Debt and public sector deals needed - and loads of jobs
INSIDE POLITICS:Routine political jousting resumed when the Dáil returned from its Christmas break during the week but the real action, which will have a vital bearing on the country’s fortunes in the years ahead, was taking place elsewhere.
Debt relief, the scale of the public sector pay bill and the unemployment crisis all featured in behind-the-scenes talks that will determine if the target of exiting the EU-International Monetary Fund bailout by next year can be met.
Taoiseach Enda Kenny has staked his political reputation on getting a deal to ease the burden on the State’s finances arising from the €31 billion worth of promissory notes created to prevent the unilateral collapse of Anglo Irish Bank.
The impact of the notes has frequently been misinterpreted because they are a complex and technical banking device involving €31 billion in capital over 10 years as well as €16.9 billion in interest.
The net point is the State has to borrow the funds to meet the annual repayments on the notes. The interest has an impact on annual budgetary arithmetic.
The Government’s ambition is to get a deal that would extend the lifetime of the repayments for as long as possible. That would reduce the annual interest and make the State’s debt more sustainable.
Last Monday night, Minister of State for European Affairs Lucinda Creighton gave a very upbeat assessment of the prospects of a deal after a meeting in the German foreign ministry in Berlin. Her optimism tallied with that expressed a day earlier by the Taoiseach.
The Government clearly feels that a deal on the promissory notes is within its grasp. If it ultimately turns out that this is not the case it will cause acute political embarrassment and damage the credibility of the Coalition.
The Taoiseach has adopted a risky strategy by talking up the prospects of a deal but he has certainly left the European Central Bank and other EU states under no illusions that a new arrangement to deal with the debt is essential if Ireland is to meet its targets and successfully exit the bailout.
Of course, even if the deal is a good one, it will be derided by the boys of the old burn-the-bondholders brigade, from Sinn Féin to Shane Ross, as nothing short of a complete write-off would be enough to satisfy them.
Those who have been vociferously calling on the Government to renege on the Irish bank debt pretended not to notice during the week when their economic model, Argentina, which unilaterally defaulted on its debt in 2001, suffered further embarrassment over that decision.
It emerged that the country’s president, Cristina Kirchner, was not able to travel abroad in her expensive government jet earlier in the year because it was in danger of being impounded by Argentina’s creditors. Instead, she had to travel in a rented British aircraft. More to the point, the country’s economy remains in dire straits and is actually getting worse a full 12 years after the default.