Abysmal deal ransoms us and disgraces Europe

OPINIONS: Ireland has lost. The EU has lost. We are both just pawns of European banks and the ECB, writes FINTAN O'TOOLE

OPINIONS:Ireland has lost. The EU has lost. We are both just pawns of European banks and the ECB, writes FINTAN O'TOOLE

This is not a rescue plan. It is the longest ransom note in history: do what we tell you and you may, in time, get your country back.

The extent of the abandonment of Irish national interests is clear from three aspects of the deal.

The interest rate, at almost 6 per cent, is viciously extortionate.


The National Pension Reserve Fund, which is all we’ve got left for strategic investment to rebuild our economy, is to handed over – in a brazen example of “demanding money with menaces” – to failed banks.

The disastrous banking strategy is to be continued: “an intensification of the measures already adopted by the Government” is the Government’s own phrase. And a savage attack on low-paid workers, in the form of a huge reduction in the minimum wage, is to be written into a binding agreement.

Would the Irish people, if asked, vote for any of these measures as decent solutions to our very real dilemmas? That the answer is so obviously “no” tells us the brutal truth: Irish democracy has been abandoned by a zombie government.

A weak, demoralised rump administration, served by the same Department of Finance that oversaw the gestation of the crisis, went into bat against the big powers of global finance.

A government that was spooked and stampeded by the small-time bullies of the Irish banks was never going to be able to stand up to the International Monetary Fund (IMF) and the European Central Bank (ECB).

The losers, however, are not the Irish governing classes, who have shown themselves so impervious to shame. They are the Irish people, whose sense of democratic citizenship has been rudely stripped away.

But they also include the EU itself, whose political institutions and leaders are painted as mere pawns of the European banks and the ECB. Even Angela Merkel, who suggested bondholders should bear some of the pain, has been left looking impotent. European ideals and values have been exposed as window dressing.

There are two international options for dealing with broken and delinquent states: the Versailles option and the Marshall Plan option. After the first World War, the Versailles Treaty imposed harsh reparations on Germany, helping to destroy both Germany and Europe. After the second World War, constructive help was given.

Yesterday’s bailout of broken and delinquent Ireland is much more Versailles than Marshall. There is no sharing of the burden. There is no evidence of a single thought for the consequences of mass unemployment, mass emigration and war on the most vulnerable. There is no European solidarity. And there is not even a genuine sense of self-interest. The sadistic pleasures of punishment have trumped the sensible calculation that an Ireland enslaved by debt is not much use to anyone.

Like the sorcerer’s incompetent apprentice, the Government repeatedly waves its wand and turns crises into catastrophes. It turned a banking crisis into a sovereign debt crisis, which it then transformed into a crisis of Irish democracy by undertaking negotiations it had no right to conclude. And now, in concert with the EU and the IMF, it has turned a crisis of Irish democracy into a crisis of European legitimacy.

Yesterday’s abysmal deal turns Ireland’s shame into Europe’s disgrace.

We know what a genuine rescue plan for Ireland (the nation, not the governing elite) would have looked like. It would have provided enough money, lent at a sufficiently low interest rate (2 or 3 per cent), to allow for a fair and balanced austerity programme that did not involve a crippling of the Irish economy and a tearing apart of Irish society. And it would have involved a 50/50 sharing of the burden of bank debt.

This kind of deal would have recognised two things. One is that the European Union cannot be sustained without a basic sense of mutual interest. Put simply, it is not in the interests of the EU as a whole for one of its members to be shoved into a vicious downward spiral of depression and debt.

The other is that, while the primary responsibility for what has happened in Ireland lies with our own political, administrative and banking elites, Europe was barely less stupid. European banks (especially those of Germany and the UK) shared in the delusion that Ireland was an endless gold-rush – why else did they shovel so many hundreds of billions, via the Irish banks, to our property developers? The ECB and the IMF continually testified to the essential soundness of the Irish banking system.

And, crucially, the ECB (and its political masters) fully endorsed the insane strategy of bailing out Anglo Irish Bank and Irish Nationwide. The ECB, no less than the Government, threw good money after bad. Morally, as well as pragmatically, the EU ought to share the pain.

Instead, we have a punitive, short-sighted and utterly unsustainable deal that will not solve the Irish crisis and that reduces the EU to the status of a banker’s bailiff.

The overwhelming concentration in the deal is on forcing the Irish people into taking on yet more debt so that they, in turn, can put yet more money into their insolvent banks. The purpose is not to help Ireland but to shore up the euro and to ensure that the European banks get their money back.

One of the worst aspects of this dreadful deal is that legitimate anger at the EU and the IMF will distract attention from the heart of our problems: our own elites and our own institutions. It opens up the possibility that, as things spiral downwards, Irish politics could revert to the xenophobic victim culture that is dormant but by no means extinguished.

Paradoxically, this would destroy the momentum for radical internal reform that is essential to our eventual emergence from this hole. The EU, which prides itself on spreading democratic values throughout the continent, will have undermined them in one of its own members.

Fintan O’Toole was master of ceremonies at Saturday’s Ictu demonstration in Dublin against the austerity plan