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“This is an Election to Lose”

Posted on: March 20th, 2007

Moore McDowell is many things: he is a likeable but crusty old UCD lecturer; he is an intelligent Fine Gael supporter; he is an entertaining economist; he is bearded, but not a SIPTU leftie. So why did he tell Pat Kenny this week that this election is a battle to lose?

His message was clear: the next government will face economic problems on all fronts. Moore is currently a sane Irish voice of cautious heresy. As turmoil devastates the world’s stock markets, other more compromised commentators are urging complacency. Every collapse is greeted by the same chorus: it is a “correction”. Ireland’s entire financial services propaganda engine is in full throttle.

Scores of worse-than-useless economists, on the payroll of the banks or insurance companies, are offering deeply flawed opinions. At times of crisis, clever eggheads with household names and inflated reputations are wheeled out to prophesy paradise in the middle of Sodom and Gomorrah. The message has been muttered in unison: hold your heads; stay calm; this is a hiccup. The sub-text: save our industry, our fees, our commissions.

However, the cold, impartial, spoof-proof stock market itself has a different message: take cover. The message from the Irish market is even more ominous: head for the hills.

Ireland’s stocks have been among the worst performers in the world in March. We have made Wall Street, the Footsie and European markets look like an oasis of prosperity. Sellers of Irish stocks have suddenly surfaced at home and abroad. Last Wednesday when the Dow had fallen by just under 2 per cent and the Footsie by 1.5 per cent, Irish stocks plunged by over 4 per cent.

But why the sudden change in sentiment?

It is partly the drip-drip feed of multinational desertions in recent weeks. It is partly fears about the US economy. But our steeper local market fall is mostly due to Ireland itself. And above all, it is due to Ireland’s obsession – and our Achilles heel – property.

Property is not just the cornerstone of our prosperity. It is the basis of the boom in Irish shares. Each annual fall of 10,000 new houses built means a loss of 1 per cent in gross national product. The property sector claims as much as 25 per cent of economic activity. Fourteen per cent of our jobs are in the construction industry. Feeling uncomfortable? Join the club

Watch the property market. Prepare to exit. Man the lifeboats.

Note what Moore McDowell might have muttered to his brother Michael: “This is an election to lose.”