Ireland is paying for ‘huge’ real estate mistakes that helped push the economy into the worst recession in its modern history, according to the only chief executive to survive a cull of the country’s top bankers.
Demand for homes, stores and offices built outside the largest cities and towns during the country’s decade-long boom may not recover for five years, said Fergus Murphy, CEO at EBS Building Society, which provides one in five Irish mortgages.
‘Many of those developments are likely to be severely challenged,’ Mr Murphy, 45, said in an interview last Friday, adding that he expects a quicker recovery in Dublin. ‘We are not the Celtic Tiger anymore.’
Irish property prices have fallen on average by half over the last two years, as the global financial crisis froze credit. The government is setting up a so-called bad bank to purge lenders of real estate assets, restart lending and reignite an economy that will shrink about 7.5 per cent this year.
‘I have my bad days but on balance I would be optimistic’ on the economy’s prospects, said Mr Murphy.
He is the only CEO of an Irish bank or building society not to have been replaced since the government stepped in to rescue the financial system last year. He joined EBS in 2008, three years after the Dublin-based company started accelerating lending to property developers.
Prime Minister Brian Cowen’s government last year guaranteed Irish banks’ deposits and some of their debts. The state has also pumped 3.5 billion euros (S$7.23 billion) into the country’s two biggest lenders, Bank of Ireland Plc and Allied Irish Banks Plc.
In January, Finance Minister Brian Lenihan nationalised Anglo Irish Bank Corp after chairman Sean Fitzpatrick resigned because he failed to fully reveal his loans from the lender.
‘The sins of the few have polluted the whole sector,’ Mr Murphy said. ‘The dirty linen was washed in public, heads have rolled, there has been accountability, and there probably needs to be some more.’
Source: Business Times, 24 Nov 2009
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