Labour needs to spell out its banks strategy

THE Labour party says nationalisation of AIB and Bank of Ireland is the best course of action. However, it is extremely important that any such plan is presented with intricate detail.

A crucial part of any bank nationalisation proposal, in any country, is the exit strategy. To date, Labour has not provided sufficient information as to what their particular exit strategy would entail – or, indeed, whether they actually have it adequately mapped out.

Nationalisation of banks in Japan led to the taxpayers there eventually losing trillions of yen when the institutions concerned were reprivatised. Labour favours the Swedish model, but it relied on the government revaluing the krona when that strategy was implemented in the 1990s.

Ireland would have no such control given that we are now members of the eurozone.

If Labour is serious about its proposal, it needs clearly to state

(a) How AIB and Bank of Ireland would be reprivatised, and

(b) How many years does it estimate the two banks would remain in public ownership?

Is there a timeline in place? The latter point is especially important vis-a-vis how shareholders will be affected by the proposal.

I feel Labour is putting forward proposals too closely in line with the ICTU’s “There is a Better, Fairer Way” document, which proposes bank nationalisation. It is obvious that support for this document is part of a wider Labour strategy to secure votes from those interested in seeing the proposals in that document implemented.

However, it is not the interests of the ICTU that need to be adhered to, but the national interest as a whole.

Given the extent to which ordinary people nationwide had made what was previously regarded as a prudent initiative for their pensions by investing in AIB and Bank of Ireland, it is clear why putting forward proposals in the national interest remains of utmost importance. Also, note should be taken that the key to Japanese economic recovery during its “lost decade” banking saga was not nationalisation per se but the hardline stand of the then government in 2002 in forcing banks to write down non-performing loans. What was the key to recovery in Japan is the key to recovery here, and nationalisation is not needed for that to occur.

Bank nationalisation is very far from a simple process. It is often said that the devil is in the detail and without knowledge of that detail, the nationalisation proposal put forward by Labour is tantamount to a red rag to a bull, especially when people’s investments are at stake.

John Kennedy

Knocknashee

Goatstown

Dublin 14