If Fine Gael and Labour are genuinely interested in challenging the bank bailout they should offer us a referendum, writes FINTAN O'TOOLE
THE IRISH blessing and the Irish curse are one and the same: adaptability. Having no fixed framework in which to make sense of things, we adapt magnificently. In its benign form, this extreme flexibility makes us, in general, highly accomplished emigrants. But it also has a malign side – we get used to anything. What the election so far suggests is that, by and large, we have got used to the most astonishing things.
What’s striking about Michael Lewis’s long report on Ireland in the current edition of Vanity Fair magazine is not that it tells us a great deal that most Irish people don’t already know. It is just how breathtakingly bizarre – “deeply weird” is Lewis’s phrase – our current regime seems to an intelligent outsider. Lewis, who has written so brilliantly about the crazed world of Wall Street, appears genuinely stunned by the sheer madness of the Irish bank bailout. It seems demented, he suggests, even to those who benefit from it. He cites a Merrill Lynch bond trader who was hoping to dump his Irish bank bonds for 50 cents on the dollar in September 2008 only to find the next day that the Government was insisting that he take 100 cents on the dollar, courtesy of the taxpayer.
There’s a phrase that Lewis uses to describe Brian Lenihan’s apparently plausible spiel about the banks, and it hangs like a dark cloud over the election: “normalising a freak show”. We are exhibits in a freak show: Roll up! Roll up! See the Insatiable Irish swallow another 10 billion of debt! And most of what we see and hear is designed to make us believe that this is normal, acceptable, even inevitable.
As Lewis puts it, “the crazy uncle leapt from the cellar, the drunken aunt lurched through the front door and, in front of the entire family and many important guests, they carved each other to bits with hunting knives. Daddy must now reassure eyewitnesses that they didn’t see what they think they saw.”
This is the tone of the mainstream election: move along, folks, there’s nothing to see here.
Let’s remind ourselves what this new normality is. We have 1.8 million people at work. They are carrying a huge burden of debt: total loans to Irish households and businesses amount to about €350 billion. They also have to deal with Government debt of about €150 billion. And the rational, normal, inevitable view is that they should also underwrite private banking liabilities somewhere north of €200 billion (135 per cent of GDP).
The truly strange thing is that even those who are insisting we must do this don’t actually believe that it makes sense. Irish policy is being determined by the International Monetary Fund and the European Union. Neither of these institutions actually thinks that it is moral or sustainable for taxpayers to bear the costs of private banking failures.
The IMF, in its most recent global financial stability update, suggests that in order to solve banking crises, “effective resolution tools are required that can . . . preserve financial stability, while ultimately allowing losses to be borne by creditors rather than taxpayers”. The IMF, in other words, believes that deals have to be done and that bondholders, not taxpayers, have to take the hit for reckless lending by private banks.
What about the EU? Its policy response is so disjointed that there’s no straight answer to that question. But we do know what its most powerful figure, German chancellor Angela Merkel, really thinks. She said last November that bondholders should take the hit when a country is in trouble. The EU intends to make sure this happens – after 2013.
This is what pushes the current Irish policy beyond the bizarre. Almost no one involved thinks it makes sense. The bondholders, delighted as they are, think we’re mad. The IMF thinks the losses should be borne by “creditors rather than taxpayers”. The EU thinks there should be structured defaults on failed banks – just not yet. The only people who actually think the bailout is right in principle and practice are Fianna Fáil and the Department of Finance. And they’re in such deep denial about their catastrophic mistakes that they can no longer make sane judgments.
And yet, this policy in which no sane person believes is the normality that defines the election. Fianna Fáil insists on it, Fine Gael and Labour believe they can alter it somewhat. But it retains the status of “reality”. And to a very large extent, Irish society has adapted to this “reality”. The craziest proposition in the history of the State – that a massively indebted society with mass unemployment and mass emigration can underwrite huge private bank debts – has been successfully transformed into a commonsense assumption.
If Fine Gael and Labour are genuinely interested in challenging this reality, there is one simple, bold move they can make: offer us a referendum on the bank bailout and the EU-IMF plan. To those who threaten Armageddon if we vote No, there is a rather good answer: we’re not mad, we just agree with the IMF and Angela Merkel.