Tuesday 25 July 2017

Mark Doyle: Short View

Max Doyle

IT wasn't the burning of Rome that ended Emperor Nero's rule; in fact he remained in power for another four years despite his awful fiddle playing.

Nero's eventual successor, Galba, inherited a ruined economy and his primary objective was to restore Rome's public finances. But Galba became unpopular as he attempted to cut the pay of the largest public sector group -- the Praetorian Guard. Galba's reign lasted just seven months before he met his end.

Galba struggled to strike a fair balance in his ambitious cutbacks and targeted the people over the elite. Had he managed to achieve mutual concessions, he might have had more success -- so I wonder what Galba's advice to Enda Kenny would be today?

There is no doubt the books have to be balanced, but it is also clear Ireland is incapable of covering all of the bank loses and reducing the deficit at the same time.

The market is assuming that Ireland will share the burden with its creditors; it's the worst kept secret -- a soft default. Capitalism only works if people pay their debts back -- but likewise the concept of debt repayment linked to ability to pay is common. Just last month the Icelandic people proved this.

Interest rates and repayment dates can all change and be amended by mutual consent and the time to negotiate as a borrower is when one has maximum leverage. Ireland's leverage comprises our democratic will, our substantial but dwindling cash balance and our euro membership.

Calls for a referendum on our repayment of debt are laudable; without it, Enda has little choice but to follow Galba.

Max Doyle is a principal of Prime Focus Management specialising in investment and turnaround of Irish companies

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