Friday, 4 February 2011
The Irish Tragedy - A US journalist's account
Fascinating article in Vanity Fair magazine written by a US journalist who toured Ireland recently speaking to some of the main players - economists, politicians and bankers. The story makes for fascinating reading and illustrates how a country went insane and was encouraged to do so by dishonest politicians and bankers. The scale of what happened is simply incredible and the levels of mendacity reached by politicians and others disgraceful. I am deeply ashamed and angry that a Green party participated in this corrupt and morally bankrupt government, which presided over much of this mess. Three years ago I warned about entering the coalition with Fianna Fail and wrote a number of articles over the last two years in US and Australian journals criticising the Irish Greens for continuing to vote through these measures, laid out so clearly in the Vanity Fair piece.
They will be punished electorally (they are currenly only on 1%) and they deserve to be. Those who spoke out against this madness in the party were forced to leave it, including my friend Bronwen Maher, who is now in the Irish Labour Party. But it is the Irish people who will be forced to pay for this for a generation, unless they default, which I sincerely hope they will. The Vanity Fair piece is getting a great deal of publicity in Ireland and makes gripping reading.
With the Irish general election underway, I hope that the parties of the Left do well and turn around after this election to renegotiate the debt and the bondage which this gang of gombeen men politicians and speculators have sold them into. I have nothing but sheer contempt and loathing for those who ran this government and for what they are doing now to some of the poorest people in the country.
For Osborne and Cameron, Ireland was supposed to show the way. The current joke doing the rounds is that the only difference between the UK and Ireland is two years. Time for a rethink!
The following quote from the article sums up a lot of what has happened in my country:
In any case, if the Irish wanted to save their banks, why not guarantee just the deposits? There’s a big difference between depositors and bondholders: depositors can flee. The immediate danger to the banks was that savers who had put money into them would take their money out, and the banks would be without funds. The investors who owned the roughly 80 billion euros of Irish bank bonds, on the other hand, were stuck. They couldn’t take their money out of the bank. And their 80 billion euros very nearly exactly covered the eventual losses inside the Irish banks. These private bondholders didn’t have any right to be made whole by the Irish government. The bondholders didn’t even expect to be made whole by the Irish government. Not long ago I spoke with a former senior Merrill Lynch bond trader who, on September 29, 2008, owned a pile of bonds in one of the Irish banks. He’d already tried to sell them back to the bank for 50 cents on the dollar—that is, he’d offered to take a huge loss, just to get out of them. On the morning of September 30 he awakened to find his bonds worth 100 cents on the dollar. The Irish government had guaranteed them! He couldn’t believe his luck. Across the financial markets this episode repeated itself. People who had made a private bet that went bad, and didn’t expect to be repaid in full, were handed their money back—from the Irish taxpayer.
In retrospect, now that the Irish bank losses are known to be world-historically huge, the decision to cover them appears not merely odd but suicidal. A handful of Irish bankers incurred debts they could never repay, of something like 100 billion euros. They may have had no idea what they were doing, but they did it all the same. Their debts were private—owed by them to investors around the world—and still the Irish people have undertaken to repay them as if they were obligations of the state. For two years they have labored under this impossible burden with scarcely a peep of protest. What’s more, all of the policy decisions since September 29, 2008, have set the hook more firmly inside the mouths of the Irish public. In January 2009 the Irish government nationalized Anglo Irish and its 34-billion-euro (and mounting) losses. In late 2009 they created the Irish version of the tarp program, but, unlike the U.S. government (which ended up buying stakes in the banks), they actually followed through on the plan and are in the process of buying 70 billion euros of crappy assets from the Irish banks.