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Brendan Keenan: Blaming Europe is not going to help us solve our problems

I am not usually stuck for words, I think I can safely say, but I was caught out by a German TV reporter just before the bailout, when she asked why there was so much hostility towards Germany?

At that stage, I wasn't aware that there was, particularly. But she, being German, had got it in the neck doing her interviews around town. Now, of course, I know that she was right.

Our old ally, the French, seem to attract less hostility. Yet, according to reports, it was president Nicolas Sarkozy who gave Enda Kenny the most grief during the last EU summit (I prefer council meeting, since it is quite clear these occasions are an integral part of our political process, not just special gatherings of heads of government).

The version of this stormy session picked up by the UK's Channel 4 was intriguing. It went along the lines that Mr Kenny waved his electoral mandate at the assembled leaders as a reason for giving him a lower interest rate.

Umbrage

Mr Sarkozy, and perhaps German Chancellor, Angela Merkel, it was said, took umbrage at his lack of acknowledgement that it was their money keeping his country afloat.

You may remember that there was a different version of events from that most seasoned of campaigners, the Luxembourg prime minister Jean-Claude Juncker. Quite remarkably, he went public with his view that Mr Kenny had been bullied.

He, and others, have suggested that Ms Merkel was not an eager participant in whatever bullying took place.

Rather, it is said, she felt that there could have been a deal involving corporation tax and interest rates had Mr Sarkozy been a bit less heavy-handed.

It may not be too fanciful to see the account given to Channel 4 as a French explanation of why things went sour.

On one thing though, French, Germans and others seem united -- that Ireland needs to "put something on the table". Perhaps Mr Kenny's travails were a blessing in disguise. Or perhaps he knew what he was doing? (I haven't asked him, but I'm sure he would say he did). He did not want to put anything on the table; at least not yet.

It would have been awkward enough to come back having conceded ground on corporation tax, even in return for a cut in the bailout costs.

But to follow it a few weeks later with the preservation of the bank bondholders would have been a lethal combination.

In the longer term, though, the blame game with Europe spells trouble for Irish politicians. We can assume that the German TV reporter told her audience that the Irish were angry at the Germans for lending them money.

And indeed, our attitude seems to be that their banks shouldn't have lent us money in the first place; and their government shouldn't lend it to us now to help pay back the first lot. Not unless it's very cheap anyway.

One can see why that wouldn't go down over there. The political difficulties have been exacerbated by the fact that it also sums up the attitudes of the coalition parties during the election campaign -- Fine Gael's on interest rates and Labour's on bank debt.

I think it was my friend Shane Coleman (apologies if it wasn't) who quoted the 'Carry On' film line; 'Infamy, infamy! They've all got it in for me'.

It is not a very attractive attitude even when there is some truth in it and in this case, I'm not sure that there is.

Eamon Gilmore's comment that is would be Frankfurt's way or Labour's way already shows signs of joining that select pantheon of political comments which are never forgotten.

Unlike Eamon de Valera's dancing at the crossroads, or Jack Lynch's standing idly by, it has not actually been misquoted yet, but that will probably come.

There is, don't forget, more trouble on the way. Corporation tax is still on the table. Someone has to explain the looming large job losses in the banks.

Most dangerous of all, the gloomy consensus forecasts for the economy mean there may have to be negotiations on further austerity measures before the year is out.

Monday's Exchequer returns were broadly on target for the first quarter, but only because of a 56pc overshoot in corporation tax.

Taxes

One can imagine how that will play in the Elysee Palace. The taxes which show how the domestic economy is doing, income tax and VAT, were about 4pc below target.

Not bad forecasting by the Department of Finance in such difficult circumstances perhaps.

But a 4pc slippage in these taxes over the course of the year would amount to a shortfall of €1bn. We can't expect corporation tax to keep making up the difference, and the IMF certainly won't.

One can imagine the furore if further cuts or taxes are imposed later in the year. Last week the Irish Congress of Trade Unions took part in a European Union initiative to campaign against the austerity programmes -- or at least the form they are taking.

They have got support from some unexpected quarters. Several international analysts have said that Ireland's problem was not a fiscal crisis, and that fiscal austerity is not the solution.

One can see what they mean -- up to a point. The scale of the crisis is due to excessive private borrowing, not public borrowing. Government debt would not be rising so fast if so much private debt had not been transferred to the State.

But there is a fiscal crisis nonetheless. The overflow from the private borrowing was used to cut taxes and increase spending to such an extent that the present tax base and rates are incapable of paying for the present cost of government services, no matter what the economy is doing.

Normal growth at normal interest rates will reduce the deficit, but it will not eliminate it. There is no way of knowing what exactly the gap is but it is somewhere in the region of €8bn a year.

One may argue, and argue vigorously, about the exact measures and timescale for fixing this, but not about the actual problem.

This is not something for which we can blame Europe, or anyone else, but that may not stop us trying.

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