& Richard Curran on State’s role,
THE government will have to move from containment to compensation pretty quickly as the economic cost of the coronavirus spreads. It will be an expensive and difficult mess for any new government that may emerge in the weeks ahead.
Who would be in a hurry to take over the health portfolio from caretaker minister Simon Harris?
As the number of confirmed cases in Ireland increases, the corporate problems associated with controlling the spread through workplaces around the country are growing.
Workers who have employment contracts can at least rely on what it says in their contract regarding time off work. Those in more precarious low-paid work, who do not have traditional employment contracts, could find themselves in more serious financial straits.
This point was very well made by Irish Congress of Trade Unions general secretary Patricia King in an open letter to the Taoiseach.
The whole situation gets a lot more complicated where people are told they must self-isolate or work for home, even when there isn’t anything wrong with them.
With a number of schools now closing for two weeks, parents may need to take time off work to mind their children and the question of getting paid enters a whole grey area.
Hence the need to have some kind of agreed ground rules in place. The question is, who should foot the bill? The State looks like being on the hook for at least some of it, but employers should shoulder some of the cost.
Separately, Orlaigh Quinn, secretary-general of the Department of Business, Enterprise and Innovation, said last week that the department was looking at financial supports for companies affected by the coronavirus outbreak.
Irish companies importing and exporting face potential disruptions to their supply and sales chains because of cross-border travel restrictions and lockdowns to prevent the spread of the virus.
It is difficult to see how such a compensation scheme might operate. Some firms, depending on their sector, may even be covered by insurance policies, but that might be like getting blood from a stone, depending on the small print.
Quinn referenced some of the Brexit contingency planning that has been discussed.
Here, Irish companies could be assisted by the State for a period of time if their business is badly hit by a no-deal Brexit.
However, the kind of measures being talked about on Brexit were soft loans to get through cash-flow issues. If the coronavirus really does kick off here, it could sink a lot of businesses which would need more than loans expected to be paid back in the future.
A very generous scheme could end up as a blank cheque for firms that would prove very costly for the exchequer.
Either way, there will be an as yet unknown financial cost to the exchequer in helping businesses and employees through changes to entitlements on sick pay or other social insurance measures.
The virus is likely to cause much greater workplace disruption and cost in the weeks ahead. Those who can work from home have the option of getting paid while doing at least some of their work away from the office. So many other jobs and professions do not have that luxury and battle lines on compensation, pay and rights are being drawn already.
The virus is moving quickly. The collapse of Flybe is being blamed on Covid-19 but rival airlines are warning against bailing out financially weaker airlines. Ryanair’s Michael O’Leary struck two very different notes when talking about coronavirus last week.
He told Bloomberg it would most likely have a negative effect for a few weeks, but he expected people to travel in very large numbers at Easter. When asked about the scale of booking fall-off he said it was in the 25pc to 30pc range, with some territories higher than others.
While playing down the long-term consequences of the virus on the aviation business, he did say: “It’s inevitable in the next couple of weeks we’ll see more failures.
“Where you have a massive short-term decline in bookings you have a massive short-term decline in cash-flow.”
The International Air Transport Association suggested the crisis could cost airlines $113bn (€101bn) in lost revenues. This was more than three times its projection just a fortnight ago. Estimates of the cost of this crisis to the economy are growing by the day. No wonder the main political parties are in no big hurry to form a new government and start picking up the cost.
AIB to relive embarrassing Kallakis loan debacle
AIB may have to relive one of its more embarrassing episodes from the boom years in the courts — for a second time. Back in 2013, Achilleas Kallakis was found guilty of defrauding the bank by forging paperwork to secure £740m of loans to buy property.
Kallakis bought 11 properties with the loans and, perhaps luckily for AIB in the end, bought well. Although he did spend money on yachts, arts and luxury cars.
He was eventually sentenced to 11 years in prison after an initial sentence was deemed too lenient. Anybody can be done by a fraudster, even a bank. But this was a three-quarters-of-a-billion-pounds sting. It didn’t look good for AIB and how it operated during the heady days of the boom.
Then again, we kind of guessed. The trial didn’t reflect well on the bank and how diligently it sought to confirm the bone fides of Kallakis, who had set up British Virgin Islands trusts and said he had backers in Asia.
When it comes to brass neck, Kallakis was in a league of his own.
Now his son, Michalis Kallakis, has been granted a run at a civil action. He claims he was a beneficiary of the trust which owned the properties purchased with the borrowings from AIB.
He claims the bank made false/and or negligent misrepresentations to gain control of the properties before selling them on to Green Property.
AIB denies the claims and will defend the action vigorously. The bank exited the properties quickly back in 2008. It sold them to Green Property for £650m and ended up taking a £56m write-down.
Green waited and gradually sold them back into the market over the following nine years, eventually selling the last one in 2017 into a well-recovered UK commercial property market. Having bought them from AIB for £650m, it eventually received £781m for 11 properties when the last one was sold.
AIB was entitled to 31pc of the profits Green made. Green Property, run by Stephen Vernon, made a packet and would have cleared around £131m in profit from the deal.
After giving AIB close to a third of the upside, Green still would have made in the region of £91m. AIB’s share would have been around £39m, less than the write-down it had taken when it sold them on. But still, not a bad outcome from a real banking cock-up.
If the legal action goes ahead, the details of this messed-up chapter in boom time Irish banking will be pored over again.