Jody Corcoran: Team Ireland counting on Noonan's game skills
The outcome of talks on the issue of promissory notes will define the success or failure of this country, writes Jody Corcoran
Minister for Finance, Michael Noonan
OF COURSE there is not going to be a referendum on the new fiscal compact. The last person to suggest that the people be asked what they think was the prime minister of Greece. And we all know what happened to George Papandreou.
He was summoned to meet Angela Merkel and Nicolas Sarkozy. Within 10 days of his referendum announcement, on the acceptance of the terms of a eurozone bailout deal, he was gone, replaced by a technocrat prime minister.
That is not to say that the Government should not threaten to hold a referendum on the new compact. Of course it should, and here is why...
As technocrats go, you would go a long way to find one more technocratic than the Governor of the Central Bank, Patrick Honohan, the man who most grievously miscalculated the possible scale of bank losses in Ireland.
You may remember that Honohan was the target of a blistering attack by the economist, Morgan Kelly, in an article in which Kelly advocated that Ireland should break free of the Troika and bring the budget immediately into balance.
"To borrow so that senior civil servants like me can continue to enjoy salaries twice as much as our European counterparts makes no sense," Kelly wrote last May.
It seems Honohan has come around to the Kelly way of thinking. At least somewhat. In an address at the launch of a book last week, Honohan raised the issue of pay rates in the public sector.
But it was not his stating of the 'bleedin' obvious' that caught my attention. Nor was it his reference to others in Europe, "many" (implicitly not all) of them supportive, each with their own set of interests not always fully aligned with those of Ireland, as he said.
What caught my attention was a throwaway revelation that the Governor has recently -- to refresh his ideas -- been looking through a book which he said was familiar to many economics students, The Art of Strategy.
It is a pity that Honohan was not more aware of the "powerful external forces" referred to in his address, when he -- as Kelly put it -- "deftly sliced off at the ankles" Brian Lenihan just as the late finance minister was set to exploit a strong negotiating position to seek a bailout of the banks only.
The Art of Strategy, by two economics professors at Princeton University and the Yale School of Management, is a book on game theory, or, if you like, rigorous strategic thinking.
It involves the art of anticipating your opponent's next moves in the full knowledge that your rival is also trying to do the same thing to you. As Honohan implied in his address, our opponents are those in Europe whose interests are not fully aligned with Ireland's.
The current Minister for Finance, Michael Noonan, has always been adept in the art of strategy. He certainly was when almost half of Fine Gael TDs and senators wanted to remove Enda Kenny as leader -- the man who now takes the challenge to those powerful external forces in Europe.
It was not that, at the time, Noonan was full of confidence in the potential of Kenny as Taoiseach -- rather he saw an opportunity for himself to replace the challenger, Richard Bruton, as spokesman and subsequently Minister for Finance.
Parts of game theory -- at which Noonan is skilled -- involve simple common sense, much is counterintuitive. But it can only be mastered when one develops a new way of seeing the world -- or in this case, Europe.
We will know in March if Noonan has mastered the art.
By that time the Government will be a full year in office. That is not significant in itself. What is significant is that at the end of March, the issue of what are called "promissory notes" will come sharply into focus.
The last government chose to provide promissory notes, a form of State IOUs, to Anglo Irish Bank and the Irish Nationwide Building Society (now IRBC) because it did not have the cash to bail them out.
Since the notes were issued in March 2010, they have risen in value to cover more than €30bn of the almost €35bn cost of the failed banks.
Payments, including interest, to be made on March 31 every year until 2031, will be -- deep breath -- just over €3bn until 2023; just over €2bn in 2024; €900m a year until 2030; and €100m in 2031.
In other words, this is the debt burden which, unchecked, will leave the country in ruins for a generation.
Michael Noonan is in talks with the European Central Bank, the European Commission and the International Monetary Fund to find a cheaper way -- how the notes can be changed -- to pay for these zombie banks. The outcome of his talks will come to define and success or failure of the Government -- and the country.
If Ireland can get out from under the terms of this debt, then there is a chance, just a chance, that a generation will be saved.
If not... well, the last person leaving the country should turn out the lights.
Which takes us back to the fiscal compact.
If the Government acted strategically, it should allow the Attorney-General all the time she needs, and more, to consider the legal implications of the fiscal compact and then announce its intention to hold a referendum in, say, mid April.
As it continues to rush headlong over a cliff, Europe desperately needs a success story: it will not be Greece, nor will it be Portugal. The only prospect of success is Ireland.
It is, therefore, possible to argue that Europe needs Ireland right now as much as Ireland needs Europe.
Last May, Morgan Kelly said that, thanks in large part to Patrick Honohan, the ECB walked away from its bailout negotiations with Ireland with everything it wanted.
"The IMF were scathing of the Irish performance, with one staffer describing the eagerness of some Irish negotiators to side with the ECB as displaying strong elements of Stockholm Syndrome," he said.
Unfortunately, the Government is showing every sign that nothing has been learned and everything forgotten.
Of course the compact was negotiated so as to avoid a requirement to hold a referendum in Ireland. At a level, there was good reason for that. There is every chance a referendum would be defeated.
At another level, the prospect -- nay, the threat of a referendum provides the Government with the only opportunity left to leverage a successful outcome to talks with the European Central Bank, the European Commission and the IMF on the promissory notes issue.
It is still difficult to know on which team Patrick Honohan is playing -- the ECB or Team Ireland, resplendent in Gilmore's green jersey. In any event, as a central figure in the talks, it is interesting to note that he is familiarising himself with the art of strategic thinking.
But it will be even more interesting to know if Michael Noonan is, as I suspect, a master of the art on an international scale -- or is he just another teacher-cum-TD who took advantage of an opportunity when it fell into his lap.
Originally published in
