Honohan is being forced to recognise reality. The problem with next year’s stress tests is that they cannot be massaged locally. They are pan-European. Honohan said as much when he conceded: “I can’t guarantee [that the Government won’t have to provide capital] because the big stress test, which I would guess will be in the third quarter of next year, will be under the supervision and monitoring of the single supervisory mechanism.
“They set the parameters, the stresses and the assumptions. We don’t know what those assumptions are. We can’t control them so we cannot be sure there won’t be any need.”
How very awkward for Ireland.
Honohan and Gilmore both know that we are most unlikely to pass the stress tests. A back-of-the envelope calculation on the consequences of our bankers’ refusal to recognise the losses on their mortgage arrears makes very gloomy reading.
We are certain to be rumbled next year. So government ministers and officials have begun to speculate openly about where the mugs can be found to bridge the gap.
Our first port of call, Angela Merkel, is no longer a mug. Her prospective partners in the Social Democrats have already ruled out sinking good ESM money into AIB and Bank of Ireland.
The second port of call, the battered Irish taxpayer, is a mighty mug, but no Cabinet member can go back to squeezing the empty barrel within 18 months of an election.
Suddenly the solution has surfaced. Bang on cue, Honohan, the academic, and Gilmore, the old socialist, have found the nation’s salvation: they will be beating the global highways and byways in search of ‘private capital’ for insolvent banks.
What a brainwave. Imagine all those mug investors being suckered into this little goldmine: next December (2014) after we have failed the stress tests, the Honohan and Gilmore roadshow will be offering them a unique chance to invest in a great recovery sector.
No matter that its two ‘pillar’ banks will still be drowned in unsustainable debt, that they will have recently failed European stress tests, or that they will still be run by overpaid insiders imbued with a culture of greed.
No matter that the same banks have been peddling fantasy balance sheets for five years. No matter that such a fantasy has been indulged by regulator and government alike.
These private sector mugs will not be buying.