Foreign Perspectives

Archive for the ‘Business’ Category

The Daily Star probably summed up most clearly the public opinion of the Irish government in its headline the other day.

However, it’s not the doing of a single government that has driven Ireland to bankruptcy: it has taken years of nonsensical decisions to get them here and it will take years if not decades to get them out of this mess.

For many years now the key skill in Ireland seems to have been to screw as much as possible out of Europe (ie everyone else) to finance a massive growth in the Irish economy. Until recently signs were everywhere announcing that one project or another was 85% financed by one EU fund or another.

That worked well in the case of infrastructure projects like the Dublin to Belfast motorway which replaced a truly naff road from Dublin to the Irish border that existed before. The problem is that it was only those European financed projects that went ahead and at almost every other point on the border you notice that you’ve crossed the border when the quality of the road goes down dramatically. The snag with these projects is that 1) only the capital costs are financed so Ireland now has a whole lot of motorway that it needs to pay to maintain and 2) now that Ireland has been replaced as Region 1 country by all the new eastern bloc countries it is not only not getting finance for its own infrastructure projects but needs to pay for those elsewhere.

Then there was the fiasco of untold numbers of “tax breaks” (ie bribes) for, mainly, American multinationals to establish themselves in Ireland. When the restrictions on those “tax breaks” ran out, Dell relocated almost immediately to Poland. In effect this bribe money (for there is no other way to describe it) was used by those companies to pay the salaries of the employees ie the Irish governments were simply borrowing to pay themselves. Quite why they didn’t realise at the time that this was never going to be a workable long term strategy is beyond me.

And, of course, all the above stoking of the economy meant that salaries rose and so therefore did house prices. Massively. Thus the banks were drawn into this Ponzi scheme. Like all such schemes, it looked like a no-lose situation. Like all such schemes, the money ran out. And like all such schemes, it collapsed in quite a spectacular manner, the full extent of which has yet to be seen. With increasing house prices comes increasing confidence and that surely led to increased personal borrowing in Ireland.

Sadly, this is going to be a very, very hard time for the Irish. Cuts and asset sales will be the order of the day for many years. The banks will probably be the highest profile casualties with the breakup of the non-Irish empires of AIB and Bank of Ireland looking like the first of many sales to come (already Bank of Ireland (UK) has been separated out). Cuts in a range of social security benefits and of civil service salaries are certain as are the inevitable protests against them. Gone too is any semblance of sovereignty over their own affairs. Not only are Europe and the IMF taking control of key aspects of life in Ireland but so too is the British government.

Much as I wouldn’t want to live in a united Ireland, I do feel for our friends in Ireland on this last point and even though Britain is doing it for selfish reasons (no way could it cope with a mass exodus of Irish to the UK), I’m sure that there will be a feeling that depending on Britain is a massive step backwards.

Many years ago when Wendy was first in the UK we applied for and received a European residence permit but after we went to France we didn’t bother to renew it.

To get the European family permit (ie entry clearance visa) whilst we were in France would have entailed a three or four day trip to the embassy in Paris and a wait of anything up to a year. This made it impractical for us so we didn’t bother and instead just went without the visa. Wendy’s Australian so doesn’t need a visa to get into the UK but as it turned out, the immigration people at Rosslare just accepted our statement that we were living in Belfast and let us pass.

So, we’re in the UK sans visa. Interestingly, since there’s no requirement to register with local authorities in the UK, there appears to be nothing stopping you just staying on regardless of what any stamp in your passport may say about when you should leave.

Anyway, to get Wendy legal we, in principle, are supposed to apply for a residence permit for her. Snag is that when we arrived the processing time for this was getting on for two years (despite the legal obligation for the authorities to do it within six months) and we knew that we needed to go back to France that summer. So we didn’t bother. Next time we came back the immigration people accepted our statement about living here (which we had been doing) and off we went again.

Since we’re notionally in the process of selling our place in France we knew that we’d need to go back there at some stage to finish packing etc. but didn’t know when so a two year processing time (during which time they keep your passport) also wasn’t on. Thus we find ourselves living in the UK for getting on for two years now with nothing to show any right to do so and nobody making any attempt to deport Wendy as yet.

The one problem is with social security who have already stated that they don’t believe Wendy is here legally but, despite their obligation to do so, have done nothing about reporting her to the border agency people although they do insist that we need a European family permit.

Funnily enough, we’ve since found that, courtesy of a determination made right here in Belfast, we were correct in our assumption that we didn’t need a European family permit to enter the UK. Just as well really since it’s a visa and you can’t get a UK visa when you’re actually in the UK as you can only get UK visas from British embassies and, of course, there are no British embassies in the UK.

What we are doing, somewhat belatedly, is applying for a European residence permit. At present, the advice is that we may be turned down for this (although we may not). Being refused this permit doesn’t appear to be a problem though as there are no limits to the number of applications and appeals that you can make (all of which are free) and you’re legal in the UK whilst they’re processing the application. Since it currently takes them about six months to process an application, all that you need to do is to reapply if/when you get the refusal and you’ve another six months legality. Weird, huh?

Quite why anyone bothers trying to stay here illegally when they can legalise things seemingly permanently so easily is beyond me.

In many ways this is, for once, an improvement for the customers of the former Halifax but it comes with downsides too.

The range of products on offer is significantly improved with the addition of both a proper Visa card in addition to the existing Visa Electron (which remains the default card issued) and a multi-currency sterling account and a lot more branches in Spain. It’s as clear as mud but the need to keep a balance of 600€ for free banking seems to have disappeared albeit with the downside that there’s now a charge of 9€ per year for the Electron card regardless of balance (replacing the previous 18€ for balances under 600€); it’s 15€ a year for the full Visa debit card.

Probably the biggest downside is that the free transfers from Halifax UK to Halifax Hispania have disappeared so it’s probably a good time to get yourself one of the free FairFX cards and thereby get back your free currency conversions. For free cash withdrawals you can get the CaxtonFX card though their exchange rates aren’t so good therefore it’s probably best to get both cards if you’re living in Spain.

One big difference is in the list of charges. Replacing the Halifax’s previously very clear and short list is a massive 60 page document from Lloyds that throws clarity out the window. It’s certainly complete but I question whether they couldn’t have produced a much simpler and shorter document for normal customers instead of the monster which seems to cover all possibilities from normal people through to major corporate banking.

Overall, I suspect that, for a change, this amalgamation of the Halifax and Lloyds TSB in Spain is probably a good thing for their customers. You can get the freebie currency transfers elsewhere and it frees up the 600€ that was tied up previously to get the free banking, albeit with the downside that you need to fork out 9€ a year.

Aren’t debit cards the same as credit cards? No, they are very different and have different characteristics when you’re trying to use them overseas which aren’t always apparent.

The first key difference is that they are directly linked to your bank account and this makes them a little more risky to take abroad (it’s much safer to take credit cards and a cash card).

Debit cards for international use come in four versions although not all are available in every country. These are Visa, Visa Electon, Mastercard and Maestro.

Cards branded Visa and Mastercard can be used where-ever the equivalent credit card can be used and, aside from the link to your bank account, are processed in the same manner as a credit card (press the “credit” button if prompted on an ATM or till).

Cards branded Visa Electron and Maestro are supposed to be electronic use only which means that you cannot use them in one of the old-style carbon copy type machines. In practical terms, almost all “civilised” countries use online terminals these days but this does not apply everywhere so it’s best to have a credit card as a backup. Maestro is a little more limited in that it can’t be used when you’re not at the point of sale therefore you can’t use it to guarantee hotel reservations. You can’t use either of these cards to hire a car.

Note that acceptance of cards is neither universal nor universally practical. If you are travelling to countries off the tourist routes you can find that cards aren’t accepted or are only accepted in widely dispersed locations. For example, in India I found that using cards simply wasn’t practical. Cards branded Visa Electon and Maestro are much less widely accepted than those branded Mastercard and Visa.

Bank charges on debit cards come in several basic forms. First, they charge transaction fees when you use the card to get cash. Typically these fees are around 2% with a minimum charge of £2/$2 per transaction therefore it’s best to withdraw amounts of £100/$100 to minimise this charge. In most cases, there is no transaction charge when you buy things using the card so it’s better to do that instead of withdrawing cash. Second, they usually apply a foreign currency charge which is typically around 3% (no minimum). And, of course, there may be an annual fee for having the card. Some card issuers charge a transaction fee on overseas purchases too: if this applies to your bank, use a credit card to make purchases instead or if you can’t do that, withdraw cash and use that for purchases.

Despite all that, it’s still usually cheaper to get cash on a card than to buy travellers cheques as your cost will typically be around 5% max compared to the 7% or so for travellers cheques.

Downsides are basically those charges but, if you’re careful, you can minimise them. For those living in the UK, some pre-paid cards eliminate all charges and if you’re in the American military a USAA card works in much the same way as do some American issued CapitalOne cards. If your bank is a member of the Global Alliance (Bank of America, Bank of Nova Scotia, Barclays, BNP, Deutschebank and Westpac) then you can withdraw cash from one of the other member banks ATMs without the transaction charge (you still get charged the foreign exchange fee).

I’m going to work my way through the various ways you can take money abroad over the next few weeks or so in the travel money series. I’ve already covered cash, travellers cheques and credit cards and will be covering cash cards and prepaid cards in future episodes.

The best place to do this is in a technology shop because the majority of people aren’t on solid ground in respect of knowledge of the product.

This lack of knowledge makes it difficult for them to place a value on the products being sold. Added to this is the fast changing nature of the products which often leads to illogical pricing whereby better products can cost less than inferior ones.

I saw a great example of this in PC World (always an excellent hunting ground for this type of thing) at the weekend. A couple were in to buy a netbook for their daughter. The netbook cost £239 but they were talked into paying over £600 for it and that wasn’t even counting the software that they were subsequently talked into as well. All of this stemmed from the “small” payments of £25 a month and the potential to get another “free” laptop at the end of two years. Of course, by that time, they could have bought at least three laptops with the money.

The other problem that’s particularly noticeable in the netbook market niche is that a large PC shop can have anything up to around 20 different netbooks ranging from £170 through to around £370 with seemingly little to distinguish them. I question whether a normal customer would be able to tell whether having an N270 was any different than having an N455 or N550 and in reality few people would notice the difference in processing power. Even the battery life is a very iffy means of distinguishing between models as one shop can have a netbook with a 4 hour battery life at the same price as another shop with the same model but an 8 hour battery life.

The fast moving prices also creates anomalies with newer and better models quite often costing less than the older model even when discounted. Thus the “massive discounts” that were previously available on the Sony 300 and 600 readers barely brought them down to the price of the much improved 350 and 650 models.

So, lots and lots of ways that you can be ripped off!