The Irish have a great sense of absurdist humour, making light of their own at times terrible predicament. Once referred to as the Celtic Tiger, now some Irish people refer to themselves as the Celtic Bankrupts.
Right now the country’s predicament is pretty rotten. Ireland is only the second country after smaller Iceland to have been bankrupted by its banks and bankers, with considerable assistance from weak politicians and corrupt businessmen.
Times are tough, the 85 billion euro bailout late last year was a desperate measure to halt the collapse. Now the country is in the midst of an election campaign where you’d think the prevailing idea would be “times are tough, struggle, but we can win”.
But not everyone is following that script. Certainly not the Labour Party which will help form the new Government after the February 25 election.
One of Labour’s ideas, reported at the weekend, is to set up a national investment bank, armed with 2.8 billion euros from the country’s National Pension Fund.
Reports The Irish Times: “The party’s spokeswoman on finance, Joan Burton, said that if elected … it would establish a new strategic investment bank to fund projects to enhance infrastructure and generate employment…
“…the party proposed its State-sponsored bank work in two phases, initially acting as an investment vehicle to channel approximately €2.8 billion from the National Pension Reserve Fund. As market conditions improve, it will later develop into a functioning bank, taking deposits and raising long term financing.”
This is an example of the muddled thinking that continues to blight Irish politics and policymaking. To propose setting up a new bank after the last lot were sunk by greed, corruption and cupidity, not to mention inept government oversight, is verging on the absurd.
It’s pouring scarce money (and 2.8 billion euros is a large amount of money, especially after the 85 billion euro bailout by the EU and IMF last year) into the black hole that is the country’s banking system which has already consumed more than 50 billion euros and busted the economy. No one in their right mind would promote such a dumb idea, especially after Standard & Poor’s downgraded Ireland’s credit rating again last week, citing a weakened commitment to funding the broken banking system.
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“The downgrade follows Standard & Poor’s revision of the Irish Banking Industry Country Risk Assessment (BICRA) to Group ‘6’ from ‘4’,” Standard & Poor’s sovereign credit analyst Frank Gill said. “S&P also cut the rating on AIB, Anglo Irish Bank, Bank of Ireland, and Irish Life & Permanent, and lowered its rating on foreign-owned banks active in Ireland, including KBC Bank Ireland and Ulster Bank.
“The agency said it was of the opinion that both the ability and willingness of the government to provide ‘extraordinary support’ to the institutions had weakened, and the banks had been unable to source term funding, even when government-guaranteed, for some months.”
Of course that raises a few questions — the last thing the country and the rest of the world needs is a new Irish government investing billions of dollars of scarce funds in a new bank. Why not use one of the half a dozen the country now owns?
And remember, after the Feb 25 poll the current opposition parties (and the new government ) have promised to start challenging the bailout terms and push the euro and Europe to the edge once more, just as Ireland did twice in 2009 and 2010.
The joke is on all of us actually. Rather than the big US and UK banks pushing the world to the edge in 2008, it was Ireland that took us there and threatened to drag others under in the wake of the Lehman Brothers failure. That’s why we had the spread of bank guarantees around the world as the morally corrupt Irish Government tried to save its mates in the banks and Irish business.
It’s why this idea for an Irish investment bank should be watched very closely. If Ireland pushes against the bailout package it will raise the spectre of bond holder losses (which in itself is not a bad thing given the way they blithely lent billions to dodgy banks and their corrupted boards and managements), which will see bonds in Ireland, Greece, Spain and Portugal again sold off.
So now we have a probable minister in a new government telling the world they would spend more money boosting banking and banker salaries (the new investment bank would need staff) rather than making sure the bailout can be funded, or directing funding to helping the growing number of poor and needy people in the country.