An economy in crisis - A lot more than banks is at stake

IN an ideal world, where there are certainties, where commitment and honesty are rewarded, a slight hint of optimism might just begin to make itself felt this spring morning.

The state, each and everyone one of us and our children too, have committed resources almost beyond imagining – a possible €9.1 billion, excluding NAMA costs – to try to rescue our two main banks. We were assured, time and time again, that we had no option but to do this. Equally we are assured that our investment will prove money well spent. Most of us can do little other than hope that someone somewhere really knows what they are doing and that those assurances are worth more than the once-enviable shares in those banks.

Yesterday’s welcome announcement that an agreement has been reached between the Government and public sector unions should also encourage that nascent optimism. In a deal that should please far more than just those immediately involved, state workers have been told that they will not face further pay cuts before 2014. For their part, unions have agreed to cooperate with a range of cost-saving measures. Though individual unions have to vote on the package, it offers a degree of certainty and space for essential reforms.

The appointment yesterday morning, by the High Court in Dublin, of a provisional administrator to Quinn Insurance, owned by billionaire Anglo Irish player, Sean Quinn, did challenge whatever optimism the resilient amongst us could muster.

On foot of an application from the Central Bank and the Financial Regulator, the regulator’s officials are overseeing the day-to-day business of Quinn Direct and Quinn Healthcare.

The regulator said it had launched an investigation into aspects of Quinn Insurance which had come to its attention. The Quinn Group employs around 5,500 people in this country and anything that might threaten those jobs would be disastrous.

However, Mr Quinn’s immediate reaction – he has written to all Government ministers objecting to the “aggressive” intervention – suggests either a clash of cultures or that a new attitude has been adopted by the financial authorities. Let us hope it is the latter but let us hope too that it may prove, in time, to be an unnecessary intervention.

Those of us who, despite everything, prefer to describe our glasses as half-full will be worried too by the announcement that Government will soon have to borrow €250 million a month just to make social welfare payments. It is believed that the Government will run short of money to pay welfare dependents in just three months. The Social Insurance Fund, from which social welfare payments are made, has been devastated by soaring unemployment and a collapse in PRSI contributions. The Exchequer will have to borrow a minimum of €7bn before the end of 2012 so that people will get benefits.

All of these developments, and others too, represent great challenges. Some have the potential to lead this country along the road towards economic recovery, others have the potential to cause even more mayhem and distress. How we respond, as individuals and as a society, is our next great challenge.

We can be angry that such fantastic sums – enough to build hospitals, schools and provide all of the other services the citizens of a modern, mature economy are entitled to expect but that we do not have – are being used to pay the bills of arrogant, reckless and obnoxiously greedy bankers but that won’t change much; the banks will still need to be recapitalised.

We can be angry too that convictions still seem just a remote possibility but our laws are too feeble and they must be changed to prevent another disaster like this.

We should use that simmering anger to make it clear that we will not tolerate another breach of trust by Government, regulators or bankers. We should make it clear that we expect proper accountability and regulation of these wretched banks sooner rather than later. And we should mean what we say.

We have all been told that we will have a chance to pass judgment on our Government at the next election. But we must leave all of our politicians, especially those who expect to form the next Government, in no doubt about what we expect of them.

Democracies are based on trust and in this democracy trust has been destroyed, squandered by reckless fantasists. If yesterday’s announcements do not lead to some sort of stability in this economy, if they do not go some way to rebuilding the trust destroyed by Ahern’s age of excess and political failure, then we will have lost far more than we ever imagined was at risk.