Government failed to consider other options


As we watch the developments in Greece and the pressure being applied by Angela Merkel and Nicolas Sarkozy on Greek Prime Minister George Papandreou and the Greek government, we should reflect on the fact that one year ago, it was us in the firing line.

Back then, the EU’s less than dynamic duo decided that the cheapest way to halt the attacks on the euro was to fight the markets on Irish economic soil.

Ireland’s economy was thrown to the wolves in the nominal cause of defending the euro, though the real purpose was to defend the big continental European banks, particularly the German and French ones.

This analysis of our situation was broadly confirmed by the Polish finance minister, Jan Vincent-Rostowski, on RTE’s This Week programme in September when he said that the EU’s “bouncing” Ireland into EFSF last November had been a mistake and need not have happened.

He was right. The problem with the Merkel/Sarkozy strategy back then was that it didn’t work. The onslaught on the euro was not halted. One year later, the two of them are at it again, except this time both the costs and the risks have increased exponentially.

Insanity, they say, is doing the same things repeatedly and expecting different outcomes. That is what the EU is doing.

We have the same situation here. Last week Fine Gael and Labour reneged on a fundamental pledge given to the people last February.

They paid out to Anglo’s unguaranteed bondholders and rewarded continuing speculation in our dysfunctional banks.

Worse yet, their own comments and mixed signals to the markets meant we ended up having to pay out even more on those bonds. Had they pressed the EU and ECB to let us buy back the bonds earlier, we could have saved several hundred million euro. But the Government, by its own admission, failed to consider this option.

No matter how much it claims that it had no choice and how this was the lesser of two evils, the reality is that it did have a choice. The other reality is that this is taxpayers’ money being used to pay out on these bonds, not “Anglo’s resources”.

Their problem is not just that they failed to exercise that choice: it is that they never seriously attempted to even explore it. They went into successive summits and meetings unprepared and just expecting the answer “no”.

Just over a week ago, the Greeks got a 50 per cent writedown on their debts. Last year Ireland was told that it must carry the full burden. The ground has clearly shifted in the past few months, yet our Government has failed to capitalise on this.

Taoiseach Enda Kenny and Tanaiste Eamon Gilmore are aligned individually with the two biggest power blocs in the EU, but neither seems willing nor capable of leveraging this connection. The Taoiseach is a direct political ally of both Sarkozy and Merkel via the EPP — remember his pre-election dash to Berlin to consult with the chancellor — but he is failing to use it.

Clearly the corrections to the public finances and the focus on exports since 2008 mean our economy is in a better position than Greece’s so our case for such a dramatic writeoff is not as clear.

If we were to get the same treatment as Greece it would be worth €85bn, but we know such a demand would not be realistic. But why has the Government not placed the issue of Irish bank debt restructuring on the table?

A writedown on the billions we have pumped into the Irish banks to end up in German, French and other banks would do our economy more good than all the pats on the head and reputational gold stars in our copy books. Our economic reputation is vitally important, but it will not get us back into the bond markets or secure us lower interest rates.

Hopefully the Taoiseach will address these issues when he speaks to the nation. Perhaps he will tell us he has learnt from the mistakes made this time and that he plans to deal with the next €1.25bn tranche of Anglo unguaranteed bonds differently next year.

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