The Director of the Nevin Economic and Research Institute (Neri), Tom Healy , has warned that Ireland has the third highest level of personal or household debt among the European Union countries.
According to OECD figures, the level of personal or household debt as a percentage of disposable household income was in excess of 200% in 2014. This contrasts with a ratio of government debt to GDP of under 100% last year.
Furthermore, Central Bank figures indicate that total private debt (households and corporations combined) came to 258% of GDP in the third quarter of last year – which Healy considers dangerously high considering that economic activity is bound to slow down some time in the not too distant future.
Mr Healy says, "The toxic link between the banks and property developers and investors for buy-to-let as well as commercial and office property was the killer arrow in the celtic tiger balloon. Wages did rise rapidly in the years prior to the crash but these were driven by a property-led boom and a dramatic escalation in house prices and an ever escalating level of personal debt."
He added, "The celtic tiger period was an extreme example of how markets fail to properly value assets including that most precious of assets – your own home. It is not evident that all the necessary lessons have been learned."
Source: www.businessworld.ie
