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Mother Ireland Joins PIGS

Posted on: February 1st, 2009 1 Comment

GIVE the banks a breather this week. Instead, let us fret over the plight of Mother Ireland.

Waking on Wednesday morning, I turned to my daily diet of the Star, the Mail, the Irish Independent, the Irish Times — and last of all, very reluctantly, the Financial Times.The FT is often a hell of an endurance test. Sadly, duty dictates that it must be done; but its bright pink cover fulfils a purpose. Just carrying it around gives the impression of financial expertise to those innocents whom you meet; but far more importantly, the large pink broadsheet conceals the small redtop tabloid wrapped deep inside it.

The Star was compelling: “Big Mac Attack on Ear” was the lead story. It told the tale of how a thug bit the ear off his victim in McDonald’s. Compelling, but grizzly, fodder over breakfast.

The Irish Independent chose a more sedate subject, the boring old economy; but the sub-editors packaged it well, calling in Frank Sinatra. The words “I’ll Do It My Way” led the paper, above a big picture of Taoiseach Brian Cowen.

The Mail followed the same theme in an attempt to sex up Brian with “Cowen: We’ll Do It Our Way”.

The Irish Times addressed the topic more soberly: “Cowen Closer to Securing Consensus on need for €2bn cuts.” I read on, manfully.

My enthusiasm for discovering the state of the nation diminished with each publication.

Turning to the FT is always challenging, especially after sampling the joys of guys biting each other’s ears off.

So on Wednesday I cut corners and only read the bits about Ireland.

And as luck would have it there was no Irish news that day.

Until, suddenly, buried right at the bottom of page 23, there it was, far worse news than cannibalism in McDonald’s. Real news, strangely not yet highlighted at home.

A tiny table of numbers carried an ominous message.

The table was forbiddingly titled “Bonds — 10 year Government Spreads”. As Charlie McCreevy said about the Lisbon Treaty, “no sane mortal” would read it.

But its message was alarming.

In layman’s language it told where Mother Ireland rated as a credit risk among 21 selected countries.

Go on, guess.

All right, you are bang on. Twenty first. Out of 21 countries listed on Wednesday, we were considered a worse credit risk than the destitute Greece. In Greece there are riots on the streets.

We pay a full percentage point more than Berlusconi’s unstable Italy for our borrowings.

Every time the yield on our bonds rockets, it means that global confidence in Ireland is tanking.

So the Financial Times, not the Star, contained the most chilling news of the day.

It confirmed the prevailing prejudice about Ireland overseas. We are now dubbed one of the “PIGS” countries. This nasty little acronym is reserved for European basket cases. It stands for Portugal, Ireland (or Italy), Greece and Spain. We are bottom, in bad company.

Cowen and his crew have a mountain to climb to convince the outside world that we are in control of the public finances. Global investors will need an earthquake in their mindsets if Ireland is not to pay dearly for borrowings in the coming years.

We are already paying a risk premium on our debt due to inexplicable delays in a package for recovery.

Delay in decision making has undermined confidence. No sense of urgency seems to have penetrated the Taoiseach’s office.

The delay in a deal between the unions and the Government last week made matters worse. As the talks dragged on in Merrion Street, the uncertainty prompted markets to downgrade our debt by the hour. No one in Ireland noticed, except a few demented sods, the sad cases who read the most obscure tables in the FT.

Unwelcome global curiosity about Ireland has intensified. The Brits scent blood. Just last week Sky News despatched a crew of crack reporters to analyse the dire state of our economy.

Tales of the exploits of our developers have crossed the Irish Sea and the Atlantic Ocean.

Foreigners have twigged the chronically cosy relationship between our builders and our bankers. The Anglo Irish Bank story has gained wide coverage.

Let us hope they do not rumble the crutch being used to bolster confidence in our economy. Wait until overseas investors discover that the Government has entrusted the Irish nation to the care of a few guys with tenderly nurtured beards. Trade unionists are again dictating the recovery package. Markets do not love guys who do not shave in the morning.

Down at the talks in Merrion Street the theatricals are stage-managed for local consumption, but cut no ice abroad. Absurd grandstanding by big employers group IBEC grabbed a few headlines. Nobody in Ireland took serious notice of the IBEC clowns who claim that they represent business interests. Foreigners do not know that IBEC merely provide a useful foil for the guys with beards.

In the Seanad last week, Joe O’Toole reminded us that IBEC represent the banks in the pay talks. Indeed Anglo Irish Bank is one of their most enthusiastic members. Joe omitted to mention that profligate semi-state agency FAS is one of IBEC’s loyal paymasters. IBEC boss Turlough O’Sullivan tries to disguise the embarrassment of being funded by the banks and the discredited semi-state monopolies, by colonising words like “enterprise”. The “enterprise” best-known to IBEC is the enterprise shown by its funders in FAS with its frolics in sunny Florida.

IBEC could do us all a favour by cleaning up the antics of its members, bankers or semi-states, which let down the entire business sector.

On the union side the clear impression is emerging that the comrades are embarrassed by their own clout. No other social partner matters. No Irish chieftains have rolled over at the sight of an army of bearded wonders so rapidly, not since the 10th Century when Cowen’s predecessors capitulated to the equally bearded Vikings.

Yet the deal, to be announced on Tuesday, must not be a fudge. The cuts for us all must be real cuts. We must not think we can fool the global markets with phantom figures. If we do, the rate of borrowing will rocket — if we can find any lenders at all.

Standard and Poors, the global credit rating agency, has put Ireland on credit watch along with other invalids like Spain and Greece. Earlier this month it issued a warning to Ireland and Greece that their ratings could be downgraded if we do not produce the right public spending package. On Friday, another agency, Moodys, followed suit, putting us on credit watch. They too demand a reversal in the public spending chaos.

A tall order. Public spending is a shambles, but Moodys also gave the Irish banks a dishonourable mention. Try as we may, we cannot totally avoid the banks in any rating of Mother Ireland. The public purse has guaranteed them. A €440bn bank guarantee, hangs over us all.

And the latest idea of a ‘bad bank’ would mean that the taxpayer takes over all the banks’ bad debts to cleanse the financial system.

If that happens we will be forced to ask an even more uncomfortable question: Are the banks now more solvent than Mother Ireland?