Cowen’s choice: Sell the bailout to the people or risk being pushed out
The British treasury has invested £117 billion into their banks and put in place a programme of insurance of toxic bank assets. Their chancellor, Alistair Darling, has revised downward the net cost of this to the British taxpayer from £50 billion to £6 billion of net losses.
Gordon Brown’s government has taken an 84% stake in Royal Bank of Scotland and 43% in Lloyds’ banking group. Both the US and European governments are much further down the road than us in bank reforms.
The medium-term outlook is for an upward cycle of events that will ultimately restore banking profitability. This will create future shareholder value and a return on taxpayer investment. The arguments against NAMA principally related to an overpayment on property portfolios. The key issue is to ensure that NAMA transferred these loans at realistic market prices – otherwise it’s a zombie institution with a paralysed business plan. The higher the NAMA haircut, the more viable this prospect becomes.
The politics of this week’s historic happenings can be positive. The Financial Regulator’s office is revamping by the replacement of a dormant Patrick Neary with a tough, vigorous Matthew Elderfield. A compliant and invisible Central Bank is now headed up by a confident, independent external governor, Patrick Honohan.
The secretary general of the Department of Finance has been replaced. New regulatory criteria are being put in place to ensure banks cannot be over-leveraged with excessive loans and must have extra core capital. This week’s measures, in retrospect, could be the pivotal turnaround for the taxpayer to escape the blanket state guarantee on Irish bank deposits. This could be a fresh start from a financial nightmare.
Success in politics begins with smart communication. Courageous conviction and passion are the hallmarks of leadership. President Barrack Obama seized that opportunity with healthcare reforms. Faced with more paralysis, he bit the bullet of campaigning on the media and with town hall rallies.
He twisted congressional arms to get his crucial vote over the line. He went “all in on the river card”. By upping the ante of political rhetoric and drama, he showed leadership from the front. Even George Dubya Bush seized his moment to secure a second term in office. Election results count. Only subsequent events prove you right or wrong. What’s essential is the power of persuasion to allow the public to follow. Our Government lacks communication and presentation that is full of such self-belief.
Along with the banking crisis, the other current crucial consideration is the reduction of public expenditure and stability in the public finances. The December budget arbitrarily cut public service pay and welfare. The blind and the sick had to accept a reduction in income because the state’s finances are losing €2bn per month. We were repeatedly told that €4bn of spending had to be saved.
This was split three ways: pay, welfare and other services. Since then the public sector unions have slowly wound up a campaign of work-to-rule. Initially there were strictures from Brian Lenihan about staff suspensions and further pay cuts next year, if reforms were not agreed. Over recent weeks the Government turned a blind eye to phones being unanswered and public offices being shut. The debacle of 50,000 unprocessed passports could not be ignored.
What are we to make of this week’s framework agreement between the public service union leaders and government?
The blatant fear has to be the cabinet is concocting a façade that amounts to a cave-in to avert all-out strikes. This could result in the 2010 budget arithmetic yielding only temporary illusory savings. Remember the unpaid leave scheme. Have we forgotten what we promised the EU Commission, the ECB and our euro currency colleagues? A programme of fiscal rectitude cumulatively to reduce the budget deficit by €12bn over three years.
Ireland has been lauded for its courageous budgetary stance. This may be a mirage. Our international credibility will be reduced to Greek status if the Government doesn’t hold the line.
The political mantra seems to be day-to-day survival at all costs. It’s a policy of constant appeasement. With the Greens, it’s conceding extra, disproportionate ministries or animal welfare legislation. Brian Cowen seems addicted to the path of least resistance. Similarly with the reshuffle, his caution would not permit the sacking of any minister, only replace vacant posts.
The Taoiseach’s pattern of performance is now well established. He talks surly and tough, then accepts concessions. This only attracts further conflict, as we understand he is all bark and no bite.
Little wonder then that within the Fianna Fáil parliamentary party the dispossessed are finding their voice. Progressively the serial dissidents – John McGuinness, Mattie McGrath, Noel O’Flynn, Ned O’Keeffe – are becoming more visible and vocal. They are being joined by MJ Nolan, Brendan Kenneally, Bobby Aylward and Máire Hoctor. Former axed ministers such as Seán Power, Tom Kitt, John Browne, Noel Ahern, Mary Wallace and Michael Ahern could yet cause serious grief.
The new cohort of expectant deputies now realise Cowen will not give them anything. This group includes John Cregan, Darragh O’Brien, Michael McGrath, Timmy Dooley and Chris Andrews. They lack a big beast.
SOONER or later, a senior minister may cop the need to jockey for pole position. The scenario is simple: Fianna Fáil loses the next election, cowering Cowen is ousted and a leadership contest ensues. The entire block of senior ministers who sat on their hands and propped up Cowen unquestioningly can all be tarred with the one brush. Hence, the opportunity to break from the pack. Take a short-term hit, one step backwards, in order to land the prize as Albert Reynolds did previously.
Pundits have dismissed these rumblings as inconsequential and well short of the 18 required signatures for a motion of no confidence. Heaves start with humble origins and gradually gain momentum. Bertie Ahern never allowed discontent to take root. Cowen is letting it flourish. All the while, his authority is being undermined. Bad polls compound his fate.
Cowen has surrounded himself with advisers who lack political guile and communications creativity. His government press secretary is career civil servant Eoghan O Neachtain. His special adviser is Prof Peter Clinch. There is no Peter Mandelson. PJ Mara and Peter Prendergast understood the law of the jungle – devour or be eaten. Each week brings another missed opportunity.
Cowen should seize the moment to speak to the nation in a “back me or sack me” style. The media are treated as an irritating necessary evil that has to be indulged rather than a conduit to sell the message. The banking bailout could be sold as a transforming moment. As comedian Frank Carson cracks, “it’s the way ya tell ’em”. Cowen’s failure to communicate and connect is at the core of FF’s problems.
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