Ireland: Selling the Family Silver

A couple of weeks ago I posted a talk by Paul Volcker. Volcker's message was sobering but he did close with a note of optimism: Ireland, he said, seemed to "get it" and was taking the appropriate - albeit painful - medicine now in order to get its fiscal house in order.

Well, maybe, but if you live in Ireland it's not so easy. Apparently the Irish government is trying sell a number of government-owned entities in order to raise cash. These sales are not without its controversy, as this article from the Global Post indicates:

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.

And then later:

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).

Higher taxes, massive layoffs, restrictive fiscal policy - let's see if the Irish approach works, since we may be heading that way in this country in a few years.

http://www.globalpost.com/dispatch/ireland/100726/ireland-economy-sale