The IMF is now saying that small countries shouldn’t be rescuing the European banking system on their own and that the EU as a whole should step in to deal with failed institutions. That’s a bit late for us. It was obvious to anyone with eyes in their head that it was a European problem, and not solely the responsibility of individual governments and the clue is in the name: European Union. Yet for the last three years, this country has pushed the burden of the collapsed banks onto the backs of a tiny and financially exhausted population.
In doing this, we have adopted a language that fails to reflect the reality of what is happening. We speak of bailouts, rescues and of protecting the banking system. As recently as today, an Irish Times article about the Euro crisis refers to the recapitalisation of Anglo-Irish bank.
Stop, I want to tell them. Listen to what you’re saying.
Anglo was not recapitalised, and neither was Irish Nationwide. Both of these companies are dead. They are no longer banks. They can’t be recapitalised. What happened was that a huge amount of money was appropriated from Irish citizens and given to speculators who had taken a risk on these pyramid schemes masquerading as banks and who were in danger of losing their bets. A significant amount remains to be paid to the same people.
Can we get that absolutely plain? As far as Anglo and Nationwide are concerned, there is no bailout, no rescue and no recapitalisation. It’s a straight transfer of cash out of your pocket and into someone else’s wallet.
Of the Troika members, the IMF has consistently taken the view that Ireland should not have to carry the burden alone, and that investors should be forced to share the loss. Even though my view is that the shareholders should have been told to get stuffed, at least the IMF’s view is more rational that that of the ECB and the European Commission. Even the Financial Times has been arguing that the bondholders should be given a debt-for-equity swap, which translates roughly into Congratulations. You now own a bust bank.
Two banks, which are currently the subject of a major police investigation, collapsed with huge debts as a result of bad management decisions. They were private companies, with private investors, they served as conduits for property developers’ money and they had no role in the broader economy. Neither bank had so much as a single ATM on a single street corner in the entire country. Despite what we were told, if they had been allowed to collapse, nothing at all would have happened, and yet our government decided that you and I should make sure none of the investors lost a penny.
This is the great mystery of the insane bank guarantee scheme devised by Brian Lenihan in 2008. This man was not a fool, so why on earth did he decide to sacrifice the future of generations in order to ensure that investors in a private company would not suffer? The answer to this question will explain why Ireland is now so crushed beneath debts. I believe that it lies in a combination of pressure from the ECB and a fear that some very dirty things would be exposed.
What might those dirty secrets be? Well, perhaps they might include the amount of debt the two Ponzi banks owned involving senior politicians, judges, police, senior civil servants and all the other members of the elites in this little state. Or to put it another way, it might expose the amount of favours that had been bought, and if that happened, who knows what sort of contagion might have been triggered? Before you know it, one dirty secret might expose the next until the whole thing lay bare. Much easier to sell generations of Irish children into poverty and emigration.
Ridiculous as Lenihan’s call to patriotic action was, at least it came from a man of privilege and member of the corrupt ruling party. What would you expect from him? But to hear Lenihan’s puffed-up Fianna Fáil nonsense repeated by Eamon Gilmore was nothing short of nauseating. The Labour Party leader urged the opposition to pull on the green jersey and support the government in its talks with the Troika. I remember when Eamon Gilmore had principles, but this statement was worthy of Bertie Ahern at his most venal.
Of course, there were those who insisted from the start that we should not take on these obligations, that it was foolish, and there were even some who said that the decision to do so was treason, including the same Eamon Gilmore who now calls on us to pull on the green jersey. Gilmore made this charge against Brian Cowen little more than a year ago under parliamentary privilege, accusing him of knowing that Anglo was bankrupt when he issued the guarantee.
Not so long ago, we heard Pat Rabbitte, another Labour minister who once had principles, defending the disgraceful give-away of our gas and oil to multinational companies for nothing, so what exactly are we to make of our political leaders? I don’t know. Personally, I think we have no hope of mature political leadership in this country. It seems to be a choice between Fine Gael, who are really Fianna Fáil, Labour who are quickly becoming Fianna Fáil, or the Shinners, who will eventually become Fianna Fáil. Maybe we don’t deserve anything but gobshites in government.
Things are coming to a head, now that Christine Lagarde, the IMF head, has spoken so bluntly of the dangers facing the world economy.
Anglo and Irish Nationwide, the two dead banks, are now amalgamated into an entity called the Irish Banking Resolution Corporation (IBRC), or the First Bad Bank of Ireland, depending on your point of view. This is the entity that gets all the banking money we borrow from the EU and the IMF, and while it’s true that Ireland’s costs involve more than simply pumping money into this bad bank, it’s a very large component of our costs. We borrow €3.1 billion every year to pump into this financial black hole which in turn pays out a pile of money to creditors.
Now here’s the conundrum. The famous promissory notes that everyone talks about attract an interest rate of 8.6%. This is the IOU that the Irish government provided to Anglo. And Anglo, in turn, was able to go to the only outside bank that would lend it a penny — the ECB, from which it got money at something like 2%. Unfortunately, the idea of reducing the interest rate won’t save us anything, because we already own Anglo. Whatever margin it makes on the money will come back to the exchequer in time.
The real disaster is that the cash is gone. It’s been handed over to the investors who couldn’t believe their luck that some idiot was going to cover the losses they’d already written off. If we had declined to take these losses onto ourselves, nothing at all would have happened. In this respect, Anglo and Nationwide were no different from a company making engines or matchsticks. Private companies go bust all the time. Ireland’s credit rating would not have been reduced, since the liabilities were those of two private corporations and there was absolutely no reason why any government should take them over.
But as we know now, that’s not what happened, for reasons that have yet to be exposed. My own view is that the lunacy of the banking guarantee was caused by a mixture of hubris, stupidity and corruption, although I don’t think these three things were necessarily all present at the same time, or in the same people.
Now that the IMF has come out so blatantly and pointed at Europe as the problem, perhaps it will be possible to re-examine the Irish bailout deal with the Troika, although in truth, it’s very hard to see where the scope for renegotiation exists, now that all our money has been stolen with the connivance of successive Irish governments.