|
|
|
|
|
The real business of politics
07 March 2010 By Pat Leahy, Political Editor
The circus of the recent resignations, the strange plans in the Green Party for the rotation of ministerial jobs and the on-again, off-again reshuffle has distracted political attention from a much more important issue that looms before the government: the messy, expensive and politically toxic job of fixing the country’s banks.
Privately, ministers and officials acknowledge this. They also say that the public will wake up to this pretty soon.
But actually, as the static results of last week’s Red C/ Sunday Business Post monthly tracking poll made clear, the public regard ministerial comings and goings as much less important than the politicians do.
It’s not that the identity of the defence minister, who gets to sit in the high-chair at the cabinet table or the exact configuration of the Department of Enterprise don’t matter.
They are all, in their own way, matters of consequence - particularly for politicians themselves.
But they matter a great deal less than what the government is shortly to embark on.
For all the attention paid to it, the reshuffle - now expected when the government returns from its various St Patrick’s Day wanderings - pales into insignificance beside the banking rescue, which will enter a new and active phase in the coming weeks.
Senior government sources said last week that they were planning for a sort of banking ‘‘big bang’’ shortly after the reshuffle - an announcement of the full extent of the National Asset Management Agency (Nama) transfers and the immediate recapitalisation of the banks from the National Pension Reserve Fund.
Ministers hope that this will close an awkward political chapter. ‘‘That’ll be the end of what the state is going to do to fix the banks," said one official. But it was said more in hope than in confidence.
The losses racked up by the Irish banks because of their reckless lending are nothing short of astonishing, and present a longer-term challenge beyond the immediate cash crisis that the 2008 bank guarantee was designed to avert.
Because of the guarantee, the banks have been able to access funding. But the more basic problem remains - that they gave out a lot of loans that they won’t get back. The losses from these would have slowly strangled the banks, or at least turned them into - in the metaphor of the moment - zombie banks.
Enter Nama, the second step of the government’s three step (guarantee-Nama-recapitalisation) plan to save the banks.
Having (finally) received the go-ahead from the European Commission last weekend, Nama is now beginning the process of buying the loans from the banks, thereby enabling them to get rid of the bad loans.
However, the discount - the famous ‘haircut’ - that the banks will concede on these loans will mean that they require an infusion of funds.
And it’s pretty much certain that there’s only one party likely to be willing to meet that requirement. Step forward, Mr and Mrs Taxpayer.
The political problem is that the same Mr and Mrs Taxpayer are acutely aware of the banks’ role in creating the crisis in the first place.
They are also noticing that the banks are increasing the mortgages they pay every month. And they know that the banks are severely restricting credit to businesses - many of which are, in turn, facing closure.
So what’s the point, they wonder, in bailing out the banks at such great cost? ‘‘Of course it’s politically toxic," said one political source.
‘‘Look at it: not only are we bailing these guys out, but they’re going to increase your mortgage as well."
What the government has to do - and, in fairness, it’s a tough sell - is explain to the public that it is saving the banks, not as a favour to the bankers, but because the country needs a banking system if its economy is to function.
It also has to convince people that saving the banks in this particular manner - as opposed, say, to outright nationalisation - is preferable.
It also has to explain all this in a way that doesn’t undermine investor and consumer confidence in the existing banks. So this is what faces ministers - whoever they are - in the coming weeks.
A hugely expensive and largely unpopular policy which benefits a despised sector will be proposed and defended by a mistrusted government. And not alone is the government mistrusted, but its leader usually displays little interest in actually telling people what he is doing, and why he is doing it in any systematic way.
Taoiseach Brian Cowen and many of his ministerial colleagues also have serious credibility problems.
It’s no accident that the most able advocates of the government’s plans - Brian Lenihan, Eamon Ryan, Alan Ahearne - are the ones who are relatively untainted by the excesses and the mistakes of the boom years. No wonder the Greens are jumpy.
One thing in which Irish politics has grown to specialise is having enormous rows about small things, while ignoring very big and pressing problems and potential problems.
So political debate during the final phase of the Celtic tiger years was routinely focused on side issues - the then taoiseach’s finances and ‘Rip-off Ireland’, to name but two examples - while ignoring the fact that the economy had inflated a huge property bubble and the state’s finances had become dangerously unstable.
The forthcoming encounter with reality is just one of the consequences of that.
|
|
|
