No wonder SMEs have been battered and struggling. Collapsed consumer spending, combined with legacy debt, have been a double whammy.
The SME debt crisis has been like a ticking time bomb. Yes, some banks have dabbled in dealing with small firm clients in trouble. They have put a stay on debt repayments and even begun cutting deals.
The problem has been that many of these small companies are multi-banked and multi-borrowed – they borrowed directly for the business, indirectly for the premises and dabbled in other property disasters.
SME loans stood at €576m in June. Property-related loans accounted for a massive €32.3bn. The Central Bank has suggested up to 50 per cent of SME loans were in trouble, but you wouldn't see that figure when you analyse the arrears profiles of individual banks. This is because they didn't always strip out the property element.
Bank of Ireland has €10.9bn outstanding in SME loans in the Republic of Ireland. Almost €3bn of it is in default. AIB has a total of €14.2bn in SME and commercial lending. Almost €5bn of it is in trouble.
The new protocol is very sensible and divides up SME debt into loans granted which were essential to running the business; loans advanced indirectly to the business to finance assets like the purchase of a premises (also essential to the business); and debt connected to the SME that depends primarily on the performance of the business for repayment.
This was all the other property-related stuff owner managers got stuck into during the boom which acted as a non-essential drag on their business. Its presence has prevented many otherwise viable SMEs from getting any kind of loan in the last four years.
Deals will now get done. That has to be a positive thing, albeit long overdue. Those deals will involve write-offs which will cost the banks money.
Fresh stress tests are coming, and the fiscal advisory council says banks may need more money from somewhere. Privately, bankers I have spoken to say they don't believe they will, or if they do, only small "non-critical" amounts. But they are not saying it publicly!
The big 2011 injection of taxpayer money into the banks was based on certain scenarios. It assumed that even in an adverse scenario, GDP would still grow by 1.4 per cent this year. The Department of Finance now believes it will be just 0.2 per cent. Ernst & Young thinks it will contract.
How much of the €57bn owed by SMEs is coming back? Will the money allocated for bank losses on SME debt be sufficient? That depends on the deals that banks are forced to do by the poor state of finances of SMEs. It also depends on how much of the money allocated for losses has been used up already.
SMEs have been crippled by debt and paralysed by banks unwilling to lend. This new protocol is an opportunity to finally work through this problem and give SMEs a fighting chance again.
IT is hard to beat an outside perspective on how things are really going in Ireland. And nobody does it better than straight-talking Germans living here, who know what is going on, but are also willing to be totally frank.
Well, last week around 400 chief executives at the Deloitte CEO Forum were treated to such a presentation from Aer Lingus chief executive Christoph Mueller, who came here from Germany in 2009.
Mueller is perfectly positioned to apply an outside perspective to a country with which he is now very familiar.
He praised the inventiveness and innovation of Irish business in general and Irish aviation in particular.
He said that 50 per cent of the world's leased airplanes were registered in Ireland in a leasing industry that generated €300m a year in Corporation Tax here.
But when it comes to the economic crisis we should realise that the worst may be over, but "the real hard work is just beginning".
When it comes to the pain of cutting costs or government austerity, you have to cut deep at the start. The longer it goes on the more people resent it. He questioned the easing up on necessary budget cuts, comparing it with "tranquilising the pain with promises we cannot keep".
He said when he took over in 2009 Aer Lingus had spent the previous seven years trying to be a "me too" low-cost airline and had failed. He said Aer Lingus customers didn't want it, and neither did Aer Lingus employees. He had to cut costs and reposition the business.
He was full of praise for the staff and culture at the company, despite having many confrontations with trade unions in the past four years.
But he said successful Irish companies had to be flexible and also noted that here in Ireland we have too many "ceremonial jobs" around the State industrial relations machinery that should be "cut off" because they are incompatible with the new global economy.
Dispute resolution mechanisms were fine, but running off for rulings on every small thing was not good.
The collapse in Irish air travel numbers was an unprecedented 30 per cent in 2009 and 2010 and it hasn't come back, he said.
And he wasn't totally convinced by Michael O'Leary's new cuddly approach at Ryanair, saying he believed changing a company's culture was much easier said than done.