IRISH TIMES ECONOMIC DEBATE

'We are the silent poverty class . . . there is absolutely no help and no one is listening' - IRISH TIMES    LINK

"We are not entitled to a grant or any help but the reality is that we have nothing," says a garda's wife who wrote to a number of politicians last week to outline her family's day-to-day struggle.Photograph: Getty Images

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• ‘There are weeks I can’t put food on the table’ | 17/10/2012

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KATHY SHERIDAN

“BEFORE WE start”, said the woman from the Money Advice and Budgeting Service (Mabs), “you should know you’re the seventh guard in here in 10 days.” Seated in front of her were a despairing Garda sergeant and his wife. The Mabs adviser was attempting to reassure them that they were not alone.

Colm and Jean (not their real names) had been floundering for a while. Over several years, Jean had been in contact with this reporter, describing the struggle of people on so-called middle incomes: “We are the silent poverty class. We’re not the kind to ring Joe Duffy or give our names but I’m sure there are thousands like us. There is absolutely no help and no one listening . . .”

Last week, in desperation, she wrote a letter to a number of politicians, including Minister for Transport Leo Varadkar, “mainly because every time I hear him on the radio, he seems to be very anti-public service – as are all his backbench Fine Gael colleagues”.

In the letter, some details of her family circumstances were changed to protect her husband’s identity. However, The Irish Times has since met her and established the facts to its satisfaction.

The couple’s financial problems had been brewing for about seven years, since they bought a well-located but modest, four-bed semi-detached house with an extra bedroom and a better choice of schools for their children. “It was when prices were at their peak . . . We didn’t know that,” she says.

Now, after computing the household figures, the Mabs adviser was focusing on the mortgage of nearly €1,400 a month. Unless Colm started selling impounded drugs, she joked, they would have to seek help from St Vincent de Paul. She would be happy to refer them. In her long, neat columns of income and outgoings, the family’s “available income” per week came to minus €286.36. The mortgage is over the next 25 years and her husband is over 50, Jean wrote.

“ . . . Interest rates are only going to go one way and that’s up . . . I am scared for our children’s future and ours. There are weeks when I can’t put food on the table . . . To the outsider, we look like we have it all . . . Inside we are having a nightmare.

“Whilst we pay our mortgage every month we have absolutely no extra cash at all after all the bills are paid. We live in constant terror of the washing machine breaking down or the car”, she wrote.

“If it wasn’t for my mother bailing us out all the time, we would be right under,” she added.

The effect of constant scrimping and worry leaches into every crevice of family life. There are what she calls “cornflakes days”, when they eat nothing else. There is the pain of seeing their eldest child make it to a prestigious third-level course, but unable to register because they can’t assemble the fees: “Imagine how upsetting that is?”

The younger children are resigned to the fact that they can’t attend birthday parties because the standard €20 gift is way beyond the family’s means.

“We have no savings, no holiday home, no fancy cars,” she wrote. “We have never done anything to put ourselves at risk, only move house to have an extra bedroom . . . We are dying a slow death. We go nowhere.”

Piano or swimming lessons, are unthinkable. She pays the TV licence in dribs and drabs to keep out of the courts. A repair man arrives and gives an estimate of €100 to fix the dishwasher. Later, sitting in the unheated house, she says her parents, a couple on “ordinary pensions”, will probably pay for the dishwasher and the college fees.

How can this happen to a family with an annual income of about €75,000 gross (including overtime and allowances) last year? To a Garda officer in possession of that holy grail of the permanent, pensionable, public sector job? To a family that didn’t party, or buy the Spanish villa, that always paid its bills on time and made sacrifices to maintain the health insurance payments? The payslip is revealing. The health insurance payment to the Garda scheme is €75 a week. The pension-related payments amount to even more.

Some years ago, they prudently joined the Garda credit union’s billpay scheme by which all their bills – including the mortgage – were calculated on a budget plan, and €528 a week deducted at source to pay them (identified as “St Raph BV” on the payslip).

However, price rises in gas, petrol and electricity mean the sum is no longer sufficient to cover the bills. Garda overtime is not available anymore, they say, and the allowances are under threat. They know that the €77.06 weekly rent allowance (designed to cover the cost of gardaí being obliged to live away from their home area), will probably be a target of the cuts.

After six years’ service as a sergeant, the basic salary before allowances is €51,084 but clearly, their day-to-day living expenses have come to depend on the allowances and child benefit. Not featured in the payslip is a payment of €500 a month, after tax, to cover unsocial hours. For Colm, this is compensation for six consecutive nights a month of 10-hour duty, plus Saturday and Sunday work.

After all deductions, he is left with about €109.22 net on his weekly payslip to cover all other costs. Their great fear now is of losing any of those allowances, which Jean describes as a lifeline. If the rent allowance was cut, for example, he would be left with about €30 on his payslip in an average week to cover essential outgoings.

The picture painted by the Mabs adviser is not quite as cheerful. She calculated the family’s net pay and child benefit total at €807.37. After totting up the mortgage payment and items such as fuel, food, clothing and footwear, education/medical/ transport, bin charges etc, she saw no way of getting their outgoings below €1,100 a week.

Seven years ago, said Jean, the price of their new house included €36,000 stamp duty. “And now they are coming after us for property tax and child benefit cuts . . . We are not entitled to a grant or any help . . . At least if I was on social welfare, my [child] would get a grant for college, I would get the interest paid on my mortgage and I would get medical cards. At the moment, I can’t afford to bring my children to the doctor.”

She wonders in the letter how they can be expected to give more, concluding: “We are a sinking ship and nobody is throwing a rope.”

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BrianClarkeNUJ

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BrianClarkeNUJ

The solution to Ireland's problems is very simple but non one in Ireland wants to listen.http://www.informationclearinghouse.info/article32... There is more than enough for everyone in Ireland to have a quality life its just that the banksters have Irish people at each others throats instead of the island being united together to solve their problems like Iceland

Wednesday, October 17, 2012, 17:14:31

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BrianOCinneide

I would say that the problem here is the bank that lent them the money for the house in the first place. The courts should be able to reduce the mortgage repayments to what the mortgagee is able to pay.
Furthermore let the begrudgers stop complaining about the Public Service. Where would they be without the gardai and other civil servants?

17 Minutes Ago

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marsbillie

Without wishing to sound mean, this article I guess sums up the differences between wants and needs in modern society. The emphasis on a broken dishwasher is staggering. I know people living on 4 times less who have managed for years, ask a foreign national whom came to this country. It is also rather insightful that Public servants must have their kids in college. This is truly a money management and planning, or lack thereof issue, hence MABS. Move along. There are people more deserving.

StephenDifc likes this.

21 Minutes Ago

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StephenDifc

75,000 gross? Are you having a laugh? Maybe it is a money management problem? For example: "Estimate of €100 to fix the dishwasher" How much is a sponge, a bottle of fairy and asking the kids to do it?

BrianOCinneide and StephenDifc like this.

24 Minutes Ago

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BrianOCinneide

Like foreigners, eh?

16 Minutes Ago

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SmellybeardM

Tough but fair.

a well-located but modest, four-bed semi-detached house with an extra bedroom and a better choice of schools for their children.

On a basic of 51k?

StephenDifc likes this.

Top Economists: Iceland Did It Right … And Everyone Else Is Doing It Wrong

Iceland Shows the Way

By WashingtonsBlog 
August 25, 2012 "Information Clearing House" ---- Nobel prize winning economist Joe Stiglitz notes:

What Iceland did was right. It would have been wrong to burden future generations with the mistakes of the financial system.

Nobel prize winning economist Paul Krugman writes:

What [Iceland's recovery] demonstrated was the … case for letting creditors of private banks gone wild eat the losses.

Krugman also says:

A funny thing happened on the way to economic Armageddon: Iceland’s very desperation made conventional behavior impossible, freeing the nation to break the rules. Where everyone else bailed out the bankers and made the public pay the price, Iceland let the banks go bust and actually expanded its social safety net. Where everyone else was fixated on trying to placate international investors, Iceland imposed temporary controls on the movement of capital to give itself room to maneuver.

Krugman is right.  Letting the banks go bust – instead of perpetually bailing them out – is the right way to go.

We’ve previously noted:

Iceland told the banks to pound sand. And Iceland’s economy is doing much better than virtually all of the countries which have let the banks push them around.

Bloomberg reports:

Iceland holds some key lessons for nations trying to survive bailouts after the island’s approach to its rescue led to a “surprisingly” strong recovery, the International Monetary Fund’s mission chief to the country said.

Iceland’s commitment to its program, a decision to push losses on to bondholders instead of taxpayers and the safeguarding of a welfare system that shielded the unemployed from penury helped propel the nation from collapse toward recovery, according to the Washington-based fund.

***

Iceland refused to protect creditors in its banks, which failed in 2008 after their debts bloated to 10 times the size of the economy.

The IMF’s point about bondholders is an important one:  the failure to force a haircut on the bondholders is dooming the U.S. and Europe to economic doldrums.

The IMF notes:

[The] decision not to make taxpayers liable for bank losses was right, economists say.

In other words, as IMF put it:

Key to Iceland’s recovery was [a] program [which] sought to ensure that the restructuring of the banks would not require Icelandic taxpayers to shoulder excessive private sector losses.

Icenews points out:

Experts continue to praise Iceland’s recovery success after the country’s bank bailouts of 2008.

Unlike the US and several countries in the eurozone, Iceland allowed its banking system to fail in the global economic downturn and put the burden on the industry’s creditors rather than taxpayers.

***

The rebound continues to wow officials, including International Monetary Fund chief Christine Lagarde, who recently referred to the Icelandic recovery as “impressive”. And experts continue to reiterate that European officials should look to Iceland for lessons regarding austerity measures and similar issues.

Barry Ritholtz noted last year:

Rather than bailout the banks — Iceland could not have done so even if they wanted to — they guaranteed deposits (the way our FDIC does), and let the normal capitalistic process of failure run its course.

They are now much much better for it than the countries like the US and Ireland who did not.

Bloomberg pointed out February 2011:

Unlike other nations, including the U.S. and Ireland, which injected billions of dollars of capital into their financial institutions to keep them afloat, Iceland placed its biggest lenders in receivership. It chose not to protect creditors of the country’s banks, whose assets had ballooned to $209 billion, 11 times gross domestic product.

***

“Iceland did the right thing … creditors, not the taxpayers, shouldered the losses of banks,” says Nobel laureate Joseph Stiglitz, an economics professor at Columbia University in New York. “Ireland’s done all the wrong things, on the other hand. That’s probably the worst model.”

Ireland guaranteed all the liabilities of its banks when they ran into trouble and has been injecting capital — 46 billion euros ($64 billion) so far — to prop them up. That brought the country to the brink of ruin, forcing it to accept a rescue package from the European Union in December.

***

Countries with larger banking systems can follow Iceland’s example, says Adriaan van der Knaap, a managing director at UBS AG.

“It wouldn’t upset the financial system,” says Van der Knaap, who has advised Iceland’s bank resolution committees.

***

Arni Pall Arnason, 44, Iceland’s minister of economic affairs, says the decision to make debt holders share the pain saved the country’s future.

“If we’d guaranteed all the banks’ liabilities, we’d be in the same situation as Ireland,” says Arnason, whose Social Democratic Alliance was a junior coalition partner in the Haarde government.

***

“In the beginning, banks and other financial institutions in Europe were telling us, ‘Never again will we lend to you,’” Einarsdottir says. “Then it was 10 years, then 5. Now they say they might soon be ready to lend again.”

And Iceland’s prosecution of white collar fraud played a big part in its recovery:

[The U.S. and Europe have thwarted white collar fraud investigations ... let alone prosecutions.] On the other hand, Iceland has prosecuted the fraudster bank heads (and here and here) and their former prime minister, and their economy is recovering nicely … because trust is being restored in the financial system.

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