“Did you hear about the Paddy who built a firewall, to keep the fire in? Those are the charred remains of him there!”
I’d be willing to bet than when the historic economic times we presently live through, are chronicled in a century hence, the above or something similar will be a global joke. This entry examines two terms thrown around by politicians and the media, and indeed economists and commentators as if they were well-established terms with clear meanings
Firewall. Well we must surely all know what this term means in the context of the EU financial crisis. There’s a stack of newspaper articles, political speeches and broadcast reports which make reference to the term. So when EU leaders, including our own Taoiseach, refer to the term “firewall”, we all know what that means, right? Really?
Since most of us use computers connected to the internet, we’ve probably all come across the term “firewall” which is something that protects our computers from viruses and other nasties that might steal our bank account details or slow our computers down. In the building trade, a “firewall” is just that, a fire retardant substance poured into a wall so that a fire that might start in one apartment in a block won’t spread to another – ask the residents of Priory Hall if you’d like more explanation on that. So a firewall in general terms stops something nasty from spreading. And in the EU context, the “nasties” are losses in banks which might occur as a result of a bank in one country not repaying debt to a bank in another country. Simple, eh?
But hang on a second. In the case of the EU, it is Ireland which is shouldering a burden of €60bn-plus to bailout its banks, including €34bn to bailout two utter zombies, Anglo and Irish Nationwide Building Society – now known together as the Irish Bank Resolution Corporation. So the “nasties” – bank losses for which we as an nation are footing the bill – are all here in Ireland. And what is Builder Enda doing? He’s got his hod and his shovel out and he’s busy building a firewall around Ireland, keeping the “nasties” in! What kind of lunatic would engage in such behaviour?
The truth is that Ireland as a nation is facing a very high level of debt if it continues to pay for the bank bailout. Some say the level of debt is sustainable, others disagree. It’s arguable but the position on here it is not sustainable in the context of having a decent society. So the “fire” which we are actually keeping in by building a “firewall” around Ireland is, in the view on here, likely to leave us with a scorched earth society impoverished by European standards. Oliver Cromwell’s bits would be spinning in their graves at the effort expended whilst alive, that 400 years after spreading a scorched earth policy in Ireland, our own leaders are doing it for us. And they seem genuinely pleased to announce their contribution to building firewalls!
Lastly on the term “firewall”, the reference to “fire” might be misleading. Fires grow, financial losses don’t necessarily – a €34bn loss in Anglo/INBS which may be passed to banks in other countries, remains a €34bn loss. Whereas oxygen and additional combustible material might allow a fire to double in size, in the case of banking losses, these are numbers and they are precise and finite. So building a “firewall” around Ireland and keeping a €34bn loss in Anglo/INBS means that – just to illustrate the point – there isn’t a €8bn loss in Britain, a €12bn loss in France and a €14bn loss in Germany; in other words Ireland shoulders a €34bn loss and Britain/France/Germany don’t have to. And a corollary of that is that the removal of the firewall doesn’t lead to losses in Britain/France/Germany increasing.
Contagion. Whereas firewalls are regards good, “contagion” is regarded as bad. Again, what does the term “contagion” mean? Most of us will probably think of the bubonic plague, the dreaded lurgy as it’s that time of year or bird flu just to be dramatic. And contagion is the spreading of a “nasty”, a disease. So if one person dies of bird flu, we want to stop the flu spreading so as to prevent further loss of life. So “contagion” is a bad thing and stopping “contagion” is good, right?
And again in our EU crisis, stopping contagion is seen as a good thing. But what does it mean? It means the losses in Anglo/INBS are kept in Ireland. So if bank losses were like the bird flu, then Ireland might succumb and die, but by stopping “contagion” the UK/France/Germany don’t catch the flu and die also.
But again, this doesn’t stack up. The €34bn losses in Anglo/INBS are finite and don’t double to €68bn, if some of the losses are taken by the UK/France/Germany. Indeed by promoting “contagion” or the spread of losses, the likelihood of Ireland surviving is increased – rather than Ireland dying of the bird flu,Ireland along with the UK, France and Germany might just have heavy colds instead.
So the next time we get our fearless negotiators into an interview and they give their support to the concept of a “firewall” and the dangers of “contagion”, perhaps they might be challenged as to why the former is a good thing, and the latter a bad thing in Ireland’s context. And let’s consign Paddy jokes to history.
(Graphic above produced by Japlandic.com, with other examples of artwork available here)
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