If Skoda can successfully reinvent itself, so can our clapped-out state

NEGATIVITY of the national public mood is at fever pitch. The response to the allocation of free cheese has been bizarre. As part of the Common Agricultural Policy, the EU Commission has a regular policy of acquiring and distributing free food, within its remit.

Circulation of 53 tonnes of Irish cheddar cheese has no downside. Don’t want it? Ignore the option. Tasty protein for free can only be good for you. As minister in the mid-1990s, we distributed copious amounts of free tinned stewed beef. The howls of derision that greeted Brendan Smith were irrational and nonsensical. This scheme is utterly disconnected from our present economic plight.

The weeping and gnashing should be reserved for authentic bad news. False positivity to date has been based on denial and inaccurate analysis of the extent of bank losses and fiscal deficits. The reasons why Irish sovereign bonds are now well above an unprecedented 8% are manifold.

Total bank bailout costs are now likely to be much greater than €50bn. Official growth forecasts of 2.75% are fantasy. The Department of Finance’s credibility has imploded. Angela Merkel has spelled out the inevitability of PIIGS bond default. Our politicians are paralysed by looming elections. Instead of cursing the dark, it’s time to focus on a syndrome of solutions.

What are the answers? The nation, more particularly the Government, cannot function without credit. The sooner we embrace recourse to the European Stabilisation Fund the better. Monthly NTMA bond auctions won’t recommence any time soon. Temporary liquidity should not be confused with underlying insolvency.

Prof Morgan Kelly’s missive this week highlights even greater recapitalisation for AIB and BoI. He claims the taxpayer will have to pump €16bn into BoI and €26bn into AIB. That’s €20bn beyond previous pronouncements. This is unaffordable to the National Pension Reserve Fund. The printing presses of promissory notes can’t cover these liabilities.

Klaus Regling runs the European Stabilisation Fund. We need to twin four-year budgetary plans to an application for finance from his office. The vagaries of the bond markets will extract too high a price in terms of economic stagnation. Our capacity to repay debt is finite. There is no point continuing the pretence that we can maintain the pace on a treadmill that moves too fast. The sooner this is done and dusted, we can move on to matters within our own control.

Public service reform is dependent on courageous leadership. Both Government and opposition have repeatedly stated in recent weeks that the Croke Park deal need not be renegotiated. Fine Gael’s final acquiescence completes political unwillingness for confrontation.

The best prototype solution for what needs to be done to public administration is Aer Lingus. After years of multiple rounds of cost-cutting, it finally took Christoph Mueller to bite the bullet. His 20% reduction in payroll costs saved €97m. Impact voted against. He stuck to his guns. The transformation is self-evident. Last year’s loss of €34m has been transformed with a nine-month profit of €60m, despite volcanic ash clouds.

Unless a similar crossroads of crisis emerges in the apparatus of government, transformational change will not occur. It beggars belief that the HSE human resources division employs 2,000 people for the past five years. There is no justifiable reason for clerical officers to get half an hour off to cash pay cheques that no longer exist.

Absenteeism is tolerated in government employment because it is rewarded. There is a direct correlation between sick pay schemes, substitution rosters and the levels of absence. Neither union leaders nor politicians will face reality unless there is a clear present external threat.

Our political system has failed – too many TDs chasing correspondence and cares of constituents. Our electoral system has created the most potent vested interest in the state – local communities. Worse than the professional elites, sectoral cartels and cronyism is the vice grip community campaigns have over public representatives. The first loyalty of every incumbent and wannabe Dáil deputy is the case for their constituency above the national interest. Hospital rationalisation, bogus decentralisation and the location of IDA projects are examples of gross national inefficiency.

The electoral solution? Radically raise the ratio of voters to TDs directly elected. This can be done by reducing the number of TDs to 147 and then only electing 60% of them on an area basis. The quality of national public representatives would be greatly enhanced by a proportion (up to 40%) of parliamentarians being elected from a list system, corresponding to that party’s national vote share.

Specialists in various fields could be chosen on a national basis, while people-pleasers can avail of the current route. Our present system ensures maximum vulnerability of our politicos, with an appalling lack of authority. Our long-term security derives from the health and growth potential of the real economy. We remain a small, open trading economy. Two key issues are competitiveness and investment. Ireland Inc’s competitive rating has declined from 12th to 20th in the past two years. Our share of foreign direct investment into Europe has halved from 12% to 6%. We need to procure increased corporate finance emerging from China and India who have not endured any recession. Excessive reliance on US projects needs to be refocused towards the east.

Lessons of the decade have been that we cannot survive on selling property to each other or public services for sustainable jobs. The cost of utilities (power and public transport) and professional services remains to be restructured further down towards European averages.

THE remaining resolution relates to the looming mortgage crisis. Official statistics state that only 37,000 out of a total 790,000 mortgages are distressed. Anecdotes abound of AIB and BoI camouflaging the true extent of impairments on residential loans. Interim solutions of interest only payments, interest holidays and the lengthening of the life of the mortgage result in delisting from official records. As mortgage credit contracts and house prices fall further, these problems may become endemic. A debt forgiveness scheme, after the redemption of the house, and reform of insolvency law are medium-term eventualities. Reduced incomes and extra unemployment will undermine mortgage repayment capacity. The Government seems determined to kick this ball into touch for the next government.

The cleansing of the past can be enhanced by fresh procedures: whistleblowers need to be facilitated to acquire the truth; dismissal of public servants has to be allowed to ensure accountability; legal and external advice needs to be made transparent other than through the 30-year historic rule; Freedom of Information legislation needs to be further expanded. Across a range of monetary, political, administrative and economic spheres, there are real resolutions to what are seemingly intractable problems. Decisive leadership is absent. Unabated anger needs to be redirected from cheese distribution towards constructive remedies. If Skoda can successfully reinvent itself, so can we.