Belfast Telegraph

Bailout is bitter legacy for the next government

By Brendan Keenan

They call it a memorandum of understanding. But there is likely to be little understanding, either in the sense of knowing what it means or, so far as the EU/IMF is concerned, the sense of offering sympathy.

One got the impression last week that even opposition politicians had difficulty understanding what it implied for them. Or perhaps they have trouble actually believing what the opinion polls tell them — that in a few months they will be in government, with a comfortable majority.

I suppose it is hard to believe, given that Fine Gael has not won an election for 28 years. Still, it hardly excuses the opposition's fondness for making rods to beat what will surely be their own backs.

Pat Rabbitte and Joan Burton both raised the question of the constitutionality of strictly conditional loans from the EU and IMF. They may not intend taking a case themselves, and most lawyers say they would lose, but as ministers they are unlikely to enjoy the consequences of someone else deciding it's a bright idea to trail the deal through the grinding wheels of the courts.

Finance Minister Brian Lenihan raised a more contentious issue in his Dail statement on Thursday.

He suggested that the opposition should have been more circumspect in their attitude to banking policy, to avoid frightening depositors into withdrawing their money.

One illustration of the difference between government and opposition is that, in government, Fine Gael might not have been too keen on nationalising the banks.

That is the kind of thing which frightens a lot of voters about them. But we will give that imaginary coalition the benefit of the doubt and assume they would not have gone for the astonishing blanket guarantee.

But they will inherit it, along with a radical process which is well under way. The budgetary parameters are set out in the memorandum.

There is secretive work going on to bring some resolution to the banking crisis, although the feeling grows that yet more horrors will be revealed.

Unlike Greece last year, the Irish election campaign will centre round the question of how to deal with a crisis the scale of which the voters understand only too well.

They will expect to hear what Fine Gael intend to do. They will want to hear that they intend to make life easier.

This is where the trap opens wide. The loss of income from this week's budget will have hit home by the spring.

Yet, it is difficult to see how a new government can negotiate any substantial change to the EU/IMF agreement, which means at least two more nasty budgets are in train.

By the time an election is called, a ridiculous €8bn to €10bn of extra capital will have gone into the banks.

Can a new government ever get it out again? Possibly — even probably — not. All it may be able to do at some point in its term is finally declare the appalling total and draw a line under it.

The conclusion must be that the banks and public finances will be just as heavy a millstone for the next government as it is for this one.

It will have to try to make its mark on areas other than employment and living standards. That is a tough call, since these are the things voters care about most.

There is evidence, though, that they are caring more about the generally decrepit state of Irish society.

There is much in the opposition's policy documents on such matters.

But in the Dail, and on TV, they bang on endlessly about jobs and the banks. Great fun, no doubt, but is it wise?

Belfast Telegraph