Saturday 25 May 2019

Ten years after the bank guarantee have we learned any real lessons?

Editorial Comment

In modern Irish historical terms, September 30, 2008, will live on in infamy. A decade on from that fateful night, Ireland, while beginning to recover, is still feeling the effects of the devastating recession and much of the country remains mired in economic uncertainty and depression.

Five years after the banking collapse, then Finance Minister Michael Noonan described the decision to issue a blanket guarantee to Ireland's ailing banks as "the blackest day in Ireland since the Civil War broke out".

Mr Noonan's take on the guarantee was certainly dramatic but it was accurate and it remains so today.

Faced with an imminent total collapse of Ireland's banking sector, Taoiseach Brian Cowen, Finance Minister Brian Lenihan and their most senior advisors had a remarkably unenviable task.

In front of them were a number of options, every one of them bad. Their job was to pick the least worst option from a menu of dismal choices.

In the end they made their great gamble and plumped for the blanket guarantee, a decision that sent shock-waves around the world and which has cost Ireland its economic sovereignty and, to date, the Irish taxpayer some €64 billion.

The guarantee was a disaster for Ireland and its people but without it would things have turned out much differently?

In choosing the disastrous option did the Government avoid a catastrophic one?

Whether it was burning the bondholders; letting Anglo - and possibly the pillar banks - collapse or the myriad of other options on the table that night, nothing would have, or could have, prevented the crash and all the pain and suffering it caused.

By September 2008, Ireland's economy had been allowed to inflate to utterly unsustainable levels. Decades of short-sighted, often election-orientated policy left the economy in a uniquely vulnerable position.

The oft mentioned 'soft landing' that Brian Cowen had pinned his hopes on was an impossibility and if things went further south, as they did, Ireland was economically doomed.

That is the real lesson of the guarantee and, a decade later, we don't seem to have learned any real lessons from it.

There is talk of a recovery but this is limited to the major cities - cities where many people struggle to put a roof over their heads and feed themselves.

Government spending is set to increase but much of the €2.5 billion spend will go on plugging gaps in the country's creaking infrastructure.

Meanwhile, in an economy whose growth has been grossly distorted by the presence of massive multinationals, there is once again talk of tax cuts.

There is a need for spending, on housing and health in particular, but it needs to be responsible and well planned.

Huge Tax cuts and massive spending plans might work well at the polls but they risk repeating the disastrous mistakes of the past.

Slow and steady wins the race and the Government needs to take its foot of the gas.

Enniscorthy Guardian