Ireland: selling the family silver

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The World

DUBLIN, Ireland ─ Like to buy a nice new airport? No? How about a railway network or a power station? Well then, wouldn't you like to have a bus company, or a harbor, or a television service or a chain of post offices?

Anyone of these properties could be yours; all reasonable offers considered. They are slated to come under the auctioneer’s hammer in a fire sale of national assets in Ireland.

Like a household up to its ears in debt, the Irish government is planning to sell off the family silver to make ends meet.

Minister for Finance Brian Lenihan appointed a commission on July 22 to look at the possibility of unloading these assets to help meet Ireland’s crippling national debt of 84 billion euros ($108 billion). The planned sale is an indication of how desperate the financial situation has become since the Irish property bubble burst three years ago. 

A nation listed the as the sixth richest non-oil country in the world by Standard & Poor has seen a sharp decline in wealth and economic activity. Tax revenues have collapsed and the government is struggling to keep its controversial pledge of two years ago to bail out the country’s banks, which are floundering under the weight of reckless loans.

This has created a black hole into which tens of billions of euros are disappearing. The worst offender, Anglo Irish bank, is in the process of transferring loans with a nominal value of 35.6 billion euros ($45.5 billion) to Ireland’s “bad bank,” the National Asset Management Agency, known as “Nama.”

Irish Property developers — until recently members of the world’s rich set — are now saddled with immense debts, such as Dublin-based Paddy Kelly who was worth 350 million euros ($455 million) in 2007 and now owes 350 million euros.

Sean Fitzpatrick, the former chairman of Anglo Irish and a poster boy for the excess of the Celtic Tiger era, was declared bankrupt last month owing 150 million euros ($195 million), a rare event in Irish economic life.

Ireland emerged from recession in the first quarter of this year, helped by profitable multinationals, but it is a jobless recovery and little new wealth is being created.

Banks are tight-fisted, unemployment is rising and emigration is increasing. A ruthless government is slashing public spending and state salaries while raising taxes to prove its credit worthiness to the financial world.

There are even proposals before the government to impose tolls on country roads rather than just motorways, such is the desperation to squeeze more euros from dwindling personal incomes.

U.S. economist Paul Krugman, writing in his New York Times blog last week under the heading “Leprechauns and confidence fairies,” maintains that this is a mistake, and that the Irish government “should do all they can to avoid prolonging the slump even further, that austerity may be self-defeating.”

But Cliff Taylor, editor of the Irish financial newspaper The Sunday Business Post, responded: “If the government did pump money into the economy it would lift things a bit, no doubt, the more pressing problem is that we haven’t got any money to pump in.”

Which comes back to the plan to sell off state assets to raise cash. The full list of properties targeted by the new Review Group on National Assets, chaired by “slash and burn” economist Colm McCarthy, has been published on the finance department’s website.

It includes 28 semi-state bodies, commercial enterprises owned outright or controlled through majority shareholding by the Irish government. Some are national icons, like RTE, the state radio and television station. Others are more mundane concerns like Dublin’s unionized bus service.

There will be a furious political and popular response when the “for sale” signs go up. A Sunday Tribune investigation of previous government sell-offs shows that more than 8,000 workers were made redundant once their companies fell into private hands.

Economist Jim Power pointed out that “given the massive failures in the private sector, particularly in the banks, it cannot be taken for granted that the private sector will do any better.”

Irish people remember the debacle over the 1998 sale of the national telephone company, Eircom. Tens of thousands of citizens who — on the urging of the government — took out shares lost out as the stock market value fell. Moreover, the number of employees dropped from 11,000 to 6,000, its nationwide broadband rollout was patchy, many of its assets were stripped and it now has debts of 3 billion euros ($3.9 billion).

A disincentive for prospective international buyers is that some semi-state bodies, relics of a pre-modern Ireland, with guaranteed employment and pension plans, are heavily in debt. Dublin Airport Authority which has borrowings of over 1 billion euros ($1.3 billion).

Apart from assets such as the Electricity Supply Board, worth an estimated 7 billion euros ($9.1 billion), rich pickings from among the family treasures are actually quite slim. The problem with a national fire sale of Irish assets is not so much what it might raise, or even whether it is a good idea, but whether anyone will turn up.

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