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Sunday 15 September 2019

Jonathan Fallon: Why Michael Noonan should publish that bullying letter from the ECB ... and put it in its place

The late Brian Lenihan. Photo: Getty Images
The late Brian Lenihan. Photo: Getty Images

THERE is a saying that ‘the man who does not make mistakes does not usually make anything’. These are wise words but they are based on the idea that we learn from our mistakes. If we do not learn then all we will make is more mistakes.

Recently Com McCarthy called for a legal challenge from the Irish government against the behaviour of the ECB with regard to our bailout. His argument was sound and based on the fact that Ireland was used as a pawn by the ECB in a much wider game of chess. It is the same ECB that now wants to call the budgetary shots. The time has come to remind it of its place. Political division and internal point scoring has been used as a tool by the ECB to push its agenda.

Within any loan agreement it is, of course, reasonable that the loaner demands a bottom line figure. A bank will tell you how much you have to repay and when. It does not tell you to change jobs, or make demands on how you come up with the money unless you have actually defaulted on the loan. Ireland has not defaulted on any payments to the ECB. We are, however, being treated like a defaulter.

Demanding a bottom line is one thing, but it is another matter entirely to start shaping society and forming rules about welfare, healthcare, education or taxation systems for instance. Such items are a matter of social policy and political ideology and I for one am not prepared to cede to the idea that the troika has all the answers or that their political philosophy or economic approach is always correct. They can have their bottom line, but how we get there and come up with it is a matter for us and us alone.

Dan Boyle recently pointed out in his book, ‘Without power or Glory’, the duplicitous nature of conversations that took place with Ollie Rehn. Sinn Fein have been told clearly by the troika that anything can be changed so long as the bottom line is met. However ministers are scolded by the troika for trying anything that does not meet with ECB approval as regards policy. The strategy is clear. The troika is always presented as the hapless friend, trying to aid everyone. In the meantime, the ECB continue to pull the strings and out manoeuvre everyone.

The latest part of this saga is the letter that was sent to Brian Lenihan by the ECB, making an implicit threat if Ireland did not take a bailout. The ECB opposes the publication of this letter. Michael Noonan is letting a committee come to a decision in what is clearly a delaying tactic. It is nothing short of a national disgrace that neither the last government, nor this one, seems to have sufficient political courage to publish the letter and show the ECB up for what they really are. A misguided policy of being partners is still at play. Irish politicians need to wake up. That partnership died a long time ago and they are being used as fall guys and patsy’s ever since.

One would think Michael Noonan should have learned from the mistakes of the previous government. They were routed at the last election because of a failure to see reality and face up to the issues. Michael Noonan has nothing to fear from publishing the letter and telling the ECB that they should not say stuff that they didn’t really mean. He may fear that it will put him offside, but he already is. The troika will haply dump the government as soon as it suits its own ends to do so.

This letter is important. It fits into a wider scheme that illustrates a clear strategy by the ECB in negotiations. First of all, let’s put aside political differences at home. This does not exonerate previous governments from poor decisions that cost the country billions. It does not exonerate the last administration from handling the bailout negotiations badly. They were experienced and we should expect more from them. But the current government can learn if it wishes to.

The letter is said to have carried an implicit threat to Ireland about withdrawing funding from banks. This was an important step because it was designed to let the government know that it had no option. It was not made public, because the intention was always that any bailout had to be sought by and blamed on governments. The Irish government may still have hoped to avoid a bailout. We were well aware of the claim that they were fully funded into 2011. The problem was the budget. For a budget to be accurate it has to be based on some realistic borrowing figure. Rumours, particularly those generating in Europe, were pushing Irish bond rates higher. The only solution might have been to bring forward the budget.

However, the government was introducing a four year plan in an effort to appease the markets, but that plan was based on the figures predicted for Anglo Irish Bank debt. This was a disgraceful situation that the government was solely responsible for and this should not be forgotten. But, the latest figures seemed to finally come to a conclusion on the level of debt. They needed the ECB to sign off on them before any budget or four year plan could happen. Given the resources at its disposal the ECB took an extraordinary length of time to agree the figures and sign off on a plan that was necessary to calm markets.

Then came the bailout itself. There is no other way of putting it, but that the Irish government was outwitted and outmanoeuvred at this time and deserved to be held accountable for their failure to negotiate. Patrick Honohan in an interview with Vincent Browne gave us a clear insight into how things transpired. This combined with Morgan Kelly’s analysis should leave nobody in any doubt as to how the ECB operates.

Honohan said that, in his view, the politicians - Lenihan in particular - thought that the negotiations would last some months, probably into 2011. This timeframe would mean Ireland would have introduced a budget and perhaps calmed the markets. Officials were already talking but in all previous negotiations with the EU it was only when the politicians entered the fray formally that the real work started to get done as regards an agreement. This attitude is probably what led to the farcical denials of bailout negotiations by senior government ministers.

When the news broke it was the BBC that carried the story via a leak from the EU. The ECB was at work again and now had ensured that, thanks to some stupid idea of partnership, the Irish government had walked straight into the mess.

In a matter of hours the Irish government were shown as liars and dodgers and the troika were coming in on a white horse to sort everything out. Morgan Kelly pointed to the coup de grace that was Patrick Honohan admission that negotiations were already taking place.

This final act saw the elected government removed from the stage completely with no power, influence or public support. The deal was wrapped up between civil servants and officials on either side. Nobody who would ever answer to the public. Just the way the ECB like it.

If ever a country needed a general election it was at this point. We required a government that had public support and could deal with the ECB on that basis. Instead the government fumbled along insisting they had no choice. The ECB convinced them they were putting their country first by doing so and that a budget had to be brought in before any pesky elections that could upset things. That was always the plan.

The ECB was not a ‘partner.’ It had bigger fish to fry and it needed Ireland off the stage and neatly wrapped up in a tight deal.

Now the troika want to tell us not only the bottom line figure but how we will shape our society, what value we will place on education, welfare, and health, on work and on different sectors of society. They have exceeded their brief and need to be reminded of this.

Michel Noonan should publish the letter forthwith. Let the ECB deal with the consequences.

Johnny Fallon is an author and political commentator

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