Saving the banks - None of our options are attractive

FINANCE Minister Brian Lenihan spoke for the great majority yesterday when he described the cost of the bank rescue package as “horrendous”.

Even though the figure was not terribly different to what was expected when it finally arrived, like a death in the family, it was heartbreaking and overpowering in equal measure.

And, like a bereaved family, it is entirely natural to wonder if things can ever be the same again. This morning we can only hope that they might but recent history has shaken our confidence and it is hard, at this moment, to believe they will be any time soon.

Yesterday’s announcement pushes the cost of the State’s banks rescue package to some €45 billion, with the possibility of this astounding figure reaching something around the €50 billion mark if commercial property prices fall by 65% and remain more or less static for a decade.

The scale of our difficulties is reflected by the decision by the National Treasury Management Agency to suspend its bond auctions planned for this month and next month. They hope to return to the markets in the first quarter of 2011. This only acknowledges that the markets would not offer acceptable, much less attractive, terms. Just like a farmer during our Economic War, there’s no point in bringing the calf to market, no one wants it.

Mr Lenihan also acknowledged that a “significant additional adjustment” in the “fiscal consolidation plan” would be required when the Government finalises the 2011 budget in early December.

This, sadly, can only mean cuts and/or taxes more severe that those already anticipated by a worried, frightened and angry society.

It may mean too that Europe has concluded that the Croke Park deal commitments on not cutting public sector pay or forced redundancies are unrealistic. It is unimaginable that, if the dreaded day arrives when the International Monetary Fund storm troopers arrive at the airport, that those guarantees would hold much water.

It is unimaginable too that long-promised public sector reform can be delayed or its implementation continue at its snail’s pace much longer. In this moment of crisis it is time for a less leisurely and consultative process than the one we’ve relied on heretofore. We are in a war for our independence and our survival as a modern, European economy. Anything that stands in the way of success must be put aside for the moment.

Inevitably, what was already expected to be a very severe budget will be even more so and deeply divisive as well. It will also render the recent opinion polls, especially Fianna Fáil’s slight improvements, redundant.

There was one piece of good news yesterday morning, unimaginable as that may be.

Mr Lenihan made it very clear that senior bondholders would be repaid in full but he said “legislative arrangements” would be introduced to address the position of the €2.5bn of subordinated bondholders at Anglo Irish.

If this means that the State repay all that it borrowed in our name then so be it, it cannot be otherwise.

Equally, if it means that an entirely different approach is taken to those international financiers who supported Anglo Irish – and many other financial institutions – in the excesses that destroyed our country and our ambitions then so be it.

If the Government is to get the support it needs to carry this package through it must differentiate between debt incurred by the State and debt incurred by bankers gone mad. Taxpayers cannot be expected to regard these different categories of debt with the same sense of obligation. The markets do not so why should we?

Some months ago, before the Dáil broke up for the summer recess Labour leader Eamon Gilmore accused Taoiseach Brian Cowen of economic treason. Mr Cowen was angry and offended but in the light of yesterday’s figures the adjective is almost superfluous. The only difference is that Mr Cowen does not, by any means, stand alone. Every banker and auditor, every regulator and politician, every cheerleading economist and commentator stands accused though to varying degrees. Yesterday’s figures were a bitter pill to swallow but the fact that, two years after the event, not one person has been before the courts on even a token charge just adds to the sense of outrage.

We may be shocked and angry but we don’t seem to have many choices, either we accept our situation and deal with it or we waste energy fighting each other and, inevitably, finish the job of destroying this country.

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