Wednesday, November 19, 2008

What's going to happen next?

With bank shares at yet another all-time low, dire economic forecast on every news bulletin, house prices down 15-20%, doom and gloom all around, one has to wonder what’s going to happen next? While the rest of the world appears to be stabilising slightly, it seems that Ireland is sinking further and further, with no sight of the bottom yet.
The banking crisis has been the trigger for all the difficulties we are facing today. Over-lending for property and personal spending reached epic proportions in 2006 and 2007, while Ireland Inc. partied like there was no tomorrow. We are now suffering a collective hangover, with no immediate remedy.

According to reports, the Taoiseach told the Dáil today that recapitalisation of the banks alone will not solve the issue of access to credit for small businesses. During leaders' questions, he said the Government was looking at range of measures to remedy the liquidity problem but he said he was constrained in revealing what they were.

This is bad news. This Government has failed in every major initiative it has tried to launch, including its Budget. They do not seem to have any imagination, and even when they decide on a course of action, they are unable to see it through to finality. The fact that they are “looking at range of measures to remedy the liquidity problem” probably means they have little or no idea what to do! Even if they do, they will probably be too hamstrung to put it into action.

Unless they can come up with a comprehensive plan and can put it into action now, it now seems likely that a number of our banks may fail, while others might be taken over by predatory foreign interests. This will be a disaster of unimaginable proportions for the country. Even now, there is little or no hope of small businesses getting credit. This is causing huge cash-flow difficulties. Many solid businesses will go broke. Unemployment will soar at a time of low tax revenue. We can only hope it does not come to pass.

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