Debt deal helps Coalition to pass its political NCT

Thu, Mar 7, 2013, 00:00

Opinion:Two years on, the Coalition of Fine Gael and Labour has lost a lot of its showroom sheen and is showing signs of wear and tear. But any small doubts about its medium-term survival were dispelled with the deal on the promissory notes, which by most yardsticks was a political coup.

When the 200 items or more in the programme for government are parsed, what is striking is the number of goals that have not been achieved in the 24 months since the Coalition came to power.

However, despite the cumulative effect of all those “fails”, the Government’s success in persuading the European Central Bank to allow a scheme that converts the promissory notes into bonds trumps them all. In effect, it allows the Coalition to pass its political NCT with flying colours.

Michael Noonan added to that achievement by securing a commitment from fellow EU ministers to an extension to the maturities of its bailout loans. The actual details will determine a lot. But along with the promissory note, it has made the past month its strongest in office.

The Government’s programme drafted in March 2011 runs to 64 pages, reflecting the key points of both party manifestos. A coalition between a centre-right party and a centre-left one will involve some compromise. But what was striking about the document was how much of both parties’ key policies that seemed to have survived, albeit in slightly diluted form.

All of the major policies on Fine Gael’s five-point plan were still there in one form or another. They included NewEra and universal health insurance. The quid pro quo for Labour was a strategic investment bank and a promise of universal (ie free) GP care.

The compromises included the strategic investment bank becoming a (much more timid) fund and NewEra becoming a very different entity from that overall manager of State utilities envisaged by Fine Gael pre-election.

Before entering government the parties had a lot of common ground on what to do with the banks and on political reform. There was less agreement on fiscal policy and on how to reduce costs in the public sector, as demanded by the troika. The parties compromised on the split between cuts and taxes, with both parties shifting to accommodate a ratio of two to one in favour of cuts.

Public sector numbers

On public sector numbers the document contained a maximum and minimum number of reductions that reflected the prevailing thinking in both parties. In November 2011 they agreed to a figure of 21,500 by 2015, which was exactly halfway between their respective numbers.

It’s on the issues on which they have agreed that the Government’s record is most patchy. As the Coalition has matured in office, the phrase “democratic revolution” has been rendered increasingly nonsensical. Most of the promises on political reform have not been implemented or have fallen short of what was promised.

However, the sometimes maligned Minister for the Environment Phil Hogan has effected genuine reform (championing female candidates and ensuring Dáil numbers are to be cut to 158).

Many other Dáil reforms have been disappointing. It is unlikely the Dáil will sit the promised 150 days a year, or four days every week. Friday sittings are poorly attended. The topical issues debate often looks suspiciously like the derided adjournment debate, just earlier in the day. After the referendum defeat Dáil committees have no real power of inquiry. Bills are constantly guillotined.

Both Government parties campaigned before the election on renegotiating Ireland’s interest rates (on its bailout loan) as well as on the costs of propping up the banks and forcing a haircut of senior unsecured bondholders.

Once in office the Coalition retreated meekly from its position on senior bondholders and made little headway either on interest on the loans or on the costs of recapitalisation.

An early effort by Enda Kenny to get other EU leaders to agree to a reduction in interest on the loans was rebuffed by Angela Merkel and Nicolas Sarkozy. The Government copped a lucky break when by default it had to be offered the more favourable interest rates awarded to Greece for its second bailout.

The Government also quietly dropped its efforts with regard to senior bondholders when the ECB in Frankfurt said no.

At least some of the ground has been recovered by the agreement “noted” by the ECB which sees the ending of the dreadful promissory note. Some commentators have questioned how good the deal is but the political optics were strong – the Government getting rid of the former Anglo Irish Bank and the detested promissory note in one fell swoop.

A programme for government is binding only morally and politically. Not all the 200-plus items in the 2011 document are important: some are vague, while others seem to pay lip service to a particular sector (the section on Irish language and the arts, for example).

Slow progress

There are a number of major policy commitments, however, and progress on those seems slow. There is a hugely ambitious plan to roll out by 2016 a new health system (based on universal health insurance) as well as free GP care.

But the evidence is that the project is lagging well behind target with a long-delayed White Paper on universal health insurance not yet published.

After being delayed for a year, the constitutional convention is under way and has already decided three issues. However, the single biggest item of political reform – the abolition of the Seanad – requires a referendum. The Government has indicated that it will take place in the autumn.

Perhaps the most important development towards the end of the year is another goal not explicitly stated but implied throughout the programme document. That will be the announcement on whether Ireland will be exiting the troika programme after four years and regaining its sovereign independence.

If that happens, it has the potential to be a game-changer and will have the power to render irrelevant all kinds of unfulfilled promises in the programme document.

* Harry McGee is political correspondent

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