Debt claim demands a response - IMF chief criticises debt deal

YESTERDAY’S assertion by Ashoka Mody, the former IMF chief of mission to Ireland, that Enda Kenny’s Government “blew” an opportunity to get a deal on debt write-down and a “slower pace of austerity” from the troika when it took office four years ago, will hardly enhance the reputation of the Coalition.

It again raises questions that Fine Gael and Labour must have hoped had been left for history but now need to be answered — once again it seems that a what-might-have-been is at the centre of Irish life.

Mr Mody’s claim will re-energise the impression that the country’s situation was so very difficult, so close to calamity, that our Government was happy to accept almost any terms to avert collapse and the very real prospect of social chaos.

It will re-energise too the impression that our political leaders were as much supplicants as they were negotiators, but none of those realities allow Mr Mody’s challenging assessment to be set aside.

His judgement, and it must carry great weight, is so damming that a comprehensive government response is essential.

Despite an improving economy and consistent jobs growth, the Government, and as an election approaches, must wish that Mr Mody had kept his opinions to himself.

But he did not and his criticism will resonate right across the country where hardly a family has avoided the impact of our economic collapse.

Had a better debt deal been achieved we would have avoided some of the hardships of recent years but our national finances were so skewed that some changes were essential. That is our sobering reality.

Mr Mody’s assessment, and frequently repeated but unfulfilled promises on the possibility of debt write-down from Mr Kenny and Finance Minister Michael Noonan, must bring into question the response to the crisis and how credible some of the persistent claims around the possibility of a debt write-down deal really were.

Those claims were made persistently and with political objectives in mind even though senior banking figures scoffed at even the suggestion of debt forgiveness.

That they have come to so little, and even if repayment schedules have been stretched the overall debt figure remains unchanged.

Mr Mody, a visiting professor at Princeton University, also suggested that the debt accumulated by the previous government was “odious debt” that arguably should not have to be repaid.

The appeal of that declaration was not matched by any suggestion as to how we might satisfy our ongoing and essential credit needs — we still borrow the bones of €10bn a year for basic housekeeping — if we defaulted on debt already incurred.

This reality was faced by Greece too at yesterday’s meeting in Brussels where they were reminded by Germany’s finance minister Wolfgang Schäuble that “the new government in Athens had to fulfil the core conditions of its bailout programme”.

Mr Schäuble’s adamance shows where the power really lies, and who decides the terms of credit given to bankrupt nations. It also illustrates how very little wriggle room those facing an immediate crisis really have.