Why hot air alone won't be enough to start the bonfire of the bondholders
Published 11/06/2015 | 02:30
'Burn the bondholders' was one of the most memorable catchphrases to emerge from the financial collapse.
A stirring slogan. It gave the illusion that the Irish were no push- overs and our leaders would fight our corner in Europe.
But it didn't amount to anything - the rallying cry proved to be stitched together with bluster and false promises, and many bondholders were paid in full at a huge and ongoing cost to the nation.
Burning this cohort remains a compelling idea, however. There are fewer bondholders left to scorch, of course. But some are still hanging in there: owners of subordinated bonds who refused to settle when Anglo was liquidated, and took legal action to stay in the queue, in the expectation of full repayment.
And so the popular battle call is back on the lips of politicians, after a suggestion advanced by the outgoing Governor of the Central Bank Patrick Honohan. Joan Burton says she's up for burning them, Michael Noonan isn't dismissing it.
Don't get me wrong, I'm keen to see any IBRC bondholders with their hands outstretched zapped, nuked and blown to smithereens. Burning goes too easy on them in my book. Expecting a liquidated bank to make good on its junior debt is a detestable notion.
But I don't want to be palmed off with more hot air and sound bites from the political class. We had enough of that in the last general election, when every opposition party vowed to burn bondholders if elected. Yes, I'm talking about you, Fine Gael and Labour. The change of tone from Opposition to Government was marked.
If the current administration is serious about challenging the bondholders, then let it start by taking the necessary steps. Action please, not talk. After all, anyone who wants to win has to work steadily towards their goal. Slam dunks are more likely to happen because of practice, not brilliance.
That means doing research and compiling a list of the best debt lawyers in the world, followed by negotiating to retain the services of the one most suited and able to take on Ireland's case.
The bondholders may not be in line for payments for two to four years' time, when IBRC is liquidated and assets of €21bn are due to be shared out, but leading debt experts handle complex cases and have busy workloads. The Irish State can't expect to bag the best man or woman to make our case at the eleventh hour.
News that Prof Honohan is urging the Government not to pay junior bondholders is a wake-up call. It's a reminder that the State will have to engage in a legal battle if it is to deny them their payments of up to €300m. Which of us wouldn't prefer that money to be spent on restoring services in Ireland, rather than see it handed over meekly to bondholders?
That figure is peanuts in proportion to the €34.7bn ploughed into IBRC, the former Anglo Irish Bank and Irish Nationwide, but it's far from loose change in terms of a country still struggling under a debt burden. And bear in mind, it's to meet such onerous debts that services were cut back. Reminders of the human cost are all about us, but two to chill the blood emerged in the past few days. They are the cases of a 102-year-old woman left for 26 hours on a trolley in Tallaght Hospital's emergency department, and a 101-year-old woman with a similar wait in University Hospital Limerick. A debt-ridden country is no place for the old.
It's no place for the young, either. Let's not forget how in excess of 200,000 young people aged 24 and under have emigrated since 2007. A great many people won't know their grandchildren.
Taking on the juniors "might be worth a big legal battle" according to Prof Honohan, in correspondence recently with the Department of Finance. No mights about it. That €300m could do a lot of good here in Ireland.
But if there is a case to be made, we must hire the most competent people to present our argument. Let's not depend on the uncertain mercy of others, as we did four years ago, when the ECB and IMF listened and looked away. When they said pay up and we were bulldozed into compliance.
Let us be advised by Prof Honohan, a diligent servant of the people, and prepare to test in court the legality of forcing the Irish people to shoulder the gambling debts of others. But a plan needs to be put in place now - and it must move along irrespective of who's in power. While both Mr Noonan and Ms Burton say they are taking Prof Honohan's suggestion seriously, neither may be in office when the time comes.
Junior bondholders can be tenacious, as we saw when a group refused the Irish Government's offer of 20 cent in the euro and went to the high court in Britain, where they won the right to be considered for payment after IBRC's eventual liquidation. Junior bondholders may be at the back of the queue, but if there is any surplus they'll be entitled to all of their money back. Every last cent.
Let's not stand idly by while that happens. 'Burn the bondholders' has to be a well-constructed and funded campaign - not an empty slogan.