Going rate or not, public patience is wearing thin
The Government has to convince the public to accept a series of swingeing cuts in sensitive areas, particularly health services, in the forthcoming budget. A minimum of €3.6bn has to be found on Dec 5, but it will be roughly 2015 before the country gets back within the 3% budget deficit limit agreed with the troika.
That means another three years of painful belt-tightening. And that is if the economy doesn’t deteriorate any further.
To the outside world these budget cuts have been introduced with a remarkable degree of social cohesion. How long is this going to last?
The level of public anger at bankers’ pensions and pay could see simmering discontent mutate into something much harder to control unless the Government takes remedial action soon.
Nearly €30bn of taxpayers’ money has been poured into the former Anglo Irish Bank; €5.4bn into Irish Nationwide; and a further €30bn into Bank of Ireland, AIB and Permanent TSB.
The reason the country lost its economic sovereignty in 2010 was because the Government could no longer backstop mounting losses in the banking system.
That six executives at the former Anglo are now earning over €500,000 a year is politically poisonous. As is the news that senior former executives at the banks which had to be bailed out have now retired on gold-plated pensions.
Sentiment towards bankers is at an all-time low. Fiona Muldoon, a director at the Central Bank, gave a very public dressing down to bankers at a conference last month. She said they lacked humility and acted like adolescents. It could very well be the first time in the western world that a central banker’s speech was noticed by the general public — never mind gain widespread support.
Tánaiste Eamon Gilmore has promised to look into pay levels at IBRC. Political pressure will increase in the weeks ahead to do something.
One possibility is that this could presage a merger between IBRC and Nama. The chief executives of both state-controlled institutions, Mike Aynsley and Brendan McDonagh, appeared before the Oireachtas finance committee over recent weeks.
Both men were grilled by TDs about why they should not merge. Both men claimed there was no compelling rationale for such a move. However, both institutions are charged with running down assets between now and 2020. When the Government looks to make future savings, this option will surely be in the mix.
IBRC chairman Alan Dukes has defended pay levels. He argues that the state-owned bank has to compete in the open market to attract the talent needed to work through IBRC’s deeply troubled loan books in order to maximise returns for taxpayers.
There is a lot of merit in his argument. Unfortunately, salaries in the financial sector are still ridiculously inflated. Over the past couple of decades bankers came to see extortionate pay levels as their birthright. The collapse of the financial system which lumbered many countries, including this one, with crippling debt levels has so far failed to dent their sense of self-importance.
So while IBRC may have to compete in a sector with norms that jar with everyday reality, it is owned by a state that is bankrupt. The bank’s shareholders are ordinary taxpayers, who have very little patience with arguments about market rates and commercial agendas.
This is one circle the Government will have a very hard time squaring. But it is going to have to very soon.
Joined AIB upon leaving school. He retired in 2009 at the age of 55 on a pension of €529k per annum. Mr Sheehy announced this week he would reduce his pension to €250k per year.
Was the chief executive of AIB between 2009 and 2011. Before then he had been head of capital markets. He received a €3m payout upon leaving the bank and is entitled to a yearly pension of €234k.
Joined AIB in 1989 and was finance director between 2005 and when he left the bank in 2009. He is entitled to a yearly pension of €248k.
Left AIB in 2009 when he was head of the bank’s Republic of Ireland division. He took over as head of the Red Cross in Ireland in 2011. He is entitled to a yearly pension of €264k.
The former finance director at AIB retired from the bank in 2006 at the age of 48. He got a pension top-up of €2.13m when he left the bank and was allowed start drawing down his pension at the age of 50.
The current chief executive was the head of the Irish retail business in 2007. That year he had a total remuneration package of just shy of €1.5m. At the end of 2007 he was entitled to an annual pension of €156k on retirement.
Since becoming CEO he has waived his right to retire at the age of 55, which would have required the Government to top-up his pension fund.
Mr Boucher will now be entitled to a pension of €460k each year when he retires at the age of 60.
Retired from Bank of Ireland. He was the chief executive between 2004 and 2009. His pension entitlement is €656k per annum.
The current head of Bank of Ireland’s retail operations.
Mr Crowley, 51, was head of retail financial services between 2004 and 2009. On his retirement he will be entitled to a pension of €273k per annum.
Current head of non-core operations at Bank of Ireland. Mr Donovan, 47, was head of capital markets between 2006 and 2011. He will be entitled to a pension of €271k per annum when he retires.
Former chief financial officer of Bank of Ireland. He retired last year on a pension of €221k per annum.
The former chairman and chief executive left in 2009 with loans outstanding of €150m. He had a yearly pension entitlement of €3m. Half of this goes towards paying off his creditors and the other half goes to his wife. He stands trial in 2013 on charges of financial irregularities.
The then-CEO had a basic salary of €956k in 2007 and a bonus of €2m. His pension contribution for the year was €274k. He moved to the US shortly after the nationalisation of Anglo in 2009. IBRC is in litigation with Mr Drumm in an effort to recover roughly €8m in outstanding loans. He is awaiting bankruptcy proceedings in the US scheduled for early next year.
The former head of Irish lending left the bank at the beginning of 2008. He had a basic salary of €455k in 2007 plus an €800k bonus and a €123k pension contribution. IBRC is currently in litigation with Mr Browne in an effort to recover €50m in loans.
The former finance director had a basic salary of €485k, an €800k bonus, plus a €94k pension contribution in 2007. Mr McAteer is due to stand trial in 2013 on charges of financial irregularities.
The former managing director of the bank had a €413k basic salary in 2007, a €640k bonus, plus €118k in pension contributions. Mr Whelan is due to stand trial in 2013 on charges of financial irregularities.
The former head of Irish Nationwide retired in 2009 with a pension pot of €27m. He also took a €1m bonus when he left the building society even though the bank posted a €2.5bn loss that year. He has refused to hand back the bonus despite several requests by the Government. He is currently being investigated by the Central Bank.
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