I feel that many comments are being made about the loans being extended to Ireland by the EU and the IMF, which suggest that Ireland alone has a responsibility for what has happened, and that Ireland alone, is being bailed out by the generosity of others.
This is not the full story, and I try to put the other side of the story forward, in my letter below to President Barroso.
Dear Jose Manuel,
I read your response to questions in the European Parliament about the Irish fiscal situation, in which you seemed to be suggesting that this situation arose solely because of irresponsibility in Ireland.
I agree the main responsibility does rest with Irish institutions, the Irish Government, the Irish Central Bank , the Irish banks, and the Irish individuals who borrowed irresponsibly.
But you should know that this is not the whole story. British, German, Belgian, American, French banks, and banks of other EU countries, lent irresponsibly to the Irish banks in the hope that they too could profit from the Irish construction bubble.
They too had available to them all the information about spiralling house prices in Ireland, but they still lent the money. These banks, who lent to the Irish banks, were supervised by their home Central banks, who seemingly raised no objection to this lending, which was so ill advised. Their home Central Banks also had available to them the same information, that everybody else had, about the imbalances in the Irish housing market and the disproportionate increase in house prices relative to incomes in Ireland.
So these non Irish Central Banks must take some share of responsibility for the mistakes that were made. Yet the non Irish banks, who so foolishly lent to the Irish banks, are now being spared any share in the losses, because the Irish taxpayer is bailing them out.
I feel you should acknowledge that. You did not do so in your statement in the European Parliament
I also believe the European Commission was involved, under the Treaties, in some responsibility for supervising the Irish economy, and that it too had full information on the obvious imbalances I refer to above. You ought to have acknowledged that responsibility of your own institution, which the Commission shares with ECOFIN.
What did the Commission do at the time about the Irish housing bubble?
What did the ECB do?
Nothing very effective, it seems.
Some reflection on that would be appropriate to accompany your fully justified criticism of Irish failings.
The fact also is that interest rates in Ireland were too low in the first years of the euro. They were kept low by the ECB, because of the needs of other EU countries, which were not booming in the 2002 to 2007 period as Ireland was. That is also, in part, a European responsibility, although, of course, the Irish authorities should have found other measures to compensate for the fact that the ECB was pursuing interest rate policies that were unsuitable to Ireland.
You were right in the European Parliament to remind the Irish people of their recent policy failings, but you should tell the whole story, not just one side of it
Ireland’s bank guarantee in 2008 may have prevented a Europe wide banking collapse in 2008. You did not refer to that possibility at all. Do not forget Credit Anstalt in 1931, or Lehman Brother in 2008.
I hope you will find an opportunity to redress the balance in a future statement.
Yours sincerely
John Bruton (former Taoiseach and former EU Ambassador)
10 comments:
Thanks for writing that letter.
Whilst Joe Higgins would drive anybody a bit demented, I was shocked at Mr. Barroso's demeanour and aggressive comments in the European Parliament.
A very good overview of how the system operates. But as you pointed out so well Europe could be in a far worse position were it not for the Irish bank guarantee. Maybe your intervention could be used to reduce the very unfair rate we are being charged for the so called 'bail out'.
Is anyone surprised by Barroso's comments given the seldom occurrence of politicians admitting their own faults?
Dear Mr Bruton,
Well done on sending this letter to Mr Barroso.
Obviously we are responsible in large part for the catastrophe that besets us. Policy makers, bankers, regulators and consumers are all in it together.
But Barroso forgets that we are being used as a way of trying to save the Euro and the reputations of Europe's central bankers. An official from the ECB will appear on Primetime tonight and tell us that any forcing of Europe's big lenders to "take a haircut" would cause a run on those institutions. "So what?" I ask. We are being used as an expendable asset by the ECB. Its a disgrace and I am furious that our "government" and their "negotiators" have allowed this to happen.
The ECB have decided that it is acceptable for our economy to languish in deflation with no internal consumer demand, no internal growth and 13-14% unemployment, as long as the big lenders arent threatened and as long as the ECB save face.
Just as our own regulator is culpable in all of this mess, then the EU regulators are also culpable.
Perhaps if you see Mr Barroso you could tell him that there is at least one Irish man willing to put all of this to him in clear language. I would relish the opportunity.
Well done again.
Yours sincerely,
Dr. John Curran.
Dear John,
Well done! It is good to see somebody in a leadership position stand up for a change. How dare Barroso et al treat a proud and ancient nation in this contemptuous manner. We do indeed have an obligation to pay off our own government's debt and we have a responsibility to our partners in the EU to minimise financial colateral damage. However, the latter must not come at the destruction of our country and the loss of our young people. As a lifelong proEU person, I am horrified at the hostile reaction of our so-called friends. There is no dignity in borrowing from those who want to grind us down. We should take the pain, STOP BORROWING immediately, let the bondholders go, and raise our heads once more. It is not worth prostituting the nation or sacrificing the young generation to borrow money that we will have to pay back plus (outrageous) interest in any case. Our forefathers sacrificed a lot more so that we could stand proud and free. Let the fight-back begin! Mise le meas. Former EU supporter.
I agree with the comments made above. I also congratulate you Mr. Bruton on your letter.Your points are fctual and well made.
I did feel that Mr.Barosso was very rude to Joe Higgins and should apologise. This is not the way to conduct business or to speak to somebody when you disagree with them.
I was heart-warmed to see Ireland stood-up-for and in such a balanced and thoughtful way. I do hope Mr. Barroso will take up your invitation to redress the balance, but in any event I feel sure our European friends - especially including the fair-minded Germans - will take due note. Philip O'Sullivan
John, delighted about the action you have taken and to read this. The EU / ECB cannot deny standing on the sidelines while funding the Irish bubble with low interest rates and cheap money. The interest rate fiscal policies might have suited the German slow growth rate but was counter cyclical and fuelled Irish growth. We got it wrong but the ECB also failed in it's duty of care.
Excellent and balanced appraisal of the situation. There is more than enough blame to go around. Your point about the Irish taxpayer shouldering the cost is an important one and one that has not been recognised not to mind, acknowledged.
Excellent analysis. The contribution over the last decade of the wider group of EU and Member State institutions is neither recognised nor acknowledged. Nor is the current contribution of the Irish tax payer in shouldering the burden is recognised or acknowledged.
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