Stephen Collins: Ireland's bank guarantee worked

Amidst all of the media coverage of the 10th anniversary of the bank guarantee and the bailout that followed two years later, the most important point of all has barely been mentioned – the strategy worked.

Ten years on, this country has bounced back from the brink of disaster that could have ruined it for decades. We have the fastest-growing economy in the European Union, unemployment has dropped into low single figures, living standards are rising and the population is growing rapidly.

Things could so easily have turned out very differently with devastating consequences for all the people of this country if hard decisions had not been taken and Ireland had defaulted on its bank debts.

The decision to guarantee the banks, made in the early hours of September 30th, 2008, in an atmosphere of impending doom, was denounced at the time by Opposition politicians, commentators and pundits of various hues.

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Contrast the Irish recovery with the fate of Greece. They compounded the suffering of their people and delayed their country's recovery by almost a decade

Of course it was appalling that the Government found itself in a position where it had no option but to give a guarantee to reckless banks whose folly had brought them to the brink of collapse.

The question, though, is whether there was any viable alternative and the clear evidence is that there was not. All of the hand-wringing about what went wrong, which began 10 years ago and continues to this day, cannot alter the fact that on the night in question the options were grim and Brian Cowen and Brian Lenihan took the least worst one available.

The cost of the guarantee turned out to be far bigger than anybody expected on the night, but the cost of a banking collapse would have been infinitely greater and its impact would have been felt by everybody and most particularly by the weakest in society.

Critics of the Fianna Fáil/Green government that took the decision, and of its Fine Gael/Labour successor which stayed broadly on the same path, claimed our political leaders were far too subservient to the European Union.

It is a facile argument which has clearly been refuted by the evidence. Contrast the Irish recovery with the fate of Greece, whose leaders went down the road of rejection and defiance. They compounded the suffering of their people and delayed their country’s recovery by almost a decade.

One of Ireland’s leading academics, Prof Brigid Laffan, in a stimulating lecture in 2016 assessed the response of the Fianna Fáil/Green government and the Fine Gael/Labour coalition which succeeded it to the enormous problems posed by the crash.

She gave them both considerable credit for taking the tough decisions required to stave off disaster. Comparing what happened in Ireland to events in Greece, she pointed to the great contrast in negotiating style between Yanis Varoufakis – who served as Greece’s minister of finance from January to July 2015 – and Irish Minister for Finance Michael Noonan, who was in office during the same period.

“I am constantly surprised at the media exposure that Varoufakis gets in Ireland; he appears as a star turn at this or that meeting and is fawned over on radio and television. He was a disaster as Greek finance minister; he left the economy in further decline, capital controls in place and the banks shut. He had managed to alienate each and every member of the Eurogroup and did his country no service,” said Laffan.

The bottom line, however, is that they did the right thing by the people of the country and that needs to be recognised

The main political parties have paid a high price for doing the right thing. Fianna Fáil, the party which had dominated Irish politics for 80 years, suffered a stunning collapse in support in the 2011 election, which followed shortly after the EU/IMF bailout, while its Green coalition partners were wiped out.

It is debatable whether the party was punished for the way it presided over an unsustainable boom or for the cutbacks it implemented to save the country from bankruptcy. Its number of seats in the Dáil collapsed from 80 to just 20.

The Fine Gael/Labour government that swept into power with a record level of support in 2011 did not fare an awful lot better in electoral terms even though by any objective standard it did the right things in office. The Labour Party went from triumph in 2011 to disaster in 2016, while Fine Gael limped back into office after a mauling from the electorate.

It is fair to say that politicians of the main parties were the architects of their own destruction. Fianna Fáil presided over an uncontrolled boom that was bound to end badly; Fine Gael and Labour in Opposition tried to pretend there was an alternative to hardship so it was hardly a surprise when the electorate rounded on them for implementing the policies they had denounced.

The bottom line, however, is that they did the right thing by the people of the country and that needs to be recognised. The corollary is that the vocal advocates of debt default who dominated so much of the debate from 2008 to 2010 were all proved wrong. Both these facts need to be acknowledged if the State is to come safely through the next crisis whenever it happens and whoever is in power.