The 85 billion euro question


Faced with real cuts in their pay and living standards, they have woken up and begun to ask questions about this "rescue" package.  They have begun to ask the same question we asked on this page two weeks ago. 

During the boom, the European banks loaned billions of euros to the Irish banks, which then lent it on to Irish property developers who inflated the property bubble here. The European banks did so because they were getting a higher than average return on their funds. 

They, like so many people here, wanted a bit of the Irish property boom. But since they took the risk, surely they should now be sharing in at least some of the consequences of the downturn?
After all, that's how capitalism works.  You take a risk for high rewards.  If it goes wrong you lose some of your investment, maybe even all of your investment.  

Except that's not what is happening in this case.  In this case the European banks are to get ALL of their money back, courtesy of the state guarantee to the Irish banks.   A chunk of the EU/IMF bailout fund for Ireland will be used to pay back the European banks in full.

Unfortunately the €85 billion IMF/EU fund is not a present for us. It's a loan which has to be paid back with interest.

And who is paying this?  The ordinary Irish taxpayers, that's who, even though the vast majority of them had nothing to do with the property bubble here. 

This point was made in the European Parliament recently by the Socialist Member of Parliament Joe Higgins from Dublin.  The European Commission President Jose Manuel Barroso erupted in fury at the accusation, which shows that Higgins was right on the money. 

It's worth going on line to see the Higgins speech and Barroso's angry reaction (Google either of their names and you will find it). 

Higgins described the bailout fund as “nothing more than another tool to cushion major European banks from the consequences of their reckless speculation...” He said it was a way of transferring tens of billions of euros of private bad debts on to the Irish people. 

“Far from being a bail-out, your IMF/EU intervention in Ireland is a mechanism to make vassals of Irish taxpayers to the European banks,” Higgins said.  “You are destroying our services and the living standards of our people."

Spoken like a true socialist, especially the reference to vassals!  It was great stuff and almost turned us all back into the student socialists we used to be all those years ago. 

Of course it's not that simple. But Higgins has a point, and it's a point that most people here agree with. 
And it's not just ordinary people who are asking the €85 billion euro question. Some economists here are now asking why the European Central Bank (ECB) did not see what was going on during the Irish boom. 

They are supposed to be in charge of banking in the EU and they get all the figures sent to them by the national central banks (including the Irish Central Bank) so they cannot say they did not know. 

Why did the ECB not see that the Irish boom was being driven by a huge property bubble?  Why did they not stop the French and German banks from pouring money in here to fuel the boom?

That's what the ECB is supposed to do.

But they didn't.

Like everyone else they missed it. In that way the mandarins in the ECB are almost as culpable as the failed regulators and crazy bankers here. 

Instead of apologizing for their mistake, however, they are lecturing Ireland about our failure of regulation, about irresponsibility.  And they are teaching us bad boys and girls a lesson by lending us the billions of bailout money at a crippling 5.8%, even though they are raising the funds at less than 3%. 

And they are doing that even though a chunk of the money will be used to pay back the European banks!   You couldn't make it up!  With friends like that, we need no enemies.  

The Fine Gael leader Enda Kenny and his finance spokesman Michael Noonan made a trip last week to Europe to visit Barroso for discussions on a possible future renegotiation of the terms of the Irish bailout deal.  Or so we were told. 

In fact it was no more than a photo op for Kenny to make him look like the taoiseach (prime minister) in waiting as the election campaign here gets underway. 

But it's hard to have much confidence in Kenny renegotiating anything. He is so out of his depth on the big financial question that the Fine Gael party has been keeping him away from the media as the campaign begins. 

That renegotiation has to be the biggest issue in this election because everything else will depend on it.  Without it, all the promises that the parties will make between now and voting day will be meaningless because there will be no money to do anything.

So the €85 billion euro question is -- does any Irish politician have the brains and the backbone to stand up to Europe and get us a fair deal?