Tuesday 21 January 2020

Credit overdue for two men who brought Ireland back from brink

Debt of gratitude: Michael Noonan, left, and Enda Kenny, pictured at the Shelbourne Hotel for the formal announcement of the opening of the European Investment Bank Group’s first permanent presence in Ireland, in December 2016. Photo: Doug O'Connor
Debt of gratitude: Michael Noonan, left, and Enda Kenny, pictured at the Shelbourne Hotel for the formal announcement of the opening of the European Investment Bank Group’s first permanent presence in Ireland, in December 2016. Photo: Doug O'Connor

Ajai Chopra

I first met Taoiseach Enda Kenny and Finance Minister Michael Noonan on November 25, 2010, when they were still members of the Opposition. As an early election seemed inevitable, meeting representatives of Opposition parties was an essential step for the EU and IMF teams in Dublin. The purpose was to gauge whether the economic objectives and policies underlying the planned financial rescue loan for Ireland would be called into question after an election. Without satisfactory assurances of the political will to implement needed policies even if the government was to change, it would have been difficult to proceed with the rescue.

Adequate assurances were received and three days after the meeting with Fine Gael representatives, and separate meetings with representatives of the Labour Party and Sinn Féin, the Fianna Fáil government, the EU and the IMF announced on November 28 that agreement had been reached on a financial rescue loan for Ireland.

At that first meeting, Mr Kenny and Mr Noonan emphasised that Fine Gael was committed to the central elements of the rescue programme, but that it would have its own proposals on certain aspects if it was in government. Notably, they believed more should be done to promote growth and that the bank resolution strategy put an excessive burden on the Irish taxpayer. They also stressed that more would need to be done to generate European solidarity, especially as the sustainability of Ireland's public debt remained in doubt. The fundamental tenet expressed by Mr Kenny and Mr Noonan was that the programme needed to work and that it needed to be fair.

I next met Mr Noonan on March 16, 2011, about a week after he had become Finance Minister. Brendan Howlin of the Labour Party, who had become Public Expenditure and Reform Minister in the coalition government, also participated. Both ministers stressed that the new government needed to take full ownership of the programme, and pre-election rhetoric to "re-negotiate" the programme was toned down. The ministers reiterated Ireland's commitment to reduce the fiscal deficit to 3pc of GDP by 2015, consistent with the objectives under the EU excessive deficit procedure, but they sought changes in the mix of budget measures to focus more on job creation, a major coalition objective. Keeping fairness in mind, the new government also rejected the cut in the minimum wage agreed by the previous government. With the fundamental thrust of the programme preserved by the new coalition government, EU-IMF partners easily accepted these changes.

From my vantage point, it was striking how effectively Mr Noonan and Mr Howlin worked with each other. It was well understood from those early days that Mr Noonan did not have longer-term political ambitions beyond his role as Finance Minister, which changed the calculus of doing what is right versus what is politically expedient.

Just three weeks into the job, on March 31, 2011, it fell to Minister Noonan to make a major policy statement to the Dáil on bank capital needs and restructuring plans. Sadly, the new government's intention to impose losses on senior unguaranteed creditors of Anglo Irish Bank and INBS, two non-viable institutions that were in the process being worked out, was thwarted by the European Central Bank. The Minister's statement had to be amended at virtually the last minute to exclude this element. This was a bitter disappointment, not least because greater burden sharing with bank creditors was an important feature of the new government's agenda.

Following this defeat, the Taoiseach and Mr Noonan redoubled their efforts to extract concessions from European partners and more generally to promote European solutions to what was not just an Irish problem but also a European problem. There were some wins, including better terms on EU loans to Ireland and the ECB's acquiescence to extinguishing the much-hated promissory notes and replacing them with long-term government bonds, which improved prospects for regaining full access to the sovereign bond market. But there were also defeats, especially when the euro area leaders reneged on workable plans to allow the direct recapitalisation of banks by the European Stability Mechanism.

The Taoiseach and Minister Noonan have been inexorable advocates for Ireland both domestically and internationally. They oversaw the steadfast implementation of the policies in the rescue programme supported by the EU and IMF, despite some dark times. In the final months of the programme they were wise and confident enough to reject calls from the Europeans and IMF to enter into a follow-on precautionary arrangement once the programme ended.

Under the leadership of Taoiseach Kenny and Minister Noonan, and before that the Fianna Fáil government, the Irish people have made tremendous sacrifices while maintaining social and political cohesion. Although repair of the economy still remains incomplete, much has been accomplished since the crisis struck and recovery is now well under way. Substantial credit for this goes to Enda Kenny and Michael Noonan. As they hand over the political reins, not only the Irish people but also the international community owes them a huge debt of gratitude.

Ajai Chopra is a former deputy director of the IMF

Irish Independent

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