Opinion Analysis

Monday 23 October 2017

Take it or leave it, but this was the only deal on the table

The bailout could have been fairer, but the task now is to make the best out of a bad situation, writes Colm McCarthy

The financial terms of the bailout deal finalised last weekend with the IMF and the European institutions make no significant concessions to Ireland, but unilateral rejection is not a realistic option.

None of the cost of the enormous bank losses will be borne by the providers of the bailout funds and it was never likely that they would be. But the terms also constrain the Government's ability to impose more than a small portion of those losses on bank bondholders. The rate of interest on the overall facility is not generous either. The deal however had to be accepted and the task for this Government and the next is to make the best of a poor situation. Those on the political left, who have been ranting on about rejecting the deal, know perfectly well that this cannot be done, and are throwing sand in the eyes of the electorate.

This was always going to be a 'take it or leave it' offer. The Government had been out of the bond market since October, the state-guaranteed banks could not fund themselves in the markets either and were clearly in the early stages of a bank run. The Government's cash reserve would have been exhausted quickly, possibly in days, had it been deployed to replace funds lost in a run. External funds had to be sought but also had to be accepted. The alternative was the immediate closure of the banking system and those who pretend otherwise either don't understand, don't want to, or don't care.

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