2053: What does the 40-year payback mean?

Two years ago, within hours of becoming Taoiseach, Kenny was at a European summit in Brussels. Immediately, he was ambushed by a forthright Sarkozy, who initiated a long campaign for Ireland to reform its corporate-tax regime as the price of bailout concessions.

The “Gallic spat”, as Kenny memorably put it, underlined Ireland’s low standing in the aftermath of the bailout. It mattered not a whit that Kenny had been on the Opposition benches throughout the boom years and that the economy blew up under the stewardship of Brian Cowen and Bertie Ahern.

There would be no reduction in the interest rate on the rescue loans without a corresponding concession from Kenny on corporate tax, he was told. Not entirely without foundation, our economic disaster was seen “in Europe” as the failure of the entire body politic and the administrative class.

It took the Taoiseach many months to win the argument. When the breakthrough came, it was as the result more of an effort to ease rising pressure on Italy and Spain than of Dublin’s negotiating prowess.

The picture has since changed, incrementally but steadily. At the outset there was anxiety among European politicians and officials about election slogans such as “Labour’s way or Frankfurt’s way”. They were also reluctant to countenance the notion that senior bank bondholders would be torched.

Praise for the Government

In the intervening period, the Government’s solid execution of the bailout programme won international plaudits. These may grate, and much of the praise is superficial, but there was still a sense that Kenny, Gilmore and their Ministers were doing what they were supposed to do.

This is important in a scenario where successive Greek governments have failed to meet promises, worsening recession in that country and increasing its reliance on external aid.

Similarly, the political scene in Italy and the sense of brooding crisis in Spain underscore the external image of stability in Ireland.

The referendum to cut judges’ pay is said to have impressed Merkel greatly. A bigger coup still was the referendum on the fiscal treaty. Voters might have come out more in fear than relish at the prospect of “more Europe” in Irish budgets, but it was still a result.

All of this was for the good. While the Taoiseach always played on his centre-right political link with Merkel, the unseating of Sarkozy by the new socialist president of France, François Hollande, opened up a new alliance, and a connection for the Tánaiste to exploit.

Government priorities

The key for the Government is to capitalise on the progress made. While the next big task in Europe is to secure a concession on legacy banking debts, a breakthrough is unlikely before the German general election in the autumn.

In spite of this week’s success, there is no let-up of other tension on the home front. Leaving aside the abortion conundrum, the economic pressures are still huge.

The reforms mooted in talks on a second Croke Park pact are not exactly the stuff of popularity. While no Government wants gardaí and nurses protesting on the streets, the ending of the promissory-note scheme will do little to lessen the demands to reduce the public-sector pay bill.

At the same time, there is still frustration in the troika that the Government has not tackled pay at the very top of the scale in the health service and the Civil Service. The argument that the external supervisors would provide a degree of political cover for Ministers has not gained traction.

The deal with Frankfurt comes as a great relief to Kenny, Gilmore and the rest of the Government, and reinforces their credibility and authority. But the road ahead is still long and hard.