* Dublin, older citizens have dodged worst of economic downturn
* Countryside, younger people still at sharp end of crisis
* Broader-based consumer spending needed to maintain momentum
By Conor Humphries
MULLINGAR, Ireland, July 28 (Reuters) - Struggling cafe owner Julie Mangan rolls her eyes at talk of packed restaurants and queues for house viewings in Dublin as proof that Ireland’s battered economy is finally on the mend.
With two consecutive years of growth, falling unemployment and the property market showing signs of life, Ireland is being held up by European leaders as the continent’s best chance for a bail-out success story.
But data also shows inequality in employment, spending power and real estate, making the recovery increasingly dependent on a small privileged minority and leaving behind a frustrated underclass mired in debt and joblessness.
“Maybe in Dublin they’ve turned a corner, but it’ll take a long time to trickle down to us,” said Mangan, after another quiet lunch hour in the small town of Mullingar, about an hour west of the capital. “No one in this town is doing well.”
The Irish government’s borrowing costs have fallen steadily since they peaked in 2011, paving the way for the country to complete its 85 billion euro bailout at the end of the year. That would make it the first euro zone state to exit an aid programme, providing a much-needed success story for the European Union.
But exports continue to shrink, making the economy increasingly dependent on domestic consumers to lift growth to the annual 2.5 percent-of-GDP level that economists say is needed to lower the debt pile.
That means it needs the large ranks of its 4.6 million population who have been squeezed repeatedly by unemployment, crippling mortgage debt and higher taxes to start spending again.
An unexpected contraction in the first three months of the year that sent the country back into recession for the first time since 2009 indicated that is not happening yet.
On Mullingar’s winding main street, where every second shop has windows plastered with special offers, businesses say turnover has been steadily declining over the past three years, with dips repeated every time a new austerity budget is announced.
“I can’t see where the green shoots are,” said Derek Monaghan, 34, who has managed a computer repair shop since losing his job at a joiners two years ago. “Sales down, footfall down - it’s steadily getting worse.”
Ireland’s national statistics agency does not break down economic performance by region, age or social grouping, but a series of other indicators is showing deepening splits, with the young particularly badly hit.
Many in their 30s bought their first houses with 35-year mortgages at the height of the “Celtic Tiger” boom that ended in 2007, when property prices began falling through the floor.
Those in their 20s are struggling to find first jobs in a recession and can only dream of buying their own home.
One third of the population - and over a quarter of those working - has less than 50 euros of disposable income left once essential bills are paid, according to a survey by the Irish League of Credit unions.
That also highlights another major risk factor for Ireland’s economy - property debt. One in five mortgage holders is in arrears or has had their loan restructured, and bad debts could yet force banks already bailed out once by the state to ask for more help.
“The Irish economy is an economy of contradictions,” said Dermot O‘Leary of Goodbody Stockbrokers.
“The younger part of the population in general has a lot of the debt and little of the wealth,” O‘Leary said. “And then you have the regional differences. It is clearly a Dublin-led recovery.”
Across the border in the British province of Northern Ireland the economic picture is also blurred, with productivity gains in the 15 years since a peace agreement ended three decades of sectarian violence threatened by renewed outbreaks of civil unrest.
Irish unemployment, a key cause of arrears, has started to fall and house prices rose in June for the first time since the crash, but the improvement is unevenly spread. The jobless rate is 17 percent in the midlands region, which includes Mullingar, compared with 11 percent in Dublin. Five years ago both stood at 5 percent.
Mullingar’s retailers say most people spending money are older. One said young people only seem to celebrate when someone finds a job in another country.
Excluding housing costs, spending by those under 45 fell by a third in the five years to 2010 as they felt the force of the financial crisis. Those aged over 45 spent a quarter more, according to calculations by the ESRI think tank.
Regional inequalities are also growing. Richer areas of Dublin boast packed pubs, restaurants and shops and queues of people to view houses for sale. Mullingar’s cafes are half deserted, shops have permanent sales and so-called “ghost estates” in the surrounding counties are pocked with empty homes.
Dublin’s house prices rose 4 percent in June, and even that figure is skewed by heavy demand in its affluent southern suburbs, raising concerns about isolated price bubbles - though economists say the government could raise taxes if property inflation speeds up too much.
In the rest of Ireland, prices fell by 1 percent, further widening the gap for mortgage holders between the value of the houses they own and the debt they have to repay.
”The negative equity side is hard on a lot of people,“ said Frank Hanlon, who bought his Mullingar house for 200,000 euros and now watches neighbours sell for 60,000. ”People feel a bit trapped.
“When you go up to Dublin, you’re surprised there are still people in the shops buying, there is money out there.”