Let me remind you: the economy was in freefall, Northern Rock went wallop, share prices in Anglo, AIB and BoI were tumbling, the sub-prime time bomb detonated in New York. What did our politicians do? Bertie Ahern retired, followed by months of laps of honour and a consequent coronation of Brian Cowen. No serious governance work was done from March to August. The roof fell in with the bank guarantee in September.
Politicos seem oblivious of the real world beyond their own bubble. Ireland Inc can’t afford four months before government clicks into gear again. We are faced with the following timetable: extensive Christmas holiday break; politicking (electioneering) in February, full-blown campaign in March and a new government in situ during April. It’s like going to big fight boxing, having umpteen meaningless under-card bouts, before the main action. Extra time to endure 296 political hacks appointed to quangos and John Gormley finalising pet projects like a land fill levy of €120 per tonne to increase waste disposal costs. The election outcome will be about the relative strengths of the current opposition parties. Fine Gael seeks to target ten extra seats from their tally of 51 deputies obtained in 2007. Their top hit list includes a seat in Dublin Central, Dublin Mid-West, Dublin North West and Kildare South; a second seat in Carlow-Kilkenny, Cavan-Monaghan, Dublin South Central, Galway West, Cork North Central and Cork North West. If they achieve 32% of the vote, they will be the largest party and lead the next government. Their recent polling consolidation is mostly to do with their improved collective cohesion and unity of purpose.
Labour needn’t worry unduly about their recent poll contraction. If stabilising around 25%, this marks a huge elevation from their last outing of 10% of the vote. This will pole vault the party from 20 to around 40 seats. The combination of FG plus Labour should have a majority in excess of 15 in the Dáil. Anything larger will sow seeds of backbench discontent and is superfluous for a working government. Labour’s weaknesses will continue in Connacht, rural Munster and the border counties where they have no party organisation infrastructure. The Gilmore Gale can still sweep through Dublin and urban Ireland.
The Fianna Fáil carcass is set to be dismembered by not just the conventional FG/Labour competition, but also a disaffected protest vote. Sinn Féin’s current crop of five TDs (with Gerry Adams replacing Arthur Morgan) can be supplemented by seven more. These could include Padraig McLochlainn (Donegal North East), Sean Crowe (Dublin South West), Mary Lou McDonald (Dublin Central), Dessie Ellis (Dublin North West) Maurice Quinlivan (Limerick), Peadar Tobin (Meath West) and a surprise win in Waterford. Add Joe Higgins (Dublin West) and Richard Boyd Barrett (Dun Laoghaire) as certain election victors.
All the above amounts to a transformed Dáil. Headlines will abound about fresh starts and new beginnings. Subconsciously, the new government team suspect that the worst economically is over, that FF will have taken the hit for the most odious depths of the downturn. Dream on. The prospects for 2011 and beyond are daunting. The next administration will have to be on their “A” game to establish authority and credibility. Popularity isn’t an option. As we endure a third year of recession, we assume that it must be nearing an end. This wishful thinking is not based on any full understanding of the present government’s strategy. Cowen’s colleagues have spent two years chasing the cycle of events. At the back of their minds they had the notion that if they could survive to June 2012 things would improve. The “something will turn up” strategy was met with events that only lowered their approval ratings. This “kick the can down the road” tactic will result in our next government inheriting a lot of hospital passes. Take the four-year plan — it’s full of political landmines. It includes residential property taxation and household water charges — delightful electoral liabilities. Vague assurances have been given to the IMF/EFSF that these revenue measures will inflict a minimum €500 additional take from 1.6 million households. The contemporary authors of these tax broadening measures will not be the two Brians. Some 307,000 public servants, anticipating some respite having elected Labour into Government, are due to face more painful realities. The present government said the Croke Park deal should be reviewed within a year if not delivering wholesale savings. This timing should nicely coincide with the establishment of the new Government’s Department of Public Service Reform. Anticipate the mother and father of all resistance when the IMF insists that the “no pay reduction/ no compulsory redundancy” clauses have to go. Associated reform of semi state companies will unleash conflict. New Greek and British Governments have faced identical dilemmas.
Worst of all, while 2010 was the year of the ever elongating Anglo Irish salvage costs, there may be even worse ahead. 2011 will be the year that the tale is told on Allied Irish Bank. Further to imminent full nationalisation, there will be no need to dupe private investors anymore. There will be no trading market in shares and hence no shareholder price to maintain. As with Anglo, no further internal incentive to conceal the toxicity. Scary anecdotes are circulating that AIB may be in worse odour than Anglo. As a much larger bank, they are more exposed to a wave of mortgage defaults and crippling bad SME loan losses.
Kenny and Gilmore can expect early briefings from senior civil servants. These will paint the picture that identified bank losses to date have been focused primarily on property portfolios and NAMA related transfers. Yet to be tackled are the impairments from the €120bn of losses relating to a minority of 790,000 mortgages. The financial distress of four to five small business insolvencies per day over a three year period has still to materialise. This €32bn of non-corporate lending is set to contract, with potential significant fall out. Meanwhile, Brian Lenihan’s Treasury Promissory Notes will fall due for payment. This Government didn’t provide cash for Anglo and Nationwide’s losses — just IOUs. The Blueshirts and Red Roses can procure the full finance.
The expectation that the tide of ever increasing exports will lift all our boats is an enduring hope. However, when balanced with the €15bn that has to be sucked out of the domestic economy between now and 2013, stagnation rather than growth emerges. This means an overall scenario whereby our national debt, exceeding €200bn, will overshadow our national income of €180bn. Guys and gals of government can look forward to the reputational damage of default, when the EU cops our inability to sustain inherited indebtedness. Don’t forget, they will also be the meat in the sandwich of SPUC and the pro-abortion lobby in eventually legislating for the X case. FG and Labour should enjoy their last Christmas before entering the asylum. It’s only the inmates, rather than the institution, that will change.