“We were on the up and up,” Condra said.
The Condras are among hundreds of thousands of Irish who, over the last few years, finally started to catch up with and even surpass many of their European neighbours. But now, after a stunning plunge fueled by a disastrous banking collapse, the economy has fallen back to where it was in 2005, before a housing bubble stoked a growth frenzy.
“The last several years of growth in Ireland have effectively been wiped out,” said Constantin Gurdgiev, an economist and lecturer at Trinity College in Dublin. For many people in Ireland, it is as if the boom never happened. And some of those who floated up during the good times now see themselves slipping even further behind.
“It’s like we drew the lottery ticket made in hell,” said Condra, who says he gets by with only two pairs of shoes, one for work, so that he can afford to meet the needs of his growing children. “Suddenly we see that the Europe we’ve bought into isn’t a golden utopia.”
Benefiting from years of low interest rates that followed the creation of the euro zone in 1999, Ireland enjoyed one of the biggest growth spurts of any country in Europe, and spent lavishly as its wealth increased.
The economy expanded an average of 7 per cent in the decade leading up to 2007 before plunging into a deep recession. Per person, inflation-adjusted economic activity has fallen approximately 18 per cent from the peak, when the average gross domestic product per person was a shade over 43,000 euros ($62,000). Now it is less than 35,000 euros ($50, 767).
As the country tries to recover from the bust, many of its people are paying a tremendous cost for the folly of the country’s banks and to bring its government finances back in order.
As part of Ireland’s effort to pay down its immense debts and bail out the banks, the Condras’ salaries from their state jobs as hospital workers have been cut 20 per cent in two years. Higher taxes and further spending cuts are on the horizon.
Moreover, the European Central Bank, for the first time in three years, is raising interest rates, which will increase borrowing costs on existing home loans. That frightens the Condras even more.
“Now we’re terrified that we won’t be able to pay our mortgage, and could move into social housing,” Condra said.
Even people with good incomes who have not been hit as hard as the Condras are convinced that Ireland is facing years, perhaps a full generation, of economic struggle. With unemployment at 14.7 per cent, thousands of young Irish people continue to leave the country to find work. Those who have good, secure jobs here are thankful, but even they worry about the future and are rationing spending. Household savings surged to 11 billion euros in 2009 from 3.5 billion euros in 2008, and net disposable income fell.
Glimpses of renewal
There are glimpses of renewal. Exports from multinational companies like Intel, Pfizer and smaller manufacturers are surging as wages become more competitive and help to lower production costs, giving hope for future growth.
Signs of a real estate recovery have even emerged, with buyers flocking to recent auctions to snap up distressed properties. Patsy Carney’s generic pharmaceuticals export business, EirGen Pharma, has been thriving. He has hung on to the 40 employees at his plant in Waterford and hopes to hire 60 more people.
Nevertheless, he recognises what the collapse has meant for the Irish as a whole. “You see it all around you, all the people out of work, and there’s nothing turning up,” he said.
“It’s frightening.”
In Ireland, treatments at suicide prevention centers increased by a third last year, with sudden financial troubles cited most often as the cause of despair. The biggest fear is that growth and jobs are not going to return as quickly as promised. Instead of investing in its future, Ireland is committed to spending at least 46 billion euros to bail out its banks, and must pay a substantial interest rate, about 5.7 per cent, on an 85 billion euro European rescue package. And fears linger that Ireland could default on its debts.
Angry voters swept out the government in March, making Ireland the first euro club member to punish its leaders for their handling of the economy. But the new prime minister, Enda Kenny, has little choice but to follow the austerity blueprint, which the International Monetary Fund now acknowledges is delaying recovery. The fund cut its 2011 growth forecast to 0.5 per cent, down from an already meager 0.9 per cent, as a programme to save an additional 15 billion euros over four years kicks in.
For the Condras, it seems like only yesterday that everyone in Ireland was living better than ever — even people who had been near the bottom. Two years ago, Brian’s take-home pay as a hospital porter in Dublin was 1,200 euros ($1,718) a month. He and his wife were able to begin saving for their children’s schooling, and secured their first loan ever to buy a small brick row house.
Their fortunes suddenly changed, though, when Ireland’s banks went bust. Unlike Iceland, which did not save its debt-ridden banks, the Irish government decided taxpayers would pay the full bill, which adds up to more than 10,000 euros per person.
Brian’s pay was gradually whittled down. He now earns 240 euros ($344) less a month, and his wife’s income fell after she cut her work hours to stay home and reduce their child care expenses.
The forced austerity is tough, but his biggest fear, Brian said, looking at his three young children as they pried open a chessboard, “is that my kids will get caught up in a poverty trap.”
The couple has stopped setting aside money for higher education so they can meet the mortgage payments. They no longer pay their electricity bill on time and have begun scrimping on items they took for granted, like butter. Birthday parties for their children have been stopped; a vacation trip is out of the question.
Carless, Brian spends an hour on the bus each way to and from his job in Dublin; when he sees a politician in a shiny black sedan through the window, he fights back his anger. He has not bought a pair of jeans in a year, and Rosie has taken the pragmatic step of wearing her flat wedding shoes around the house.
Nearly everyone they know is underwater on their mortgage; one neighbour expects a foreclosure in two weeks. And last month, eight homes in their otherwise quiet working-class neighbourhood were burgled.
