Lenihan Knows One Thing about Bank Bailouts - Do as the EU Says

Daily Mail (London), September 13, 2010 | Go to article overview

Lenihan Knows One Thing about Bank Bailouts - Do as the EU Says

Byline: the Mary Ellen Synon COLUMN

ODD, this. Just about anybody in the country is willing to hang a banker. And just about everybody in the country is furious that the Finance Minister has been letting bankers direct his policy on the bailouts. But almost nobody is furious with the people who are orchestrating the whole multi-billion outrage: I mean the European Commission and the European Central Bank.

Sure, Mr Lenihan has been led by the banks into just exactly how he should save them from default, how he can take their bad loans off their books, how he can force taxpayers to take on tens of billions in debt to save the banks from their own greed and stupidity.

But who is telling Mr Lenihan to do it? The Commission in Brussels and the European Central Bank in Frankfurt.

So if you are angry with bankers, do indeed form up a mob to march on the bankers' gulch of Foxrock and burn the lot of them out. If you hate the Finance Minister's policy of capitulation to the bankers, go right ahead and wait for the next general election and deliver a humiliating defeat to him and the rest of the Government.

But you need to understand that such action will still leave the big bosses of the bailouts untouched.


For the big bosses are not in Ireland. And they will still be in charge, whoever forms the next Government. You can't burn them out or vote them out. They are the elite of the EU, and they will go on controlling Government banking policy.

What is it they want our banking policy to do? They want it to operate in the interests of the survival of the monetary union, not in the interests of the survival of the economy of this country.

If we were to let even the cursed Anglo default on its investors, Ireland might be forced at last to make the wise decision and demonstrate that a country can indeed leave the euro to save itself. The EU will not allow that. Brussels says the eurozone must be the Hotel California: you can check in any time you like but you can never leave.

This is why the most enlightening quote of the week was actually a line buried in the Sunday Independent yesterday. A long way down a report on Brian Lenihan and others, the reporter just mentioned something Brian Lenihan said following a party conference in 2008. Mr Lenihan told the reporter he had been caught up in partying hard, and so had missed a telephone call from Jean-Claude Trichet, president of the ECB. Mr Lenihan continued, saying he did not get around to returning the call until the next day, 'a conversation during which he was told to protect the banks at all costs'.

The reporter didn't grasp the implications of the line. Instead, he went on that he was not interested in 'the subject matter of the conversation' but that, 'in his revelry,' Mr Lenihan had missed the call. Alas the reporter missed the story. That was not the Taoiseach giving the minister his orders, it was the unelected president of the ECB.

And such members of the EU elite will go on giving orders to our ministers until some political leader emerges here who has the spine to say to Brussels and Frankfurt, 'No more.' But just look at Fine Gael and Labour and tell me what you think the chances are of that happening. Exactly.

So our Government's policy of saving the banks 'at all costs' as Mr Trichet demands -- at the cost of emigration, the cost of the destruction of small businesses, the destruction of public services, of the destruction of jobs and investment -- will go on. What we have now is a permanent Government, and it is in Brussels. It is made up of people who have no loyalty to Ireland and who never face an election.

It is this unelected EU elite to whom our Finance Minister turns for his orders. It is they, and not the Cabinet, who set Government policy on the banks.

Perhaps you noticed that after the minister's announcement last week of the Government's decision to split the bank and his insistence this decision offers the markets the kind of certainty they are looking for, the Commission chilled the whole effect with a single statement.

It said that the plan 'needed clarification on key aspects'. In other words, the commissioners hadn't yet given permission to our Government to implement this policy.

For the commissioners are the ones in whose anterooms our Finance Minister waits for his audience.

Then he goes in and kisses the ring and presents his plans for their approval.

Yes, once our ministers went to the archbishop's palace in Drumcondra for their orders. Now they go to the European Commission in Brussels and the ECB in Frankfurt. Take your pick. Once Eamon de Valera submitted his draft of our constitution for approval by John Charles McQuaid.

Now Brian Lenihan submits his plans for our banks for approval by Commissioner Almunia.

For a cabinet minister to submit in either way is demeaning. It is an act which surrenders democracy.

And like the Church, the EU has the power to scar the children of this country for generations: or perhaps you missed those estimates by the two leading economists Peter Boone and Simon Johnson in the New York Times/Baseline Scenario blog on September 3. They said that under the current Government programme here: 'We estimate each Irish family of four will be liable for [euro]200,000 in public debt by 2015.

'There are only 73,000 children born into the country each year, and these children will be paying off debts for decades to come -- as well as needing to accept much greater austerity than has already been implemented.

There is no doubt that social welfare systems, healthcare and education spending will decline sharply.' So how many children here will be left unprotected by social welfare systems when the austerity demanded by Mr Trichet becomes even more intense? We may not know until some later generation demands another Ryan report.

So there will be austerity but not because economic analysis demands it. Two Nobel Prize winners in economics Joseph Stiglitz and Paul Krugman have both recently said that severe austerity and bank bailouts are not the answer for the Irish economy.


No, there will be austerity because Jean-Claude Trichet demands it. And he demands it all across Europe as a means to strengthen EU institutions of control over domestic budgets.

His method is this: Insist governments, especially those in Ireland, Greece and Portugal, screw down their spending until the people pay with their blood to clear the deficits.

Then insist that, since this is such a politically unpopular policy, new powers must be given to the EU to enforce the continuation of austerity.

It has been suggested that such powers of coercion may include the power to stop EU funds being paid to the delinquent state, or that voting rights of the delinquent state in the council be removed until its budget is in line with new EU rules.

Mr Trichet does not even want to wait for treaty law to be changed to achieve this. He insists that existing laws must be used 'to the maximum' to achieve this new power for the EU to punish member states. He told the Financial Times last week he wants sanctions imposed 'quasi-automatically'.

In other words, as soon as the member state disobeys the new rules, no room for compromise.

Which for Ireland in particular is an interesting thought. Follow this sequence. Imagine Ireland is punished for its continued high debt and deficit by losing its voting power in the council.

How important could voting power be? Just last week Batt O'Keeffe insisted that he would use Ireland's veto power at the council if any move were made to introduce a common rate of corporation tax across the EU.

Of course, if the Commission submitted the proposal to the council at the time Ireland had lost its vote because it did not meet EU demands for the strongest of austerity, well, we would have no vote with which to veto the change in corporation tax rates.

The Irish minister would sit there, mute and impotent, as our low rate of corporation tax was outlawed.


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Lenihan Knows One Thing about Bank Bailouts - Do as the EU Says


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