News Shane Ross

Friday 29 August 2014

Shane Ross: Legacy issues lost us the loot

Published 30/09/2012 | 05:00

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IN DENIAL: Enda Kenny and Michael Noonan sought to downplay the bombshell news that ESM funds will not be allowed to sort out the sins of our bankers

ROISIN Shortall proved a godsend to Enda Kenny last week. The departing minister of state may have caused Labour leader Eamon Gilmore a few transatlantic tremors, but Shortall handed an unscheduled shield to the Taoiseach.

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Her dramatic exit from Government provided a diversion from a far more shattering story. While Gilmore went missing in action in New York, far from the Labour Party's Balbriggan battleground, Enda was left in the frontline at home.

Although the Taoiseach took temporary flak for his friend and ally James Reilly, the spat between the two health ministers conveniently camouflaged the most serious political setback of his Government's life.

Even as Shortall was vanishing from the scene, unfortunately, so was a lot of European loot. The Labour Left may grieve for Shortall in the short term, but not for half as long as they will mourn the evaporation of the expectations of European funding for our banks.

In time, the loss of the loot will prove far more hurtful to the nation than the shafting of Shortall.

Shortall will, hopefully, be back. The loot may be lost forever. All the media buzz last week surrounded the feisty Roisin's dramatic resignation in Dublin. Far more cataclysmic events in Helsinki were relegated to second place.

The three most powerful finance ministers in Europe had given the thumbs-down to Ireland's hopes of a Santa Claus-type bank rescue.

The new European Stability Mechanism (ESM) funds would not, after all, be allowed to be used to sort out those sins of bankers committed prior to the establishment of a new European banking supervisor.

Or, as they put it so delicately, no "legacy" assets would be taken on by the new body. Thus historic problems would be left in the hands of "national authorities".

Enda and Ireland are left holding their own banking babies. Contrary to previous hopes, Europe was not now going to charge in, a white knight on a chariot, to buy shares in AIB and Bank of Ireland at inflated prices.

Europe doesn't do white knights. As far as the three powerful finance ministers were concerned, Ireland was done and dusted. There was going to be no relief for past sins.

Ireland is a sinner from the past, doing its penance dutifully -- an example to other errant nations. Future sinners will qualify for forgiveness. The ESM will step in with funding to break the link between bank and sovereign debt for them, but not for us.

Ireland was out on a limb, abandoned by its colleagues. The Government was exposed. It had grossly oversold the benefits of the earlier agreement in June.

Irish ministers were ashen -faced in the Dail on Wednesday morning. The premature cries of triumph after the summit in June had vanished.

No wonder they looked shell-shocked. Enda admitted to the Dail that he had been given no warning about the three ministers' bombshell. He was kept in the dark.

He was reminded that he had announced a "seismic shift" in June. Now, Ireland had been humiliated.

Kenny was careful to repeat ad nauseam the bald words of the June communique: the vicious cycle of the link between bank debt and sovereign debt would be broken.

Equally, he reminded TDs of the June promise that Europe would "examine the situation of the Irish financial sector with the view of further improving the sustainability of the well-performing adjustment programme".

Gone was June's rhetoric of "seismic shifts" and "game changers". Stripped of the rhetoric, the June statement suddenly looked naked.

The Taoiseach tried to claim that nothing had changed. He was in denial.

So too was the Department of Finance who even told the Irish Times that it "welcomed the ideas put forward by [German finance minister] Schauble and his allies". The mandarins feebly mumbled that "these ideas will feed into our discussions over the coming months".

The Taoiseach was in denial. The mandarins of Merrion Street were in denial. And their own minister, Michael Noonan, was in denial.

On Wednesday afternoon it was Noonan's turn to hold the Government line. He told Fianna Fail's Michael McGrath all about all the meetings he had been to in Europe where he had engaged in "constructive" talks. He insisted that Ireland was pursuing a "diplomatic offensive" -- the last refuge of a dying ambition.

Noonan even sought solace in global markets' performance on Wednesday following Tuesday night's bombshell from Helsinki. Astonishingly he claimed that "the markets have more or less taken it in their stride", boldly insisting that "the markets move every day but the movement today was relatively small".

The mandarins feeding him the figures from the markets must be on speed.

Michael's reading of the market returns did not accord with the facts. The 'Short View' column in the Financial Times stated that "Irish bonds had their worst day since May". The same normally reliable organ related how the euro had dropped to a two- week low; how investors had headed for the dollar and German bonds; how Spanish yields had spiked with Spain's 10-year bond back at the highest level since the ECB announced its bond buying plans earlier this month; how equity markets across the world fell as the meaning of the three finance ministers' statement sank in; how the Vix index, Wall Street's measure of market fear, hit a two- week high and how banking shares across Europe had tumbled.

Yet according to Enda, Michael and the mandarins it was business as usual. The action was "relatively small". They must have been tracking the gold price.

For the rest of the week the downward market trend continued. On Friday Alan McQuaid, ace economist at Merrion Capital, said that the "comments by the three finance ministers had spooked the markets".

The only people they had failed to spook were Enda, Michael and the mandarins.

Kenny and Noonan seem to have totally missed the point. Possibly in panic mood, they both attempted to downgrade the status of the trio of ministers who issued the offending statement. Noonan almost rubbished the meeting, witheringly asserting "in the broader scheme of things, it was a statement issued following a meeting in Helsinki attended by three finance ministers".

Taoiseach Kenny spoke loftily of his own meetings with three PRIME MINISTERS, firmly putting the three upstart finance ministers in their place. Unfortunately the three prime ministers whom Enda had met came from Greece, Italy and Spain -- three basket-case countries. The three finance ministers issuing the statement came from the three strongest, triple-A rated nations in Europe: Germany, Holland and Finland.

No contest. Enda's pals are the bearers of begging bowls. The three finance ministers hold the purse strings. His assertion that "all European finance ministers are equal when they sit around the table" is nonsense.

The big powers in Europe are treating us shabbily. For a short while they even cruelly allowed us to indulge the fantasy that they would pay us €20bn for equity in our pillar banks when it was worth less than €8bn.

We will hear no more of that.

The Government needs someone with the bottle of Roisin Shortall to stand up to our European colleagues, someone who is neither captured, nor in denial.

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