Ireland Revolts for Stability Post author By Philip Lane Post date February 28, 2011 Oliver O’Connor interprets the election results for WSJ readers here. Categories In Economic Performance Tags Irish general election 31 Comments on Ireland Revolts for Stability ← Donal O’Mahoney on Senior Bank Bonds → Money and Banking Statistics: January 2011 31 replies on “Ireland Revolts for Stability” I had posted this comment on anoter thread – but it seems appropriate to repeat it here. Unfortunately the bulk of the column seems to be behind a paywall but I gather the thrust of it is amazement at our national timidity. It seems our most radical form of revolution seems to involve replacing tweedledum with tweedledee.. Tweedledum and Tweedledee Agreed to have a battle; For Tweedledum said Tweedledee Had spoiled his nice new rattle. Just then flew down a monstrous crow, As black as a tar-barrel; Which frightened both the heroes so, They quite forgot their quarrel Our electorate is easily spooked by imaginary “monstous crows” . Any hope our elected representatives are less jumpy? “The new coalition won’t default on its sovereign debt or raise its corporate tax rate.” Pangloss redux Between the news about FF asking Libya to buy the banks, upward rent reviews versus the needs of shopowners vs NAMA and the banks and insurers and the price of oil well over $100 per barrel everything is going in the direction of t*ts up. I wouldn’t rule anything out. What does the WSJ know anyway? All quite sensible. A different link here: http://online.wsj.com/article/SB10001424052748703933404576170033504889292.html @all Breaking Newz: New York Times – 7 minutes ago Ireland’s Kenny Wants ‘Swift’ Deal on Coalition O_me_Gawd! Swift’s Modest Proposal in the Programme for Government – A neu_Herod stalks the land – the childer of the poor and the neu_poor are destined for the pots of the vichy_bankers’ elite in the kore. http://www.nytimes.com/reuters/2011/02/28/world/europe/news-us-ireland-vote.html?ref=global-home Sorry about that second link Putting the title into Google and clicking on the WSJ.com link works for the full article (or at least it did for me). The WSJ appears willing to provide free access, but makes you work a little bit. @John McHale Good tip – works for me also – some glitch which they will no doubt fix later? “The Irish people are wondering why they should make whole the remaining €21 billion of private bank debt that is not guaranteed by the state. Why should Irish taxpayers have to suffer for bad lending decisions made elsewhere in Europe? The simple answer is that the ECB, Germany and other governments insist that national taxpayers bear these costs. When and how this became ECB policy is unclear. It seems to have been implicitly in place even before the 2008 Irish bank guarantee.” The perennial question which consumes so much space in here and is obviously not amenable to any logical answer. Under what obscure regulation did this “implicit guarantee” creep into existence. Is the EU really in the business of fuelling moral hazard in the banking system while aggressively punishing taxpayer scapegoats for private sector delinquency? @ seafóid ‘Between the news about FF asking Libya to buy the banks’. Please reassure me this is some kind of surreal joke. If not – source? @ a punter I saw this yesterday http://www.news.com.au/business/ireland-sought-libyan-bailout/story-fn7mjon9-1226013196144 Ireland needs a Che Guevara not a Sea(gaeilge) Begorrah to stand up for us. All that talk about discovering for the Irish people what went on in the banks, was it fluff from Enda, we’ll see. Great wipeout of FF, only group who voted for them was the elderly, who, fair dues, out of nostalgia, pensions, medical cards were too forgiving. Looking ahead, will we get our Pecora? http://colmbrazel.wordpress.com/2011/02/28/enda-begorrah-we-need-pecora/ I presume this is the same article. The bit that got up my nose is this: Nobody can say what the final costs of the banks’ bailout will be. The Irish people are wondering why they should make whole the remaining €21 billion of private bank debt that is not guaranteed by the state. Why should Irish taxpayers have to suffer for bad lending decisions made elsewhere in Europe? The simple answer is that the ECB, Germany and other governments insist that national taxpayers bear these costs. When and how this became ECB policy is unclear. It seems to have been implicitly in place even before the 2008 Irish bank guarantee. If Irish opinion matters a rap EU policy-makers (not that I know of any compelling reason why it should) then they really need to put a stop to this crap. It’s simply disgraceful that a group made up of democracies is making decisions in this way. I heartily endorse Colm McCarthy’s call for kicking back against this kind of treatment. I get the impression that this originally may have been a much longer article that was edited for reasons of space or else that the writer was asked for 300-400 words on the Irish election, just to fill a slot assigned to the Irish election. Oliver O’Connor seems to be in the habit of writing optimistic articles about the Irish political economy and this article also seeks to give out positive signals: we’re a patient lot, content to wait for the ballot box to wreak havoc on our ‘oppressors’ rather than storming parliament; our new government will not renege on coporate tax rates vital to continuing FDI in Ireland, especially from the US. All grand, but one of the first actions of the new government will likely be to inject about 10bn euro capital into the banks, which may strike those who voted for them as a mite peculiar given the rhetoric of the election campaign. Shortly thereafter they may be forced to admit that there really isn’t much they can do on ‘renegotiation’ of the IMF/EU deal and we’ll have to live with it for the foreseeable future. In between, one may expect that the new Minister for Finance will stand on the steps of the Department of Finance and solemnly declare that things are so much worse than he/she had anticipated, so those fancy jobs stimulus plans will have to wait awhile… What Fine Gael have missed out on is the availability of a ‘small party’ – like the Greens or the PDs after previous elections – willing and able to take the risk of going into government and provide a stable parliamentary majority in return for implementation of some niche policy initiatives. Governments with very large majorities, whether single party as with FF in 1977, or the Labour /FF 1992 coalition, do not have a great track record of providing ‘stability’; rather the opposite. When all the Minsiterial posts are allocated, just how do they propose to control upwards of 80 backbenchers, some of whom, especially in Fine Gael, will be seething with resentment in having missed out on positions of power conceded to their Labour colleagues? Six months down the road, how will Labour Ministers, and their backbenchers, respond to further proposed cuts in social welfare and /or public service pay and pensions? They can’t keep blaming it all on Fianna Fail for ever. Anyway, nobody cares about ‘them’ anymore. One has to wish the new government the very best. Given their majority; they can do a great deal or very little; particularly in areas of social and political reform. One good thing is that the opposition in the next Dail may be of a higher calibre than was provided by both Fine Gael and Labour over the past 12 years of misrule; but it will be splintered and risks having its most effective voices emasculated by ‘parliamentary procedure’ as well as by its lack of any major political party to lead the opposition. For instance, there will be more shadow portfolios than Fianna Fail have parliamentary party members to take them up. On the economy, even to an ordinary citizen like me, it doesn’t look like the new government will have much scope for changing the terms of what is already agreed with the IMF/EU except for some tinkering around with the interest rate; and that only after a year or so. Hopefully one of their early actions will also involve restructuring the budgetary process and the Department of Finance. Overall I’m just as frightened about the future – probably even more so – than I was before the election. Its very much evil twin replaced by good twin. I for one look forward to a radical change and modernisation in Irish society. Just as happened every other time FG /Labour etc came in after FF. All has changed changed utterly with the arrival of a FG-Labour coalition What a depressing shower!! You are not the types I would have out selling on a wet Monday morning. I would have preferred to have a government that is united in taking on vested interests of Left and Right but that didn’t happen. Nevertheless, I expect a reforming government. What is life if there is no hope? In 1981, FF didn’t pay a heavy price but I wOuld argue that what happened on Friday is different: http://www.finfacts.ie/irishfinancenews/article_1021728.shtml @ wow Ok, maybe things wont be all that different now. But at least every politician in ireland, current and future, knows what will happen if they allow ignorance, incompetence and arrogance to set in. The election was a worthwhile exercise, if only for that alone. @ Veronica: There is a ‘small party’ its known as FF. I wonder? They have a real incentive to stick with the programme. I do not think its a runner, but it is a viable option, say when TSHtF. Who knows. Lenders want money back. Predicament: Income to pay is going down! Probability of default is going up. That’s Math I. Now for the real problem: Energy prices. Energy price up, G*P (or however you measure aggregate economic output) down. Thats’s Math II. G*P down, Income? . . . up (sh1tkreek). That’s Math III. BpW Veronica, wow and JMc excepted! @J McHale McGrath Its an SEO (search engine optimization) gambit, FT, NTY and many others (esp scholarly papers!) engage in the same sordid game with search engines. link is generated for and clicked via a search engine, we’ve given up some bait but the hook is in the mouth. Once inside if you try to move around you find you are in the net (to torture the fishing analogy) Solution is to tell your browser to tell everyone else that you are google, not store cookies and hey presto all of the web is open and there are no ads anywhere. It’s a rather glaring security (of content) via obscurity ploy, what comes from trying to have it both ways. @Michael Hennigan “The Funeral Oration of Pericles from The Peloponnesian War by Thucydides, was delivered in Athens in 431 BC and while it may be partly aspirational, it illustrates how enduring the concept of democracy has been in the history of man: : “Our form of government does not enter into rivalry with the institutions of others. Our government does not copy our neighbours’, but is an example to them. It is true that we are called a democracy, for the administration is in the hands of the many and not of the few. But while there exists equal justice to all and alike in their private disputes, the claim of excellence is also recognized; and when a citizen is in any way distinguished, he is preferred to the public service, not as a matter of privilege, but as the reward of merit.” Good morning/evening Michael! Cicero approves … but is otherwise indisposed to engage at the present time. He is out on the p1ss with Blind Biddy wasting the proceeds of a little flutter with PaddyPower.com on the recent hustings. @ Brian Woods, There’s no incentive for FF to go near FG, and certainly FG would risk electoral destruction themselves if they went within an asses roar of FF for this political cycle. ‘The Soldiers of Destiny’ have limited options for survival in their present sorry state. If FG could have avoided coalition with Labour, FF’s demise as a political party, following on their demise as a political force, might have been hastened. As things stand, Labour’s anxiety for power at any cost provides FF with a lifeline. They have options to stage a comeback if they can get their political act together – probably sooner than anyone thinks. One curious by-product of how the votes shook out is that there are now a sizeable number of constituencies where all the seats are in the hands of the government parties. Further, Fine Gael and Labour control more local councils than FF do. The councils are not being run particularly well and FG’s plan to give them power to raise stealth taxes – as the citizens view them anyway – may lead to a bit of a representational clearout come the next local elections. I think you’re right too about an energy crisis adding to our national woes in the next couple of years. There is no energy policy that has been properly thought through by any of the parties; they’ve all been enslaved by ‘green’ jargon and rhetoric. They have no ideas with which to meet the challenges ahead. So aside from having to buckle under to the IMF/EU deal, apart from a couple of minor concessions, having little scope to implement ambitious jobs plans and, because of the inherent instability of having far more backbenchers than they could shake a stick at and thus no incentive to reform parliamentary procedures (which is where the real rot is in our political system), I think there are grounds for msigivings about the likely success of this new administration. I would be very happy if they took an innovative approach – appointing the best people from both parties to office, irrespective of current party rankings or geographical consideration; radically reforming the way the Dail works and so on. I hope that is what actually happens and I’m proved wrong. We’ll have to wait and see, won’t we? I think it’s a carefully-written article that elevates the 12.5% to the level of a sovereign commitment equivalent to sovereign debt. The reader is left to draw his/her own conclusion about how to get the sums add up if sovereign debt and “sovereign” tax rates are off the table. This conclusion would be consistent with previous editorial positions of WSJ on Ireland and de banks. @ Veronica: “Wait and see.” Yep. There are very real and very nasty economic and political issues lurking. The political ducking and weaving will make Cassius Clay look like a statue! “There is no energy policy that has been properly thought through by any of the parties; they’ve all been enslaved by ‘green’ jargon and rhetoric.” Spot on! What many commentators miss is the rapid rise in the domestic energy demand and use by the principal oil and gas producers. They have less and less to export. Production cannot be ramped up – historical discoveries have declined and new reserves are less than overall declines. Global demand is somewhat masked by the current economic problems in developed economies – problems which cannot be resolved absent some pretty large debt write-offs. The latter will be resisted until the unfortunate taxpayers are ex-sanguinated! BpW If they have been ‘enslaved’, it’s because they have no alternative vision. @ Michael Hennigan, Good paean for democracy on your blog. But Adam Smith wrote there are two ways to conquer a country, one is by the sword, the other is by debt. Some would argue financial fascism in Ireland holds sway and democracy set aside and debt has conquered us. Democracy for us, oligarchy, secrecy and special laws for the banks. Is democracy fast disappearing? Agree we’ve a had a victory for democracy this weekend, but we’ve a long road to travel and a real battle to be fought if democracy for us is not just a circus or pretend game of musical chairs. @ Veronica “What Fine Gael have missed out on is the availability of a ’small party’ – like the Greens or the PDs after previous elections – willing and able to take the risk of going into government and provide a stable parliamentary majority in return for implementation of some niche policy initiatives. ” The risk of that strategy just isn’t worth it. How many seats do the Greens and PDs have this time around ? @seafoid Such parties enter government at their own risk. It’s their problem. After their first coalition with FF, the then PDs increased their representation; a few years down the road they put themselves out of business. As for the Greens, part of the problem for them is that the public, preoccupied with economic misery, really don’t rate climate change or other environmental issues close to Green hearts as much of a priority at this moment in time. @ Veronica Re “So aside from having to buckle under to the IMF/EU deal, apart from a couple of minor concessions…” I’m afraid our imminent default will not be solved by ‘a couple of minor concessions’ Default is probably unavoidable at this point. @ Veronica: “As for the Greens, part of the problem for them is that the public, preoccupied with economic misery, really don’t rate climate change or other environmental issues close to Green hearts as much of a priority at this moment in time.” ‘They’ would if it impacted upon ‘them’ – remember Holy Mary of The Smokey Coal? The Dublin smog simply disappeared. Miraculous it was! Any cures for our f****d-up economy? Yes, but it will have to be business-NOT-as-usual. Now, that might be a tad tricky. We voted, rather than re-volted, ’cause we were able to. Low relative cost. Fun-and-games to come later. BpW @Brian Woods Fair point. Voting out the government was a relatively costless exercise compared to the reactions of the Greeks and French, not to mention North Africa. In five years time, however,… @ Michael H Populist machine politics grows up for good reasons, which haven’t gone away. FG has no track record of taking on the vested interests in the propertied or professional classes. Old-con neo-con same old con. If they ever do it, it will be because the EC pushes them into it. @ Veronica + 1 and you are right to be nervous. A big majority won’t provide stability. The only significant impact our new government could have on the economy would be to take particularly horrendous decisions and make matters worse. Other than that, the long, slow economic recovery will play itself out at its own pace and largely dependent on international events. Therefore the only significant contribution to improving Irish life that is within the gift of the new government is to implement meaningful political reforms that might make our system of governance, including or especially economic governance, more fit for purpose. I am convinced that as a nation we are now presented with window of opportunity during which significant change to the machinery of government will be possible. The public mood supports it as never before and the numeric strength of the government will give them power to effect it. The main obstacle now will be political will. The question is this: will the key players in the new government, Gilmore, Kenny, Burton, Noonan, et al, have this mission in them. Will they be selfless, noble, visionary, courageous, and tenacious. Or will they retreat into the tired old party shells, playing it safe, not taking a stand, fudging and postponing, obfuscating and ignoring, and keeping party and re-election as foremost in their minds? To the incoming government: please do not talk of tinkering with the interest rate on the EU/IMF deal. We do not want to renegotiate the deal, we do not want to borrow the money at all, we want burden sharing with investors. That is what is fair. Taxpayers borrowing money to bail out investors is unacceptable at any interest rate. Comments are closed.