In its latest World Economic Outlook, the International Monetary Fund (IMF) has urged world governments to introduce policies to reduce debt in our households, including mortgage write-downs. With reference to Ireland, the IMF said household debt – driven by the housing boom – is the main cause of our prolonged recession.
Rather than spend to drive the economic growth, people are concentrating on saving and reducing their debt.
Interestingly, while highlighting other countries that have engaged in mortgage write-downs, the IMF suggested Ireland could take a leaf from their book. But such calls for debt forgiveness for Irish households is not new.
Over a year ago, the AIB chairman stated publicly it was an option the bank was looking at. Meanwhile, Master of the High Court Edmund Honohan also called for debt forgiveness for cash-strapped households, while strongly lashing banks and other credit institutions for their harsh methods in chasing debtors who are unable to pay.
The problem, however, is that the Government is not doing enough to help. So far, economic initiatives such as the €100 household charge aimed at boosting the nation’s revenue have only succeeded in increasing household debt. And with water rates looming, the situation may only get worse.
We believe that debt forgiveness would not only help many people who are struggling to make ends meet, but would also ensure a boost to economic activity which in turn will return us to growth.
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