Solution isn't perfect but it's no time for bickering
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Thursday August 20 2009
Cerberus was a fearsome three-headed hound which guarded the gates of Hades in Greek and Roman mythology. All those slavering jaws meant the beast was constantly ravenous -- raw meat appeared to be his dish of choice, although he was once lulled to sleep with drugged honey cakes.
Several thousand years later a new hellhound with an insatiable appetite has emerged, according to popular mythology. Its name is NAMA.
The National Asset Management Agency has become the fiend incarnate -- a lightning rod for discontent. In the process, it has been transformed into a useful tool for a variety of lobby groups and community organisations seeking to harness public restlessness.
NAMA, with a remit to remove up to €90bn of mainly compromised loans from the banks, has been fingered as the bailout mechanism for the discredited face of capitalism. This gives citizens a focus for their anger.
But what viable solution has been put forward by the protesters agitating against cuts and shouting down the proposed agency?
It is true that people have suffered, and they expect their pain to intensify before the condition improves -- any recovery is likely to be some years off. So resentment against NAMA for wolfing down funds is understandable.
The agency will gobble up money from the European Central Bank which will have to be repaid. At the same time, we will see budgets squeezed on everything from welfare payments to health and education. While we don't know precisely how much NAMA will cost, informed opinion suggests it could be around €50bn.
Our public finances are in a state of profound crisis: tax take is €34bn, and €21bn of that has to go on welfare. On second thoughts, profound crisis may be an understatement. But if we don't feed NAMA, even if it means cutting off an arm to do so via austerity measures, we will wind up in a greater mess.
NAMA has been largely endorsed by the 'Financial Times', with some caveats, (the 'FT' thinks it's too harsh on the banks!) and it is a workable solution. The International Monetary Fund, which bails out countries when they can't make their own tough decisions, has also backed NAMA. It is not a perfect remedy but it has teeth.
If legislation to establish the new agency is not passed next month, our situation will deteriorate more rapidly than we have witnessed. There is no problem with making amendments to NAMA, but a solution to the banking crisis must be up and running by October.
If we fail to meet that deadline, the international markets -- the people we borrow from to pay our nurses, guards and teachers -- will conclude that lending to Ireland is no longer a safe bet. In future they may no longer advance us money, or do so with penal interest rates attached.
Of course, much depends on how NAMA is implemented. Pay too much for property developers' assets and the taxpayer gets fleeced; pay too little and weaker banks emerge from the wreckage -- and the economy gets fleeced.
Crucially, NAMA hopes to have the loans of the 50 biggest developers off the banks' books by Christmas. But a number of public protests are scheduled for next month to coincide with the Dail debate on legislation to establish the agency.
These include marches and protests to highlight the difference between the tens of billions to be spent on buying property assets from the banks, and the cuts recommended by the McCarthy report.
Dissenters ranging from the Socialist Workers' Party to Sinn Fein to the People Before Profit Alliance insist the Government should throw a lifeline to workers instead of banks.
But if we don't rescue the banks, the economy will collapse. Already banks are receiving thousands of requests from businesses desperate to reschedule their debt repayments. But foreign-owned banks operating in Ireland are keen to retrieve as much as possible as soon as possible -- and are putting the squeeze on Irish businesses.
Meanwhile, the Green Party is planning a special conference to discuss NAMA. We are on a knife-edge, and the Greens -- who went into partnership with FF with their eyes open -- need to stop playing politics and start paying attention to the consequences of their actions.
We must have NAMA up and running as quickly as possible. Bear in mind rescue plans are in full swing in other countries, whereas ours is not even established. And the health of our banking system remains delicate, despite measures to revive it ('The Economist' has called it the most fragile in the eurozone). NAMA may not be an ideal solution but it is one with a chance. However, if the Greens buckle over NAMA as they are threatening to do, and the Government topples with a general election precipitated, all the efforts made to resolve the banking crisis will unravel.
This is dangerous territory. Especially as the money for NAMA is coming from Europe, and a second Lisbon referendum is scheduled for October. Strictly speaking the two matters are not linked -- but, everyone knows they are.
With international eyes fixed on Ireland, wondering whether we can implement our own solutions, we do not have time for politicians to bicker and to raise the possibility of an alternative to NAMA. It is too late for that now -- unless we want the country to go to the dogs.
mdevlin@independent.ie
- Martina Devlin
