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Ireland's government, bankers take heat over IMF and EU loans.
DUBLIN, Ireland — The 85 billion euro ($113 billion) loan arrangement announced in Dublin Sunday has provoked intense dismay throughout Ireland that it will benefit the banks and their bondholders, while imposing crippling austerity measures on the people for years to come.
The small country on the Atlantic seaboard that was the envy of Europe until a few years ago now faces years of higher taxes, deterioration in essential services, lower wages and an annual exodus of young people graduating from college and unable to find work.
Members of the opposition accused the government of being bullied by the European Central Bank and the International Monetary Fund (IMF) into swallowing a deal that imposes austerity and stifles economic growth. Labour spokeswoman Joan Burton summed up popular reaction, saying, “The country is banjaxed.”
Up to 35 billion euros of the 85 billion euro rescue package will be diverted to the domestic banks that brought on the crisis through reckless and irresponsible lending before the property bubble burst. Jack O’Connor, general president of Ireland’s largest trade union, SIPTU, complained bitterly that “the fund was earmarked to be poured into the black hole that the Irish banking system has become.”
Announcing the deal in the government press center, Prime Minister Brian Cowen disclosed that the interest on the loans will average 5.8 percent, higher than for Greece, a rate that many economists say Ireland will not be able to afford. The level was evidently imposed partly to discourage other countries like Portugal from seeking similar deals.
Irish bank bondholders — investors who knew the risks — will not take losses, as German Chancellor Angela Merkel initially proposed. The European Central Bank made clear to the Irish that any default would threaten financial stability in Europe. Putting the best face on the resulting, catastrophic, financial burden, Cowen said the government did not burn the bondholders as Ireland “is not an irresponsible country.”
However, under Cowen's watch — and in a culture of cronyism among politicians, bankers, developers and speculators that his Fianna Fail party encouraged — the Emerald Isle has ceased to be a sovereign country. This was symbolically underlined when, after Cowen disclosed the deal to the nation, his place in the government press center was taken by two officials from the IMF and a bureaucrat from the European Central Bank, who proceeded to tell reporters what they had in store for the nation.
The Irish crisis began on Sept. 30, 2008, when the government announced that it would guarantee all deposits in Irish banks and mortgage providers. A number of banks were on the point of collapse as investors were losing confidence amid falling property values and withdrawing billions in deposits. Since then almost 40 billion euros has been injected into AIB, Bank of Ireland and Anglo Irish Bank.
Irish voters expressed their anger on the streets of Dublin Saturday when some 60,000 people, many of them middle-aged and middle class, braved record low temperatures to complain of being betrayed by the Fianna Fail-led government.
“This is not a rescue plan,” said one of the organizers of the protest, journalist and author Fintan O’Toole. “It is the longest ransom note in history … . On the one side we will borrow yet more billions to bail out the bankers, and the other side of this deal is that society is supposed to declare war on the poor and vulnerable.”
Camera crews from all over the world covered the event, but were denied any outbreak of violence like that which convulsed Greece during its bailout crisis. Apart from a few scuffles between police and a break-away group, the mass protest was peaceful. The slogans were directed against the government rather than the IMF. Banners carried such slogans as “Fianna Fail, your time is up,” and caricatures of Cowen portrayed as a puppet of the banks.
Protesters, like student Annie McNamara, came from across the country to protest. McNamara traveled the 156 miles from Cork with her family because “this is our kids’ future they are playing with, they’re going to destroy everything — you cut from education, you cut from health care, what sort of life will they have?”
Ajai Chopra, deputy director of the IMF’s European Department, expressed pleasant surprise at the warm greetings he received from members of the public as he walked the half mile from his hotel to the Irish Central Bank every day during a week-long negotiation. This was partly because he did not use a limousine, in contrast to Irish cabinet ministers whose over-indulgence in the perks of office, such as the use of expensive limousines for short journeys, has helped stir public outrage.
Cowen, who justified the “dig-out” from the IMF and the European Central Bank as necessary to allow Ireland to fund its budgets over the coming years, faces a catastrophic political defeat in the next Irish general election, to be held by March at the latest. Before that he will introduce a harsh budget based on a crippling four-year plan negotiated with the IMF and European Central Bank, which the opposition will be powerless to modify in office. The deal has been done and Ireland, not just Fianna Fail, is now being punished for the profligacy of its elite.