Massive fallout from ‘bank deal’

Joe McHugh says this week’s historic moves by the government has three aspects: it is the first major step to clean up the ‘nightmare’ of the banking debt they inherited from the last government; it proves solid, mature negotiation works; and it will send out the right signals to investors that this country is a secure place to invest.

Sinn Fein’s Padraig MacLochlainn says ‘that’s a joke’ pointing to what he says is a simple statistic which illustrates the stark unfairness of what is happening: “We,the people of the 26 counties, make up roughly 0.9% of the population of Europe. We have now taken on 42 per cent of the banking debt of Europe, a debt that was never ours but that of private banks, as sovereign debt. It won’t be our children but our grandchildren and their children who will be paying for this.”

Speaking with the Journal yesterday Deputy McHugh (F.G) said he wanted to get across the message that the fight on this issue was far from over, that the government would keep fighting for ‘the honest and fair deal the Irish people deserve.’

And The Fine Gael deputy said no one, least of all him, was under any illusion that the last five years had been tough for many families.

“We inherited a nightmare, a mess. It’s been a bit of a nightmare trying to clean it up too. And no one is under any illusion we have a ways to go yet.We have a 200bn. debt problem to resolve so to get a deal on the promissory note (basically an IOU note from the Irish government to the European Central Bank) is significant. It recalibrates the debt in a way that gives us breathing space, gives us time to get the economy moving again.”

And hitting out at what he described as ‘celebrity economists’ Deputy McHugh said most had played the populist card in the newspapers and in the broadcast media while ignorning the consequences of what they were advocating. That, he said, was not something Finance Minister, Michael Noonan, had the luxury of doing.

He went on: “This was never going to be quick, never going to be easy and I understand how frustrating it was for people.However, this is a massively complex issue involving countries, banks, bond holders etc across many countries and continents. But we now have a deal. And that shows the value of taking the mature, long term strategic approach. Some of the ‘solutions’ being advocated by the celebrity economists would have been a disaster.”

But Deputy McHugh’s views on the deal were not shared by Sinn Fein’s Deputy Padraig MacLochlainn

He told this newspaper: “They can dress and spin this anyway they like but this is a disastrous move by the government. Before the General Election we had the Labour Party saying it was either Labour’s way or Frankfurt’s way. And we had Fine Gael saying not a red cent more for the banks. Both parties rolled over this week - game, set and match to the European Central Bank. The ECB never liked the promissory note anyway and now they have got rid of it by ensuring that was basically a bank guarantee is now a sovereign debt of the people of Ireland.”

He went on: “Not one cent was written down. This was debt incurred by private banks engaging in private business, but the ECB insisted that the Irish government take it on to prevent a run on the banks and pay back the bond holders. Put it like this, what we have done is akin to a family taking on legal responsibility for a mortgage they can never repay, that they never asked for and that they never wanted. It’s crazy.”