A year in politics: the Enda the bailout

May elections in 2014 will present a particular challenge for the Coalition, which will also face the ultimate test of its decision to forgo an emergency credit line post-bailout

Daunting tasks: Tánaiste Eamon Gilmore (left) and  Taoiseach Enda Kenny. Photograph: Aidan Crawley

Daunting tasks: Tánaiste Eamon Gilmore (left) and Taoiseach Enda Kenny. Photograph: Aidan Crawley

Sat, Dec 28, 2013, 01:00

For all its success in the achievement of a smooth bailout exit, the Government faces a daunting task in 2014 as it seeks to establish durable access to global capital markets.

With the fragile economic recovery still a work in progress, Fine Gael and Labour must also run the gauntlet of risky local and European elections in May. A banking stress test by the European Central Bank later in the year may present yet more searching questions for embattled Irish lenders. After momentous developments in 2013, these scheduled events stand as major hurdles to be overcome in the year ahead.

Still, the likelihood of a Cabinet reshuffle in 2014 and the appointment of Ireland’s next EU commissioner will be an opportunity to put a new complexion on the Government. Although only minimal change is in prospect, the potential for drama is clear. From his personal perspective, Taoiseach Enda Kenny has emphatically ruled out taking any senior EU post and pledged to lead his party into the next general election.

The Coalition is ending 2013 on something of a high. More than halfway into their five-year mandate, Kenny and Tánaiste Eamon Gilmore can claim a success in bringing the bailout to a close. The crisis is not yet at an end, but steady job creation and modest economic growth have raised hope that the next budget will be the last to include tax hikes and spending cutbacks.

Yet there were still notable setbacks in 2013 for the Coalition. One was the overwhelming defeat of the Seanad referendum, leading to criticism of the Government’s limp campaign and Kenny’s failure to participate in a TV debate. Another was a spate of Fine Gael defections over contentious abortion legislation.

In addition, Labour’s torrid byelection performance in Meath East put internal strain on Gilmore. A Labour leaflet attacking Kenny did not go down well. It finished as a bad day overall for the Coalition, even though Helen McEntee of Fine Gael won the seat held by her late father.

Despite all the fiscal pain it continues to impose, the Government’s fundamental calculation remains that the people will ultimately give it credit for staying the course. Nevertheless, Kenny took care in his televised national address earlier this month to note that many people have yet to see the improving economic situation in their daily lives.

The May elections present a particular test. No government contemplates a midterm contest with glee, but ever-deepening fiscal retrenchment means Fine Gael and Labour are each vulnerable to attack.

True, nothing has emerged so far in the lifetime of the Coalition to jeopardise its essential stability. Yet there is concern within the ranks that Labour candidates especially will bear the brunt of public disaffection. Not that Fine Gael is immune to electoral flak. The larger party must also minimise damage. Gains seem unlikely.

This is in spite of Micheál Martin’s difficulties in the struggle to regain Fianna Fáil’s verve. For one thing, Martin has found it especially tough to find a big-name candidate to contest the European election in Dublin. For another, his party’s disastrous stewardship of the banking crash will be revisited in 2014 when a long-delayed parliamentary inquiry into the debacle starts its work.

Although the challenge from Sinn Féin cannot be underestimated, 2013 brought trouble for its veteran leader Gerry Adams. He faced questions about his failure for many years to report the sexual abuse of his niece by his brother. He also came under pressure over his denials of any involvement in the killing and secret burial of people “disappeared” by the IRA. His insensitive response to the Smithwick-tribunal report met with derision.

If all of this forms the political tapestry at the end of 2013, the clock will be set at nought at the outset of the new year. With the Government keen to sell the Irish story to an international audience, the National Treasury Management Agency is expected to make a speedy foray into international debt markets in January and February.

The objective is to sell between €6 billion and €10 billion in bonds, leaving the Government with enough money to fund itself right through to 2016. Although a receptive market is expected, this will be but the first step back into an unforgiving crucible.

In the postbailout situation, the Government hopes to take some spinoff benefit from the recovery of the US and British economies. The danger that the wider European economy will not gain sufficient momentum presents a risk in its own right to the nascent Irish turnaround, but the easing of the sovereign-debt emergency is to the Government’s advantage.


Ultimate test
But there will be no hiding place in the new dispensation. In 2014 and beyond, the maintenance of investor confidence will have a key bearing on the Government’s borrowing costs. In turn this will have an impact on the national finances. So it will not suffice simply to re-enter debt markets. Sustained demand for Irish bonds must be attained. This will be the ultimate test of the decision to forgo an emergency credit line on the way out of the bailout.

The deal last February to scrap the Anglo Irish Bank promissory-note scheme was crucial to the exit strategy, not to mention the Government’s composure. The pact meant the Government did not have to shell out €3.l billion at the end of March, nor another €3.1 billion in June, nor a further €3.1 billion next March. It was both a financial and a political reprieve.

True, the Irish people remain on the hook for the debts of Anglo and Irish Nationwide Building Society. But the deal postponed debt repayments until 2038. Although the payback will continue into 2053, the State’s borrowing requirement should drop by €20 billion in the coming decade.

The deal, which was followed by a night of fevered politicking in Leinster House to rush through emergency legislation, helped give the Government a fighting chance of leaving the bailout without fresh aid. Although Noonan made use of additional fiscal headroom to reduce the rate of retrenchment in Budget 2014, the move was not without anxiety on the part of the troika bodies.

There was a further tense night in the Dáil when the Government came to enact the abortion legislation in July, facing down a sustained effort by anti-abortion campaigners to block the new law. After 21 years, the legislation finally gave effect to the 1992 ruling of the Supreme Court in the X case.

But the occasion is remembered for the infamous “lapgate” incident, when the Fine Gael TD Tom Barry pulled his party colleague Áine Collins on to his lap. Collins later described the incident, which was captured by television cameras, as “very disrespectful” and “very inappropriate”.

More significant politically was the defection of then Minister of State for Europe Lucinda Creighton, who lost both the Fine Gael whip and her ministry by voting against the legislation. In sum, five TDs and two senators refused to back the law. There had been speculation that Kenny would lose as many as 12 from his parliamentary party, but he mounted a forceful fightback to bring other potential rebels onside. Most of the dissidents then aligned with Creighton in the Reform Alliance faction, prompting talk of an eventual move to form a party. This is not seen as an immediate likelihood.

There were defections from the Labour ranks, too, the most notable being that of the former party chairman Colm Keaveney. He resigned from Labour in June and joined Fianna Fáil in December. It was an extraordinary volte-face by a man who had been an ardent critic of Fianna Fáil.

Another TD in the news was Luke “Ming” Flanagan, who faced allegations of hypocrisy and deceit over the quashing of penalty points he received. Having previously denied ever having points cancelled, he told the Dáil it happened on two occasions. This hadn’t deterred him from public criticism of the practice or participation in a noisy campaign to highlight it.

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