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Wednesday, December 8, 2010

Of Course We Should Call It a Bailout

Looking back on the past few weeks, it's strange to see how naïve we were as a country. The fear was palpable as the spectre of the IMF loomed over us. Repeated assurances from the government that no digout would be necessary were ignored by everyone; we knew we were fucked. Fianna Fáil were in a position that may well have been unique; we've spent decades assuming that they were all crooks, but now we're not so sure. Can it be that Biffo and his minions were merely being incompetent? That rather than being the mendacious fuckers that tradition and experience would paint them, they were simply incapable of doing anything even remotely effective?

The prevailing wisdom is that Fianna Fáil's legendary cronyism lay at the root of the problem; that they bailed out the banks simply because they were so intimately connected to the country's leading bankers. I find myself demurring on this point; I honestly believe that when he made those unfortunate guarantees in September 2008, Lenihan was doing what he thought was best for the country. He wasn't, of course. He was just laying the groundwork for national penury. Fianna Fáil's crony culture is a toxic one that damages the country and is absolutely inimical to democracy, but in this case it served only as an easy target for those looking for reasons that we got into this mess. Biffo's government simply wasn't up to the task of dealing with the crisis.

But there's no point in talking about democracy to Fianna Fáil; their assertion that they still had a mandate to govern was so ridiculous that even Charles J. Haughey would've been hard pressed to say it with a straight face.

And so it is that we find ourselves with the most austere budget in the history of the state. Why?

Two reasons; first of all, Fianna Fáil were incapable of doing anything. Secondly, because we were fucked in the arse by the ECB.

It pains me to say this; I've long been a fervent advocate of European union, and I've been looking forward to a common currency ever since I first heard the idea broached all those decades ago. Why exactly a ten-year-old should get excited by monetary policy I'm not sure, but I was enchanted by the idea of the ECU (as it was then), and up until a few weeks ago I'd lost none of that enchantment.

I'm still absolutely in favour of the EU and Ireland's continued membership in both it and the euro, but it's not as easy as it used to be.

When the trinity of initialisms that comprise the ECB, the EC and the IMF came to town, we all pretty much knew what was going to happen. The Irish Times' invocation of 1916 may have been slightly over the top, but not by much. We were giving away our sovereignty. More specifically, Biffo was giving away our sovereignty.

It now seems obvious that before negotiations began, the Irish team were given one and only one instruction: protect the corporation tax rate. And this they did. But in doing so, they gave away everything else. Biffo could announce that the lynchpin of the country's FDI programme was intact, but there's little else he could offer us. The pension reserve was eviscerated and we were lumbered with an interest rate that by any objective standard was ludicrous.

What was truly bizarre, though, that it wasn't the IMF that was the main culprit; it was the ECB. Lenihan was basically ordered by Trichet to stop the banks failing, and while Fianna Fáil and the Irish regulators do bear a lot of the blame for failing to curtail the banks' excesses, the ultimate arbiter of such behaviour is the ECB. It was just as guilty -- if not more so -- than the local fuckwits.

So why don't we just default? Quite simply, because it would cause unknowable problems -- if not death -- for the Euro. Those who suggest that we should call this imposition of debt a loan and not a bailout are missing the point. It absolutely is a bailout. We're bailing out the ECB. And we'll be paying for that largesse for generations.

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