December 09, 2013

An open Letter to Minister Shatter

On Monday this week I received a surprise email from The Minister for Justice, Equality and Defence. Signed “Best Wishes, Alan”, minister Shatter’s email was no Christmas greeting. It acknowledged a November online campaign to "Destroy the Anglo Bonds" in which I had participated along with an estimated 100,000 others.

The timing of Alan’s missal was unorthodox, as the vote (on the bonds measure) had already taken place. All other email's I had received from TD's were in favour of the motion (which failed to pass the Oireachtas) and had been sent before the debate. None of these were from any of the three major parties. In contrast to Alan’s letter they were strongly in favour of removing the Anglo 'socialised' debt of €25,000 Million, first created by Fianna Fáil as promissory notes, then consecrated by Fine Gael & Labour into sovereign bonds.

I can only surmise that Alan felt a need to explain himself.

This ‘debt’ as every Irish person knows was the result of a disastrous public rescue of Anglo Irish Bank, the bank that The British Independent Commission on Banking called “the worst bank in Europe”. Internationally Anglo is a case study in the corruption of the European banking sector. To Alan it was an unsightly legacy from Fianna Fáil. Had Alan not listened to the Anglo Tapes? Maybe not.

In this open letter of reply I would like to thank Alan for being kind enough to reveal current Irish government strategy in refusing to wipe out Ireland’s illegitimate banking debt. Alan was indeed in an ebullient mood, describing how “his Cabinet” had reached “an agreement with the ECB”; one Alan assured me, was the “best possible outcome”. To support his assurance Alan noted that this had been acknowledged by “numerous independent commentators”. As an “independent commentator” may I respectfully beg to differ?

Having expressed why the motion was just not sensible, Alan’s unsolicited epistle drifted into a strange twilight zone of self-contradiction and false hope. First came the imaginary stick, then the illusory carrot.

This began with a terrible list of what might befall our island nation had the current (or the previous) government not chosen to save the systemically critical banks. Banks like Anglo, who Michael D. Higgins (still a TD back in 2009) called “no more systemic than a dandelion”.

Included in Alan’s list of hypothetical catastrophes were the undermining of “A quarter of a million” jobs. Also it seems, financing vital public services “would be made very difficult”. There would also have been “significant implications for our exit from the EU/IMF Programme”. Could it be that Alan’s psychologist has suggested that all this will seem like a bad dream some day soon?

Then came the carrot of hope. Come on plucky little Ireland! All is not lost! Maybe (just maybe!) we won’t have to pay eight and a half million euros a day plus interest in some fantasy future?

By 2031, it might all be over bar the refinancing.

Alan assured me that his “Cabinet colleagues” raise the issue of the Anglo debt at the “European Level” on a regular basis. The Taoiseach, he assured me, had also written a letter “to EU leaders” only a month back arguing that “It remains imperative, as we all agreed in June 2012, to break the ‘vicious circle’ between bank and sovereign debts […]”. Rather than the Christmas cheer Alan’s final comments left me just a little confused:

“My Government colleagues and I will continue to build on the significant progress that has already been made in stabilising the banking sector and returning economic sovereignty to the Irish people.”

But Alan? Isn’t Enda also an “EU leader”? Didn’t you mean to say that he had written to the other EU leaders? One last clarification: what was all that about returning economic sovereignty to the Irish people? I know we have ratified a few memoranda in our day, and even a treaty or two (albeit the second time around) but I have to confess I had not realized that we had given away our economic sovereignty? When did we sign that memorandum?

Do send me a copy!

Oh well, if this is indeed the case, then maybe it is all for the better. Might I suggest we simply close the anachronism that is the Irish Central Bank and leave the ECB to pay our “sovereign” bonds, in their entirety, to themselves?

On that cheerful note I want to wish you and yours a very Merry Christmas and a Happy New Year,

A Chara,

[Enclosed the full letter sent bcc: to me and (presumably) to all in the campaign]

I’d like to acknowledge your recent email concerning the Technical Groups Motion in Dáil Éireann.

This motion is an example of the hard rhetoric and soft option politics that brought our country to the brink of insolvency. We must remember that on 20th January 2009 it was the then Fianna Fáil-led government that nationalised Anglo Irish Bank and took it totally into State ownership. Following this, the promissory notes have been part of Government debt since they were issued in 2010.

Since coming into office in March 2011 my Cabinet colleagues and I worked hard and reached an agreement in February 2013 with the ECB in relation to the promissory note debt which represents the best possible outcome achievable for Ireland and has been acknowledged as such by numerous independent commentators. It is not sensible for the State to lobby our European partners further on this issue now that agreement has been reached, nor is it sensible for the State to abandon diplomacy and consider ceasing payment on its contractual obligations at this critical time.

The opposition motion, had it passed, was a threat of default that would have:
-undermined a quarter of a million jobs directly and indirectly supported by foreign direct investment;
-made it very difficult to borrow the funds required to finance vital public services such as the social welfare, health, and education systems;
-further increased the cost of credit in the Irish economy
-had significant implications for our exit from the EU/IMF Programme of Support and our return to market funding.

The opposition motion, had it passed, would have questioned the State’s commitment to repaying these debts and may put at risk our ability to regain sustainable market access. State access to financial markets is vital for the funding of the numerous public expenditure programme that the opposition are constantly seeking. To now deviate from where we have got to can only be considered foolhardy given how close we are to the successful exit from the EU/IMF Programme and our return to market access.

Stable public finances are an essential prerequisite to long term economic growth, stability and job creation. We will only be able to successfully access the markets in the long term if the markets believe that we are reputable and follow through on our commitments.
The enormous cost being borne by the Irish taxpayer as a result of the recapitalisation of the Irish banking system is a topic that my Cabinet colleagues and I continues to raise at a European level on a regular basis.

In a letter to EU Leaders last month, the Taoiseach stated that “It remains imperative, as we all agreed in June 2012, to break the ‘vicious circle’ between bank and sovereign debts that forced Ireland into a Programme in 2010, at a time when there was a different consensus in Europe on the merits of ‘bailing in’ creditors of failed banks.”

I know some would have liked the monies to be simply written off. Unfortunately this was never possible and if the State simply defaults on its obligations, such a default would have a devastating impact on the State's capacity to again borrow funds to pay for essentials like schools, hospitals and job creation measures.

My Government colleagues and I will continue to build on the significant progress that has already been made in stabilising the banking sector and returning economic sovereignty to the Irish people.

Best wishes,

Minister for Justice, Equality and Defence

Posted by Tony Phillips at 09:08 PM | Comments (0)