The people never agreed to pay €3.1bn a year

OPINION:We are duty bound to ask ourselves if it is acceptable to pay €3.1bn in March to get nothing in return, writes VINCENT P MARTIN

Last week our Government presented a crippling budget in an attempt to save €3.5 billion next year.

In 2010, the government of the day provided promissory notes, made by the State, to fund the bailout of Anglo Irish Bank and Irish Nationwide, now merged as the Irish Bank Resolution Corporation (IBRC).

This financial rescue was in the form of IOUs at a cost of €31 billion to the taxpayer. The promissory notes were given to make a zombie bank solvent as it now had an asset and it was on this basis that the Central Bank lent the IRBC €31 billion, which is then paid on to third-party bondholders.

Under article 123 of the Treaty of the European Union it is expressly forbidden for a Central Bank to lend to an insolvent credit institution like Anglo. The clever promissory note ruse circumvented this prohibition.

While matters were kept within EU rules, Anglo was made to look solvent so that the Central Bank could give it the money to repay its bondholders.

The European Central Bank had no banking default nightmare to deal with, but the Irish people were on the hook for the whole amount. And so every March the Irish people must repay over €3 billion.

And the payment is not to anybody. The money is just destroyed (taken out of the system). The sick are not treated, the young are not educated, hundreds of thousands face unemployment and emigration and at least one in five private residential mortgages are in severe trouble – and we burn €3.1 billion!

This is a truly staggering amount of money. A billion is a difficult number to comprehend but one US marketing agency helped demystify its sheer magnitude as follows: “a billion seconds ago it was 1959, a billion minutes ago Julius Caesar was alive, and a billion hours ago our ancestors were living in the Stone Age”.

Seven hospitals

The sum to be paid in March could build seven national children’s hospitals – and we are to repeat this insanity every year!

This all-too-smart accountancy trick destroyed our national finances and has led to the loss of our economic sovereignty.

So in this context we are duty bound to ask ourselves whether it is acceptable to pay out the €3.1 billion next March to get nothing in return.

To answer such an important question we ought to look at both sides of the story.

There is an established argument which supports the payment. It is this – we agreed to pay and we are bound by that agreement. There is force to this argument. If we cannot be sure that people will honour their commitments this makes us less likely to trade or exchange with them and that is damaging to us all.

But the law has always recognised that a party to a contract must have agreed to its terms. If a party has not agreed then the contract is not a contract at all and the party is not bound.