Tuesday 24 October 2017

Maeve Dineen: Pivotal deal must be followed up by sustained government action

Maeve Dineen

Sometimes you have to take a step back and analyse what it all means. This has been another remarkable week in the story of our financial crash.

But I'm inclined to believe that one of the most important aspects to the deal is that there was a deal at all. Success usually breeds success and the Government is clearly on a roll at the moment. Long may it continue, I hear you say.

The deal has finally managed to restore the primacy of politics over the markets. This Government is finally rediscovering that it makes the rules, and it can change the rules if, and when, it wants. Unfortunately, this was a truth that the previous government had forgotten.

Time and time again, we were told by Brian Cowen and Brian Lenihan that things couldn't be done because the markets would not allow it.

I don't know how many times the two Brians told us that banks could not be liquidated without bringing down the nation's, and perhaps Europe's, financial system.

Yet on Wednesday night, two banks, Irish Nationwide and Anglo Irish Bank, which were collectively known as IBRC, were quickly liquidated without the blink of an eye.

There was no financial crash, no stock market meltdown – in fact, Irish bond yields improved on the news.

So much for the notion that it would be impossible or irresponsible to kill off the banks.

The fact that some subordinated bondholders have also been stuffed has also gone unnoticed.

The markets are not in freefall; Ireland is not an international pariah.

The present and previous governments have been inclined to hide behind the law too often, forgetting that it is their job to make the law.

One of the first signs this was changing came with the amendment to the Constitution to force judges to take a pay cut in line with everybody else.

I liked that move because it also established once again that judges, like banks and companies, don't make the law. They implement it.

A problem over the past decade, here and elsewhere, has been politicians' eagerness to bow to the markets and pretend they know best.

Anybody who has ever worked in the markets or business knows that this is not always the case. A free-market economy is undoubtedly the best way to run a country, but it won't solve every problem and can never replace a strong government.

Free markets need strong governments just as much as strong governments need free markets.

Putting down two zombie banks that had gone bust was not subverting capitalism as we had been told so many times. It was capitalism in action.

While I have a certain sympathy for the banks' employees, I felt a sense of delight to know that the Government seems to have finally begun to recognise its own strength and understand the limits of the private sector.

Now all it has to do is recognise the limits of the public sector, and we will be well on the road to recovery.

Irish Independent

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