Wednesday 18 September 2019

EU worked in its own interest but no one was looking out for us

Bruce Arnold

In the days leading up to the bank guarantee, on September 30, 2008, economist David McWilliams was close to Brian Lenihan, gave him what help he could and watched -- not without misgivings and growing alarm -- the uncertain and faltering search by the Finance Minister for a way forward.

McWilliams gives a good account of this in 'Follow the Money'. Lenihan, new to Finance, new to economics generally, came to McWilliams. McWilliams became increasingly involved and increasingly sceptical. "I never thought the . . . guarantee would be so loose and so all-encompassing".

What he never knew, because Lenihan did not tell him, was that the eventual force behind the blanket guarantee that has cost us so much money was the European Central Bank.

As John McManus tells us, in his November 22 article in the Business section of the 'Irish Times', "Jean Claude Trichet rang Brian Lenihan over that fateful weekend in September 2008 to impress on him the importance of not letting any Irish bank fail."

The inferences McManus draws are that the ECB would step in and that Lenihan, because of the criminal failure of Irish bank regulation, coupled with incomprehension by the Irish Government, the banks and Lenihan himself, as to what to do, would comply fully with what was suggested.

No one knew where it would lead and what damage would come of it. No one in our own administration considered what an abuse it was of our sovereignty or how gravely it breached our constitution.

McManus puts it mildly: "When the history of Ireland's banking and fiscal collapse comes to be written, the role of the European Central Bank may well turn out to be the most controversial."

Neither the Government, nor the Department of Finance, nor Lenihan himself, knew where it would lead nor how to control it. It was thought that the necessary details would manifest themselves because the ECB had backed it as a solution.

The people who had created the mess remained in charge and the EU, which through the ECB had taken over the government of Ireland, left the details in the hands of incompetent people who fumbled further and further into crisis.

Throughout much of this period, the Government were saying that we had sufficient money for the present. At the same time, they watched guaranteed financial assistance to the banks flow into a black hole.

Government reaction to how Lenihan was handling the situation was inadequate. No legislation to deal with what lay ahead was passed. Effectively, the momentous decision to guarantee the banks was allowed to go ahead without any understanding that this was for Europe's sake and not ours. This raised clear constitutional issues.

A secret relationship between the EU and Ireland, its purpose to stabilise European banks and financial institutions and the euro, was handled by two members of the Government and a handful of officials -- none of whom seem to have had a full grasp of what it all meant.

Commentators and lawyers this week have shown a relaxed view of the gross abuse of the Constitution that began more than two years ago.

With good reason, having struggled with the Economic War, Eamon de Valera insisted on constitutional restraints on "the appropriation of revenue or other public moneys" unless recommended by the Taoiseach and Government in a written and signed message (Article 17.2). That article presupposes knowledge of the details.

A complete reversal of all this was the course pursued by this Government. They appropriated the revenue, signed for it and sealed the deal. They then let members of the Dail make statements without having seen the documentation. After that the Government revealed part -- but part only -- of what had been done by publishing some of the memoranda. This was the culmination of over two years of secret actions by two members of the Government, and possibly more who were in the know.

It is understandable that, in the limited constitutional debate this week, the emphasis has been on Article 29 on International Relations. Written long before we surrendered our sovereign status by saying 'Yes' to the Lisbon Treaty, Article 29 is much more ambiguous in its meaning. Article 17 is a fundamental one that required a number of actions by the State where money was concerned. Not only were the provisions not followed, they were deliberately and covertly circumvented in what I regard as a serious abuse of power.

It is no wonder that Fianna Fail's standing in the opinion polls is now so low. It deserves to go even lower. What is a wonder is how calmly the opposition parties are considering what they cannot or should not do, rather than building a convincing case for throwing out the present Government now.

There must be many no-hopers in Fianna Fail who see it in the same way, their future probably best served by crossing over to another party or joining a new political party. What a pity that one has not yet been formed.

Irish Independent

Today's news headlines, directly to your inbox every morning.

Don't Miss