€85bn rescue package - Unwelcome return to penal times

TODAY is a grim reminder of one of the darkest eras of Irish history.

By inflicting an enormous financial burden on every household in the country, the €85 billion rescue deal for Ireland signals an unwelcome return of ‘the penal times’.

In place of the imperial ascendancy of the 17th century, however, modern penal laws will be enforced under an agreement forged between one of the most unpopular Governments since the foundation of the state, the International Monetary Fund, the European Central Bank, and the EU Commission.

The extremely tough four-year deal gives a new meaning to the term ‘bailout’. Instead of rescuing the ship of state it could scuttle it. Overall, the deal includes €10bn for bank recapitalisation,€25bn for banking contingencies, and €50bn for exchequer funding needs.

In a smash-and-grab raid on the National Pension Reserve Fund, €17.5bn of the package comes from our own resources, scuttling hopes of using it as a stimulus for growth. It sticks in the craw to see the fund plundered for the benefit of bankers who have lied through their teeth in this crisis.

In a more positive development, reports of a crippling 6.7 % interest rate were wide of the mark and there will be some relief at the average rate of 5.83%. Yet, that leaves a financial burden that will wreak irrevocable damage on the fabric of Irish society for generations to come.

Hopes of ‘burning’ bondholders have been scotched because the fragile eurozone, with Portugal and Spain in imminent danger of economic collapse, would explode. So, the beleaguered Irish taxpayer will have to pick up the tab for losses of €67bn incurred on EU loans, plus the interest rate, while wealthy investors will recoup their bonds in full because of the Government’s ill-advised bank guarantee.

Astonishingly, the Government remains in denial about the cause of this debacle, with the Taoiseach last night attributing it to the global economic crisis. Any lingering doubts about the level of public anger over the Government’s role evaporated at the weekend when some 50,000 people took to the streets in protest at an economic debacle not of their making but caused by greedy bankers, dodgy developers and inept politicians.

In a welcome twist, the threat hanging over Ireland’s Corporate tax of 12.5% has for now been removed. The pledge to reform and downsize the banks is to be welcomed. So too is the hoped-for stability derived from not having to borrow on costly bond markets to run the country over the next few years.

While the overall targets of the four-year plan may be fixed in stone, scope must be allowed for any incoming government to change aspects of the deal. The agreement sets the scene for a budget that will inflict further pain on every man, woman and child in the country. It is doubtful if the Government will also slash the pay, perks and pensions of politicians and top civil servants.

Regrettably, Ireland’s negotiators were outmanoeuvred in the high-stakes poker game that will dictate the country’s future for years to come. Hopefully, the endgame will not prove a recipe for total disaster.

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