A year in which we escaped the worst
Despite the huge cost of bailing out the banks and the time that has passed, the system is still not doing what it is supposed to do – support recovery. Central Bank economists in mid-year found that too many viable businesses with solid investment projects were being rejected by the banks when looking for loans.
And if the credit crunch continued for firms in 2012, households were hardly any more successful in persuading banks to lend. The stock of outstanding mortgages kept shrinking, falling €1.4 billion between January and October, the most recent month for which figures are available.
Bond market miracle
Despite a still-broken banking system, international sentiment towards the State strengthened in 2012. The remarkable decline in government bond yields from their record peaks in July 2010 continued over the course of the year, allowing a limited return to the market and keeping alive the prospect of exit from the EU-International Monetary Fund bailout at the end of 2013.
The Government deserves its share of the credit for this, and for more besides. It continued to meet the many conditions of the bailout and plugged away patiently in Europe in the hope of making the banking portion of the State’s debt mountain more manageable.
The Coalition also avoided making its own job more difficult. The amateurishness with which it handled its first budget was gone in 2012. The four-man Economic Management Council controlled the budgetary process tightly and effectively.
If amateurism was dispelled, such idealism as existed when the two parties came to power was all but abandoned. James Reilly’s channelling of health budget funds to his own constituency, revealed by this newspaper, was an abuse of public office of the most depressingly traditional kind. That he retains his seat at the Cabinet table gives the lie to the talk by both Taoiseach and Tánaiste of a new politics.
Nor was there much sign of willingness to stand up to vested interests. Phil Hogan caved in to rural lobbyists when he climbed down on levying a charge for septic tanks and Brendan Howlin capitulated abjectly to public sector unions when he paid their members “increments” despite a supposed pay freeze. So little has been done to enforce payment of the household charge that the Government has almost incentivised tax evasion.
But for all that, the Coalition is doing more than just muddling through (if not by much) and the dim light at the end of the tunnel that flickered as 2012 began is a little brighter as of year’s end.
It could have been very much worse.