly at occasional social gatherings such as weddings or christenings which thankfully, because of the costs of such events, are becoming less frequent.

In fact, all occasions have been greatly reduced. We scrimp for months to ensure we can afford presents for our children at Christmas. And birthday parties have likewise been greatly scaled back. We have noticed over recent years that the presents received by our children from their friends on these occasions have got increasingly smaller while some kids, undoubtedly from households under even more pressure than ours, don’t bring presents at all.

Overall the cumulative effect of seven years of fiscal austerity, with the promise of more to come, has severely depressed demand among Irish consumers. Those who are fortunate enough to have money more often than not hold onto it with dear life due to fears for job security or as a hedge against future taxation. As a result, shop and pub closures are a regular occurrence.

And we are not alone. For thousands of others the situation is far, far worse. Behind many closed doors in Ireland, families are silently suffering tremendous despair brought about by financial stress. An acquaintance of mine told me that her husband, a mortgage arrears collection agent working for a bank, witnessed deeply harrowing scenes of families with young children surviving on breakfast cereals and huddling in cold candle lit rooms because their electricity supply had been disconnected.

As it stands, the average Irish household is hugely indebted to the banks, mainly due to the high incidence of homeownership. When this personal debt is added to the overall government debt, we are the most indebted nation on earth. Today, 18.4% of all mortgages are in arrears or have had to be restructured. This is well above the average for a typical industrialised country such as Germany, France, Britain or the US. In response to this crisis, the government has introduced personal insolvency legislation and has drawn up codes of conduct for banks to follow when dealing with mortgage arrears. But many critics say that the rate of house repossessions will accelerate, and the widespread fear that they will ultimately have their homes taken from them still exists among many struggling families.

Meanwhile, across the country doctors report that more and more people are coming to them suffering from crippling anxiety, depression, and insomnia directly attributable to their financial circumstances and pressure from lending institutions. A woman with a young family speaking on national radio said that Saturdays and Sundays were the only two days of the week when she wasn’t overwhelmed with stress. The weekend was the only time when there were no upsetting phone calls from the banks or disconnection notifications from utility providers arriving in the mail.

Unsurprisingly, incidences of suicide have markedly increased because of the economic downturn and the sense of despair brought about by joblessness. Ireland has one of the highest rates of suicide in Europe yet some working in this area have commented that the true suicide rate may be significantly under recorded. This is because many suicides may be wrongly classified as ‘open verdicts’ and thus not included in the overall statistics. Recently, the Wexford County coroner commented that the suicide rate in his region among young people had become a “major epidemic.”

For many, things are so bad that seeking help from charities has become an essential lifeline. Soup kitchens, something that Ireland thought she had seen the last of after the ending of the Great Depression, have opened up in large population centres such as Dublin, Athlone, and Cork to offer food aid to sizable numbers of cash strapped families and individuals struggling to buy even the basics. At the same time, teachers across the country report that many children attend school hungry because there is no food at home. St Vincent de Paul, a nationwide Catholic run charity, distributes food, clothing and other assistance to tens of thousands of desperate people who often have nowhere else to turn. Many of these people seeking charitable assistance, it must be remembered, are very often people who were perhaps once gainfully employed or even self-employed during the boom times.

Since the introduction of austerity, the phrase ‘fuel poverty’ has entered the national lexicon. Most reasonable Irish people accept that the spiralling price of crude on world markets in recent times has raised prices on gas and other fossil fuels. But what is less palatable among people who already struggle to fill their gas tanks and heat their homes, are carbon taxes imposed by the Irish government that further increased fuel prices substantially.  In addition to these tax increases, social welfare fuel allowances have been reduced and many elderly people, who are more prone to the effects of cold winters than younger people, are often compelled go to bed early or wear overcoats in their homes in order to avoid the very real risk of hypothermia.

In fact, the increasing cost of fuel is becoming a major burden for ordinary Irish families. For instance, there are reports that some police officers, who like my wife have suffered sizable pay reductions, are so financially stressed that they are forced to sleep in their police stations as they cannot afford the gas to commute to and from their jobs.

Utility companies too report that tens of thousands are falling into arrears with their heating and electric bills with several hundred being disconnected every month. Meanwhile the cost of fuel has made the theft of home-heating oil a tempting lure for thieves. In fact, every day, unscrupulous gangs roam the country siphoning oil from unprotected outdoor storage tanks.

Invariably, the unrelenting stress brought about by punitive austerity and unsustainable debt creates a huge strain on many relationships and family life.  In my neighborhood, many people I know personally have in recent times separated. In fact, throughout all of Ireland, marriage breakups and incidences of domestic violence have increased. However, many separated couples cannot afford to live in separate dwellings due to the onerous cost of living and the widespread problem of negative equity.

 

It is little wonder then that the unemployment rate still remains stubbornly high at over 11.9 percent. Many of the jobless are people who were previously employed in the construction industry during the Irish housing bubble. Also, most economic analysts agree that the unemployment figure would be much higher if emigration from Ireland wasn’t so high. (One thousand emigrate abroad every week). Recently, the IMF stated that when involuntary part-time workers, that is to say people who have had their working hours reduced are taken into account, the unemployment or “underemployment figure” would stand at a “staggering 23 percent” a figure that would parallel Spain’s horrendous unemployment statistics.

For young people, the unemployment situation is especially bleak. Over thirty percent of those between the ages of 15 and 24 are out of work. The result is that many graduates and school leavers are faced with the stark choice between years on welfare or having to look abroad for job opportunities.

And yet infuriatingly for many people, despite all the apparent suffering and misery created by their policies, the Irish government remains intent on pressing ahead with its avowed aim of paying “our debts” (the tens of billions which were originally the banks’ debts) and sticking rigidly to the breakneck austerity programme imposed on us by the EU, the ECB and the IMF, regardless of the wider societal impact. Enda Kenny, the Prime Minister of Ireland (who incidentally is paid more than Barack Obama) and Michael Noonan, the Finance Minister, say that they have no choice, as the country has just emerged from a bailout programme. But many economic commentators and those who work for the many charities across the country dealing on a daily basis with the ‘new poor’ often counter that the government do have choices. They say that the government all too blithely cut payments and allowances to the disabled, the blind, and other vulnerable groups instead of taxing the more affluent in society. Indeed, since the crisis began, the gap between those at the top and those at the bottom rung of the socio-economic ladder has dramatically increased.

Public servants and many in the private sector have had severe pay reductions or reduced working hours imposed on them while those in charge of bailed-out banks (currently funded by state handouts) still enjoy obscene pay scales.

But it is the general sense of unfairness that most rankles with my friends and acquaintances. Day after day, they read with growing anger newspaper reports of the still lavish lifestyles and pensions enjoyed by the people who destroyed their country. Senior politicians (some of whom left office in disgrace) and bankers, who presided over a massive property and banking bubble, have all long since retired with pension pots worth many millions of Euros. They read about bankrupt property developers, who have had their colossal debts taken off them by the Irish state, still living in their palatial homes, dining in the finest restaurants and seemingly spending their days working on their handicaps on the best golf courses across the globe.

At the end of the day, most of the Irish population can fully empathise with Bob Geldof’s anger at what’s happening in Ireland. In the eyes of many, our politicians seem more distracted by sorting out the banks and spinning positive sound bites about the macro economy than standing up for those they represent. So as many people of my generation become increasingly crushed under the twin boulders of austerity and debt, many are coming to the same depressing conclusion as Bob Geldof’s taxi driver; that we really “were never meant to be rich.”

 

 

 

 

 

References

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