Banks breathed a sigh of relief last week, but now people whose homes and businesses are at risk from the credit crunch face a relentless financial sector, writes Carl O'Brienand Ruadhán MacCormaic.
EVERY DAY the panic, fear and desperation of the credit crisis tumbles through the doors of the Money Advice and Budgeting Service (Mabs) in Navan, Co Meath and into the office of Tommy Curran. "There are a lot of people under severe pressure, but they don't want anyone to know. They are just too ashamed," says Curran, the organisation's co-ordinator.
"I've had three suicides in the past few months because of the kind of pressure some people are under. They're people who lived it up during the boom - and now they're facing the shock of being in dire financial straits."
Once, the bulk of the advice service's work was aimed mainly at unemployed people or those on low incomes trying to repay debts to moneylenders. These days, it's a parade of anxious middle-class callers with cement faces and furrowed brows, desperate for advice on how to claw themselves out of a financial black hole.
"They're people who bought the five-bedroom house, even though they only needed two or three bedrooms. They had aspirations of private schools and colleges for their children," says Curran. "Now, they've either lost their job or are on reduced hours; they don't have enough for the mortgage, they can't get a loan from the bank. It's a massive culture shock for many people out there who've never experienced this before."
At the height of the boom, Navan, a commuter-belt town, was a standard bearer for the tiger economy - a thriving urban centre within reach of the capital, with an ever-rising stock of housing estates that saw its population soar by more than half in the space of just five years.
Although Navan has transformed itself in recent years, it has felt the icy winds of the economic downturn more than most. For years the local economy relied on the furniture and carpet industry, but since the padlock closed on Navan Carpets in 2003, the only major single employer has been Tara Mines, and today the town has a disproportionate stake in construction and its offshoots. The silencing of such a pivotal industry has played its part in leaving Navan with one of the fastest-rising dole queues in the country, with numbers in the county jumping by around 50 per cent over the past year.
Like many other towns and villages across the country, the credit crunch is sending a shiver across the entire business community and into the lives of middle-income families. In a town where there were almost as many auctioneers as bookmakers, three estate agents have closed in the past year. Builders have been laying people off, but so too have hardware shops, car dealerships, shops and delis - "invisible victims of the recession", as local Siptu official Anton McCabe calls them.
Last week he went to the local social welfare office on an errand but couldn't make it through the door for the crowds. "I don't know when I last saw that in Navan. I couldn't believe it. I asked the lady, when did this explosion start? And the social welfare officer says, 'there has been about five weeks of it. The place has been full'," says McCabe.
In darker times the locals used to joke that they'd only shorten the dole queues in Navan by making people stand in twos. "And that's what they had to do, literally. We're getting back to that. It's frightening."
A largely entrepreneurial economy such as Navan's relies to a great extent on two pillars - confidence and credit - and the recent financial convulsions have meant both are now in meagre supply. Some of those who have lost their jobs have left for Australia, but for others the spectrum of possibility is agonisingly narrow. McCabe mentions men with €1,200-a-month mortgage repayments who now receive no more than that in unemployment benefit.
To see children crying after their father has killed himself over financial trouble is the extreme end of things, says Tommy Curran at Mabs. "But the banks are coming down heavy; you get a credit controller from a bank ringing 10 times a day, looking for new income and expenditure sheets. It has hit construction, of course, but the ripples of the crisis are affecting much more. You have suppliers, pubs, restaurants, big factories, all feeling the pinch. We need a bit more from the banks - that would ease the burden on a lot of people."
Everyone knows of someone in trouble, but nobody admits to having problems of their own. Sifting through the accounts at a recently-closed car dealership on the Athboy Road in Navan, liquidator Anthony Weldon describes how the squeeze on loans and overdrafts is putting everybody under pressure. But cultural hang-ups about money have outlived the boom, and most are loath to admit to having difficulties. "The first step that I find, no more than a problem like alcohol, is recognising you have a problem. That's often the hardest. Some people have to take their head out of the sand and acknowledge they have a problem," he says.
Brian Fitzgerald, an independent councillor, says the credit squeeze is hitting young couples particularly hard. "These are young people who have been waiting to get an affordable house under the local authority scheme. They've been approved by the council and are ready to buy, and now they find they can't get a mortgage from the bank. There are huge numbers being rejected for loans - it's absolutely ridiculous."
AMONG THE MORE well-heeled, the squeeze is affecting people's lifestyles as consumers put aside the credit card. "The shopping trips to New York and the exotic holidays are being put on hold," says Jenny D'Arcy, a Navan-based Fine Gael councillor. "You can see a lot of young people tightening their belts because they know things are probably going to get even worse next year."
The telling vignettes slip easily into conversation. Two years ago a woman who runs a children's drama class in town couldn't find places for all the kids signing up - now so few come along that it's like starting all over again. Or there's the union official who recently heard a woman describe the no-frills, debt-free "credit-crunch wedding" she and her fiancé were improvising.
By his own admission, Kenny Timmons has never known bad times. When he left school in Kells in 1992 he went straight on to building sites, and by 2004 he had his own carpentry business that employed about 20 men. He has an apartment on Wall Street in New York to his name, and another in Dubai in the United Arab Emirates. "I could see this recession coming here. Unfortunately, I couldn't see it coming all over the world," he says.
Of the 20 men who worked for him four years ago, only two remain, and while he feels the sense of panic is overdone, he admits to feeling a little nervous. "It's tight for money now - very tight. It's the end of the tax year and the Government are expecting a lot of money in from everyone. Everyone is in the same boat . . . a week's wages is all we're getting now.
"The banks are to blame for this. They could have kept a better control on it. They were giving them out willy nilly to everyone, mortgages and loans. And that was driving everything up. And now things are gone down, they're not giving anything out."
In terms of its credit record, Navan is representative of the entire country. Right across the State, businesses are struggling to cope with the ripple-effects of the squeeze. "Cash flow is the lifeblood of any business," says Mark Fielding of the Irish Small and Medium Enterprise association (Isme). "The problem is that businesses are finding it difficult to get overdrafts or loans. Getting paid by debtors is taking longer, so the cash flow seizes up.
"Accountancy-led big business and State organisations are withholding payments within the current law and boosting their own cash flow. This is hitting weaker players hardest," he says.
"It's crippling many small firms, imposing serious financial constraints, unnecessary administrative burdens and in many instances leading to insolvency."
Under prompt-payment legislation, companies are required to pay their suppliers within 30 days. Fielding says the average length of time has now lengthened to 67 days. The irony, he adds, is that smaller businesses, on average, owe half as much trade credit as they are owed by larger businesses.
"The simple result is that if you're not paid by the big guys, then you can't pay the smaller guys, and you may not have enough cash to pay your staff at the end of the week.
"Small and medium-sized enterprises account for around 98 per cent of businesses and employ, maybe, a million people. People are being let go in twos and threes, so it's not making headlines. But the potential cumulative effect is horrendous."
New national figures from Mabs give an indication of the precarious financial situation many find themselves in, especially those on middle-incomes. Mabs says the average level of debt facing people seeking assistance from the organisation has jumped by 50 per cent so far this year to €11,400 per client.
A growing number of people on middle incomes are in serious financial trouble and are seeking help to cope with mortgage repayments and other loans.
The confidence boost offered by the Government's multi-billion euro bank-guarantee scheme was supposed to help get banks lending again and inject more credit into the financial system. So far, though, it hasn't worked. What's more, the misery is set to get worse before it gets better. The ESRI has forecast that the recession will deepen, with unemployment set to jump to 8 per cent. And if rising unemployment, rising debt and a return to emigration wasn't bad enough, there is the prospect of a 1980s-style Budget looming next Tuesday, stuffed full of spending cuts and tax hikes, which could end up dragging the economy even further into recession.
Eamon Flanagan, a Dublin-based financial adviser, sees the micro-effects of a tighter lending market every day. "One family had savings and were looking to buy a holiday home abroad, and the banks weren't willing to lend because it was outside the country. That has never happened to me before," he says.
"Ask any broker out there: it's extremely difficult to get a loan for anybody. I have one mortgage deal on my table here at the moment that I'm working on since April. If this was two years ago, I would have had it over the line in a month."
Now is not the time to apportion blame, Flanagan believes, and he suggests that, for all the recrimination of recent weeks, many of us knew we were living beyond our means - "but we were all in the party together".
Another financial adviser, Paddy Geaney, makes the same point by describing the recent case of a widow who had paid off her mortgage but decided to take out another one just to clear her credit-card bills. "I don't know what she told the bank. Twenty-five years to clear off your Visa? God almighty."
Not everyone is gloomy about the prospects for the future, though. Back in Navan, Tommy Curran says more understanding and patience could help many people in trouble. "The banks created this problem and they can help to solve it. What we need is a bit of fortitude and compassion. There is no need to come down heavy with the law. "There's no point in having a credit controller harassing someone, ringing them 10 times a day, demanding new income and expenditure sheets every second day. We need to ensure that those in trouble with credit are put on some kind of repayment programme.
"At least the banks listen to us and give us a certain amount of heed. I'd say to anyone in trouble to sit down and examine their options and work something out. Generally, there's always a way out, whether it involves a payment pause or whatever. And it's in a bank's interests to go down this road."