“Too much” is a very vague term. It would be more accurate to say “What happens when people don´t want to lend to governments anymore”.  Nonetheless, if a debt or a deficit is perceived to be too high, a country needs to borrow less, spend less and/or grow more. These are very difficult options.
 
For Ireland this meant higher income taxes, higher VAT, lower public salaries, higher retirement ages, lower capital spending and less state support for the elderly and children. Tough medicine to be sure, but I´m proud to say we had the stomach for it, unlike lots of other (mostly Mediterranean) countries that should be taking similar measures.

France is a good example. There was a massive public uproar recently when the retirement age was increased … to 63 years ….in small increments between now and 2018. They´re getting no sympathy from me!   
 
Germany, on the other hand didn´t need to do anything nearly as extreme as the Irish because they are a conservative and prudent economy with low wages and high productivity. Between 2001-2006 they were drinking diet cokes while the Irish, French, British and Spanish were downing straight whiskies and margaritas. Their finances were fine and thanks to their awesome economy they can grow their way out of a recession a lot quicker than everybody else.
 
These are among the reasons we´ve started promoting multi tenanted German properties in key locations. 
 
Feel free to call or email me (investments@torcana.com) if you´d like to learn more.   

Kind Regards

Colin Murphy

About 45% of our clients and visitors to www.torcana.com are based in Ireland, so we pay very close attention to the political and economic situation on the ground. Unfortunately it looks increasingly likely that Ireland is going to be very volatile over the next 6-12 months. The Lisbon Treaty is coming up in early October, which is extremely important to ratify but a huge distraction in terms of rebalancing the economy and overall employment.

There is also a budget coming in October where details of roughly $5billion in cuts/savings in public expenditure will be announced which will face very heavy resistance from the unions and large sections of the general public.

But of course, our headlines will also be dominated by the NAMA legislation due to be debated shortly. It is probably the most controversial and most important legislation that our country has ever debated. I’m far from convinced myself that the government are taking the correct course of action with this. 

No doubt many politicians and bankers wish they’d taken a different career path. 

Alas, the Irish economy is far from recovery and property prices need to fall an awful lot more before they’ll get this investor interested. However, and belatedly, other countries are positively brimming with opportunities.

For more information, please see www.torcana.com.

Kind Regards

Colin Murphy

Director

Torcana Ltd

While Irish taxpayers will understandably be galled at the thought of paying for non performing property loans; I don’t really see what difference it makes whether the loans based on the purchase of Irish or foreign land. The purpose of the National Asset Management Agency or the “bad bank” as it’s more commonly known, is to provide certainly about Irish banks balance sheets by removing assets whose value is worrying investors.
 
This should give investors a measure of confidence, as the government is effectively forcing the banks to write down the value of the loans before taking them over. However, they’ll be concerned about the (vague) levy that could be charged back to the banks (and hence their investors) if the Irish government makes a loss on these assets down the line.

I actually think the worst performing loans are going to be those given to purchase scandalously overvalued Irish land (a prime example being the Jurys Ballsbridge site in D4). I don’t see why they wouldn’t be able to recoup a decent percentage of loans given to purchase in places like Florida and Birmingham (given time), although I’d imagine most of the Eastern European loans (a very small percentage of the total) will simply be written off.

Kind Regards

Colin Murphy
Director
Torcana Ltd