Perhaps buoyed up by political support which has seen all votes on Budget 2011 thus far being won, perhaps fearful of the consequences of rumblings on Opposition seats about a constitutional challenge (and indeed an actual challenge by retired builder John Wolfe at the High Court), perhaps nudged by the IMF whose approach tends to involve securing national ownership of any bailout deal, perhaps acknowledging that the bailout may be what is most remembered of this Government’s legacy, perhaps wanting to challenge Opposition alternative solutions – whatever the reason, the Government has relented on its steadfast opposition to a vote on the IMF/EU deal and the stage is now set for a vote on Wednesday next 15th December, 2010 – a great day for democracy.
However, cast your minds back to the “debate” on the IMF/EU deal that took place in the Dail last Tuesday and Wednesday (30th November and 1st December). Having seen parts of the debate, I was struck by the open-mouthed gobdaw reaction from the Opposition seats when the Taoiseach correctly claimed that Greece was now seeking the same deal as Ireland. I was puzzled by the Government publishing the Memorandum of Understanding and some supporting documentation when the debate was practically concluded on the Wednesday – why was it not published two days beforehand so that the debate could at least be based on an actual agreement. The NTMA published the interest rates chargeable on the deal on the same Wednesday. I was suspicious when I read in the Irish Times that there was a secret side letter to the agreement which dealt specifically with the banks. I had the usual sick feeling in my stomach at the press release by the Financial Regulator which outlined with very little detail the latest additional injections into our banks. I was confused by RTE’s interview with Governor Honohan and his apparent opposition to the plans for the banks and wasn’t clear on what basis he had objected to the plan and what the alternatives were. And the previous week I was questioning in my own mind why Matthew Elderfield was only now talking about assessing non-NAMA loan losses on a granular basis and whether such analysis would lead to yet more creep in the final cost of the bailout. And I was confused as to why no-one had challenged Olli Rehn, who is adamant we return to a 3% deficit:GDP ratio % in 2014 but seems unconcerned about our debt:GDP spiralling well above the 60% ratio % allowed in the Stability and Growth Pact. So the great concern is that the debate and vote on Wednesday next will be ill-informed and deputies will be deprived of the information they need to form their views, one way or the other, on the bailout deal. Having followed the proceedings closely over the past year, the following is what I would have said was needed:
(1) The secret side letter to the IMF/EU agreement which apparently deals with plans for the banks
(2) The identities and sums owing to owners of debt by the State-guaranteed banks. Senator David Norris began naming names in a Seanad Committee last week : he only got as far as Aberdeen Asset Management (London Ltd), AGICAM, Aktia Asset Management, Aletti Gestielle SGR and Alliance Bernstein (UK) Ltd before the chairman stopped his revelations. The great suspicion here is that the banks are being bailed out so that foreign financiers can be repaid loans they injudiciously provided during the boom years.
(3) The workings and research used to support estimates of future non-NAMA loan losses. Might we be looking at another €10bn or €50bn? Given the poor forecasting record thus far, how confident can we be in any predictions from the Department of Finance, Financial Regulator and indeed Central Bank Governor but they are the best we have and deputies should be able to form a view on the level of exposure.
(4) The workings and research used to examine the effects of deleveraging Irish banks of perhaps €90bn of lending in the next three years, in particular the effects on the national economy as well as ensuring the banks have adequate controls in place to ensure deleveraging doesn’t take place in such a manner that seems to be attracting those to our shores today who expect to “make out like bandits”.
(5) The workings and research used to examine alternatives to the bailout and in particularly default options.
(6) The position of the ECB with respect to short term liquidity assistance.
(7) A business plan for the banks including estimates of losses from existing loans and future operating profits. The current plan might see Ireland having a viable banking sector but banks might need to lend at ECB base rate plus 7% to be profitable. What sort of economy will we have with banks operating thus?
(8) The Bank of Ireland restructuring plan which was approved by the EU on 15th July, 2010 – yes nearly five months ago – which has still not been published.
Of course the above are the known unknowns. They may give rise to further unknowns which are relevant to any debate on the IMF/EU bailout. Some of the information above will have commercial sensitivities and will arguably touch on issues of national security and there exists a strong possibility that information will be leaked into the public domain. But I hope that those possibilities and consequent damage will be weighed against an informed debate and a way forward which will be owned by the nation, accepted on its behalf by democratically elected representatives.
Next Wednesday is likely to be one of the most momentous day in the Dail since the foundation of the State. The negotiators of the deal, Messrs Honohan, Elderfield and Corrigan and the relevant folks from the Department of Finance should be summoned to the chamber and given a few chairs beside the Ceann Comhairle so that they can be questioned or asked to contribute as needed. This debate should be akin to an extraordinary Committee hearing. The time for poker is over (if it was ever justified).
Thus far the debate has been presented in black-and-white terms – bailout versus default. There are greyer positions – the bailout terms might be revisited (interest rate, scheduling the use of our strategic financial reserves, stimulus packages), default might be partial, Ireland could seek to buy back its own bonds at a discount, burden-sharing with the ECB and other debt holders. The debate next Wednesday might result in a position not established today.
The Taoiseach has quite rightly challenged the Opposition to propose a better alternative. That’s fair enough and we have the right to see if the Opposition is advancing impractical or fantasy alternatives. But the Opposition must be given access to the information needed to have an informed debate. And as much as the Opposition will be put on the spot regarding alternatives, the Government should be forced to justify the deal, explain its impact on national life, explain the theoretical modifications that might have seen a better deal (and why we practically didn’t secure these modifications) and deal with the alternatives in a constructive and engaged manner.
UPDATE: 10th December, 2010. The IMF has deferred its board meeting to agree the bailout pending the outcome of the vote next Wednesday “in deference to Ireland’s parliamentary processes”.
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