A European prize for Ireland’s spineless leader

The future of Ireland is 'shredded' as hundreds of thousands pour out. How this all came to pass is becoming more and more a matter of public fury, writes Tom Gallagher

Tom Gallagher
On 30 June 2013 23:35

Before 2008, Ireland’s sovereign debt was one of the smallest in the European Union (EU). In 2013, when household debt is added in, Ireland is possibly the biggest debtor in the Western world as a ratio of economic output.  

Last week, key revelations about how this catastrophe occurred were published in an Irish newspaper. They were the  transcripts of phone conversations between two senior managers in the Anglo-Irish Bank which has since gone on to acquire the infamous sobriquet of the ‘bank that broke Ireland’.  

They revealed how the previous government was duped into pumping €7billion of emergency cash into the bank on the assumption that it was facing no more than temporary liquidity problems. The two cynical and foul-mouthed bankers mocked the state that was willing to save them and boasted about how, once the politicians had been "pulled in’, they would continue to provide emergency funding.

Against a background of public fury, the Director of Public Prosecutions has tried to block further revelations. Enda Kenny, Ireland’s Taioseach (Prime Minister) since March 2011, has promised a parliamentary enquiry.

But this will be after a lengthy summer’s break for Ireland’s elected legislators, (some of the highest paid in the Western world).

The Irish Dail (Parliament) is a toothless body. In 2009 when it was already clear that the state’s decision to guarantee the liabilities of Anglo-Irish and also the Bank of Ireland left it facing a €39 billion bill and a budget deficit of over 30 percent of GDP,  a parliamentary committee was set up. But Anglo’s chief, Sean Fitzpatrick, simply refused to attend as did Ernst & Young, Anglo’s auditors.

Kenny is a politician of modest abilities with immense self-regard. His role is to keep Ireland sedated during what is probably just the preliminary stages of a crisis lasting decades, as crippling for the country as defeat and occupation in war.  

Ireland has also just completed its six-monthly stint chairing the EU. Kenny acted as the pliable frontman, legitimising a non-solution to the massive debts overhanging Europe’s banks due to years of reckless investing. Instead of the banking union, Germany’s Chancellor Merkel called for in 2012, a framework for banking resolution has been agreed that is full of get-out clauses.         

Kenny managed to get on the cover of Time magazine in October 2012 as the architect of a phantom economic recovery that was sheer boosterism from spin doctors. From a mediocre gallery of European centre-right leaders, Merkel has plucked him to be the candidate of the European People’s Party as the next President of the European Commission.

Only if the main centre-right political family manages to stem predicted big losses in next year’s European elections, can Kenny hope to leap from West of Ireland parish pump politician to one of the grandees of Europe. In the job, he would probably cave-in to the forces which ensure that Europe is dominated by producer interests and sharp-elbowed states like Germany and France. After all, at home, he has shown remarkable consideration to the banks, property interests and lawyers whose greed and hubris brought low ‘the Celtic Tiger’.

For the power-brokers in the People’s Party, Kenny may well appear a harmless pushover. But he poses problems if the Christian democratic and centrist family wishes to retain a wholesome image. He has shown indulgence to at least one former senior colleague in his Fine Gael Party whom a state tribunal into the privatisation of telecommunications accused in 2011 of ‘cynical and venal abuse of office’ .

In coalition with an Irish Labour Party, now mainly supported by the middle-class public sector, he has pursued an anti-clerical line which has involved Ireland closing its embassy in the Vatican. Finally under Pope Francis, the Vatican appears intent on cleaning up its discredited banking arm and rooting out what the Pontiff himself has reportedly referred to as a lobby of gay clerics within the Vatican government or Curia.

If these steps come to anything, it will be a contrast to the shielding of white-collar crooks who in Ireland have created a dysfunctional state that is  a menace to millions of its own citizens.   

While the Pope wishes light to be shed in the Vatican’s shady corners, Kenny appears desperate to halt the leaks about the banking bail-out. Perhaps he was prompted by Merkel who last Friday stated that the disrespectful tone towards the wider society displayed by the Irish bankers appeared to be a common problem in the banking community — in Ireland, Germany and elsewhere.

In November 2010, the earlier guarantee to cover the deposits of toxic banks like Anglo led to a huge loan being forced on Ireland by the Eurocrats managing the crisis in the Eurozone. As Wolfgang Munchau commented in the Financial Times on June 23rd, German banks had amassed huge stocks of dodgy foreign securities (many of which were located in irish and Greek banks). Until now, Germany and France have insisted that taxpayer funded bailouts be imposed in partner countries in order to repatriate these toxic loans.

But on June 28th, there was a volte-face. The EU agreed that investors and wealthy savers would have to shoulder the costs of future bank failures. The punitive rules imposed on Ireland no longer apply. But Ireland continues to have a debt-to-GDP level that means the country risks becoming a human desert as consumption and investment crash.

As its young and talented citizens stream abroad in their hundreds of thousands, no wonder it is felt that Mr Kenny deserves a prize for his inane reasonableness as his country’s future is shredded.

If Irishmen of his stamp had been as prominent in olden times as they are now, Britain would have encountered very little problem from the Irish and they would mostly all have converted to what was the prevailing faith and ideology in the larger neighbour.

Tom Gallagher recently completed a book entitled the EU’s Road to Crisis: European Disintegration Through Monetary Union

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