August 21, 2011 / 11:29 AM / in 9 years

Ireland to mull mortgage forgiveness - minister

DUBLIN (Reuters) - Ireland is to consider a proposal to write off up to 6 billion euros (5.25 billion pounds) worth of mortgage debt in a bid to boost the economy, the country’s housing minister said.

A horse grazes in front of derelict flats in the Ballymun area of North Dublin, October 1, 2010. REUTERS/Cathal McNaughton

A government committee is to consider a proposal to relieve households left in negative equity by a fall of around 50 percent in residential property prices, junior minister Willie Penrose told the Sunday Times.

He was referring to a proposal made earlier in the week by leading Irish economist Morgan Kelly, who estimated that a mortgage debt forgiveness scheme would cost between 5 billion and 6 billion euros.

“If the figure is as reasonable as he is saying, then it would be foolhardy for us not to examine it properly,” Penrose told the newspaper.

“We have set up a group to examine possible solutions and it should look at the proposals from Morgan Kelly.”

Almost 90,000 mortgages were either in arrears or had been restructured, some 11 percent of the total residential mortgage market, according to the last Central Bank figures released in May.

High repayments on mortgages taken out during a dramatic property bubble are a significant drag on the domestic economy, which is struggling to recover from one of the deepest recessions in the euro zone.

The government is to release a detailed three-year plan of cutbacks and tax increases in the autumn in a bid to reduce uncertainty that is seen as restraining consumer spending, the Sunday Business Post reported.

Ireland has committed to cutting its budget deficit to under 3 percent of gross domestic product by 2015 from an estimated 10 percent this year under an 85 billion euros bailout deal with the European Union and the International Monetary Fund.

It has not yet given a detailed breakdown of what cutbacks it will make to meet that target.

($1 = 0.694 Euros)

Reporting by Conor Humphries; Editing by Hans-Juergen Peters

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