Voters will be certain to remember that election pledges have failed
Ministers will argue otherwise.
But the perception of voters and an increasingly frustrated public who feel ripped off by the reckless gambling of investors in the good old years cannot be ignored by the Government.
The reality, of course, is that some of the incoming ministers knew in their hearts that the idea of burning bondholders and making them pay part of the latest €24 billion in bank losses was never going to stick.
European banks never wanted it. International investors would panic. And there was always the threat that the European Central Bank would pull the plug on the drip feed money being given to Irish banks that keep ATM machines and normal day-to-day business running.
Fine Gael and Labour were always going to be in the same position as Fianna Fáil and the Greens.
The mistake then was teasing voters with a pledge during the February election campaign that no bank would get a cent unless senior bondholders shared the burden.
Many commentators this week have pointed out that FG’s Leo Varadkar was most adamant about the pledge when he said that the banks would not get “another cent” beyond the agreed €35bn until they showed how they would “impose losses” on all bondholders and creditors.
The promise became a negotiating issue with the ECB and one which this week the Government had to back down on.
Finance Minister Michael Noonan said yesterday the outcome of the promise was always going to happen under the “umbrella” of our European partners.
But we’ve been told that the European bank governors, on a whole, don’t want us to burn the senior bondholders who have money in the last two big institutions, Bank of Ireland and Allied Irish Bank.
Mr Noonan blamed the U-turn on the possibility of losing out on ECB funding and scaring off future investors in the two banks.
Fianna Fáil could and would have told you that.
Coalition partners Labour are also lying low after their election pledge that it would be “Labour’s way rather than Frankfurt’s way” (where the ECB headquarters are) when it came to renegotiating Ireland’s crippling debt completely collapsed.
Leader Eamon Gilmore had “straight-jacketed” the party with his gusty pledge.
The Tánaiste, though, must be eating humble pie now.
It became clear during the week that ECB president Jean-Claude Trichet (Gilmore referred to him as no more than a European civil servant during the election) will not be by any means bowing to ‘Labour’s Way’.
The failure of the coalition Government to secure a rumoured €60bn medium-term liquidity fund for Irish banks from the ECB, as well as Frankfurt’s order not to burn senior bondholdlers, was surely an embarrassment for Mr Gilmore.
Minister Noonan still gloated on radio yesterday that Ireland had at least secured a commitment for “ongoing” funding from the ECB.
Another minor backing from Frankfurt was the suggestion that Irish banks did not need to engage in a rapid firesale of assets and could instead sell them over a longer period to maximise potential returns.
But would slapping some of the bank losses on bondholders really benefit us? According to Minister for Public Expenditure Brendan Howlin, any haircut for senior bondholders may only bring in €3bn to €4bn.
But the damage to our reputation would be much more costly.
Arguing this to a disappointed public is more difficult though.
Mr Noonan will no doubt claim the restructuring of the banks, following the stress tests this week, will benefit the economy.
But any benefits for ordinary homeowners, business people and employers are a long way off.
It is almost certain that as we continue to pump billions of euro more into the troubled banks, lending will still be restricted and at least for one or two years more.
In the meantime, voters will be certain to remember that those election pledges to punish bank investors and take control from Frankfurt have failed.
CONNECT WITH US TODAY
Be the first to know the latest news and updates
