The deal for the €85 billion euro bailout for Ireland was done last weekend, with €35 billion earmarked for the banks and €50 billion earmarked to keep the state going for the next few years.
We're getting this vast amount of money from a combination of sources, from the International Monetary Fund (IMF), the European Union and a few individual countries, including the U.K. We're even being forced into taking some of it out of our own national pension reserve.
Getting the deal done is reassuring to some extent because it means we now have enough money to keep going for the next few years while our financial mess is tackled. Schools or hospitals won’t be closing, the police will still get paid, services will continue and welfare will be available to those in need.
This may sound a bit dramatic, but there was a real question mark over all that in recent weeks because neither the state nor the banks here could raise any more money on the markets. It currently costs over €50 billion a year to run the country, and we only raise €31 billion in tax revenue. There was a serious possibility that we were going to become a failed state in the middle of next year when the cash we have left would run out.
That can't happen now. And for that, I suppose, we should be grateful.
But there's not much gratitude in the air here at the moment. Instead there is absolute outrage, bordering on open rebellion. The deal may be done ... but the Irish people are not buying it.
The problem for the Irish and European leaders is that there has been a sea change in public opinion in Ireland over the past few weeks, a reversal of the previous public mood of resigned acceptance. The 50,000 strong protest march in Dublin last weekend showed just how much the public attitude has shifted.
What has changed is the hope that a lot of people were clinging to that somehow they would be able to get through the crisis without being affected too much. That hope has now evaporated.
People have woken up to the fact that the impact on their lives will be enormous. The bailout is going to saddle the country with huge debt for years to come, and that will filter down and squeeze everyone.
People have also woken up to the fact that nearly half of this bailout debt is being taken on so that the bondholders and foreign institutions that stupidly lent tens of billions to the Irish banks can get their money back.
Ordinary people here are now asking themselves why they should have to pay for this when they had nothing to do with the irresponsible behavior of the Irish banks during the boom.
So although the finance ministers from all over Europe met in Brussels on Sunday and signed off on the deal for Ireland, there is little or no support for it from the Irish people.
Taoiseach (Prime Minister) Brian Cowen held a press conference on Sunday evening to explain the details, but he’s not really convincing anyone. Instead of being grateful to Europe and the IMF for coming to our rescue, there is boiling rage among ordinary people here at the deal that has been decided over their heads.
There is outrage because this enormous debt will be a millstone around our necks for years to come. And in particular there is absolute fury that ordinary Irish taxpayers will have to repay the billions lost by our banks.
Everyone here accepts that cutbacks and extra taxes are necessary to bring our state spending into line with our sharply reduced revenue. For that reason there has been general acceptance of the four-year plan to bring down our deficit, even though it means severe cutbacks with a massive €6 billion adjustment in next week’s budget.
But the banks are something else. People here are now in open revolt over the bailout deal because, apart from giving us breathing space on the state finances, it will force us to pay back all of the billions owed by the banks. And it will let the bondholders off the hook instead of forcing them to share the pain.
The root cause of this is the absolute guarantee given by the Irish state to the Irish banks two years ago. The effect has been to turn the private debts of our banks into part of Ireland’s sovereign debt. Now we are paying the price.
The average interest rate on our €85 billion bailout package is to be 5.8%, a rate which is more than double what Germany has to pay this week to the markets for funds. So the word bailout is really a misnomer. It’s not a bailout -- it’s an enormous loan at a penal interest rate.
The €85 billion deal is going to cost us €4 or €5 billion a year in interest, and that will be on top of the heavy interest payments we are already making on our existing national debt.