Maeve Dineen: There's a lifeline in Greek crisis that Kenny must grab
Published 09/05/2011 | 05:00
The moment of truth is rapidly approaching for the European single currency project.
With Greece buckling under the strain of its enormous €330bn debt burden, we now have the opportunity to renegotiate the unfair terms of last November's bailout.
The news management of the emergency weekend meeting of eurozone finance ministers, called to discuss the worsening Greek financial crisis, will have had a familiar feel to those of us who remember the events leading up to this country's bailout last November.
First, the inspired leaks. Then the repeated categorical denials right up to and beyond the eleventh hour.
Finally, the belated admission that, yes, the rumours had been correct all along and the denials had been a pile of porkies.
Given this record of serial disingenuousness, is at any wonder that last Friday's denials were immediately discounted?
Surprise, surprise, contrary to what we were originally assured, there was an emergency meeting of eurozone finance ministers to discuss the rapidly-worsening Greek crisis this weekend.
While initial reports that Greece was planning to quit the euro and restore the drachma may have been a tad premature, I would be amazed if Athens wasn't seriously considering the pros and cons of such a move.
Even on the basis of what we now know, it is clear that the €110bn EU/IMF bailout package for Greece agreed 12 months ago is no longer fit for purpose, if indeed it ever was.
For the past 18 months, ever since it became clear that Greece, and then Ireland and Portugal, would require bailouts, both the EU and the ECB have adopted a minimalist approach to the rapidly worsening crisis.
For the EU, the priority has been to secure unanimity from the eurozone member countries, even if the resulting half-measures fail to address the key issues.
Who cares if the euro is going to hell in a hand basket so long as Germany and France are happy?
Meanwhile, the ECB seems determined to avoid any bank failures within the eurozone, even at the cost of far more damaging sovereign debt defaults later on.
It was always likely that the markets would see through such a gutless excuse for a policy.
With the yields on Greek government bonds now over 20pc and credit default swaps pricing in a 50pc-plus "haircut" on Greek government debt at some time over the next five years, that moment is now upon us.
So what can be done and what does it mean for us here in Ireland?
With the Greek bailout having run into the sands after just 12 months, Ireland's case for renegotiating our own bailout suddenly looks less like special pleading and more like good old common sense.
The ECB can no longer pretend that the Irish financial crisis is a largely homegrown affair and that we must be made to suffer uniquely cruel and unusual punishment for our sins.
Now that the Greek crisis has provided us with the opening, any renegotiation of last November's 'bailout' must extend far beyond the interest rate.
While the punitive 5.8pc interest rate certainly needs to be reduced, the core problem with our bailout is the principle that Irish taxpayers should pay the full cost of the Irish banks' losses.
As UCD economist Morgan Kelly has pointed out, saddling Irish taxpayers with the entire bill is a recipe for national bankruptcy.
Now that Greece has brought matters to a head, Ireland must insist that any revised Irish bailout decouples bank losses from sovereign liabilities.
With exports -- both multinational and indigenous -- booming, this would allow the Irish economy to recover rapidly. Greece has given us the opportunity.
Will Taoiseach Enda Kenny be bold enough to take it?