European report reveals the chaos of Irish economic collapse

A report into how the European Commission managed the austerity programme in Ireland paints a chaotic picture with conditions being changed, warning signs missed and documents missing.

The European Court of Auditors also reveals the Troika did not demand the Government privatise any of the State’s assets, but that this was proposed by the Government at a later stage.

The report found the commission was unprepared for the magnitude of the crisis and as a result its management, especially of the initial stages, was weak. It advised the commission it must improve its procedures to deal with any crisis.

The court said in March 2008 the commission reported no problems with the Irish budget but nine months later the situation changed.

The building and private lending booms in Ireland and the other countries were not spotted by the commission until after they had happened. However, the commission, commenting on the report, said it had warned Ireland and Spain to run a budget surplus and none of the domestic and international institutions or the private sector anticipated the severity of the Irish downturn in 2008. It had warned about overheating housing prices in 2005.

The report said there were differences between the memorandum of understanding signed by the Troika and the Irish authorities, and what had, in fact, been agreed by the European Council, representing the member states.

“In Ireland, although the council decisions mentioned no specific conditions with regard to banking surveillance and sales of state assets and privatisation, these conditions appeared in the memorandum of understanding,” the report said.

The commission, in its response agreed that privatisation was not part of the council decision and that the programme never included formal conditions to sell state-owned assets.

“Over the course of the programme the authorities agreed to identify a number of assets that could be privatised.

In addition they agreed that, in case the Irish authorities decided to privatise, half of the proceeds would be used for growth-enhancing measures. During the course of the programme no privatisation proceeds were accrued,”it said.

Frequent changes to some of the programme conditions made it much harder to track a country’s performance. In Ireland’s case some reforms were gradually diluted as they were replaced by less demanding ones or completely disappeared before they were fully completed.

A failure to comply with conditions was rarely reported, and for Ireland it was confusing with different terms used from ‘largely met’, ‘broadly met’ and ‘partially met’ without any explanation.

The commission said a programme-monitoring table detailing how Ireland was complying with the various requirements had been attached to the memo and updated.