Bailout anniversary - Let’s hope Mr Rehn is right

Today marks the first anniversary of the Government’s announcement that the European Union, European Central Bank and the International Monetary Fund had agreed to a programme of financial assistance to Ireland totalling €85 billion.

Then taoiseach Brian Cowen announced the agreement at the Government Press Centre, surrounded by cabinet colleagues Mary Hanafin, Pat Carey and Eamon Ryan.

Ireland had agreed to put up €17.5bn and the remainder would comprise of loans at the approximate interest rate of 5.83%. It was depicted as a rescue package but the public clearly held that government responsible for getting the country into trouble in the first place.

The Fianna Fáil–Green coalition government destroyed what was left of its credibility and the government imploded. In the ensuing general election Fianna Fáil suffered by far the heaviest losses in its history, extending over more than 80 years. All of its coalition partners in the Green Party were politically exterminated in the general election.

Fine Gael and the Labour Party swept into power following campaigns promising to renegotiate the bailout. In the process they left some hostages to fortune.

Leo Varadkar promised that the banks would not get “another red cent” until they burned the senior bondholders, while Labour leader Eamon Gilmore asserted that: “It’s Frankfurt’s way or Labour’s way.”

It now seems that it is going to be very much Frankfurt’s way, because the senior bondholders have not been burned and the current coalition is continuing with the terms of the bailout, but there have been some changes — especially a significant cut in the interest rate to an estimated average of 3%.

When asked in the Red C poll published in today’s Irish Examiner if the Government should continue with the terms of the bailout as amended, 48% agreed, while 30% disagreed. The remaining 22% expressed no opinion. Although short of a majority, it does suggest that more people feel that the amended bailout terms are a good deal rather than a bad deal for the country.

Of course, the higher figure may also reflect a lack of confidence in the Government’s own ability to handle the crisis. While the electorate clearly realises that the previous government was to blame for the financial debacle, the current Government should be alarmed about how it is being judged on its own handling of the crisis. The poll found that only 29% think the current Coalition has been doing a good job of managing the economy since coming to power, while 45% disagreed.

These findings emphasise the political difficulties facing the Government, as it is about to introduce its first budget. There has been plenty of warning that the budget is going to be harsh.

Olli Rehn, vice-president of the European Commission, insists there is “light at the end of the tunnel for Ireland”. For all our sakes, let’s hope it is not a train.