Aug 182010
 


Smoke and Mirrors

Corrupted politics have been the status quo in Ireland for many years. From Haughey to Ahern, tribunal to inquiry, even from scandal to ever greater scandal, it’s clear that the land of saints and scholars is not being run for the benefit of the people. Indeed, save for a few honest individuals, it’s being run by the powerful elite for their own benefit – and we, the ordinary heart and soul of a nation, are being made to suffer while they feast in luxury.

Ivor Callely is a symptom of the cause. As Bock has pointed out, he has been suspended from Fianna Fáil for his actions where other politicians from the same suspect party have been quietly tolerated after committing far worse acts. The Mahon Tribunal, for example, depicts a sprawling mess of backhanders, favours, and dodgy dealings; Beverly Cooper-Flynn, a proven facilitator of tax evasion, was allowed to rejoin Fianna Fáil. The disease, however, remains the same. The politicians of Ireland act with impunity even in the face of scandal, because if history has shown them anything, it’s that they can still be elected as long as they please the right people.

It’s all smoke and mirrors, at the end of the day. I don’t doubt that there are some TDs that got into politics out of altruism, but the pathetic reality of Ireland is that the majority of our elected representatives are corrupt – especially Fianna Fáil – and it is only a matter of the degree to which they can be bought. The worst of them desire nothing other than to get into power, and hold on there as long as possible. Power means a huge paycheck, an enormous expense tab, and the fawning attention of other members of the Hiberno-elite who know that you can tug the reins of the country in their favour.


The Boom

2006 was the year of the property boom, when house prices all over Ireland hit the highest they had ever been. Between 1996 and 2006, prices had doubled or tripled due to the roaring of the Celtic Tiger; wages were up, credit was available in the expanding mortgage market, and people bought based on the assumption that their house was a solid investment, one whose value would not fall. Where there is demand, supply will increase to match it – and so enter the property developers, who needed loans to build houses and the compliance of the local government to keep regulations out of their way.

A report by the National Institute for Regional and Spatial Analysis has condemned the government as the final cause of the bubble. From an article in the Irish Times in July:

In a 66-page report into the crisis, Nirsa lays blame for the property boom and bust squarely with the Government and local councils. It says light touch regulation and tax incentive schemes administered by a political system infected by those in power favouring friends were the chief culprits. Planning guidelines, regional and national objectives as well as proper assessment of demand for housing were ignored, it claims… …A home-grown “litany of systemic failures” that allowed the over-development and re-zoning of too much land will see housing lie empty in some areas for more than a decade.”

The reports of the Mahon Tribunal released in 2002 showed quite clearly that politicians were taking bribes from property developers. Perhaps then, in retrospect, this particular report should not shock us. But what is quite surprising is that the evidence of corruption was ignored, for the most part, and Fianna Fáil were re-elected to the government in 2007 despite questions being raised about Bertie Ahern’s involvement in those same bribes – questions, by the way, that led to his resignation a year later.

Parochial politics at its finest. It is clear that the Irish people are happy to elect crooks, as long as the crooks keep them happy in small, trivial ways. But it’s still an illusion; the crooks take money from their pocket, keep prices high, and leave them hurting for jobs, and it’s all hidden behind the veil of government bureaucracy.


The Bust

Some economists saw what was happening in the property markets and warned that it couldn’t last. It was never going to, really – ours was not the first housing bubble in the world, nor will it be the last, and the result is mostly the same in all cases. Eventually the prices collapse, and those who have bet too riskily suffer a serious loss of equity. The Irish property developers who connived with the government and massively oversupplied the market deserve that loss – but this is not a just country, and there was no reason for them to lose all that money when their pet politicians could make it all go away.

Anglo Irish was their bank. When the bubble burst and demand vanished overnight, the developers were left with thousands of empty and unfinished properties that they had borrowed heavily to build. These are the ghost estates; acres of houses and apartments built on the assuption that they would be sold for an astronomical price, and with that money the loans could be paid back. Without demand, they became worthless, while the developers were still on the hook for the loans. On the other side of the equation were the investors who were now owed vast sums of money – who were they? We already know the names of four of the Golden Circle – the ten businessmen who bought a 10% stake of Anglo Irish using money raised from its own shares – and we know they had connections to Fianna Fáil. They were not alone.

Money lost on both sides, and it seems that the property developers were listed among both. They had a problem, one that would need billions of euro to solve.

Enter Fianna Fáil, the major player in a “political system infected by those in power favouring friends”. They had a history of corruption. They had links to the Golden Circle. Sean Quinn, who was among one of Anglo’s biggest shareholders, was friends with Bertie Ahern. They had control over the budget of Ireland, and all they needed was an excuse.

Everything that has been done to Anglo has been for one purpose – to keep the bank afloat, no matter what it will cost the nation. It’s all a matter of misdirection and obfuscation; start small, say it’ll only cost so much, say this is the best option because it’ll ruin us to let it fail. Then little by little, make the public accept that which would be unthinkable. The final debt for Anglo’s life support may be €33 billion or more, which we probably will never get back. That debt includes a loan of €11 billion given to Anglo Irish based on highly risky property loans – collateral that the European Central Bank could not accept, which forced the Central Bank here to step in to save it.

Do not believe, not even for a second, that this was necessary. Gavin Sheridan noted the following quote on his blog, taken from Ireland’s note to the European Commission regarding the recapitalisation:

Anglo Irish Bank is a focused business bank with a private banking arm. The Bank provides business banking, treasury and wealth/management services. It is not a universal bank and its stated strategy is niche rather than broad market. Each of its customers deals directly with a dedicated relationship manager and a product specialist.

Niche. Oh, yes.


The Recovery

€33 billion is a huge number. After a certain point, it all becomes unreal and fantastic. Steal a tenner from a man in the street, and his rage knows no bounds; steal 2% of his wages every month, and he may not even notice. It’s all about taking from the places where no one will look, or where people will grumble the least without realising the extent of the damage to their lives. It may be legal, but that doesn’t make it right.

€33 billion, the cost of Anglo Irish alone, is more than the total revenue that the government will get from tax this year. The current national debt stands at €84 billion. In order to keep the country going this year alone, the government will have to borrow €18.5 billion from somewhere. As more money is poured into the dead bank, and more money is borrowed simply to run Ireland, that debt will accelerate out of control. The Budget for 2010 announced savings of €4 billion, but that may not be enough; the debt still rises, as making savings of €4 billion will not balance out borrowings of €18.5 billion. With a higher debt comes higher interest payments on that debt, which must be paid, leaving less money to run the country and a greater need to borrow. The government seems to be unwilling to stop giving money to Anglo Irish, so the cost of running the country must be reduced somehow – and that means bleeding the ordinary citizens of Ireland dry.

Of course, it won’t be the politicians who suffer. Even after the wage cuts for civil servants in the Budget, Brian Cowen is being paid €220,000 a year. Ministers are paid roughly €190,000 a year. The entry level salary for a TD is €92,000, with the average being €110,000 – expenses not included, of course. We can only dream of being so well off, so pampered, for a job that is essentially part-time, especially when (as Bock has pointed out before) there’s no qualification requirements other than being able to convince enough people that you’re a pretty swell guy who can do things for them. And after that, of course, bloody-minded tribalism takes over and the people will re-elect you simply because you’re ‘their lad’.

Smoke and mirrors. It always comes back to that. It’s ok to screw over your country because, well, you’re helping a few friends who helped you out a while ago. You can’t say no, because his father always drank with your father, and sure didn’t he donate a load to the party and he’s not asking for much in return. And you can hide it just enough so that no one will say anything, or you can spin it so that no one will listen, and anyway you’ll be getting a pension at the end of it and the money won’t be your problem anymore. This is Ireland, isn’t it? Half of the sheep admire you for getting away with it, and the other half don’t care. All you have to worry about are the few friends who did you a favour, and then another, and then another, and didn’t ask much until now, and where’s the harm in selling a little more of your soul for a lot more money?

Someday soon, there won’t be any more money left to take. In the cold, hard light of day, bereft of smoke and mirrors, it’s all a game of numbers on which the crooks of Fianna Fáil are gambling the economic future of generations of Irish citizens. Forget Ivor Callely; he’s another distraction. Watch the actions of NAMA, and the politicans who swore it was the best thing to do. Watch the wealthy elite who have a stake in Anglo Irish.

At the next general election, do not be fooled again.

  28 Responses to “Smoke and Mirrors: Politics, Anglo Irish, and what the Bailout will do to Ireland”

Comments (26) Pingbacks (2)
  1.  

    Not much to argue with there Claire. We’re screwed alright. I heard that Eastern European economist based in Trinity (name evades me just now) on the radio yesterday, saying that by 2014, 1/3 of our tax revenues will be going to pay the interest on our national debt. And this guy has credibility as far as I can see. But, as you say Claire: “It’s all a matter of misdirection and obfuscation; start small, say it’ll only cost so much, say this is the best option because it’ll ruin us to let it fail”. Damn right, that’s Mr Lenihan’s MO of the last few years: buy a bit of time with a few lies, and upgrade the lies as you go along. Journalists wont challenge him on it, sure isnt he a great fella, so positive and brave in the face of cancer.

  2.  

    You’re right to be angry at Fianna Fail, but will the other guys be any different? Fine Gael have already been exposed for taking donations from property developers since the crash.

    As George Carlin said, it’s garbage in, garbage out:
    http://www.youtube.com/watch?v=xIraCchPDhk

  3.  

    @EssoDee

    That doesn’t quite match up with what I worked out for the cost of servicing – I think I got a figure around 20% by 2016 – but I was being optimistic, and I assumed the interest rate and GDP would be the same, and the deficit would be reduced by €3 billion a year. Best case scenario, I suppose.

    A politician with cancer is still a politician, unfortunately.

    @rubensni

    I’m sure there are corrupt individuals in every party; such is the nature of politics. For the time being, however, the magnitude of corruption in Fine Gael is nothing in comparison to Fianna Fáil – based on current information, of course.

    A comparison of differing levels of corruption in Ireland’s political parties would be a very interesting topic. I think I will make that the subject of my next article.

  4.  

    Well put Claire Ryan. Professionals and politicians and investors have the country screwed. The ‘people’ are apparently asking only this; ‘Should we bend over further?’
    At least that’s what it sounds like to me.

  5.  

    Good letter in today’s IT:

    “The devisers of the bank bailout and Nama strategy must be held responsible. The motivation for their actions must be established beyond doubt. A necessary question, never yet asked by an apparently compliant media, is whether the participants were in any way compromised by loans.

    Were any substantial borrowings from lending institutions, millions or tens of millions or hundreds of millions held directly or indirectly by any of the decision makers? If the answer is negative we must admire the fortitude of those who, despite ample opportunity to realise any level of credit they desired, refrained from this temptation when the general consensus was that any one of ambition was practically retarded for not getting involved in the property boom.

    This is not an accusation, it is a question; a question the Irish nation is entitled to have asked and answered. Democracy itself may depend on it.”

    It is astonishing (or maybe not, sadly), that the media are not demanding full disclosure from the banks and the politicians on this. And while they’re at it, answers to questions like :
    What was the “best advice” that Cowen & Lenihan got, and who gave it to them?
    Who are the senior bondholders who have benefitted from the bailout?

    And while they are demanding answers, investigating away anyway on the fairly safe assumption that they will not get the answers from the pols.

  6.  

    That’s a fine post, Claire. The Anglo bailout crime against the citizens remains the central issue for the country, along with the bank bailout in general.

    I would just add a couple of points.

    Firstly, don’t forget the responsibility of the Green Party in this. The actions of FF are understandable from within their own warped world-view. The Greens, however, had to my knowledge no ‘special relationship’ with the bankers and property developers. And yet they supported and continue to support the bailout. This took gutlessness and willful blindness to new heights.

    Secondly – on The Recovery. Perhaps mis-named. There will be no recovery in the country until we default on these private debts foisted upon us. Apart from the bond yield payments to the vampire squid of finance capital, the doomed attempt to prop up insolvent banks will distort all future policy. We will get gesture politics on stimulus and sustainability, because the will and the means to do anything real will be diverted to feeding financial institutions.

  7.  

    “At the next general election, do not be fooled again.”

    That will be too long to wait – anything we can do now to bring down this government (which will go the distance of another two years IMHO because the parties involved have nothing else to do but enjoy the trappings of power and continue the cover-up) will go towards limiting the disaster. In two years time the damage will be magnified – the bank bailout costs will be who knows – if we extrapolate the current rate of growth in the drip-feed of admission, anywhere between €60,000,000,000 and €100,000,000,000 in a country of 4,500,000. Education and health provision for all but the well off will be savaged. Essential public infrastructure will be sold off for a song.

    The citizenry have little taste, it seems, for general strikes or taking to the streets, so perhaps we need to consider other measures to speed the fall of this government. A refusal to pay taxes over which we have some control, like motor tax, while the government continues to pay the bondholder tax, perhaps.

    Equally, we must not be fooled by either FG or Labour as well as FF/Greens. If they are not willing to commit categorically and without equivocation to a ‘restructuring’ of these private debts foisted upon the public, don’t vote for them.

  8.  

    @Pope Epopt

    Excellent points there. I have to remain at least a little optimistic, though – I’d like to hope that a recovery is still possible. I still expect it to hurt like nothing else, but at least the country would still have a working economy and people would survive.

    I honestly fear the worst case scenario.

  9.  

    Angela Merkel visited here and stayed in a B&B. She’s the German chancellor, ie. prime minister.
    Could you imagine any of our crowd lowering themselves to stay in anything less than a suite in a swanky overpriced hotel? They are so out of touch it’s ridiculous. They consider themselves to be above everybody else. You can’t run a country like that. Then again the opposition are as bad. Party politics is a joke.
    Still. I’ll be voting for ANYBODY ELSE BUT FíANNA FÁIL.
    Would it be politically incorrect to wish for Germany to invade?

    Dear Ms. Merkel,
    Our country is in the toilet, do you want it?
    Lots of love
    Ireland

  10.  

    Rubensni. If I may answer. Fianna Fail has bankrupted the country, firstly to enrich their friends and supporters and then to bail out the self same friends and supporters. No other Irish political party has any such record. You ask would another party be any better. Could they possibly be worse? If fact any 10 people picked at random from any parish in the country would not have bankrupted the country. Picked at random they would not have gained sufficient expertise at corruption to bankrupt the country. This was more than mere incompetence. This was the siphoning off of the wealth of the country to a clique. As Claire’s excellent article points out, this was corruption on a massive and continuing scale. Where do developers still get the funds for weekends in Morocco for instance? The following jingle says it all.

    Johnny bought a power station
    That burns no more coal
    Now Johnny’s in Morocco
    Searching for his —soul!

  11.  

    Points raised and relevant, well made and add to / replicate similar output from DMcW, Constantin Gurdgiev and Brian Lucey. All this virtual verbiage will however count for nothing other than provide thesis material for students in 20 years when they analyse “The paralysis of the Irish citizenery in the face of economic calamity”. Need to turn thought into constructive action-Suggestions please………

  12.  

    Claire an excellent article, you express my opinions on the subject perfectly. However the problem as I see it is two years is a very long time in Politics’ and in Financial circles. F.F. know that they will be thrashed at the next election ( I have heard Mary O’Rourke admit as much) even their “core” vote who in the past would form an orderly queue to kiss their arse are wavering. The Greens were a total fluke hence their rush to pass mad legalisation. Between them they are left with little option but to look after their friends in the extended Golden Circle, in the hope they will be looked after in return. Ireland Inc, does not even appear on their radar. All of this leave’s the way clear for a jerk to the extreme right “we need a strong leader” break the Unions! Do away with any Labour laws . Let the market decide, even if that means a return to slavery . I do not see this as an answer. I feel we do need to see those responsible for the mess being put away for a very long time!

  13.  

    Great article Claire, note I say article and not post. The long and the short of it, as it were (or is)

    “I don’t doubt that there are some TDs that got into politics out of altruism, …”
    I used to think that anyone daft enough to get into politics deserved to have some slack cut. I used to think that inspite of any altruistic ideology you’d be bound to end up frustrated by voter idiocy and apathy. I used to think that you’d have to be naîvely altrusitic or power mad to go into a career in politics, and then I learned about ministerial salaries, expenses and the like and I slowly realised that, if you’re of the right type of character, it’s probably the quickest way of climbing the ladder and insuring personal wealth.
    You don’t have to good at your job, or even qualified, nor do you have to stay their very long in order to reap all the long term benefits (all pensionable of course!).
    And all that is based on the notion that you are not actually corrupt. If you were.. well the sky’s the limit isn’t it.

  14.  

    @Gary Ireland

    You’ve echoed my biggest fear. The extent of the disillusionment with the current incumbents is such that a Tea Party style extreme right wing “National Unity’ demagogue could come in and spin the ‘unencumbered market’ line (while providing plenty of hidden subsidies to his friends in business – as every neo-liberal regime has done in the past). The longer they stay in the more risk there is of this coming about.

    I hope I’m wrong but I’m far from sanguine that the sheep that voted for FF and the PDs would see through it.

  15.  

    Just watch how McInnerney homes are swindling their way out of their debts at the moment with the help of the state(FF) and the connected directors who sit on McInnerny’s board (former bankers and heads of industry). Peter Bacon who drew up the first ‘Bacon report’ that said build, build, build; was on the board of one of the countries biggest building firms, Ballymore Properties, for fuck sake. And he also was connected to Irish Nationwide to whom Ballymore Properties owes millions. You couldn’t write this fucking shite. Sean Mulryan(head of Bllymore) had Bacon in his pocket. And yet this man is still revered. In thirty years time Primetime will be asking how was this crime allowed to be perpetrated. Cowen, Ahern, Bacon and Sean Fitz will all be dead. Like Traynor’s family, they will carry the small burden of a blip in the family history. But this is Ireland. Its an extra notch on the coat of arms.

    Darren

  16.  

    Pope
    I can see the appeal! A New “National Christian” Party. Uniform black slacks, green shits with a golden harp at each collar. Banners a red background with a black cross imposed with a golden harp. Marches and rallies with sods of turf burning on pikes! They could take out the Bankers, Developers, Builders and hang them from lampposts for starters. Next would be Trades Unionists , homosexuals, Travellers and all who may put their head above the parapet .
    Be very careful that this idea does not appeal to anyone else!

  17.  

    @Gary. I will trust that your heart is in the right place, but you see that’s the problem: lack of trust. Nobody trusts at the moment. It as though as a nation the trust in those that we have to trust has been eroded. I always had trust issues(childhood), but now its a short list of my parents, my wife and my dog. Everybody is out to save their skins at the moment and fuck the national interest. Again, this is not a dig at you, but really, bar an entire country of self-sufficiant land owners, how do you function in this country at the moment without feeling that those that make the future-shaping dicisions would sell their mother to keep their account at Louis Copeland open.

    Darren

  18.  

    An insighful, well reasoned, and well presented post, Claire. Thank you.

  19.  

    Clear and concise article, Claire.
    ANd, I fear, accurate.

  20.  

    Just how fucked are we compared with the rest of the EU? Answer: cosmically.

    Euro-area public interventions in the banking sector (as % of GDP) – approved and effective

    * Austria 32.0 8.7
    * Belgium 92.0 26.7
    * Cyprus 0.0 0.0
    * Finland 27.7 0.0
    * France 18.1 5.6
    * Germany 24.4 9.1
    * Greece 11.4 4.6
    * Ireland 231.8 229.4
    * Italy 1.3 0.0
    * Lux 20.2 8.8
    * Malta 0.0 0.0
    * Netherlands 52.0 25.4
    * Portugal 12.5 3.3
    * Slovakia 0.0 0.0
    * Slovenia 32.8 0.4
    * Spain 12.1 5.0
    * Euro area 25.4 11.5
    * EU 27 31.2 12.6

    From Irish Public Policy blog.

  21.  

    What are you talking about Pope? We’re WINNING!!!!

  22.  

    BoldPilot yep! In the race to the bottom.

  23.  

    In case no one has seen it, Newsweek thinks Biffo is one of the world’s top-ten leaders.
    As far as comments on this article go, last time I looked there were 2 comments for Cameron, zero for Sarcosi, and 73 for Biffo, all of course admiring the incisiveness of the author.
    See: http://www.newsweek.com/2010/08/16/go-to-the-head-of-the-class/the-fiscal-taskmaster-brian-cowen.html

  24.  

    Thank you for this article, Claire.
    Patrick, I heard that on the radio! The yanks will eat those words yet! I must have a look at those 73 comments.

  25.  

    Marie Claire name Brian Cowen as worlds sexiest man.

  26.  

    Very well written article Claire, Thank you for saying what a lot of people are thinking. This government are just delaying time until the next election, and because there is no willingness on behalf of any of the politicions ,Government or Opposition to change, this country is down the swannie.

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