Household Debt

17th February, 2009

I have just received a research paper on personal debt levels in Ireland. I commissioned this as I am concerned that this is a ‘silent’ but huge issue that is about to rocket up the political agenda. This is confirmed by the paper which has a number of very interesting points and conclusions.

Firstly, we have the 3rd highest household debt ratio in the euro area. We are after the Netherlands and Spain. Given the speed with which income is contracting in Ireland we are likely to move up the league.

Secondly, there is nearly €3 billion of debt on 2.3 million credit cards.

Thirdly, the redemption of these loans will be a significant cause of lower spending and even bankruptcy. This is the famous (infamous) deleveraging.

What do we need to do? Well, the massive negotiations with the banks offer an opportunity to do something about this. Better terms could be struck to allow better handling of household debt and not just mortage issues.

We need to earn more (easier said than done). Finally, we must ensure more prudent lending in the future. This is just so important.

I know these thoughts are a bit mundane when faced with a crisis of this nature. I’m going to keep at this and would appreciate any thoughts that you have.