We Are In Uncharted Territory

Well, it is just about as bad as it could be. After weeks of frantic denials, the ECB and the IMF arrived in town last week. The Irish Minister for Finance Brian Lenihan referred to them as Ireland’s friends. It was misleading: they came not bearing gifts but instead insisting on a bounty.

Irish banks had been getting money from the European Central Bank at standard rates. Well, our friends in Europe were here to tell us that the ECB money had dried up. They weren’t prepared to keep funding us as we pumped vast oceans of cash into the black hole that is the Irish banking system.
They wanted control. They also wanted to charge us punitive interest rates for any additional money they were willing to offer us.
How much did we need?
Well, that figure too seemed to have developed a habit of going up… and up… and up.
As the negotiations got underway, the Minister for Enterpprise, Batt O’Keeffe, explained the denials and evasions of the Government by suggesting that we wanted to see the colour of these guys’ money. We saw it pretty quickly alright. They told us that we needed to find €85 billion, €35 billion of which would be earmarked for the banks. They’d give most of it to us alright, though we’d have to dig into the National Pension Reserve Fund ourselves to the tune of €12.5 billion. Nice. And to get the balance, we’d have to pay an average interest rate of 5.8%.
This latest €85 billion is, of course, on top of the €50 billion already poured into the bank ‘rescue’ scheme by the Government.
In other words, all this talk about living beyond our means is bullshit. The €85 billion we’re scraping together and which can only come from the blood, guts and boiled bones of Irish citizens, is in fact entirely for the banks. We only need that much now, because we have poured such vast fortunes into these zombie institutions in the first place. The sums couldn’t be simpler. They are €85 billion down. We need €85 billion.
One of the cute hoors on our side of the table finally said it. Apparently. Any chance of burning the senior bond holders, sir? A swift kick in the goolies sorted that one out. Not a fucking chance…
And so we are presented with this monumental disaster as a fait accomplis.
What this ‘bailout’ alone represents is an immediate charge of €20,000 on every ciitizen of the Republic of Ireland. But of course, if we accept that roughly half of the people – including children – have no earning capacity, then the charge is €40.000 on every potential tax payer. Throw in punitive interest and the real cost is closer to €60,000.
These are deliberately crude figures, but you get the point. And this, we are told, is manageable?
Look, I’m an optimist by nature. And I am also forgiving. Grudges and vendettas do as much harm to the ones who pursue them as to those they are waged against. I want no part of them. But it is important to say that any suggestion that ‘we’ or ‘everybody’ or the Irish people as a whole ‘partied’ and are therefore responsible for this mess is utterly wrong, insulting and defamatory. It is a lie.
This debt is not ours.
It is wrong in every respect to impose it on the ordinary citizens of Ireland. And in the context of the ‘bailout’, it is doubly wrong to extract what is clearly a punitive rate of interest on those innocent people who are being asked to pay.
We are only in this abominable position because:

(a) The economic policies of the Fianna Fáil led governments of the past 13 years were fundamentally flawed;
(b) At a crucial juncture, they allowed us to become over-reliant on property taxes to support the economy;
(c) They failed to take corrective action when the property bubble began to spiral out of control;
(d) Instead they allowed the banks to fuel it, giving 100% loans on house purchases, upping people’s credit facilities whether the asked for it or not, running ad campaigns urging elderly people to remortgage their houses to get spending money – and so on;
(e) The banks were allowed to get too big for their boots, lending loot that they didn’t have, over-stretching their loan books and taking what have ultimately proved to be disastrous risks;
(f) The Government out set its stall by championing a system of ‘light regulation’ in every significant area of public policy, including crucially the machinations of the banks;
(g) As a result, the Financial Regulator failed entirely in his duty of care and allowed the banks to build up colossal liabilities;
(h) The Department of Finance also completely failed in its duty to ensure a level of financial prudence in budgetary policy;
(i) It also failed to engage properly with the Regulator and the Central Bank in a way to anticipate the potentially cataclysmic circumstances that were coming down the track and put measures in place to avert them;
(j) The bond holders and other financial interests who loaned the money to the Irish banks to carry out their policy of reckless lending also facilitated the madness;
(k) In every election, the Government parties put their own narrow interests ahead of those of the Irish people;
(l) They also colluded in the culture of crazy bonuses and inflated wages for senior management in the financial institutions, and matched it with grossly excessive wages for politicians and certain senior public servants (the head of the NTMA was paid over a million a year);
(m) When it finally became clear that the country was facing a ‘liquidity problem’, the Government and its senior advisers allowed themselves to be railroaded into guaranteeing the banks;
(n) Thus in attempting to deal with the problem, they were fighting with one arm tied behind their back;
(o) They also engaged in deflationary policies, the effect of which was to guarantee a collapse in tax revenues;
(p) At no stage did they show any instinct for the fray. Some Government ministers talked about playing poker. In fact the game was called Baggar My Neighbour – and the Euro suits were always going to come out on top in that one.

Are we bound by any deal done by the Government? It is a lame duck administration, which no longer has the support of the people. The Greens have said that they are pulling out. We have been promised an election – but only when the budget that institutionalises all of this has been passed. Despite all of this, I found it virtually impossible not to feel genuine sympathy for Brian Cowen over the past few weeks. He has become the whipping boy for every two bit hack in the country. And as a result he has been subjected to unremitting personal abuse. Of course you can argue that the wounds have been largely self-inflicted, but that isn’t strictly true.
In fact, the biggest culprits in all of this were Charlie McCreevy, who was the original author of the financial policies that would ultimately sink us and Bertie Ahern, who was far more directly culpable than Brian Cowen. But these smart guys got out before the shit hit the fan. Brian Cowen, on the other hand, was the proverbial man who landed just as the airport was going up in flames. And so he is the fall guy, the one who only ever has bad news to tell. He doesn’t deserve the ignominy – but I don’t know what he can do to alleviate it.
Well, there is one thing. He might decide after all to go to the country and let the people – or a new Government if it comes to that – decide how to deal with the mess. It should be possible to reduce Ireland’s so called sovereign debt by (a) getting the senior bond holders to agree to a debt for equity arrangement in relation to the banks; (b) agreeing some level of discount on the money that is to be paid; (c) doing even tougher deals with the junior bond-holders; and (d) securing money from international sources at a lower interest rate.
And if the deal is signed and sealed? Well, there is another option. It would require the biggest and most concerted campaign of civil disobedience since the Land League. It would involve payment of taxes being withheld by every citizen and every business, with the support of the public service unions, until such time as a better deal was on the table.
As the man said: we are in uncharted territory. Happy Christmas…