Mass evictions and a new mortgage crisis in Europe - another warning sign for expats

A new austerity driven mortgage crisis may be on the horizon in Europe. The Financial Times reports today that Ireland faces a new mortgage crisis that could trigger mass evictions and jeopardise the stability of the country's recovering economy. The FT reports that the struggling mortgage holders in Ireland face the threat of eviction following Dublin’s decision to lift a ban on house repossessions. "The contentious change of policy on repossessions was sought by the troika of international lenders – the EU, European Central Bank and the International Monetary Fund – which had warned that the escalating mortgage crisis was jeopardising Ireland’s fragile economic recovery."  A couple of weeks ago, the Mirror had reported that the UK Government’s welfare cuts will suck £19 billion a year out of the UK economy citing a study by the Sheffield Hallam University. According to the study Northern families in Blackpool, Middlesbrough, Liverpool and Glasgow will be hit hardest – and wealthy southern areas such as Surrey will see the smallest financial loss further exacerbating the North South divide. This serves as an advance warning of the shape of things to come (see video) and expats are urged to make investments in assets denominated in the right currencies and to have investments in the right locations and to have the right assets in their portfolios.

Austerity in divided Britain makes the South richer and the North poorer

The Economist magazine gave a breakdown recently of the political divide between the north and the south in Britain. With the unfortunate passing away of Margaret Thatcher, this divide has resurfaced largely due to the harsh underlying economic connotations (see video). An independent study, carried out for the Resolution Foundation last year by the Institute for Fiscal Studies and the Institute for Employment Research, has highlighted this deep divide of a nation increasingly polarised between a poorer half whose incomes are set to fall (largely in the north) and a top half whose living standards will continue to rise (largely in the south). Entitled Who Gains from Growth? (full report available here), the study makes clear that future prosperity for the bottom half of earners depends on a policy revolution on several fronts: increasing the number of women in work, boosting training and skills, and raising wages for the lowest paid. Without this, the report finds, a typical low-income family will see its net income fall in real terms by 15% by 2020 – down from £10,600 (at 2009 prices) to just £9,000 at the end of the decade (again at 2009 prices). A typical household close to middle income could expect to see an income of £22,100 in 2020 – a 3% fall from £22,900 in 2009. Overall, by 2020 families who depend on benefits could expect to see an annual decline in income of 1.7%. Meanwhile, the top 50% of households can expect their living standards to grow by 0.2% a year to 2020; and faster for the most affluent. A typical middle income for a working-age couple is roughly £30,000 before tax, rising to £42,000 for a couple with two children. Austerity seems to benefit the wealthy south while making the impoverished north poorer. Question is - how long can this continue without casing significant social consequences?