Forget that Troika: you need one for your own family

Adjusting our expectations about money – how much we can afford to spend as opposed to how much we’d like to spend; how much we need to live on and how much we’d like to live on – is something that I don’t think has been properly thought out yet in post Celtic Tiger Ireland.

Adjusting our expectations about money – how much we can afford to spend as opposed to how much we’d like to spend; how much we need to live on and how much we’d like to live on – is something that I don’t think has been properly thought out yet in post Celtic Tiger Ireland.

Money Express with Jill Kerby in association with Aviva

Everyone, from the politicians who are implementing the (possibly) fruitless austerity conditions imposed by our Troika paymasters in the EU/ECB/IMF, to big companies that are choosing to cut jobs first before cutting their own structural overheads or shareholder’s dividends, or those of us who cling on to unaffordable are missing the reality of the profound changes that happened when the boom ended in 2007-8.

We all need to start coming to grips with the new reality:  that most of us are going to have to make do with less earnings, less credit and the opportunity to accumulate less new stuff for quite some time.

That the natural expectation for home ownership for all, advanced education for our children and first world health care for free just isn’t affordable right now.

If there is one lesson that is being forced upon us by the debt deleveraging deal that’s been made on our behalf by the government with our creditors, (culminating in a permanent EU Fiscal Treaty that we’ll just have to keep voting for until the EU gets the answer it wants), it is that Ireland Inc is also going to have to live not just within its means in the future, but below its means for quite a while too.

You can argue until the entire European herd of privileged and pampered cows comes home that the error in lending us too much money over the past decade was as much our German and French creditors’ as our own, but I expect that argument will only work once – for Greece.

I’m guessing that we’re going to need a huge debt-writedown too, but every tax hike and levy we pay, every cut in public services we tolerate, shows the Troika that we still have a considerable capacity to absorb the financial shocks of the ‘Great Deleveraging’.

Our politicians and the technocrats believe there is no stomach here for Greek-style anti-austerity protests here for at least five reasons:

l We’re literally, not hungry enough: €20 billion is still being paid out in social welfare benefits to ensure no one starves.

l There are no mass property foreclosures or evictions because the government controls the main mortgage providers.

l The return of mass emigration/continuing job opportunities in Australia, New Zealand and Canada.

l Public sector pay and jobs continue to be protected by the Croke Park Agreement. In other words, that portion of the €18 billion still being borrowed from the EU to cover the annual budget shortfall is paying for industrial peace.

l Three foreign export sectors – pharmaceuticals/medical devices, information technology and agriculture – keep providing well paid jobs.

l There is still €88 billion under investment in private pensions and over €90 billion in household savings. This money is a last-resort source of debt repayment.

For the moment at least, what’s not to like about Ireland if you are one of her creditors?

The domestic, non-government economy is paying for the bulk of the deleveraging and will do so until it can’t, or until good sense prevails in Dublin, Brussels, Berlin and Washington and proper debt restructuring/write-down plan is adopted.

In the meantime, our government is right that Ireland won’t get out of this vast financial hole without help.

They’re just not getting the ‘right’ kind of help from our European partners and American friends.

So until they do, how about creating your own Family Stability Fund and Fiscal Treaty for your wider circle of family and loved ones (who may not have a family)?

l First, produce an up to date family balance sheet and budget. Don’t be shy – put it all down: all the assets, income, debt, expenditure, savings and investments of every member of your household.

l Consider widening the exercise to include other roots and branches of the family like siblings, parents and grandparents in order to assess the assets and liabilities of the wider ‘Family Union’ (to be referred to as the FU especially when dealing with unpleasant creditors). Take advantage of the negotiating strength that comes in numbers.

l Create your own ‘Troika’ – a committee of financially solvent, clued-in family members from each generation:  grandparents/elders; parents and young adult children. The Troika can then try to come up with a strategy that can – temporarily - distribute surpluses, help to sell/rent assets to recapitalise the indebted; invest in existing or new business ventures that might prevent the insolvency, bankruptcy or forced emigration of family members/friends.

l A job creation plan can be created too, using all the personal contacts, skills and resources of the FU to find, create or finance an Irish-based job for every FU member who needs one

I’ve been describing this as a ‘Build an Ark’ process in recent months. It takes time. We’ll come back to this subject soon.