Gene Kerrigan: Mr Cowen goes to Washington and rewrites history
He deserves credit for trying to explain his actions, but he conveniently ignores warnings he got, says Gene Kerrigan
Published 01/04/2012 | 05:00
TWICE in recent weeks, Brian Cowen came out of seclusion. The first time, at the Fianna Fail Ard Fheis, he got a standing ovation. He responded with what looked like gratitude and perhaps a little disbelief.
Then he went to Georgetown University, in Washington, to deliver a lengthy speech. The media response back home was muted.
It was, however, a substantial speech, more than 8,000 words long. And it was the first time any of the politicians who presided over the debacle bothered to provide a considered explanation of what they did and why. For that he deserves credit.
The speech has the rather grand title of: "The Euro: From Crisis to Resolution? Some Reflections from Ireland on the Road Thus Far". It's not an easy read. The speech has the leaden tone of the countless speeches Mr Cowen made during his days of floundering, full of cliches and recycled speaking points about the crisis. It can be read only with at least two breaks for strong coffee. What Mr Cowen's audience in Washington made of it, as he went on and on and on, we can only guess.
The speech uses the word "hindsight" six times. The suggestion is that it's easy to see the mistakes now, but back then things happened with no warning. "Economists today say that budgetary policy in the years preceding the crisis was not sufficiently counter-cyclical."
Counter-cyclical policies would -- for example -- dampen down a housing market when prices are tending absurdly high. And provide incentives to buy when the market is slow. Under Ahern/Cowen, it was full speed ahead with the tax breaks, as their developer and banking friends cheered them on.
Note, Mr Cowen implied his budgets were indeed counter-cyclical, just "not sufficiently counter-cyclical."
He added: "With the benefit of hindsight, budgetary policy should have leaned more heavily against the wind." Again, the implication that policy was counter-cyclical, but could have been more so.
"When the downturn came, we were not as well positioned on the tax revenue side as we could have been." Again, the implication is that Ahern/Cowen were indeed "well positioned on the tax revenue side", just not as well positioned as he'd have liked.
In truth, Ahern/Cowen bought media and public popularity with tax cuts, while foolishly betting the State's future on the belief that construction revenues would never slump. This rendered the tax base unsustainable.
And all the "in hindsight" nonsense avoids the awkward fact that there were lots of warnings that they were asking for trouble -- from the very people who Mr Ahern invited to "commit suicide". When it comes to admitting mistakes, Mr Cowen uses the passive voice ("serious mistakes were made"). By whom?
The speech quite properly points out that there was no one cause of the crisis. And it implicitly criticises the role of the ECB. "Low interest rates in Europe -- in part in response to sluggish growth in the euro area's largest economy, Germany -- encouraged large inflows of money into both fast- growing peripheral economies in Europe and into riskier types of assets as investors searched for better returns."
What a pity he didn't shout this loud when he was Taoiseach. But back then, it suited his government to play down this reality in favour of the "we all partied" fairytale.
"This growing reliance on money from overseas to fund the banks rendered the Irish banking system vulnerable to changes in conditions internationally. The mounting risks, which are now so clear in hindsight, were not fully appreciated at the time."
Again, the risks were quite clear to some -- and those people were blackguarded by the Ahern/Cowen regime. Besides, fully appreciating the potential dangers in any set of circumstances (and acting accordingly) is what Mr Cowen was paid to do. Why else do we have cabinet ministers?
The credit bubble wasn't a secret. The risks were known. It just suited some people, and their developer and banking friends, to ignore them and hope for the best.
As you might expect, Mr Cowen's speech spent quite some time rehashing and justifying the notorious blanket bank guarantee. He admitted he didn't know the banks were insolvent. It's clear the guarantee was given in ignorance. And it never occurred to any of the highly paid geniuses present that night to add a clause that would invalidate the guarantee if any information given to the State was misleading.
And then there's this amazing paragraph.
"At no stage during the crisis would the European authorities, especially the European Central Bank, have countenanced the dishonouring of senior bank bonds. The euro area policy of 'No bank failures and no burning of senior bank creditors' has been a constant during the crisis. And as a member of the euro area, Ireland must play by the rules."
And what rules might they be? Mr Cowen doesn't say. Of course, there were no such rules. There was a policy -- that German and French banks must be protected, that the money they recklessly loaned to Anglo and the other duds should be paid back by the public, who were never a party to the gambling. To elevate such cynical, extortionate policies to the level of "rules" is a poor attempt at a whitewash.
In office towards the end, Mr Cowen appeared out of his depth. His explanatory speech reinforces that impression.