Ireland faces up to bailout reality

After weeks of total denial in front of the cameras, Ireland faced a grim reality when in mid-November its central bank governor Patrick Honahan admitted in a radio interview that the country had been conducting talks behind the scenes to receive “a very substantial loan” as part of a huge bailout package offered to it by the International Monetary Fund (IMF), the European Central Bank (ECB) and the European Union (EU).

By the time this article hits desks, a large chunk of the republic’s banking system, and by extension its economy, will probably be under the ownership of Europe and at the beck and call of Brussels bureaucrats. It is a humiliation of the highest order for a country once known as the Celtic Tiger: in the hours after Honahan spoke on radio anyone checking the Irish government’s web site would have seen on its homepage a list of ‘featured’ web site links topped by keepingyourhome.ie and losingyourjob.ie - which says it all.

Game over

It is clear to everyone but Ireland’s top brass that the game is up. On 18 November, as news broke that the IMF, EU and ECB were meeting with Irish ministers in Dublin to discuss the bailout - and in possibly one of the most naïve comments made as speculation raged about its future - Ireland’s finance minister Brian Lenihan told the republic’s parliament that if the talks produced a “substantial contingency capital fund being made available to back Ireland”, it may still not be drawn down.

Lenihan opened by reassuring depositors that “all deposits continue to be safe and secure” and pointed at the “misinformed, inaccurate and in some instances mischievous comments about the protection of deposits”.

The government said the “technical discussions” had been started “to assess how it may be possible to build on the significant interventions already undertaken by the Irish authorities through the CIFS (the Credit Institutions Financial Support Scheme 2008) and Eligible Liability Guarantee Schemes, the NAMA (National Asset Management Agency) Scheme, the Central Bank of Ireland’s PCAR (Prudential Capital Assessment Review) and the restructuring and the recapitalisation, to secure an enduring and permanent resolution to the problems of our banking system.” This made the proceedings sound more like a beancounting formality than a closed-ranks summit at the highest levels of European government to hammer out a financial deal of suitable magnitude to stop Ireland hurtling towards insolvency - perhaps within days or weeks.

“Were the talks to result in a substantial contingency capital fund being made available to back Ireland and to create confidence in terms of the firepower available, but not drawn down to the banking system, that that would be a very desirable outcome,” Lehihan told parliament. “If the government has been reticent in making public comment, it has been in the interests of protecting the taxpayer. Jumping to conclusions ahead of all of the facts is not to the benefit of the taxpayer - nor is it in our interests in advance of discussions that are now taking place,” he added.