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TESS VIGELAND: This past Tuesday, the day before St. Paddy’s Day, Ireland’s finance minister went to Brussels to address the massive national debt facing the Emerald Isle and others in the Eurozone. In Ireland’s case, part of the problem was a runaway housing boom.
Christopher Werth reports on how the muzzling of the Celtic Tiger is affecting young Irish homeowners.
Christopher Werth: It’s tea time at the home of Geraldine and Paul Mangan-Ebbs. Like many young Irish couples, they’re just starting their life together and trying to make a go of it. Paul is 31 and works in construction. After a hard week, he likes to catch the rugby on TV at the weekend.
Sound of rugby game on TV
Geraldine is 29 and a civil servant. She and Paul married last year. They want to start a family, but their plans are on hold. Like many here, they’ve taken big pay cuts over the last year. And they’re saddled with a three-bedroom house they can no longer afford.
Geraldine Mangan-Ebbs: This is the office cum spare bedroom. This year, everything is nearly there, you know…
They like the house well enough, but it’s in the middle of nowhere — more than an hour’s drive from their jobs in Dublin and all their friends and family there.
So every Monday morning, dogs in tow, they pack up and head to Geraldine’s dad’s place in the city for the week. Geraldine says when they bought their house back in 2004, they were desperate to get a foot on the property ladder. They paid about $300,000. Today, it might be worth $200,000, that is, if there were any buyers.
Geraldine: This was always supposed to be our first time house, was always with the view of moving on, you know. And that’s just… I don’t know if that will happen now.
Geraldine and Paul are part of what some in Ireland call the new “lost generation.” It’s made up mostly of young couples who splurged on their first house during the boom, and now face years of daunting negative equity and the prospect of a sluggish economy for a long time to come.
Twenty-nine-year-old Liam Delaney may count himself among them. He teaches economics at University College Dublin. His salary took a big hit in the recent round of budget cuts.
Liam Delaney: You know, we were living during a bubble. We knew nothing other than continuous economic growth. And we’re seeing for the first time that that’s not inevitable.
In fact, much of that growth was based on borrowing in a country that really hadn’t been a big borrower before. Personal debt just about tripled during the years of the Celtic Tiger, when easy loans and 100 percent mortgages were pushed in commercials like this one.
Irish mortgage commercial: If you’re a first-time buyer, Bank of Ireland now offers 100 percent mortgages with your deposit up front. For information…
Throw in a newfound access to credit cards, and you had a recipe for disaster. Looking back now, Geraldine Mangan-Ebbs says Ireland just got carried away with itself.
Geraldine: I think we got very greedy in this country. Just spend and spend and spend. People were just going crazy spending, because they never had it before. And like all of sudden, “Oh look what I have! I can get anything,” you know?
Geraldine and Paul didn’t just sign up for a pricey mortgage. They also borrowed to buy a new car, and took out a loan to pay for their wedding.
Geraldine: We’re still paying for that as well. I mean our first year of marriage has probably been the most stressful that we’ve been together because of the financial stress.
Now, as they struggle to pay their bills, they’re also stressing over the future of Paul’s construction job. The latest estimates show that Ireland built around 350,000 more houses than it needs. With that kind of surplus, Paul doesn’t expect to see much construction work going on over the next few years. So, he’s back in school, studying part-time for a degree in construction management. He says this will give him the credentials he needs if he decides to look for work somewhere else.
Paul Mangan-Ebbs: Anyone graduating out of college here is going to leave Ireland now. I know people from school who are graduating this year. Maybe 90 percent of the class is leaving Ireland to get work.
And that’s raised fears that this “lost generation” of young people really will be lost to places like Canada, Australia and the United States. Paul knows life was much tougher for earlier generations, who faced famine and destitution in Ireland. But, he says, at least they weren’t weighed down with so much debt and houses that no one wanted to buy. They, at least, were free to leave.
In Dublin, I’m Christopher Werth for Marketplace Money.
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