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Here come the bad house debts - Irish family with mortgage debts left in nightmare situations

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Christine Lagarde and Taoiseach (Prime Minister) Enda Kenny in Dublin last week.
Christine Lagarde and Taoiseach (Prime Minister) 
Enda Kenny in Dublin last week.

In the last few weeks we have been listening to lots of positive noises being made about Ireland.  For the first six months of this year Ireland holds the EU presidency, so there are important people visiting here all the time for important EU meetings and they tend to say nice things about us when they're here.

Recently it was European Commission President Jose Manuel Barroso who hailed our economic recovery, saying the country is "turning the corner" and well on the road to recovery.

"Confidence is returning to Ireland and to Europe," he said at a meting of business leaders in Dublin.
As if we were not glowing enough already from that, he added that Ireland was a "shining" example of how a country can recover after it has been bailed out.

Last week it was the turn of the IMF's managing director Christine Lagarde.   In Dublin for meetings, s Lagarde poured on the charm.   She heaped praise on the government for the way we have faced up to the painful restructuring necessary to deal with the economic crisis.

"What has been done (in Ireland) is huge by any standards," she said.    The way in which we have implemented the bailout program (of spending cuts and tax hikes) has been "extraordinary."

She was so effusive in her praise that she managed to make our Minister for Finance Michael Noonan blush, according to the papers. Although that may have had more to do with something she said about how understanding of women he is (it was International Women's Day).

In return he took her for a glass of Guinness in a pub near the government offices when the day's work was over.  And she wore her lovely green scarf for all the press pictures when she was here to prove she knew what country she was in.

All of which is supposed to make us all feel much better.   It's always nice to hear people saying nice things about you.

On top of that, of course, there are three significant developments which have added to an emerging feeling here of hope, even confidence, about the  future.

There was some slight growth in the Irish economy at the end of last year.   The markets have been so impressed by the difficult steps we have taken towards fiscal sustainability that they have indicated a willingness to start buying our bonds again on a big scale and thus enable us to exit the EU/IMF program on schedule.  

And we have secured a long-term restructuring deal on about half of our bank debt (the Anglo promissory notes part) with an expectation that a deal on the other half may yet be achievable with the EU and the IMF.

So is everything in the garden as rosy as Lagarde suggests in public?   Not at all. Lagarde is a lawyer, not an economist.  

That's worrying enough, but there is another reason why we need not be too impressed by her sweet talk (and I'll come back to that at the end of this column).

There was, however, one aspect of her visit here which made few headlines because it happened behind closed doors.  Seemingly she laid it on the line to the Irish ministers and officials that something has to be done quickly to prepare for the tsunami of bad mortgage debt that is gathering in the Irish banking system.

You don't have to be an economist to see how serious it is.  Even a lawyer can see that it's bad.  

So far it's a crisis that has been largely ignored in the faint hope that the market might improve enough to sort the problem out.  For that reason, the scale of the developing mortgage crisis has not been as widely understood as it should be.

But the fact is that the crisis in domestic mortgages here is worse than anything that the speculators and developers managed to do to us.

The property crisis did not just hit developers and construction companies here.   There are tens of thousands of people here who bought houses and apartments during the boom that they can no longer pay the mortgage on.  

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