By Luke Ming Flanagan
If you want to know why the Irish people have a one-sided view of all that has happened to us in the last few years during the bank bailout, there’s a report in today’s Irish Examiner that illustrates it perfectly. It’s headlined ‘Paying bond holders saved deposits’ and it quotes just two people – Mario Draghi, ECB President, who was defending their actions through the crisis (he would, wouldn’t he?) and Seamus Coffey of UCC, an economist who has defended this government’s actions from day one.
By the way, I’m still waiting on Mario’s reply to six very pointed questions on the Promissory Note deal and the bonds that replaced them and I will keep ye posted on that, but in the meantime in this instance he was answering a letter sent to him by a GUE/NGL colleague out here, Sinn Fein MEP Matt Carthy.
THE STOCK ANSWER
In his reply Mr Draghi pointed the finger squarely at the Irish government for all decisions taken but stated (and this is what lead to the headline) that as Ireland didn’t have legislation at the time to protect depositors, if senior bondholders had been ‘burned’ then depositors – because they were on the same legal footing – would also have had to suffer losses.
Seamus of course agreed, and of course Seamus is right, but he then went further and suggested that the government could have paid back depositors later, but ‘ this would have required the State to have billions of euro upfront, which the State did not have’. He then went further again and stated ‘nobody forced us to borrow money or pay 10 times the worth of a field for development’ – the old ‘it was all our own fault, we all partied/went mad/lost the run of ourselves’ mantra so beloved by Enda and others in Fine Gael.
What Seamus DIDN’T say, however, is actually that which is most pertinent in all this. Yes, there was no legislation to protect depositors, but before that bloody guarantee there was no legislation either to put Ireland on the hook for all that bank debt. Governments actually write legislation Seamus – do you not know this? And – as that Fianna Fáil/Greens coalition showed after that infamous weekend, as this current Fine Gael/Labour marriage has shown many times since – they can write it in a hurry. So the glaringly obvious question then is this – if the government can introduce emergency legislation to protect the failed gambles of those who have spare cash with which to speculate, why could it not have introduced emergency legislation to protect the spare cash of those who just want to put something aside for a rainy day?
The bigger question though, and again Seamus only half-answers it, is the whole transaction dealing between lender and borrower.
As noted above, he points out – correctly – that ‘nobody forced us to borrow’; what he DOESN’T say is that nobody forced the bigger banks from around the globe to LEND to Irish banks either;
he points out – correctly – that when the ECB bullied and blackmailed Ireland into accepting a ‘bailout’, at that stage it was to protect themselves rather than big banks – ‘The ECB had provided €140bn, 85% of Ireland’s GDP, and an unprecedented quarter of the ECB’s total lending at the time, despite Ireland’s share capital of the ECB being about 1%. This is why the ECB was anxious for Ireland to take a bailout — to save its funds and not save the French and German banks’. What Seamus DOESN’T point out is the direction in which the €140bn of liquidity provided to the Irish banks went – that money enabled those who had been exposed to the Irish banks to get out, to make good any potential losses, much as what has happened in Greece in their so-called bailouts. The banks were the ones bailed out, we are their ‘get-out-of-jail’ card, and their losses have now been transformed into our losses.
ROOTS AND FRUITS
You can go back decades for the root cause of this current crisis, to deregulation in the banking and the financial system, to the break from the gold standard, to the creation of Central Banks privately owned by other bankers and financiers but who don’t so much create money as create debt. There is no question however that the root cause of the Eurozone’s problems was the launch of the euro itself, a currency that had so many fundamental flaws built into its design – flaws the EU/ECB is now trying to remedy on the fly – that it should NEVER have been launched as it was.
These flaws were compounded by the ECB itself when, after it had been established, it failed in its own most fundamental duty, keeping a close eye on the eurozone countries to guard against inflation. I ask you, what is more inflationary than a property bubble?
PROPORTION AND DISPROPORTION
So yes, Seamus, Ireland’s share capital of the ECB is only 1%, and by 2010 Ireland WAS being provided with around 25% of the ECB’s total lending, but why are we now landed with 42% of the Europe’s official bank bailout borrowing bill (according to Eurostat)? And I know, there are caveats attached to that, but even you must admit that Ireland HAS been disproportionately hit. Given that this is a eurozone crisis, with enough blame to share across every institution, why aren’t we landed with a bill proportionate to that 1% holding in the ECB, as opposed to the tens of billions STILL being extorted from us, as opposed to the extortionate and punitive interest rates that were initially imposed on us and lifted ONLY when Greek got its second bailout?
MY KIND OF BAD
One comment of yours I do agree with; if Ireland had refused to be blackmailed in 2010 it would have resulted, you said, ‘in a different sort of bad to what we are going through’. It would – we’d have been working for the last five years to bail out ourselves rather than bailing out international financial gamblers, including so many vulture funds, the lowest of the low. And we would now be well on the road to recovery.
But just be aware, people, when you read all those TINA (There Is No Alternative) articles from all the TINA news correspondents quoting all the TINA ‘expert’ commentators extolling this government, there IS alternative opinion, there IS an another way, and Syriza in Greece are living proof of that.
Our own day is coming.