independent

Friday 18 April 2014

Shane Ross: Michael Noonan is a man in a hurry

WHAT was Michael Noonan up to on Wednesday night? The Minister for Finance told the Dail that a deal was close in the talks on the Anglo debt. No deal was done, but it was on the way.

The minister's words, not for the first time, were in marked contrast to Enda Kenny's lofty stance that wise men keep their mouths firmly shut during negotiations.

Noonan opened his mouth wide as a whale's, surprised the Dail and started wild speculation about the nature of the deal expected on Thursday. Central Bank Governor Patrick Honohan was being despatched for Frankfurt with a proposal in his pocket.

The prestige of Patrick was on the line. High drama was expected. There was general agreement around Leinster House that the wily Michael would never announce a possible deal unless it was already in the bag.

Unhappily, Patrick emerged empty-handed from the meeting with his European Central Bank colleagues. The Government was embarrassed, but bravely maintained that they had never expected a result on Thursday. They were still "hopeful". It was obvious that there was a hitch. The ECB was not going to be bounced into a concession.

Noonan had jumped the gun. He had successfully wrong-footed the Opposition at home, who were forced to welcome any deal on the Anglo notes, even before the detail was known. The minister's moment of sunshine was their day of discomfort.

Noonan is being squeezed by events. The Government was well aware that any big news story would be wiped off the media headlines the next day. Judge Alan Mahon would see to that. So Wednesday night was his only window of opportunity.

He is being squeezed by the March 31 deadline for the repayment of €3.1bn on the Anglo notes. The Government will be forced to write the cheque this week if it is not granted relief by the European Central Bank.

He is being squeezed by the Fine Gael Ard Fheis, to be held this coming weekend. He and Enda Kenny desperately need to be able to tell the faithful how they have delivered on the Anglo notes at a weekend of celebration in the Treasury Holdings-built Convention Centre in Dublin.

The nightmare scenario would be drawing a blank on the best-flagged deal since this Government took office. The gathering of the tribe could fall flat as a pancake.

He is being squeezed by the referendum. If Noonan and Kenny cannot prove to the Irish people that we are not the tame poster-boy of Europe, the referendum on the Fiscal Treaty is in danger of being defeated. They badly need to show the electorate that they are still capable of bending the ears of Europe's big guns and that there is a reward on earth for accepting European austerity.

He is being squeezed by his own cabinet colleagues. Several ministers had signalled that a deal would be done before March 31. Senior ministers had pointedly spoken to heavyweight foreign press, including The Wall Street Journal and the Financial Times. Foreign investors were anticipating a breakthrough.

Ominously, the details of Patrick's promised package were sketchy. Noonan told us that there were plans to pay the €3.1bn with a bond, instead of cash. The bond would not be repaid until 2025. By then we could either face the second coming (of the Celtic Tiger) or Judgment Day (of national bankruptcy).

In the speedy world of modern markets, the 13-year gap could just as easily be a hundred.

The pressures on Michael forced him to make a premature announcement. In the process, he probably got right up the nostrils of ECB president Mario Draghi and the German hawks on the Commission. The danger is that the same pressures to conclude quickly will force him to accept a below-par deal.

The sparse details were not encouraging. Noonan was negotiating a delayed payment, not a write-off. There would be an interest rate to be paid on the new bond. It would not be cost-free. The debt would not change, just the phasing of the payments.

On Friday, as he walked around Waterford, Noonan told RTE News that the plans were not "medium-term", meaning that he was over a barrel short-term, because he needed to deliver this week to pacify his fellow ministers, the party faithful and the Irish people. Noonan is in a hurry. Mario Draghi has all the time in the world.

Whatever is agreed this week (and there will almost certainly be a deal, because of the urgency of the Coalition's political timetable), Noonan is holding out a much more fundamental hope for the nation. On Friday, he spoke of a " bigger deal" in the medium-term, meaning that the entire gamut of Irish banking debt will have to be renegotiated in Europe. The current deal is merely a breathing space.

Perhaps this is merely Michael's effort to persuade his domestic audience that a humiliation this month is really a first stage in a series of triumphs to come. If Mario Draghi hears that he is destined to meet the hapless Honohan for a weekly whinge over the coming years, then he is likely to give Ireland a wide berth.

Every time ministers try to give the Irish people hope of relief on the bank debt, the Eurocrats go ape. The Government needs to paint Europe as a benign sympathiser, if it is to see the referendum safely passed. Reconciling the two conflicting constituencies is difficult.

Patrick, Michael and Enda are likely to be knocking relentlessly on the European door in search of more relief in the foreseeable future. Especially as figures released last week show that our economy is far from recovering. We may have hoodwinked our own people about the "corner having been turned" -- but the world is not fooled.

The release last week of a set of official figures about the Irish economy's performance in 2011 attracted conflicting headlines here and overseas. The Irish Times, with its characteristically bullish outlook, headed its story 'GDP rises for first time in four years'. The content of the piece was far less buoyant than the headline, highlighting the reality that the 0.7 per cent growth rate was only half that recorded across the euro area.

Over in the UK, the interpretation of the same figures was different. The Daily Telegraph, carrying a deeply bearish angle, boomed 'Eurozone poster child Ireland slumps back into recession'.

The Telegraph explained that: "Ireland's economy sunk back into recession in late 2011, despite logging its first annual growth for four years, official data has shown."

Figures for the first half of the year allowed The Irish Times to carry its optimistic version. The second half heralded the recession and confirmed the Telegraph's story.

Both were technically right. The Telegraph insisted that the dismal figures rubbished the Government's claims that the tough austerity programme was working.

Despite the figures, the Government and the Department of Finance are still sticking to their head-in-the-clouds growth forecast of 1.3 per cent for 2012.

They will soon be forced to revise it. Once they accept that the growth rate is close to zero, the pressure to make more dramatic inroads into our debt will be irresistible. The days of playing political games with Anglo's promissory notes will be over.

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