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Let’s Take the Fight to France

Posted on: June 26th, 2011

WHAT has happened to all of that political capital that Ireland invested in fair Christine?

The French finance minister is about to escape from the blandishments of Michael Noonan and head for New York. In her last weeks in office, she has been happy to pose for pics with Michael at the drop of a hat.

Michael emerged from the encounters singing the virtues of Madame Lagarde for the top job in the IMF. It was Ireland’s way of sucking up to French President Nicolas Sarkozy.

All that attention given to Christine has been wasted. Michael has emerged from these rendezvous — invariably commencing with continental kisses — with a French flea in his ear.

The ungrateful Christine will shortly wave au revoir to Michael and Nicolas. She gave Michael the photo opportunities; he gave her Ireland’s support for the big gig; Nicolas kicked him in the solar plexus for his pains.

Michael will have to start all over again. He will need to be a little less demonstrative if the next French finance minister is a man, but no doubt he can tweak his diplomatic techniques.

There are signs of desperation in our dealings with Europe. We are being treated with barely concealed contempt by the two big powers, France and Germany.

We have not received as much as a crumb from the Elysee Palace in return for the long courtship of Christine.

At last Thursday’s Brussels summit, the long-running battle over a reduction in the interest rate on our IMF/ European loans was not even on the agenda. Ireland is being dismissed as an irritation.

It is time we became more than an irritation. The Government should start by putting us first, Europe second. Let us, instead, be a thorough nuisance. The softly-softly approach to France has failed.

No formal meeting between Enda Kenny and Nicolas was teed up at the summit. They met “on the margins” — diplomatic code for a few unscheduled moments snatched in the breaks.

Presumably the disdainful Nicolas was just too busy to meet the man from Mayo.

Being at the beck and call of Sarkozy is not helping our debt default dilemma. We are ducking a humiliation from our chief antagonist abroad, while trying to spin our way out of trouble back at home. Our fear of a public snub at European level is prompting an overdose of timidity. Every time Michael is snapped giving Christine a kiss on the cheek the impression of access to high places is projected. The reality is impotence.

We compensate with a mixture of hype, spoof and spin.

Enda and Michael need to deliver results. Instead, they have been reduced to making exaggerated claims.

Frantic spinning started 10 days ago when Michael, safely stranded across the Atlantic, proclaimed to the world’s media that he was going to burn the Anglo and Nationwide senior bondholders. He made hay with the news on both Bloomberg and CNBC.

The move went down a bomb at home. Bravo, we all roared. Muted applause could be heard in the Dail on Tuesday when Enda boldly asserted that Michael had not informed our European Central Bank masters of his decision.

It was even more satisfying to hear rumours that the mandarins at the Department of Finance went mental when Michael made his announcement.

The mandarins love Merkel, Sarkozy and their opposite numbers in Europe. Solo runs by finance ministers visiting the US are frowned on by the Merrion Street mob, especially when the euro falls in response.

The Anglo Irish/Irish Nationwide bombshell initially made for great domestic spinning; but after Michael surfaced on this side of the pond in Luxembourg on Monday, there was an odd silence on the subject. The mandarins and the ECB appear to have whipped him back into line. Burning the bondholders was not even mentioned in his exchanges with Christine, where Noonan loftily claims to have discussed Greece.

With all due respect to Michael, I doubt if the French finance minister had felt a compelling need to seek him out to beg the benefit of his views on the Greek crisis.

The second leg of the big spin was launched in a blaze of contrived publicity on Tuesday: the next European bailout fund would not enjoy preferred creditor status. Noonan spun this as a breakthrough, insisting that elated foreign investors would more readily snap up Irish bonds as the next European bailout fund could not jump the queue in the event of a default. Government sources peddled the myth that we would consequently be back borrowing in the global markets next year.

RTE ran the story as a “significant” success. Some daily newspapers swallowed it hook, line and sinker.

The markets were not fooled. They gave a thumbs down to the spinners. Prices of Irish bonds tumbled further. No investors regarded the change as anything more than window-dressing. The spin was stillborn. Bond yields actually soared.

Despite the minor change in preferred creditor status, the markets are clearly signalling that Greece and Ireland will default on their debt.

The only matter in dispute is the timing.

Not so, spins official Ireland, where the political classes are the worst offenders.

A vast majority of TDs are refusing to face the danger of default. Fianna Fail, the architects of our economic distress, cannot admit that default will be the ultimate result of its economic mismanagement. Fine Gael and Labour are speaking with the same disciplined voice of denial. Despite the overwhelming consensus outside the Dail that default is on the way, there are scarcely 20 TDs who have yet recognised the danger.

Independent commentators, including a long line-up of columnists from the Financial Times, have run the numbers and are warning of the near-certainty of default.

Worse still is a growing fear that our masters in Europe, too, are in denial mode. The centre of their worries, Greece, is being rescued by a monumental fudge. France and the ECB have persuaded Germany that Greece can be bailed out by enlisting “volunteers” to roll over their loans to the bankrupt nation.

Our French tormentors bear an Achilles heel in the Greek crisis. Their banks are hugely exposed to Greek debt. Sarkozy & Co have contrived a mighty fudge to take them off the hook, pretending that Greece will be saved if its loans can be rolled over — voluntarily. Down that route lies an escape for badly exposed French banks. They are on the lookout for phantom volunteers.

Any investors “volunteering” to roll over their loans to Greece should be referred to the nearest shrink. Expect fierce arm-twisting as “volunteers” are persuaded to roll over their debts by German — and particularly jittery French — governments.

Flirtatious diplomacy with Madame Lagarde is a luxury we could never afford. We owe Nicolas nothing.

Let us take the fight to France. We could get right up Nicolas’s nose by holding a referendum on the bailout terms, we could announce a cut in our corporate tax to 9.99 per cent, we could tell him to stuff his increasingly unimportant interest rate and demand an early, negotiated, debt default.

Perhaps it is time that Kenny and Noonan put Ireland first and began to cut up rough with Nicolas Sarkozy.