Opinion Letters

Thursday 21 February 2019

Ireland's hour

• In 1995, Thomas Cahill published a book entitled 'How Ireland saved civilisation'. Mr Cahill chronicled that Irish monks, led by St Patrick, St Columba and others, copied invaluable ancient Greek and Roman manuscripts, saving written knowledge from plunder and destruction by marauding Germanic tribes in most of continental Europe.

These historical copies were later released to Christianise a pacified Europe at the beginning of its feudal age in the early 12th Century. European civilisation as it is known today owes a considerable debt to these skilful monastic scribes.

In the first decade of the 21st Century, there is another untold story about how Ireland saved the EU.

On the night of September 28, 2008, then Taoiseach Brian Cowen and then Finance Minister Brian Lenihan took the fateful decision to provide unlimited guarantees of financial liabilities of all Irish banking institutions. That decision destroyed the domestic economy and social structure. Ireland has become a de facto ward of the IMF, ECB and EC, in accepting a €68bn bailout.

The reason officialy given for the authorisation of unlimited state guarantees is that the painful decision had to be made to save Ireland from the wrath of US-based credit-rating agencies and the broader financial markets. It was said then that Ireland had to avoid becoming a "pariah state".

Three years later, a public inquiry is being formulated by the Oireachtas to investigate, among other things, the reason for this particular decision.

The forensic investigation would reveal the depth and breadth of exposure by German, French and British financial institutions in bonds issued by Irish banks. The identity of these "money providers" (ie, bondholders and pension funds) of Irish banks has remained largely secretive to the present day.

During the heyday of the Celtic Tiger, a large amount of money was flowing freely into Irish banks for the unending, spectacularly high profit to be made from unbridled lending in the ever-buoyant real-estate economy.

Many ordinary Irish citizens were also caught up in this frenzy, as exulted by developers and their financial backers. The real-estate market speculation by ordinary citizens had extended rapidly, well beyond Ireland, into, among others, Riga, Berlin and Dubai. The Irish were enjoying the global reputation of having the Midas touch for creating blue-sky prosperity.

The precarious status of Irish banks (with about €100bn book losses from the accelerating decline of the real-estate economy) was exacerbated by the collapse of Lehman Brothers, the American investment bank, on September 15 that year. Interbank lending was stopped abruptly.

The extreme exposure of foreign banks in Irish financial institutions was well known to the regulators of respective national governments for many years.

Nevertheless, there may not have been any overt pressure from Berlin, Paris or London's political leaders on the two Brians for an unlimited state guarantee. In retrospect, the collapse of Irish banks could have been managed by the State, in an orderly fashion, to protect depositors.

The blanket guarantee that had been issued largely to protect private investors, ie bondholders, of Irish banks was indeed without precedent.

However, if the bonds of Irish banks were not guaranteed by the State, the collapse of Irish banks would have caused substantial uncontrolled chaos in foreign banking institutions. At that time, neither the EC nor the ECB had any contingency plan to remedy such a catastrophic event.

The uncontrolled event would have inevitably brought down the political structure of the EU.

The two Brians had saved the EU, perhaps inadvertently, by issuing an unlimited state guarantee. For this reason, they should be elevated to sainthood, albeit second order to that of revered St Patrick and St Columba.

In lieu of erecting bronze statutes in honour of the two Brians, the Berlin, Paris and London governments should meet the onerous interest payment immediately on behalf of Ireland. In other words, the outstanding institutional loan taken out by Ireland should henceforth be rendered interest free. The EU should be grateful for the sacrifice made by Ireland.

Alfred Wong
Vancouver, Canada

Irish Independent

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