Emmet Oliver: New government hit by the reality of European hostility
Published 24/03/2011 | 05:00
Voters like new governments, even when they didn't vote for them. New governments get so-called honeymoon periods because everyone likes a winner and everyone has an inbuilt empathy with somebody starting a new job.
The warm afterglow of election success is evident directly on the faces of Ireland's new ministers, but as they passed through Brussels this week the new office holders became increasingly ashen-faced as they sampled, first-hand, the prevailing sentiment towards Ireland and the so-called "Irish issue''.
The new government has a mandate, a large one, to redraw relations between Ireland and the EU over the economy, but that mandate when placed in a wider EU context gets radically diluted.
The Irish Government continues to seek a range of concessions from Europe, looking for a reduced interest rate, some flexibility on the idea of repudiating senior bank debt and full retention of Ireland's current corporate tax system.
There are plenty of good reasons for demanding many of these things, but tabling three requests all at once strikes many Europeans as rather unrealistic, if not downright insulting.
The EU Commission in private thinks Ireland has right on its side in many respects (everyone now is wedded to the principle of debt sustainability) but unilateral demands have no currency in the European Union.
Countries must parlay, negotiate and wrangle their concessions, new mandate or old mandate. That dose of reality seems to have hit Irish Cabinet members very hard this week.
For example, one new minister, Lucinda Creighton, seemed to believe that Ireland's corporation tax rate was not even a significant issue for many European states. It is.
It is not a big issue for many European citizens, but make no mistake it is a big issue for Germany and France and their respective leaders Angela Merkel and Nicolas Sarkozy.
Many of the key players in Europe are actually willing to grant Ireland concessions. The art of deal making is prized in Brussels and every day 'give and take' occurs, even if there has been previous bad behaviour.
But it is the way that countries approach this bargaining activity that matters, even more than the subject of the bargaining. Something always has to be given in return.
As can be seen from the waistlines of many Brussels bureaucrats and some Commissioners, Brussels is a town that specialises in big lunches in opulent restaurants. They may be lavish, these lunches, but they are rarely ever free.
Yes there are laws against stupidity, but rarely used
The idea of pursuing certain Irish bank directors over their role in the financial crisis is increasingly met with a resigned shrug of the shoulders and the lazy reply, "there is no law against stupidity''.
Instead of pursuing certain directors legally, we appear in Ireland to be adopting a more roundabout approach.
This week Matthew Elderfield, the financial regulator, said he intends to measure serving and future bank directors against standards of "fitness and probity''.
The 'competence' and 'track record' of the director will be assessed and unlike previous efforts in this area, Elderfield now has the power to both suspend and remove directors who are deemed to be deficient in some way.
But let us examine this statement that there is no law against stupidity. That is technically true.
But there are laws, stretching back over centuries, against people who abuse their own companies and effectively act recklessly in their role.
These so-called fiduciary duties oblige directors to act in the best interest of the company at all times; not make any undisclosed personal profits at the expense of the company; and act with due care, skill and diligence. This last obligation is essentially a law against financial stupidity and recklessness. Such a breach can be taken to the civil courts and directors can be sued for punitive damages.
Problem is only the company can take the action to the civil courts. Bizarrely shareholders, who ultimately have their wealth destroyed by incompetent and reckless directors, not boards, cannot initiate such actions.
While the Elderfield initiatives are welcome, laws that allow investors, not just company boards, to pursue clearly negligent directors is what we really need.
Nobody wants to go down the road of the litigation mania that characterises US business, but the current body of Irish company law seems to pay little heed to the investor/shareholder who puts their money on the line.
That person should have choices when their money is incinerated due to straight up financial negligence. That person should have legal choices particularly when the arms of the State fail so miserably to pursue the directors responsible for such behaviour.
NAMA is primed to do unthinkable
Has NAMA finally found a way to deal with its identity crisis? Since its establishment in late 2009 the agency has been split over what its core function is, particularly in relation to borrowers.
While former Minister for Finance Brian Lenihan talked about borrowers being chased to "the ends of the earth'', the agency has been quietly following a more prosaic and less confrontational course, re-structuring debts and lightening the burden on developers.
One says quietly because NAMA knows the political establishment doesn't care much for the idea of developer's debts being restructured or written-off.
What every Minister for Finance would prefer to hear about is derring-do tales of NAMA seizing developer's cars, houses and paintings. But NAMA has to be more hard nosed and unsentimental -- if it adopted a policy of no restructuring of debt, the whole NAMA edifice would come crashing down.
This week its chairman, Frank Daly, admitted debt restructurings in the hotel sector would soon be underway, as NAMA tries to pull some kind of commercial return out of that zombified sector. Of course deciding who is deserving of debt relief and who is not is the challenge.
Under the guise of getting the taxpayer a return, there is unlikely to be much indignation about developer's debts being restructured and loan maturities stretched out.
As long as NAMA borrowers are not seen to be treated differently to other borrowers in the economy, NAMA should be able to proceed along its current course.
For example many hard pressed mortgage borrowers are having their mortgages restructured also, either via interest only arrangements or mortgage payment holidays.
But mortgage borrowers are generally not having debts written off for all time.
But that is what NAMA may ultimately have to do either because there is no more blood to be extracted from the borrower, or the loan NAMA holds simply doesn't allow the agency to follow the money trail any further.
When the agency tells the rest of the world about this, expect an angry reaction.