Monday 21 October 2019

Neither limp EU reports, nor pinning it all on Bertie, provide a satisfying outcome to this 'Whodunnit'

Former Taoiseach Bertie Ahern
Former Taoiseach Bertie Ahern

John downing

Life would be so much simpler if we could just blame Bertie Ahern. It would be simpler again if a dispassionate assessment arrived from the EU Commission in Brussels, making key points to help us understand how it all went so wrong in the autumn 2008 bank crash and resultant recession.

Let's take the EU Commission report first. In essence it tells us that the 2008 bank guarantee was all the work of the Dublin government. It was "too generous" and it transformed bank debt into national debt.

More interestingly, the report suggests that the November 2010 bailout did not fall from the sky. It was the subject of three months of prior contact between Dublin and Brussels.

The study again makes some good points about unfinished economic reform work which the Brussels executive repeatedly dealt with in bailout progress reports. But overall the document is a rather limp piece of work which avoids some key facts.

What, for example, about the design flaws in the euro currency which left its member countries defenceless against the international crash?

What about inappropriate interest rates which fuelled property booms in Ireland and Spain?

What about repeated signals from Brussels and Frankfurt that banks could not be allowed fail? What about the unfulfilled promise in principle of the EU leaders' summit in June 2012 that Ireland would get retrospective debt aid?

These are as much a part of the Irish bank collapse which led to the three-year loss of economic sovereignty dating from the bailout in November 2010. They must be added to the national folly about property, the extremely poor bank supervision in Ireland and several other factors.

Like any half-decent 'Whodunnit?', neither is blaming Bertie a very satisfying outcome. He is too convenient a scapegoat, eventually forced out of office in May 2008 amid controversy about his personal finances, and later seen as over-pensioned in contrast to the plight of those in lengthening dole queues.

The man who was Taoiseach for 10 years and 10 months spent hours in Leinster House answering for his stewardship of a period over which the nation went from boom to bust. Leaving aside preconceived notions and taking a dispassionate view, he did well enough.

Mr Ahern is completely correct to say that no other political party advised the nation to dial down the madness in the boom years. Fine Gael and Labour especially criticised Bertie through those years. They criticised him for not lashing out more largesse.

His arguments about the impact of the international crisis were also undeniable. It was the biggest recession since 1929. The question here turns on how poorly Ireland was fixed to cope.

But things get stickier for the former Taoiseach when it comes to his blaming of the financial regulator and Central Bank for the farrago that was the alleged Irish banking supervision system from the turn of the new millennium onwards. So-called light-touch regulation would have been most welcome here. Banks lending many multiples of their limits and huge holes in accounts tell their own stories.

No government can be allowed walk from such failures of bank governance on their watch, the more so since they actually designed the system. The importance of pinning it down is that we must ask ourselves who is watching the watchers now.

Irish Independent

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