Friday 30 September 2016

Greek clouds could have a silver lining for Kenny

Published 29/06/2015 | 02:30

Economic storm clouds in 2007 helped re-elect Bertie
Economic storm clouds in 2007 helped re-elect Bertie

Precisely three years ago to this very day, Enda Kenny emerged in exultant mood after 4.30am from an EU leaders' summit in Brussels. He said he had the "game-changer" on EU help for Irish bank debt.

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Pretty well everyone present at the Justus Lipsius building felt the Taoiseach was entitled to gloat just a little.

"To those, the naysayers who say you should be beating the Lambeg drum up and down the streets of Europe, there is another way of getting results and that's what interests me," Mr Kenny said.

"I'm a hard grafter and as some of them found out, they shouldn't tangle with me too often," the Taoiseach added.

The deadpan sentence in the final summit communiqué, for those who understood the codes and procedures, did appear to hit the spot. "The Eurogroup will examine the situation of the Irish financial sector with a view to further improving the sustainability of the well-performing adjustment programme," it said.

An EU diplomat said it was "difficult to deny" the position advanced by Mr Kenny and the Irish negotiators. "They had an argument: 'You are doing for Spain something you didn't do for us', and so there was some kind of understanding."

Yes, numerous questions still remained: When would the deal be finalised? How much would it ultimately be worth to Ireland? How will it be applied retrospectively to Ireland? Would there be a row back on the commitment?

Well, let's answer the last question and move swiftly onwards. There was a row back. Ten weeks later, Germany, the Netherlands and Finland combined to deliver a strong statement saying in essence that while there would be a new scheme to deal with bank debts - it would not be retrospective. So, tough luck Ireland.

What has happened in the intervening three years has been the most nimble tiptoeing away from that euphoric outpouring of June 29, 2012. The Fine Gael/Labour Coalition has never formally resiled from the idea of getting EU help with legacy debt. Just over a year ago, Finance Minister Michael Noonan frankly said Ireland faced real difficulty getting EU bank debt compensation - and was more likely to claw back more money for taxpayers by selling bank shares on the open market.

But Mr Noonan insisted that the country will make an application for retrospective compensation for what was by then estimated at €40bn in bank debt when the EU's new bank support system, the ESM, was finally up and running at the end of 2014. He said the Government would continue to base its compensation case on that summit declaration of June 29, 2012. "But things have changed dramatically since 2012," Mr Noonan told the Oireachtas Finance Committee.

Ireland would need unanimous support from the other 27 EU member states to get this compensation. But that very week, five countries - Spain, Italy, Portugal, Greece and Slovenia - were paying more interest than Ireland to raise money on international bond markets.

"It's very hard to convince ministers from countries like that, that Ireland needs additional assistance to make our debt more sustainable, when markets have decided we're in a more sustainable position than they are themselves," Mr Noonan said.

Amid all the torrid events of the past six months across the 19-nation eurozone, the issue has just become irrelevant. There will be undoubtedly be more hullabaloo about it here in Ireland. But by now it will not harm the Taoiseach and his Government.

The realpolitik is that the ongoing disaster that is Greece and its relations with the eurozone put everything else in the shade. That said, Messrs Kenny and Noonan have shown their vulnerability on the debt issue with some robust comments last week distancing Ireland from Greece.

They have been characterised as "lining up with Germany" and ready to "kick Greece while they're down". That is something of a caricature. But it can be definitively said that this Irish Government bridled at the prospect of Greece getting something Ireland did not get - even something extracted by a country at the doors of despair.

In the nothing-for-nothing world of EU politics, the Irish Government would do better to at least extend the charity of their silence to the Athens government. The moral high ground suits Ireland even less than most other member states.

Greece, the 19-member eurozone, and the 28-nation European Union face into a very uncertain week. Much now hinges on the outcome of the surprise referendum on the bailout terms in Greece next Sunday.

The prospect of Greece leaving the currency union is more real than it has been so far. The consequential fallout for all EU member states and across the developed world could be enormous. Ireland's fragile and nascent economic recovery, much dependent on continued low-cost borrowings, could be called into question.

It is a very depressing prospect. But things could go back to where they were in 2007/2008. Privately, some EU officials suggest things could be even worse than they were back then.

But while all of this is extremely precarious for everyone in Ireland, there may, ironically, be a certain silver lining in those dark Greek clouds for Enda Kenny and his colleagues questing re-election.

Let's recall that the economic storm clouds in 2007 helped re-elect Bertie Ahern to lead his third consecutive government. At the time, the people did not feel brave enough to gamble with change.

It does not take a wide leap of imagination to see that dynamic playing for Enda Kenny next time out.

Irish Independent

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