Watershed agreement for Coalition
Economically it is in a narrative continuum with the Anglo-Irish Treaty of 1921 negotiated by Michael Collins and Arthur Griffith. It is freedom to regain economic freedom. Fine Gael will exploit that.
If the hyperbole in that comparison is obvious, it has enough truth to hold water. Yesterday’s revised agreement on the promissory note was a watershed. It falls far short of what was promised by the Government when it was in opposition. It confirms rather than repudiates the enormous debts incurred by the State on behalf of rogue banks. If it significantly delays and in real terms appreciably reduces our liability it also irrevocably confirms it. We are not burning the boldholders. We are doing it Frankfurt’s way. We are paying for all our fiscal incontinence as well as that of those abroad who profited from lending ultimately unaffordable money our banks lent on to us.
But in its revised terms yesterday’s agreement makes the burden significantly more bearable. Going forward, our still bankrupt State will have €1bn less to pay out every year and correspondingly €1bn less to cut from services or raise in taxes. Austerity will continue, but at last the light at the end of the tunnel was not an oncoming truck.
The drama that started to unfold on Wednesday afternoon and continued until after 5am yesterday when the Seanad passed the legislation winding up IBRC, the former Anglo Irish Bank, brought back painful memories of another late night in politics. On night of Sept 29-30 then Taoiseach Brian Cowen, his finance minister Brian Lenihan and a small number of officials, met with bankers. Key among them was the CEO and the chairman of AIB. A global banking crisis had engulfed an engorged and reckless Irish banking sector. Billions had been borrowed abroad to be lent at home in an era of unprecedentedly cheap interest rates.
A Celtic Tiger economy went on a spending spree, a borrowing spree and most notoriously a building spree. A bubble was inflated that by autumn 2008 was dangerously adrift on a global tide of insolvency. Confidence in the Irish banking system was disastrously undermined which by the night of Sept 29, 2008, was on the verge of collapse. At the rotten heart of Irish banking was Anglo. It has set the pace and led the way in recklessness. But if it led, nearly the entire Irish banking sector followed it to the edge of the cliff, and over into the abyss beyond.
Faced with a crisis that threatened either the immediate insolvency of Anglo, a run on the banks the following morning, or both, Brian Cowen and Brian Lenihan took a fateful decision to give a blanket guarantee to the Irish banking sector. To effect that decision an incorporeal cabinet meeting was held in the early hours of the morning that would later be the subject of recrimination from some cabinet members.
But if ministers like Mary Hanafin and Willie O’Dea complained later they did not demur at the time. The following day the Dáil and Seanad met to pass legislation to give effect to the decision.
Listening to Government speeches in the Dáil during the early hours of yesterday morning it is hard to believe that in its immediate aftermath Cowen and Lenihan’s decision was applauded.
Irish applause rose appreciably when the British Chancellor Alister Darling berated Lenihan for stealing a march on the British. Instantly in a banking world of leaky vessels Irish banks looked temporarily safer harbours. But that was not to last. The scale of liability that the State had successfully completed a reverse takeover of was staggering. It went far beyond anything that has been envisaged.
That conundrum became the concrete boots in which the reputation of the last Government sank without trace. The decision on the night of Sept 29, 2008, became an enforced bailout for the state on Nov 29, 2011. The 29th of the month is the Friday 13th in the Department of Finance. It ended our economic sovereignty, installed the troika, and saw economic policy making removed from our own hands.
At moments Wednesday night’s Dáil debate was eerily reminiscent of the night in 2008 which was the origin of the debacle. The chaotic scrambling to publish legislation, the sudden return of the President from an official visit to Italy, a session beginning at midnight, all begged the question of whether the Government was in control. Luckily for it Wednesday night’s parliamentary mess was the darkest hour before the dawn. By yesterday afternoon a deal has been done. For the Government a critical political challenge has been met.
However, the very poor handling firstly of the Magdalene Laundry issue this week, and the late night parliamentary scramble to retrofit legislation onto events that had momentarily slipped beyond their grasp, begs a question about the Government’s political skills gap.
The Coalition has the wind at its back again. Whether they have the skill to harness that wind remains to be seen. Enda Kenny in the Dáil yesterday looked and sounded like a statesman. Michael Noonan, whose own career has had multiple catastrophe troughs, may live on to prove that not all political careers end in failure. Yesterday was an undoubted triumph for him. My sense is that this deal has shored up Fine Gael support.
For Labour the benefits are less clear. There is a lingering sense that Eamon Gilmore’s stridency was more a liability than a help. In any event the working class votes the party has lost will hardly return to celebrate the mitigated austerity now held out as an immediate but anaemic reward.
For Kenny especially, however, this is validation. He is not just an underestimated politician who became a leader against the odds. He is a leader who now has a legacy.
