FRANKFURT 1 -- Dublin 0: Despite all their rhetorical flourishes during the 2011 General Election campaign about burning bondholders, the Fine Gael and Labour Party Coalition conceded to being unable to break ranks from their European partners.
Not surprisingly, the European Central Bank had different views about burden-sharing with senior bondholders as it had to think of the wider context of the impact on the entire eurozone.
Finance Minister Michael Noonan admitted the ECB had not bought the Government's argument and the "agreement was not forthcoming".
"We would like to burden share on senior unguaranteed bonds but the ECB, at present, will not change their policy," he said.
Fine Gael prattled on in a populist manner about the banks not getting another cent.
But the party subsequently moved to tone down its position -- after a week of confusion that saw senior party members repeatedly contradict one another, prompting negative international reaction -- as they tried to explain the party's policies to the public and the markets.
In its banking strategy, published at the beginning of the election campaign, the party warned it could unilaterally impose losses on unguaranteed senior bonds if some of its proposals for dealing with the banking crisis were not implemented.
Noonan consequently withdrew a threat to unilaterally restructure bank debt. By the end of the campaign, he was saying Fine Gael would only impose losses on senior bondholders as part of a European-wide framework.
Ultimately, this was the route the party has now gone down in Government.
"We always said we would approach this in the European context and we would not approach it unilaterally," Noonan said last night.
Labour was also happy to play to the public about reducing the burden on the taxpayers.
Vowing to renegotiate the bailout, Tanaiste Eamon Gilmore stated during the election: "It's Frankfurt's way or Labour's way."
Yesterday the Government said it was "committed to the EU/IMF programme".
A reduction in the bailout rate of interest is presumably still on the way, but the outcome yesterday on the injection of funds into the banks was a far cry from the rallying calls of six weeks ago.
Taoiseach Enda Kenny claimed "burden sharing is part of our Programme for Government" but there appears little appetite in Europe to go beyond the €5bn worth of subordinated debt that is being written down.
Down the line, there may be some movement on the Anglo Irish Bank and Irish Nationwide front, but the senior bondholders in Bank of Ireland and AIB as the 'pillars' of the restructured banking system won't be touched
Public Expenditure Minister Brendan Howlin admitted last night "burning the bondholders" in AIB and Bank of Ireland would "be invidious" to them securing further capital.
In other words, the warnings all along that if you fail to pay your debts, you won't be given any more money, proved to be correct.
On the plus side, the Government has attained a greater degree of credibility than its predecessors -- both at home and in Europe.
Going out to Brussels upon becoming Finance Minister, Noonan says he found there was no confidence at all in the figures coming out of Ireland on the banks, so the stress tests were vitally important.
Coming out with the results of rigorous and pessimistic tests will help to return trust.
From a domestic perspective, not letting on to people that the recovery of the banks won't be painful and costly will also help.
Noonan opened his address to the Dail last night with the hard-hitting salvo at his predecessors: "Tuesday, September 30, 2008, will go down in history as the blackest day in Ireland since the Civil War broke out."
The manner in which the previous Government presented the bank guarantee as a panacea for the banking problems was ill-judged and damaging to public trust.
Brian Lenihan wasn't keen to be reminded last night that he described the guarantee as "the cheapest bailout in the world so far".
The minister's only defence was he didn't say it in the Dail. But he did say it at the Leinster Society of Chartered Accountants lunch in October 2008.
€70bn later and the taxpayer is well aware the cost is far from cheap.
But the Coalition has presented a coherent plan for the banking sector, stabilising the position of Bank of Ireland and AIB and relying on foreign banks to bring in competition.
Indeed these banks will be almost over-capitalized by the State to encourage outside investment.
Capital is long-term investment in the banks that stays in reserve, whereas liquidity is the day-to-day money running through the system.
The Government will have to continue to negotiate with the ECB pump billions of euros into the Irish banks for up to five years, known as medium-term liquidity, to provide further reassurance.
Without the ECB's current and ongoing short-term liquidity lines, believed to hitting €200bn, the banks would be out of business.
The difficulty from the Government's perspective is explaining to the public why it is necessary to put another €24bn into the banking system.
Unless ATM's stop churning out money or depositors are told their savings are gone, which these very banking policies are preventing, it's a hard sell.
As Noonan delivered his highly significant speech yesterday, there were only 87 TDs in the Dail Chamber. The Government committed €24bn worth of taxpayers' money and only half the country's TDs bothered to show up to listen.
During the giveaway budgets of the boom years, the Dail was jammed.
The people have spoken in the ballot box but the policies and politicians haven't changed that much.
No matter as Frankfurt is calling the shots.