A lot more action needed by Fine Gael/Labour coalition to save Ireland from economic ruin
By: John Spain | Published Wednesday, December 19, 2012, 6:39 AM | Updated Wednesday, December 19, 2012, 6:39 AM
|Eamon Gilmore and Enda Kenny (Eamonn Farrell / Photocall Ireland)|
There was a huge sense of relief when the Fine Gael/Labor coalition took over the government here after the last election, nearly two years ago now.
The last government had led us into an economic catastrophe, presiding over a bubble that saw our banks almost wiped out, our state finances bankrupted and our modern nation forced to accept a bailout from the IMF, like some banana republic.
Ever since, our economy has been sliding into a steep decline, with unemployment now over 14 percent and mass emigration back again.
So there was enormous relief that Fianna Fail was out. After so many years in power it had become lazy, incompetent, compromised, and occasionally corrupt.
That sense of relief at the start of last year was mixed with seething anger at what Fianna Fail had done to the country. Which explains why Fianna Fail was decimated in the election and the two main opposition parties, Fine Gael and Labor, got a massive majority to form a new government.
Coupled with the anger and relief felt by the electorate, however, was one other very strong feeling, a sense of expectation. There was a powerful expectation in the air that this time things would be different.
Of course we understood that because of the economic mess we were in, it was not going to be easy. We knew there would have to be huge cutbacks. There was no other way.
But at least the pain would be more bearable because now decisions would be taken on a rational basis and the burden would be shared by all. The government would be open and honest about the challenges we faced and would offer real leadership and take tough decisions.
There would be no more golden circles who made loads of money and paid little or no tax. The poisonous nexus between politics and business would be excised.
There would be no more waste of public money on a massive scale, lining the pockets of those who were connected. There would be no more parish pump politics where politicians looked after their own areas and ignored what was best for the country as a whole.
That was the expectation. It was to be a complete break with the past.
We were to set out on a new path of integrity and honesty and, despite the enormous difficulties we faced, that would see us through to a renewed prosperity some time in the future.
Ah yes, that was the hope and expectation. Sadly, however, our hopes have been dashed.
Over the past year and a half our expectations have been revealed as naivety. The new administration is almost as bad as the last.
With each day that passes we see more incompetence, more cowardice in the face of our problems, more failure to take hard decisions, more parish pump priming, more abuse of power for naked self interest.
As my old French teacher used to say, Plus ca change, plus c'est la meme chose.
A wise old political observer I talked to last weekend asked, “Well, what did you expect? They've been out of power for years. Enda's been waiting 30 years to be taoiseach (prime minister). This is their chance to indulge themselves, to preen in front of the cameras, to enjoy the spoils. Can you really blame them?”
Perhaps not, because Enda Kenny and his boys have been waiting such a long time. But it's deeply disappointing.
At least when Fianna Fail was splashing out, it looked like the country could afford it. Now Fine Gael and Labor ministers are attempting to behave in the same way even though the country is broke.
The hubris and downright stupidity were visible right from the start, with Kenny insisting that Ireland would never default on any of its debts and that even junior bond holders would be paid back.
This laughable stance was taken by Kenny as though it was a heroic, principled position. The truth, which became clear as time went on, was that we had been locked into a penal and inequitable debt repayment regime by the European Central Bank to protect German and French banks and bondholders.
We should have rebelled. Instead Enda continued to honor the bailout program that had shifted the mountain of bank debt on to the backs of the ordinary Irish taxpayers.
For the Tanaiste (deputy prime minister) Eamon Gilmore it was to be Labor's way, not Frankfurt's way. That was his ringing election campaign call to arms.
We were not going to accept the IMF-EU straightjacket. We were going to renegotiate the bank debt and get a better bailout deal.
After the election he did a rapid about turn and continued the previous policy of accepting the bank debt mountain as a sovereign liability. Even for a politician, it was a jaw-dropping reversal. As a result it is now hard to take what Gilmore says on anything seriously.
From what we now know, it seems clear that the infamous state guarantee for our banks given by Fianna Fail at the end of 2008 was done without fully appreciating the consequences. The then Taoiseach Brian Cowen and the then Minister for Finance Brian Lenihan were completely out of their depth and working off inadequate information.
They seemed to be unaware that there was a real and substantial risk that what they were doing -- turning bank debt into sovereign debt -- could bankrupt the state, which is exactly what happened subsequently.
Ignorance is no defense. But at least we can say for the senior Fianna Fail people involved, they didn't know what they were doing. They were engulfed by the crisis and panicked by the thought that the Irish banks might collapse.
So they did what was necessary, as they saw it. They also bought into the European Central Bank view that no lenders could be burned.
And we set about paying back all the money our banks had borrowed from German and French banks, bondholders and other investors. As bank losses multiplied to unimagined levels the money involved was huge.
Two years later, when the Irish state ran out of money and we were forced into the bailout, Fianna Fail again accepted the EU diktat that writing down Irish debt and burning bondholders was out of the question because it might precipitate a crisis of confidence in banking across Europe.
By then, of course, they had us over a barrel. We either agreed to the terms or we were not getting the bailout money.
So we agreed and continued to pay back the mountain of bank debt as it fell due, even though we had now woken up to how unfair this was to the Irish taxpayer who had been left carrying the can.
This was the background against which the Fine Gael and Labor government took power. By then it was clear that Ireland had been given a very raw deal and that unless we could get it changed it was going to mean huge cutbacks in state spending here, coupled with higher taxes, for years to come.
The attempts by the new government to get a new deal on the bailout have been pitiful. Instead both Kenny and Gilmore have been strutting around at home, in Europe and elsewhere, making portentous speeches. If dinner jackets and speeches could fix what is wrong, we'd be in great shape.
An example of this disconnection was Gilmore addressing the UN last week on
Doesn't he know the extent of the financial crisis in Ireland?
While he was in New York pontificating, one of his Labor junior ministers was resigning at home in a bitter row about health services and how spending was being handled.
The government's main policy is to continue the regime of severe cutbacks in state spending. That is probably unavoidable, even if we did get a better deal on the bailout.
But the question is HOW the cutbacks are made and how equally the burden is shared.
So far the government's attempts to show courage and leadership have been pathetic. Cuts are made in easy targets, usually affecting the mass of ordinary people who don't have lobby groups to protect them. There is a whole section of Irish society -- the upper tier of professionals, administrators, business heads, senior civil servants and so on, including politicians and their advisors -- which has been largely unaffected by the financial crisis here. They are protected by their influence.
There may have been some small adjustment in their pay or pensions, but proportionately the effect is negligible in comparison to the pain felt by ordinary people on welfare or lower wages.
Fine Gael is presiding over this shameful situation because it does not have the courage to tackle the powerful vested interests. And Labor is almost as bad.
One of the big tests facing the new government was tackling the pay and pensions of the state sector workers. Even though the state is broke, reductions in pay and pensions for state workers have been very slight.
The reason is that the state workforce is the last bastion of power for the unions here, who are a major influence on Labor Party policy. Labor should have been able to do something about the enormous pay and pensions bill in the state sector but they have failed abysmally. Instead they reduce services and introduce extra charges for ordinary people.
The non-performance so far of the government on the crisis facing us is producing a serious credibility gap for Kenny and his ministers. Kenny's forceful, defiantly positive sound bites are sounding increasingly empty.
Action speaks louder than words. And so far there has been no action worth talking about.