While it is understandable that the Government should bask in the limelight of securing a deal on the €31 billion promissory note, underlying these celebrations is a very real sense that the work has only started.
Enda Kenny and Eamonn Gilmore immediately oversold the deal that was no deal last June with their ‘gamechanger’ and ‘seismic’ remarks and since then we’ve had an endless ‘will they or won’t they’ story played out across the media. There were those who suspected that a deal was imminent when Minister for Communications Pat Rabbitte could not contain himself and claimed the Government would not be making a €3.1 billion payment by the end of March. Of course, he was quickly slapped down by his senior Fine Gael Finance Minister as Noonan insisted he ‘butt out’ of a hot issue which was not in his brief.
While there is no denying that the promissory note deal is a good one, it must be framed as part of a far wider Irish debt landscape. The massive banking debt of €64 billion borrowed and used to bail out private banking institutions which became a sovereign debt, shifting the burden onto Irish taxpayers, is the next step in the process. This Irish bank debt had nothing to do with state overspending but everything to do with private banks being allowed to recklessly borrow and lend massive amounts of cheap money overseen by an almost unregulated Eurozone.
It was the Fianna Fáil/Green Party government that guaranteed the banks in September 2008, a guarantee copperfastened by Trichet, when he announced that no banks could fail, which sealed our fate. Our own Irish and then our European political and banking elite shifted the burden onto the Irish taxpayer – just 1.8 million working Irish citizens.
So what exactly does this mean? Last year Eurostat gave us a stark reminder when it published an analysis of the cost of the Eurozone banking crisis in each EU country. Ireland tops the table having paid out €41 billion with Germany a close second on €40 billion. But here’s the rub – Germany’s €40 billion bill represents just 1.5% of GDP but when the cost of bailing out financial institutions is expressed as a percentage of annual GDP (2011) the cost to Ireland is a staggering 25.8%. The per capita cost of the bank crisis for the average EU citizen is €191 but for Irish citizens it is a €9000 per head.
Martin Schulz, President of the European Parliament has claimed that the burdens Ireland has undertaken needs and deserves the solidarity of the European institutions. The next step on the footpath of European solidarity must be an immediate review of this morally reprehensible, socially and economically damaging unsustainable bank debt burden.
The Fine Gael/Labour coalition started the week badly with Kenny’s weak response and what appeared to be a surprisingly unprepared reaction to the McAleese Magdalene report. This continued with a rather odd display of ‘democracy in action’ with the rushing through of the Irish Bank Resolution Corporation Bill 2013 describing it as emergency legislation where Opposition finance spokespersons were given a mere ten minute briefing on the Bill.
The week finished for the coalition in the warm media glow of a well handled PR coup (leak included). The promissory note deal is good for Fine Gael but will it provide the bounce that Labour so badly need? The tendency to overplay the deal given the obstacles of a massive €64 billion bank debt burden and the continuing budget deficit may still cost this government.
There are significant battles ahead.