Ireland’s pot of gold goes poof
Bono wants to save the world. But can the U2 front man save his homeland?
Not long ago, the relentlessly philanthropic rock star, his band and a team of property developers looked at Dublin’s dilapidated docklands and envisioned a tower that would rise like an exclamation mark punctuating the Irish capital’s rejuvenation. The U2 Tower would be Ireland’s tallest building, complete with luxury apartments and a recording studio for Bono and the boys.
But the project is now on hold and may even be dead -- a victim of the worldwide credit crunch and a nose-diving Irish economy.
When the European Union’s poorer members warned the richest countries last weekend of a “new Iron Curtain” coming down on the continent, they were talking not only about the need to bail out the countries of the former East Bloc. They also meant countries like Ireland, which, after two decades of growth that made it Europe’s fastest-growing economy, is now one of its biggest busts.
The U2 Tower’s arrested development is a woeful scene replicated throughout Ireland these days. The construction site is still a gaping hole, where padlocked gates prevent the curious and the intoxicated from wandering in, and graffiti smear the walls, including one paean that reads, with grim irony, “U2 Thanks 4 keeping alive our dreams.”
Day after day brings news of another company closure or hundreds more pink slips. The housing market, once so hot that newspaper real estate ads were dubbed “property porn,” has sunk into a deep freeze. Shops beg for business with 70% discounts. Immigrants are heading home. By almost any measure, the Celtic Tiger -- as everyone called Ireland’s rip-roaring economy -- lies wounded and bleeding.
The bitter joke these days is that the difference between Ireland and Iceland, where the bank-driven economy and the government have collapsed, is one letter and six months.
“Everything was booming. Then it all just stopped,” said Colm Lambe, a 20-year-old Dubliner.
“The dole queues are the longest they’ve ever been,” he said, referring to the lines of people collecting unemployment benefits.
Lambe would know: He was standing in one. An out-of-work stagehand, he waited with at least two dozen other people outside a welfare office on a recent chilly morning before the doors had opened.
Such scenes were unimaginable only a year ago, when the Emerald Isle was still booming from an economic liberalization that unleashed investment and drew in hordes of multinational companies eager to take advantage of low taxes and an educated, English-speaking workforce.
But then the Irish economy, like so many others, found itself shipwrecked on the shoals of the global financial crisis. Unlike other countries, however, Ireland had relied so heavily on its overheated property market to fuel growth that the crash has been harder and faster.
Banks were lending money as fast as they could ladle it out, often with little regard to the creditworthiness of their clients. Developers and residents borrowed with gusto, using cheap loans to pay for new homes, bigger cars and holidays abroad, their wallets stuffed with euros.
Now more than 200,000 housing units sit empty in a land of 4 million people. An economy that posted double-digit growth during the height of its boom is likely to shrink by as much as 7% this year.
Stock prices have plummeted, and the jobless rate may push past 10%, a stark turnaround from the days when employers had to woo scarce workers with sweetheart deals.
“It’s not the fact we’re in a recession. We’ve been through that before. It’s the speed and the rapidity and the depth it has turned,” said Brian Lucey, a finance professor at Trinity College School of Business. “People are shocked by that.”
They are also angry.
Reports of cronyism and outright corruption among bankers and politicians fill the newspapers and airwaves. Outrage has focused on the spectacular and scandal-ridden fall of Anglo Irish Bank, which has been rocked by revelations of a secret multibillion-dollar transfer from a rival bank to hide its losses and of undisclosed loans to its former chairman, Sean FitzPatrick, who was forced to quit in December.
Last week, fraud investigators raided the bank’s Dublin offices amid mounting evidence of share price manipulation and irregular loans-for-shares schemes.
FitzPatrick has shown little remorse for his industry’s failures. After the government announced a nationwide emergency plan last fall to guarantee all banking deposits, he told an interviewer: “The cause of our problems was global, so I can’t say sorry with any degree of sincerity and decency. But I do say thank you.”
Ireland is now a land of ire indeed: Tens of thousands of protesters marched through the streets of Dublin recently to demand greater public accountability.
In Damian McKavitt’s eyes, the politicians and bankers are due a day of reckoning.
“They’re all gangsters,” the building painter said while standing in the unemployment line. “They’re getting millions in bonuses for giving mortgages to young people who couldn’t afford them.”
When the housing market was at its craziest, in 2005 and ‘06, banks offered 100% mortgages. Would-be homeowners slept in their cars to be the first to place bids on suburban houses that, in some places, had shot up five times in value in as many years. Prices in Dublin’s posh neighborhoods rivaled those in Beverly Hills.
“Property is a big thing in Ireland,” said Julian Cotter, a real estate agent in Ratoath, a Dublin suburb. “It’s deep-rooted in the past, that we weren’t allowed [by the British] to own property. It’s in the Irish psyche. And now that we can . . . everyone wants their own bit of Ireland.”
At times, Cotter would show five properties in a day, then return to the office and find two bids already on his desk. Ratoath grew from a sleepy village of 1,000 residents a decade ago into a bedroom community bulging with a population of about 10,000.
Reality, though, crept in through the back door in 2007, nudging interest rates up. Then it bit hard in 2008 as borrowers, including many property developers, started defaulting on their loans and the global credit crunch took hold.
That even a development consortium including some of Ireland’s richest citizens -- the four members of U2 -- can no longer proceed with its signature project underlines how dire the situation has become.
At more than 400 feet tall, the U2 Tower, designed by renowned architect Norman Foster, was to be a $265-million symbol of the country’s lofty ambitions.
In October, the Dublin redevelopment agency overseeing the project issued a statement saying its agreement with the Geranger consortium had been shelved and plans for the tower suspended for at least a year “to allow for an improvement in the current uncertainty surrounding the property and financial markets.”
U2’s manager, Paul McGuinness, declined to comment on the rock group’s real estate dealings.
What is clear is that for most people in Ireland, not just its most famous musicians, the days of easy money and big spending are over. Gone are the waiting lists for Prada handbags and holiday condos.
“As soon as we got a whiff of money, a lot of us ran ahead of ourselves,” said Lucey of Trinity College. “I think we need a period of pain and reflection. We need a period of frugality, of reality.
“As a society we need to think of how we pull ourselves out of this.”
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