November 2010 was a very dark month for Ireland, when the weather came out in sympathy with the economy. The scene on Merrion Street across the road from Government Buildings had to be seen to be believed.
As the month progressed the international media camped out, amid mounting speculation about the inevitability of Ireland having to go with a begging bowl to our future troika partners to secure the funding necessary to finance our dangerously high deficit.
The markets were simply refusing to finance that deficit, so the country was either going to run out of money to run public services or debt default would happen. In the event, the troika rode to the rescue and the rest is history.
That deal did not represent any loss of sovereignty as we had surrendered that when we made the massive mistake of joining the euro back in 1999 and subsequently mismanaged the economy in glorious fashion, but it was a total humiliation for the citizens of the country and one that will take years to erase from the national psyche.
On Dec 15, the deal with the troika will conclude and Ireland will then, in theory, re-enter the markets to raise its own monies to finance a still ridiculously high annual borrowing requirement.
As Irish citizens emerge from their beds on Dec 16, they are not going to look out their bedroom window and exclaim with joy that the troika has departed. Nothing will change. We will still be left with a very dangerously high level of government debt which is barely sustainable — even if things go relatively well for the economy over the next five years — and will be totally unsustainable if things do not go quite so well for the economy.
It is a very dangerous debt legacy that will take at least a decade of solid growth to bring under control and in the meantime, its servicing will impose a massive burden on the Exchequer. We can be pretty certain that this debt legacy will result in a further serious diminution of public services, such as health and education and the quality of public infrastructure. Those who get up out of bed every morning to work and take risks running a business will be burdened with an unacceptably high tax burden for years.
This gargantuan debt burden is depressing, particularly when account is taken of the contribution that lying bankers and other bankers have made to the debt pile.
Ireland took the bank recapitalisation on to the national balance sheet in order to prevent German banks and others from taking dangerous losses if we had allowed Anglo Irish Bank collapse and allowed bondholders in the banks take a running jump, as free market would have suggested we should have done.
However, we literally took one for the European team and now our European team mates do not want to know anything about it. If Ireland had threatened to do what it should have done back in 2009, things could be very different today for Ireland and indeed for many European banks who lent recklessly to the Irish banks.
Ireland needs a retrospective deal from Europe on the legacy bank-related debt and it should also be given funding to address the debt distress issue for mortgage holders and SMEs who are in serious debt difficulty.
If European help is not forthcoming, perhaps Ireland should seriously consider altering its relationship with Europe.
If the economy is to recover and if normal commercial life is to resume we will need a functioning banking system. It is not clear where it is going to come from. The latest move by Danske just goes to prove that foreign-owned banks have little interest in engaging in a meaningful way in Ireland and it is hard to blame them.
The onus then falls on our two domestic banks that are also pretty dysfunctional at the moment. It is a case of Back to the Future.
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