HOW ARE people coping with austerity? With great difficulty, according to the latest quarterly income survey commissioned by the Irish League of Credit Unions. More individuals and households are struggling to manage falling incomes and rising costs. Half of those interviewed in this national survey are scrambling to pay household bills on time, and almost as many have borrowed from others – mainly family and friends – to do so. The survey results under most headings highlight a deteriorating trend: more people are finding it harder to balance their budgets than before, and they worry about how to cope with imminent energy price rises and tax increases in December’s budget.
The International Monetary Fund in its recent report on the economy presented a somewhat more encouraging picture, at least at a macro level. It found that Ireland had avoided an increase in poverty rates relative to Europe despite experiencing a greater economic slump. However, this will scarcely console those who are experiencing real hardship as the gap between their income and their spending widens. For some, as was illustrated by an article in this newspaper last week, the challenge is more one of relative poverty: where a change of financial circumstance makes it harder to live within their means, but according to their expectations.
A Garda sergeant and his wife took out a large mortgage at the peak of the property boom, and later found themselves in financial difficulty, despite having a high (€75,000) annual gross income. With the collapse in house prices their house is worth much less than the amount owing on their mortgage. But with interest rates set to rise in the months ahead, their monthly mortgage repayments will increase, greatly adding to their budgetary woes. From a position where the couple once worked to live they now find they are living to work. This story is replicated across Ireland in great numbers; not the worst-case scenario by any means but illustrative of the kind of struggle facing thousands of families.
For those in financial difficulty relief may well come after the Oireachtas passes insolvency legislation, which will facilitate out-of-court debt settlement agreements with creditors. But above all, this financial crisis has served to highlight the poor money management skills of so many who took on excessive debt, without properly assessing either the investment risk involved, or their capacity to finance repayments in the event of a major economic downturn. Greater blame, however, must lie with those financial institutions who put profit before prudence, and engaged in reckless lending for which we all continue to pay a heavy price. They have to acknowledge this by way of pragmatic, inclusive response.