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The Eyes Have it Inside the Dáil

Posted on: April 10th, 2011

WAS Brian Lenihan making mischief in the Dail last week?

He began to lovebomb Minister for Finance Michael Noonan across the chamber.

And Michael responded with a fair old flash of the eyelashes.

Brian was heaping praise on Michael’s banking policy. He could hardly contain himself. He described it as “an essential first step”. Michael’s approach was ” very constructive”. The new minister could “hold his head high” as one “who took a very responsible approach on banking”.

Michael Noonan is suddenly in danger of becoming a hero of Fianna Fail , the minister destined to implement all Brian’s unfinished works.

Noonan hardly blushed as he took the plaudits from his predecessor.

And then, having consummated his affair with the minister, Brian turned his ire on those TDs he deems guilty of “economic treason”.

Brian was having a dig at Sinn Fein; but the rest of us, opponents of paying off senior bank bondholders, were caught in the crossfire. Apparently the political consensus against burden-sharing — or burning the bondholders — is now so overwhelming that opponents are economic traitors.

No doubt the likeable Lenihan had his tongue firmly buried in his cheek when he paid such over-the-top tributes to Noonan. No doubt too, Fianna Fail feels outgunned by Sinn Fein in the Dail, but there was an element of truth in his words. Fianna Fail, Labour and Fine Gael are all at one about kowtowing to Europe. They all believe that reckless German and French bankers must be compensated by Ireland’s taxpayers.

“Treason” is an odd charge against those of us whose views on the bondholders probably reflect those of the majority of the Irish people.

How do we know that we voice majority opinion on such a hot topic?

We don’t.

But we want to find out.

So on Wednesday we resolved to test public opinion on the dreaded deal with the EU and the IMF.

The independent (for some bizarre reason known as the ‘technical’) group in the Dail, moved to test the popular temperature. We formally proposed a motion seeking a referendum on the repayments we had promised to our persecutors — overseas bankers supported by foreign governments.

Trapped in a small corner of the Dail chamber were the economic traitors seeking a referendum. We were surrounded — and heavily outnumbered — by the united ranks of Fine Gael, Labour and Fianna Fail, all dismissing our project as “populist”.

Fine Gael insisted that the people had given them a mandate to govern. It did not seem to matter a jot to them that the mandate was specifically to share the debt burden with the bondholders; nor that they were now turning their back on that pledge. Fianna Fail was simply appalled by the thought that their deal would be put to a plebiscite.

And Labour? Well Labour is Labour, the party in government so glued to its seats that it will take more than Sinn Fein Semtex to remove them .

At the end of the debate we put the referendum proposal to a vote of the Dail. It was defeated by 121 votes to 27.

The message was clear: Fine Gael and Labour are already hurtling down the Fianna Fail economic road. No mere plebiscite, let alone a petition, is going to distract them.

They will not admit that they are petrified at the probable result, that the Irish people would overwhelmingly reject Fianna Fail’s (and now the Coalition’s) November deal.

The “populist” charge, so regularly used against advocates of a referendum, is deeply condescending, suggesting that the people are out of their depth .

Which is hardly supported by the evidence.

A referendum is no gimmick. It could be part of a well-structured plan, an alternative to the old Fianna Fail policy. Once the deal is rejected by the people Michael could break free of the Fianna Fail straitjacket. He could head for Europe armed with a popular mandate to renegotiate Lenihan’s legacy.

Even the mention, the threat of another Irish referendum should send shivers down the spines of Sarkozy and Merkel. The ghosts of Lisbon mark one would haunt them.

Today we badly need to invoke the memory of those ghosts. Bolstered by their presence we would be in a strong position to navigate an organised default. France and Germany would realise that it was now politically impossible for Michael Noonan to return to Ireland empty-handed after the people had told him to bring home better bacon.

What would be lost? Our present plight, as vassals of Sarkozy and Merkel, is humiliating. Last Thursday at a European Council meeting in Budapest poor Michael was still being kept waiting for even the promised cut in the interest rate on our loans. Ireland is a pushover.

Referendums give muscle to a nation’s negotiators. Take a look at Iceland, the sovereign state that allowed its banks to go to the wall, suggesting that all would not have been lost had we refused to rescue Anglo and Irish Nationwide.

Yesterday Iceland was holding a second referendum on its repayments to British and Dutch Banks, debts incurred as a result of its own banking collapse.

Last year a first Icelandic referendum on a deal about the British/Dutch repayments was defeated. Despite the government’s approval of the terms, the Icelandic president referred the agreement to the people, who rejected the original terms with 93 per cent voting NO.

Which put the government in a bit of a pickle. Or in a strong position, depending on your angle.

The Brits and the Dutch were incensed at the decision to hold a poll.

They were angry, but back they came to the table, where they were greeted by an Icelandic delegation, emboldened by the people’s will.

Lo and behold, this time Iceland cut a far better deal. Yesterday’s referendum vote offered a huge improvement in terms available to Iceland.

The Icelandic prime minister was furious with the president for insisting on a second referendum, but the decision was fully justified by the better terms extracted as a direct result of the first plebiscite’s defeat.

Yesterday’s terms gave Iceland longer to pay the British and Dutch banks. The interest rate will be lower. The bankrupt nation will repay the UK government at a 3.3 per cent rate between 2016 and 2046 rather than at a 5.5 per cent rate between 2016 and 2024.

Being bankrupt can be an advantage, especially if the people are in no mood to surrender to creditors.

Iceland’s parallels with Ireland are close. Seventy per cent of the Icelandic parliament favoured the deal, but the people were opposed. The government was against a referendum, but happily the president insisted on consultation with the masses.

After Iceland went bust bearish wags enjoyed insisting that the difference between Iceland and Ireland was one letter of the alphabet and six months.

They were broadly right in those dark days. Yet today, as Iceland resurfaces, we should happily settle for the six-month lag behind their fortunes.

Less than three years after its banks went bust Iceland is showing signs of a fragile recovery. Following an economic, financial and currency collapse in late 2008 , output is expected to expand this year, inflation is tanking and the central bank has lowered core interest rates from a crisis 18 per cent level to 4.25 per cent.

The initial political consensus for capitulation let Iceland down. Brian Lenihan and Michael Noonan should stop making eyes at each other across the chamber and follow the Icelandic experience by consulting the people.

A better deal would follow.