Fr Ted and the Central Bank: From one Irish institution to another

Image c/o Fr Ted Memes

“THIS DEBT is large, but that debt is far away.”

Flippancy aside, this comment pretty accurately sums up the promissory note situation in Ireland as it stands.

Unfortunately, it’s quite unlikely paraphrasing Fr Ted quotes will aid in simplifying any other aspects of Irish-European politics. Although, after the week we’ve had, little would surprise the electorate.

Following on from last week’s agreement with the European Central Bank (ECB), the Government no longer has to spend the next decade paying €3.06 billion annually in promissory notes. Instead, they – or rather Irish taxpayers – will repay long-term bonds between 2038 and 2053.

Taoiseach Enda Kenny described the deal, which was facilitated by the early morning liquidation of the Irish Bank Resolution Corporation (IBRC) last Thursday, as “an historic step on the road to economic recovery”.

Some commentators have agreed, pointing to the fact that it will gift the Government with an extra €1 billion come Budget time and aid our exit from the bailout programme. Today’s announcement that ratings agency Standard & Poor’s has upgraded its outlook on the Irish economy from ‘negative’ to ‘stable’ would certainly appear to attest to the latter.

However, others have denounced the agreement, saying our public representatives have sold us out and placed increased levels of debt, albeit with a lower interest rate, on the next generation. What was originally banking debt is now sovereign debt – it’s ours for keeps.

Economist David McWilliams has warned that the Irish deal will be one of the factors that feed the ever-growing European bond market bubble until it bursts.

“We know that you never make a balance sheet with too much debt better with yet more debt. You make it better with less debt.

“Countries with huge debt/GDP ratios – such as Ireland – which add to their national debt in a cavalier way, will default in huge and dramatic fashion,” he stated.

Mr McWilliams believes an Irish default would not lead to us being cut off by the ECB – citing Greece as proof of this fact.

So where do we go from here? It seems as though many members of the general public believe we have little or no control over how our money is spent.

Tens of thousands of people attended marches protesting the debt burden over the weekend. Large crowds gathered in Dublin, Galway, Cork, Limerick, Sligo and Waterford to voice their disapproval of austerity measures.

The protests were organised by the Irish Congress of Trade Unions (ICTU) long before the debt deal was reached, but the date on which they were held proved to be extremely timely. At the Dublin-based protest, ICTU General Secretary David Begg stated that the fact Irish people are paying 42 per cent of the European banking debt burden was unfair.

People are undoubtedly frustrated and somewhat ‘out of the loop’ regarding the series of events that surrounded the promissory note deal.

Given that it is the European Year of Citizens and Ireland currently holds the presidency of the EU Council, one might have hoped that greater levels of communication with the public would have been evident.

The liquidation of the IBRC (formerly Anglo Irish Bank and Irish Nationwide) was all very cloak-and-dagger. However, it is true that the lead up to such events cannot be publicly shared for obvious financial reasons.

Finance Minister Michael Noonan said he was forced into passing the necessary legislation overnight on 6 February last due to leaks by Bloomberg.  He admitted the process had almost happened on a number of occasions in recent months, to the shock of some 800 IBRC employees.

On the day the promissory note deal was announced, Minister Noonan was interviewed on Pat Kenny’s RTÉ radio show. The pair had quite a jovial conversation about the legality, or lack thereof, of the deal.The minister described the initial deal that was put in place by the previous government three years ago as “totally” illegal. 

At this point, the men traded chuckles and agreed that there’s an element of truth in the opinion that many things in the EU “are illegal until someone does them and then they become OK”.  Hilarious stuff.

This admission gives credence to Mr McWilliams’ assertion that “The ECB was created by politicians” and “will be brought to heel by politicians”. 

Is our government one of a growing number of institutions that is seeking credit for cleaning up a mess they created in the first place?

As an electorate, are we powerless to stand up to our politicians and have our voices heard? As a nation, are we powerless to do the same to our counterparts in Europe?

Is Mario Draghi our Bishop Brennan? Is long-term debt the legacy we want to leave to the next generation? Perhaps it’s our collective attitude that needs a kick up the arse.


This article was also published in Student Independent News, NUI Galway's student newspaper, and on EuropeanMovement.ie, Campus.ie and TheDailyShift.ie.