News Marc Coleman

Friday 19 September 2014

Our hand is out for some help, not for six of the best

Let's hope the re-elected Chancellor Merkel will remember and reward the sacrifices we've made, writes Marc Coleman

Published 29/09/2013 | 05:00

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GRATEFUL: Angela Merkel has much to thank us for

Imagine for a moment that after their 2004 local election drubbing, Fianna Fail had replaced Bertie Ahern with Mary O'Rourke. Imagine further that instead of the binge that followed, our national finances and property market had been kept in check and Fianna Fail had won the last two elections. In a manner of speaking, that has just happened in Germany. After ditching Gerhard Schroeder in 2005, Germans have rewarded his successor, Angela Merkel, for what have been eight years of stable and successful government with re-election. But what does it mean for us?

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In Germany, Merkel's image has gone from dour Prussian hausfrau to maternal warmth in the space of a decade, and she now enjoys the affectionate moniker, Mutti Merkel (something like Mammy O'Rourke)

In Ireland, perhaps unfairly, Merkel's image hasn't made that transition, even though, if there is one country that deserves a bit of monetary mothering, it's us. It was once said that if France was the oldest child of the church, Ireland was always the most faithful. The church's failings put paid to that. But we seem to need to be faithful to something, and where the church has declined in our devotions, the euro seems to have gained. As fidelity and sacrifice go hand-in-hand, our sacrifices resulted not only in a remarkable fiscal turnaround, but in the eurozone and, by extension Germany – and Merkel's political position – being stabilised.

Ireland has done even more than this. Where once she was a citizen of the oppressive DDR, Merkel now leads a united democratic Germany, partly because in 1990 a friendly Irish EU presidency overcame opposition from another tough woman. Six years later, Finance Minister Ruairi Quinn secured the Stability Pact that Germany wanted so much. In 2004, Bertie Ahern steered EU accession to success and doubled Germany's economic hinterland in the process. Then there was our passing the fiscal referendum last year. And Enda Kenny and Eamon Gilmore using our latest EU presidency to achieve progress towards an EU banking union. So, if we are financially indebted to Germany, one can equally argue that Germany is politically indebted to us.

If Berlin is our new Rome and Merkel our new Pope, such faith grows weak when it goes unrequited for too long. Merkel had gratitude and sympathy for Ireland last Monday, but added that her policy would not change. On closer inspection, what she may have meant was that it would not change in the immediate wake of an election.

Her defence of the ECB line on our debt makes her look more like an "Iron Chancellor" than a nurturing nursemaid. But this is a woman who was reared in a communist prison camp where speaking your mind was dangerous. As a politician, she navigates one of the world's most complicated and subtle political systems. She must watch and time her words very carefully.

Had she supported using the ESM to help our banks, she may have lost the election to forces even more hostile to us. Despite winning, she has yet to form a government. And if she is "inflicting austerity" on Ireland, it is merely the same medicine she expects from her own citizens: balancing your books, earning your keep and trading, instead of borrowing, your way to success. Wailing about German "austerity" might be fun. Then again, we might consider that this is merely our name for what Germans call sound economics. With an unemployment rate half our own (6.6 per cent), they have a point.

But we may need more than Merkel's tough love. Research from the Irish Fiscal Advisory Council shows Ireland is the eurozone's third most-indebted nation. Now, Merkel insisting that we repay our debts is fair enough. However, she might accept that six years after an Irish finance minister secured it, it was Herr Schroeder who tore up the Stability Pact and prompted Europe's fiscal meltdown.

More importantly, €34.7bn of "our" debt – equal to 21 per cent of GDP – was imposed from outside. From a perilous 2012 peak of 127 per cent of GDP, relief of all or most of that would put us closer to 100 per cent of GDP: that is, in a much more manageable and safe position.

Last year, eurozone leaders, in a move described as "seismic" by the Taoiseach, agreed to let the European Stability Mechanism be used to recapitalise banks. But the earth has yet to move for Ireland. Prodigal sons Greece and Cyprus got warm bailout hugs from Mutti Merkel. But for faithful daughter Ireland, there so far seems little more on offer than a pat on the head: the liquidation of the IBRC this year certainly led to welcome fiscal gains. But according to IFAC, those gains are "relative to the size of government debt . . . small", or certainly not enough to budge our national debt from its current perilously high level.

Next Thursday, Germans celebrate "Tag der Deutschen Einheit", the day on which Germany was re-unified in 1990. The weeks that follow will be a timely opportunity to underline our crucial role in Germany's re-unification, the birth of the euro and Stability Pact, EU accession and – last but definitely not least – the huge contribution our sacrifices has made to stabilising the euro, Germany's economy and, by extension, Merkel's re-election. As well as persuading Mutti Merkel to change her mind, there is another good reason for a diplomatic offensive: despite her win, Merkel has no majority and has had to ditch her low tax-loving Free Democrat coalition partners, possibly for the Green Party which, despite its name, is hostile to our corporation tax.

Failing to reward Ireland for our sacrifices would be bad enough: punishing us could turn out be a step too far for a weary nation.

Sunday Independent

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