Government spinning out of control with macho promissory note bluff

HAS the Government been playing a desperate game of ‘call my bluff’ with the European Central Bank? What are the stakes? Us or them?

By the end of last year, the reassurances that we would have a deal on the promissory notes before the Mar 31 payment date were becoming shriller and shriller. Even cautious Finance Minister Michael Noonan described a deal before March as “likely.”

Then I met an insider who said there was no deal. He said the Government’s only hope was to ‘take’ a deal.

I reckoned that was what Communications Minister Pat Rabbite was doing on RTÉ’s The Week in Politics on Dec 9, when he said, in relation to the €3.1bn promissory note, “we’re not going to pay it”.

Did the Government hope that threatening not to pay the promissory note would force the ECB into a deal? You could argue that it was worth a try. We will all be celebrating if it works. But it doesn’t look like it will work.

This weekend, the bombshell news appeared on the Reuters website: the ECB said it can’t be done. It contravenes the bank’s policy against monetary financing for member states.

So what happens if the game of ‘call my bluff’ doesn’t work? Are the stakes too high? What is really at stake? The solvency of the State, or the welfare of the Labour Party?

Tanaiste Eamon Gilmore’s assertion in Santiago, Chile, that a failure to agree a deal on the promissory notes would be “potentially catastrophic” for Ireland leaves little space for retreat. It boxes us into a corner: wait for a deal from the ECB or face catastrophe.

But surely the timing is political rather than economic? Gilmore, hoisted on his own petard of “Labour’s way or Frankfurt’s way”, and facing able opposition from Sinn Féin, can’t afford not to get a deal by March on the promissory notes. Can this country afford Gilmore’s stunt? Surely, we are too small, and too reliant on international financial structures and trading agreements, to go it alone?

Would we be better off defaulting in March if we don’t get a deal? Would it not be better to stay in the game, benefiting from the ECB’s €70bn funding for our banks, at an interest rate of 1.5%, and the relative shelter and stability of the Eurozone? Are things so bad now? Do you know many people living on cornflakes?

Our living standards are down at 2002 levels, which were OK. Ireland is said by the Economist Intelligence Unit to be the twelfth best place in the world to be born, well ahead of the US, the UK, France and Germany. The main criterion was economic prosperity, present and future.

Do you think we and our children would be better served if we refused to pay our bank debt, went bust, exited the euro, went solo, or knocked on the door of the UK?

I’m asking these questions because I don’t hear them being asked in the political sphere. All I hear is machismo. I suppose that’s what people like. Taoiseach Enda Kenny and Gilmore played to the crowd before the election, and they are following through on the stunt that most pleased the crowds.

But I am worried that the stunt will be — to use Gilmore’s word — “catastrophic” for the country.

Or, if not for the country, for this government. How can Labour stay in government beyond March if there is no credible deal on the promissory notes? Are they calculating that would be a good principle on which to exit and halt their slippage in the opinion polls?

We need a general election now like we need a hole in the head. If Labour walked, the best we could hope for would be for Fianna Fáil to support Fine Gael to maintain stability. Kenny has nailed the blueshirt to the mast on a different principle, that of exiting the bailout and becoming, once again, as he would say, ‘sovereign’. This narrative fits the nationalist myth on which Fine Gael is based.

Kenny says he is focused on the promissory note deal because this would make it “difficult” for Ireland to exit the bailout at the end of the year. But we know the Government is discussing the possibility of a second bailout with the IMF.

So is Kenny spinning an external reason for our failure to exit the bailout? “It wasn’t our fault, it was the ECB’s.”

I don’t know. All I know is my head is spinning with all this spin. I’m not naive enough to think the Government doesn’t need to spin, but this spin is out of control.

I believe there is a need now, in these times of enormous flux, for a measure of honesty, for a political voice that says, “We are hoping for a deal on our bank debt, but if we don’t get it before March, these are our alternatives”.

There is a need for a voice that fesses up to the fact that a deal on our bank debt is only part of the solution to our problems. Constantly looking to Europe for deliverance is a national tradition that has cost us dearly. I keep thinking of Wolfe Tone’s French ships being driven by the wind out of Bantry Bay.

WE still need to cut €3bn out of our running costs and this is something we can do for ourselves, starting with fixing Croke Park. Shrink all State-paid pensions down to a size that affords a decent life for people who have no mortgage and no dependents, say €30,000 a year. Tax all benefits, including child benefit, to make sure that the money goes where it needs to go.

Of course, we need a deal on our bank debt. Kicking the can of those repulsive promissory notes down the road, by turning them into a long-term bond, seemed like an excellent idea.

But the ECB says this can’t be done and never could be done. And you have to wonder how our Taoiseach, just two weeks ago, could have expressed himself as “confident” it would be secured by March. He actually said: “I don’t contemplate not getting a deal here.”

It looks like we may be in that place not contemplated. We may get a deal, but the ECB has explicitly said it will not result in financial savings to the State. Thanks for being so clear about that, lads.

I wish Kenny and Gilmore had contemplated more before they wagered the credibility of their government and of this State.