So the countdown is at an end. Today the Irish Government will stand by and watch as Anglo Irish Bank hands one billion dollars, or over €700 million of Irish tax payers’ money, over to an anonymous bondholder. By the end of January that amount will have risen to €2 billion.
It is doing this exactly one week to the day after Enda Kenny agreed to a 50% discount on Greek sovereign debt at a European conference during which the Irish Government did not even have the nerve to raise the issue of the mammoth Irish debt burden.
The sequence of events that have led to this transfer of Irish citizens’ money illustrates the absurdity of the policies being pursued by this Government.
The next budget will take place at the beginning of December. It will be the fifth austerity budget. The Fine Gael/Labour Government plans to take around €4 billion out of the economy through flat tax increases and swingeing cuts.
The Government PR machine is in full flow to ready the public for the adverse impact this huge adjustment will cause for citizens. For the fourth year in a row, the people of this state are hearing the same arguments, though this time from a different government. It’s still about how citizens have ‘to be responsible’. How we lived ‘beyond our means for years’. How we are nearly there and must take ‘a little more pain’. How well we are doing and how impressed Europe is with us.
The latter is the most frequently used line. Every Minister trots it out in the course of interviews. According to them this state is being held up by the European Union, the International Monetary Fund, and the Europe an Central Bank as a model for getting it right; for doing what we are told. They proclaim that we are not the Greeks or the Italians or the Spanish; as if we are somehow better than them!
It is the worst kind of patronising and jingoistic nonsense.
There is no logic, no rhyme or reason for the Government to pursue its current course of bailing out bank bondholders. What galls this blog most is that the government claims that it is powerless to do otherwise, while at the same time sitting at a negotiating table in Europe like nodding dogs when the halving of Greek sovereign debt is being agreed.
But nothing takes the biscuit more than the fact Fine Gael and Labour continue to treat citizens as though we are all stupid.
Take for example the soft-spoken, inaccurate, lecture Enda Kenny delivered to the Dáil last week in response to a question from this blog regarding the payment of this bond.
Mr Kenny claimed that the Government had to oversee the payment of this €700 million bond because the last Government had placed €31 billion of promissory notes in Anglo Irish Bank. There is no linked up thinking here. The Government would not be defaulting on the promissory notes if it ordered Anglo not to pay this private bondholder.
Enda Kenny cannot keep up with his own Government’s ‘line’. For most of the week the cabinet has been running with the theory that this bondholder will not be paid out of Irish taxpayers’ money, but instead out of its own resources. Apparently Anglo has sold some American holdings and can meet its bond responsibilities. Can someone please explain how a bank which has received €30 billion of Irish taxpayers’ money and is completely insolvent, can be described as having its ‘own resources’?
This line jars completely with Enda’s previous assertion that the bond had to be paid because the last Government had ‘committed’ us to it by handing over the promissory notes.
Then we have Michael Noonan saying that the bond must be paid because we are ‘working the EU/IMF programme’. On Thursday night’s Six One on RTE he claimed that we had the choice to either ‘repudiate the programme, or work the programme and the Government was working the programme’.
Here’s a newsflash for you, Minister:
There is no commitment to pay bank bondholders in the programme!
Minister Noonan’s uneasy grasp of Ireland’s finances was further laid bare in the same interview when he claimed that Greece was getting an awful deal and would be stuck in an EU/IMF programme until at least 2020. ‘Imagine’ he said incredulously if the government had to tell Irish taxpayers ‘we had to have ten more years of austerity budgets’.
Considering a 50% write-down of sovereign debt for this state would mean that we effectively lose €85 billion worth of debt, how does this lend itself to ten more years of austerity? And after all, nobody is claiming we need a sovereign default like Greece.
What Sinn Féin is saying, and what others from the left to the right of the economic and public spectrum are also saying, is that we need to stop honouring private banking debt because it is not our responsibility and it goes against market practice.
For example, if the Government got the ECB to write off the €31 billion in promissory notes that are essentially owed to them, that would reduce our debt to GDP by 20% and save us up to €85 billion by 2031, including interest servicing of the capital €31 billion.
The Government could also choose to stop Anglo paying out the billion-dollar bond on Wednesday. If it saved this money, and the other €1.2 billion that will be paid out by the end of January then it wouldn’t have to have such a punitive austerity budget on 6 December. Everyone could be grateful for that.
Will the Government listen? What do you think?