Bailout: A calculated political gamble that just might not pay off

THERE’S no doubt yesterday was a defining moment for the Coalition.

Enda Kenny and Eamon Gilmore: Sombre announcement that Ireland would exit the bailout without a comfort blanket

Taoiseach Enda Kenny and Tánaiste Eamon Gilmore assessed the mood of the nation perfectly by the sombre manner in which they delivered what they had been hinting at for weeks — Ireland would exit the disastrous bailout without a comfort blanket.

It was a bold move which, after three years of the country being run from abroad, demonstrated that Ireland can and will regain its independence from the moment the troika exits stage left.

But despite Angela Merkel telling Mr Kenny she would support Ireland in whatever decision it made, had we really independence in our choice? Has Ireland been bounced into a position that we may regret in the future?

Political uncertainty in Berlin may well come back to haunt us. The German chancellor had absolutely no appetite to head into the Bundestag and seek approval for what our German EU partners viewed as a second bailout. It was always unlikely to happen.

One of the main players whose actions brought those savage troika policies on Ireland was Fianna Fáil leader Micheál Martin who pointed out yesterday that Michael Noonan was seeking a €10bn overdraft facility from Europe in September.

But something happened that changed that view fairly quickly. It didn’t come from the IMF or the ECB who were in favour of the precautionary credit line. It was obviously communicated the series of political meetings in Europe where the decision was reversed and gradually released back home.

Noonan stressed yesterday — before flying to brief European counterparts in Brussels — that the time and the conditions were now right for Ireland to go it alone.

“We’re fully funded for 2014. Even if we had a precautionary credit line for 2014, we wouldn’t be using it.” It would have been a case of putting a credit line in place for next year without accessing it, he said. But had something happened between Wednesday evening and Thursday morning?

At an Oireachtas committee on the Wednesday, Mr Noonan clearly said no decision had been taken. But by yesterday morning, the special Cabinet meeting was called where the snap decision was made.

It may simply be a fear of a leak.

The Government was rightly criticised in the Dáil for giving very little detail on why they made the decision but the figures do add up.

With a least €25bn in the bank, only €9bn will be needed to fund the overdraft so you’d really need to wonder how big a world crisis there would have to be to use it up €16bn by the end of the year?

But then the ghost of Sept 30 past comes along and next year’s ECB bank stress tests are bound to cause concern in coalition circles.

Much of the staged fanfare in the Dáil had one eye on next May’sEuropean and local elections.

Both the Taoiseach and the Tánaiste pointed out that Ireland did qualify for the ESM €500bn emergency fund. There was more than a hint that while the German government and its KFW development bank has no problem lending to Irish businesses, any future loans will be heaped up on the €67bn the Irish taxpayer pumped into the banks which the Coalition is going to have one hell of a fight to get back.

And let us not forget that it was Irish families who bore the brunt of the past five years of austerity and have restructured better than any other sector of the economy. Figures show Irish private debt has been reduced from €180bn to around €120bn this crisis.

There’s been very little restructuring in the banking area and fears must be growing that when the ECB reports back next year on the condition of our banks, Irish households will be plunged into deeper crisis.

But both government parties are still holding on to their hopes that our small open economy’s growth rates will pick up next year when the rest of Europe and the world does too. It can be argued our “bright future ahead” is based on shaky ground after Mario Draghi decided to cut ECB interest rates this month by 0.25 basis points. Hardly a vote of confidence.

Other government mantras constantly repeated is that unemployment is below 400,000. That might not look as good if the JobBridge and other “temporary schemes” are included in the Live Register. Another so-called fact trolleyed out every day is that 3,000 jobs are being created very month. That may also sound great, but 1,000 of them are part-time and 1,000 people a week are leaving these shores.

All may not be what it seems at both at home and abroad. The fragile economy is being talked up by every almost single minister in government. So too is the cutting loose from the clutches of the troika. There was a fair amount of political expediency in yesterday’s decision. The Government had to hope that Ms Merkel’s offer of the German development bank working closely with Irish businesses wasn’t code for saying goodbye to the €67bn retrospective bank deal. If that were to happen before next May, Fine Gael and Labour’s calculated political gamble will not pay off.

Rehn statement

“This morning, Michael Noonan informed me of the Irish Government’s decision to exit the EU/IMF programme in December as planned and without a pre-arranged precautionary credit facility.

“I know the Irish Government has reflected very carefully on this matter. The European Commission has always made very clear that this was a decision for Ireland to take and that we would support Ireland, whichever decision was taken.

“While challenges remain, Ireland has made impressive progress and is well placed to make a successful and durable programme exit. Graduation from the programme will send a very clear signal to markets and international lenders that the adjustment effort undertaken in Ireland, with the support of its European and international partners, has paid off. Ireland has accumulated significant cash buffers under the programme, helped by the decision taken earlier this year by European creditors to extend the maturities on loans granted to Ireland.

“In short, today is a good day for Ireland and the Irish people. It provides clear evidence that determined implementation of a comprehensive reform agenda can decisively turn around a country’s economic fortunes and put it back on a path of sustainable growth and rising employment.”


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