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A Nation Of Narcotics

Posted on: March 1st, 2009

LAST April I met a hotshot Dublin businessman in a southside pub. He was not a household name but — at that time — he was as rich as Croesus. And he was angry at a piece I had written about Anglo Irish Bank.

The meeting was cloak and dagger stuff. He was not keen be seen with me; but he wanted to warn that those who were attacking Anglo would get their comeuppance. He wished to see the story in print.

The hotshot revealed that a group of his well-heeled cronies were determined to set up a revenge fund to punish all those short-sellers who had targeted Anglo. These guys had a sense of ownership: his friends were going to defend “their” bank at all costs. Those standing in the way would be swept aside by the flood of money. Enemies of Anglo would have their fingers badly burnt.

The plan was tinged with emotion; consequently it was all a bit vague, but the plot had been hatched in a Dublin hotel. A figure of €500m directly raised from the “lads” was mentioned. More would be borrowed in order to ensure success.

I still do not know today if this was the birth of the infamous Anglo 10, but I suspect that it bore the seed of the latest scandal.

At the meeting, it was blindingly obvious to me that Anglo was no ordinary bank. Anglo inspired fierce collegiate loyalty. It was more than a group of greedy highwaymen. It was almost a community, even a religion. Its disciples were zealots.

The flock included builders, developers, friends of Sean FitzPatrick and one or two politically connected plutocrats. Devotees of Anglo were not exclusively Fianna Fail supporters. They saw themselves as audacious entrepreneurs who had led the Celtic Tiger, the guys who had made Ireland buzz.

These masters of the universe have spent the past year in a state of semi-paralysis. Blow after blow must have shattered their financial and physical health.

The Anglo boys who rode roughshod over the economy, their enemies and virtually ruined the nation have been in denial for several years. They have been intoxicated by their own success. Reality disappeared sometime around the new millennium.

A bit like Ireland.

The Irish bubble has swollen in rough parallel with Anglo’s balloon. They shared characteristics: hubris, extravagance, property, borrowing — all the same symptoms have prompted the downfall of both. Where Anglo went, there went Ireland.

Last week saw the end of the old Anglo dream. The raid by the gardai at the instigation of corporate enforcer Paul Appleby marked a new low. The copycat follow-on by the Financial Regulator added to the bank’s damaged reputation. And its late arrival on the scene made a further monkey of the Regulator.

The fate of the nation and the fate of Anglo are connected in the minds of overseas investors. The shenanigans at Anglo’s HQ on St Stephen’s Green will be imprinted in the minds of those who lend to Ireland.

Our immediate problem is to detach the two.

It will not be easy. I was in the City of London on Monday meeting City types. The mention of Ireland provoked a humiliatingly dismissive tone.

Some investors openly declared that they no longer trusted the Irish banks or, by extension, the Irish Government. They spoke of our failure to tackle the budget deficit, the certainty that all the banks here would be nationalised and the inevitability of the International Monetary Fund beating down the door.

They warned we should not depend on Germany to bail us out. The Germans are looking to ensure the survival of Eastern European economies and to the recovery of their fragile neighbour, Austria.

Ireland is not on their radar.

Others went on to insist, with barely disguised glee, that we could soon be on our own. So we had better emerge from denial or we will languish with Greece and Portugal, cast into a dark relegation eurozone.

That was scary stuff, especially as the Brits are salivating at our discomfort. They are delighted to see the swagger wiped off the backside of Ireland. Some of them see us as an upstart nation, a bit like how we perceive Anglo as a bank. Too big for our boots. Rich on the back of a fantasy economy. And in denial.

Denial is a happy, happy place. A year ago, Anglo was dubbed as “a building society on crack” by London research teams. If that fairly describes Anglo, then Ireland was a nation on narcotics.

The nation is poised on the edge. We can stay on the narcotics or wean ourselves off. The narcotics road leads to ruin.

Foreign investors have been voting with their feet. Last week, evidence persisted that the outflows from Ireland’s banks have accelerated. Chunky UK deposits have been repatriated. The depositors do not trust Irish banks, even with the guarantee. The banks are a proxy for the Government. So the Government is a bad bet.

Everyone seems to realise this, except the Irish Government. It is no longer just foreigners with a historic grudge against our success who finger our flirtation with disaster. Last week Peter Sutherland, an Irishman with global clout, sounded loud warning bells.

On RTE’s News at One with Sean O’Rourke, he warned that the measures announced were inadequate. The nasty medicine, the antidote to narcotics, was needed now. Or the patient will die.

Former Taoiseach Garret FitzGerald took the same line on RTE’s Morning Ireland. Typically, Garret did not confine his criticism to partisan words about Fianna Fail. He suggested that his old party of Fine Gael needed to present more convincing policies; both men pleaded for solutions which involved immediate action. These included emergency budgets.

The Government is still in denial. The official position remains that we postpone decisions until the December budget. Tax changes must await the report of the Commission on Taxation. Expenditure cuts must be delayed until Colm McCarthy’s An Bord Snip surfaces. Both excellent bodies, but Ireland cannot afford the time.

Yet there are cheerful straws in the wind. The sudden interest in buying Anglo from a consortium shows the bank has a few drops of oxygen left. It might even give small shareholders hope of salvaging a few bob from the wreckage.

Elsewhere last week, Michael Somers of the National Treasury Management Agency skilfully raised €4bn for Ireland on the bond markets. Yet the revelation of the week was a stellar performance from the Minister for Finance himself.

Brian Lenihan’s appearance at a Dail committee was a tour de force. Lenihan’s familiarity with his brief was second to none, his fluency unmatched by any minister.

Let us hope that the critical Brits were watching. Lenihan’s knowledge would have made Britain’s chancellor, Alistair Darling, blush. And it put Brian Cowen’s performance in the shade.

If Lenihan can now turn his diligence and expertise into action, there is still hope that the nation on narcotics will not follow the road of the building society on crack.