Why Greece’s fight in Europe is not Ireland’s battle

‘We have taken the pain of austerity and are now reaping some of the benefits’

The Irish economy is in a strange kind of sweet spot. Economic growth is spreading and now appears solidly based. Low interest rates are also delivering significant benefits as we refinance parts of our national debt.

When Taoiseach Enda Kenny went to Brussels during the week, as the Greek drama unfolded, his mission was to say as little as possible and to stay out of the headlines. As we finally emerge from seven years and €28 billion of austerity, the last thing we need is to get caught up in the row between Greece, Germany and the ECB.

There is a lot of interest in the election of a Syriza-led government and its battle to get debt relief and reverse austerity. This may not end well, however. A senior Government official here said to me, as Syriza came to power, that Greece was sitting down at the poker table with a pair of twos. We shall see. Europe generally does what is expedient, possible and in its own interest, not what is “right”.

Natural sympathy

Greece is likely to be offered some extension on its debt and some leeway at home, but the question is whether this is enough for the new government. There is a natural sympathy here for their battle and a feeling that Europe has been too hard on Greece and should ease back. But this is not our fight.


We have taken the pain of austerity and are now reaping some of the benefits. You can argue for years – and we will – about the roads we took during the crisis. But as we are now seeing significant gains and getting the upside of sticking with it, the priority has to be to push ahead, rather than do anything which risks undermining the gains. What might have happened if we had – like the Greeks – tried to call Frankfurt’s bluff or dug in during the pre-bailout negotiations or whatever may be an interesting topic of conversation bears no relevance to where we go from here.

Economic row

The economic row to be had before the next general election is about how to run the country, spend money and raise taxes. It is not about banging the table in Brussels looking for “game-changing” debt deals.

We lost that argument, as the ECB and others vetoed attempts to burn senior bondholders in the banks. These same bondholders are back from the Caribbean holidays they took on the proceeds. We got some limited, though important, debt-term improvements in the last few years and the fight will continue for more of the same. But that is it.

Unlike Greece, the biggest share of our national debt is accounted for by loans from private investors. These investors are now lending us money at ridiculously low interest rates.

One of our key focuses must be to ensure that this continues for as long as possible, as it is delivering very significant, long-term gains.

These ultra low interest rates are a bubble and like all bubbles, they will burst at some stage. So the next year or two when, courtesy of European Central Bank president Mario Draghi’s quantitative easing, rates should stay low represent a big opportunity for us.

During the week, the National Treasury Management Agency raised €4 billion in 30-year borrowings at an interest rate of just over 2 per cent. It raised seven-year borrowings a few weeks ago at well under 1 per cent and six-month borrowings at an interest rate of zero.

The annual interest rate savings being locked in here – compared with the average cost of our outstanding national debt – run into hundreds of millions of euro a year.

This is why the Government is playing it so low-key in response to the Greek calls for a European debt conference. It calculates there is little chance of this happening. And we can hardly agitate for some kind of a write-down in our national debt at European level, while at the same time going out and raising new money at extraordinarily low interest rates. You can’t tell the bank you don’t intend to repay all your mortgage and then look for a cheap car loan. There is more at play for Ireland too in the next 18 months or so. In the first half of this year, the Government is hoping to sell a large chunk of Permanent TSB to private investors. Some time early next year it plans to do the same for AIB.

These transactions, particularly the AIB one, are vital in terms of recouping as much as possible of the cash paid in to bail out the banks. The priority is to get them done when interest rates are low, thus attracting investors to buy real assets such as companies and banks.

If Greece’s negotiations throw up some opportunity for us to argue for better terms on what we owe the EU, that is great. And let’s hope a destabilising crisis can be avoided.


We will see in the weeks ahead if playing hardball with Europe can deliver for Greece. This will inform our national debate about what happened during our own crisis. It may even be part of something which moves Europe towards a more pro-growth stance, which would be welcome.

But Ireland has finished with “austerity” cutbacks and growth is encouraging. There is still some way to go and huge problems left in the wake of the crash, but there are also opportunities. If the Greeks want to play chicken with the ECB and Berlin, let them at it. Perhaps they feel they do not have too much to lose.

The best strategy for Ireland, with signs finally emerging of a payback from all the pain, is to stick with it.