March 21, 2012
Why should ECB be given priority over our families?Posted in Irish Independent · 168 comments ·
Last year 76,300 people emigrated from our country. This is an average of 209 emigrating every day. Nine people left every hour. One person left every seven minutes. The people who are leaving are young, and well-educated. In the last great scattering of the Irish in the late-1980s, we know that a university graduate was four times more likely to emigrate than someone who left school before the Leaving Cert.
It was an enormous brain drain. However, for the first time in Irish history many came home in the late-1990s and early-2000s. As a member of that particular tribe being described one Christmas back home as a “financial navvy” for working in a bank in London, I am now a member of the first Irish generation that will emigrate twice.
In recent months, we are seeing something without precedent.
Emigration, which used to be the preserve of the young, is creeping up the age brackets. Now emigration of the middle- aged or the nearly middle-aged is becoming quite normal. People in their early 40s — who came back here to build their lives — are having to head out again looking for a second chance.
Today, a new type of Irish navvy — the “mortgage navvy” — has replaced the financial navvy. He is the Irish middle-aged man who is working flat out over there to pay debt over here. Years ago, we got the name “navvy” because our forefathers dug the canals in the north of England during the Industrial Revolution when the canals were termed “navigations”. Those who worked on the navigations were called navvies.
The new mortgage navvy is typically an Irish dad with a young family here in school, with a big mortgage in negative equity, who has lost his job here and has headed to London for work.
Many families are being torn as dad is only there at the weekend because he arrives in knackered on the Friday evening from London and then he is off again late Sunday night or first thing Monday.
In order to meet the big mortgage, he has to generate lots of cash and this means that even if he could find a new job here, which is unlikely, his cost base remains very high by virtue of the 2005 mortgage taken out to buy a family home, nothing special. He can’t sell the house because this will realise the negative equity and he is holding out, hoping that at some stage prices will rise so that when the ‘interest only’ loan is paid off in 2030, there will be some chance that the capital will equal the remaining debt on the place.
You will see him on the red-eye flight on a Monday morning, having spent the weekend trying to overcompensate for not being here with the kids all week. So he will be on the sideline at soccer, GAA or rugby and sitting in McDonald’s with the kids who know that dad will buy them anything and take them anywhere when he is home.
His missus, if they manage to stay together because they are apart so much, is a new type of Irish wife. She is a “mortgage widow”. She has been rendered a single parent by virtue of the size of the bloody mortgage. She lives alone in the family home, sitting in front of the TV when the children have been put to bed.
Typically a mortgage widow will have given up a career to have children in her early 30s and she fully expected to move back into employment after the initial early child-rearing years were over. The recession has put paid to that notion, as too have the demands of looking after three children by herself. By the time the mortgage navvy gets home on a Friday night, they are both knackered and whatever spark there was is quenched by the second bottle of red and the ‘Late Late’.
The other morning, this new reality for many of my own generation came to the fore as I was listening to John Teeling on the radio. Teeling is a businessman whose most recent and well-known success was the sale of Cooley Whiskey Distillery, but he has been involved in the mining and exploration business for years.
He made the basic point that this column has been making for ages: if you take more and more money out of the economy with expenditure cuts and tax hikes, the economy will shrink. He said, as any businessman would say, that if your balance sheet is broken with too much debt, you make it better with less debt, not more debt. He spoke of the Irish middle class being destroyed under the weight of too much debt and negative equity.
His solution is a debt deal, which involves a suspension of all debt repayments on a proportion of our debt for a period of five or six years. This would allow us to get back on our feet without the constant haemorrhaging of cash. Such a solution makes total sense because this is what a company would do which has a decent underlying business but has a balance sheet which is being weighed down by too much debt. To preserve the company you tell the creditors to wait.
The reason this idea struck a chord with me is that Teeling went on to talk of what he called Noonan bonds, based on the notion of Brady Bonds which solved the Latin American debt crisis in the 1990s. This column has argued for Brady Bonds to solve Ireland’s debt crisis for a few years now.
When I was a financial navvy in the 1990s I worked in the Brady Bond markets in countries such as Brazil, Venezuela, Russia and Argentina. All these countries recovered strongly after their defaults with the help of Brady Bonds. Not one of these countries had a debt/GDP ratio anywhere near as high as Ireland does now.
As growth returned, people came back to these countries and, interestingly, none of them were permanently shut out of the markets for long. Only Argentina, which tried to take the US dollar — the currency of a much stronger neighbour — as its currency, got into trouble again. We are doing what Argentina did back then by taking the de facto currency of Germany — the euro — and pretending it is our currency. It is not. It can’t be our currency if we can’t print it or change its value. Period.
Teeling is right. A massive debt deal is the only solution. It is not if but when. The only choice is whether the deal should be such that it gives the thousands of mortgage navvies and mortgage widows a break and the chance to have a normal family life for the most important time in families when their children need to be reared.
What do you think? Do they merit a break? Or will we be the society that has a constitution, which says the family is protected but we put the interests of the ECB over and above the Irish family?