Nine failures of the blanket bank guarantee – and its sole ‘success’
The benefits we were promised five years ago have proved illusory. The costs have been locked in for decades
7 To reassure depositors that their money was absolutely safe: “Deposits in Irish banks are secure and bank customers can rest confident in the knowledge that their money is safe.” (January 2009). The guarantee “ensured that citizens and businesses could go about their daily business and in the knowledge their funds are secure”. (August 2009)
Result: FAIL. Credit union deposits in Anglo Irish have been seized by the State and the EU has made it plain in Cyprus that seizing deposits is a legitimate policy for the euro zone.
8 To sustain the credibility of Irish sovereign debt on the bond markets: “borrowing costs have fallen and
our bond spreads have halved . . . as a sovereign we are now fiscally stable and credible”. (March 2010)
Result: FAIL. Largely because of the bank guarantee, the credibility of the Irish sovereign collapsed.
9 To create a well-functioning banking system: “The goal, at the end of the two-year guarantee period laid down in the legislation, is a banking system that is ‘fit for purpose’ for the transformed financial environment in which it will find itself operating in the coming decades.”(October 2008)
Result: FAIL. After five years, banks are still struggling to deal with mortgage books and credible analysts believe they may demand another public bailout.
10 To save the euro. “We were very concerned at the time that there would not be a bank run, that there would not be those photos, pictures or films around the world showing people queuing outside banks . . . That would have been a complete disaster.” (Christine Lagarde, November 2010). The instruction from European Central Bank president Jean-Claude Trichet was, Lenihan said, “that you must save your banks at all costs”. All costs, that is, to the Irish: an economy with 1.8 million workers has borne 40 per cent of the cost of the euro zone banking crisis. Result: FABULOUS SUCCESS
In all of its stated aims except one, the bank guarantee and the decisions that flowed from it have failed. The benefits promised to the Irish have been entirely illusory. The social and economic costs have been locked in for decades.
The least we can ask is that we be spared all the spinning about this great success story. As Rudyard Kipling put it, in a very different Irish context, “What need of further lies? / We are the sacrifice.”