Like any deal, the deal to rip up the Anglo Irish promissory notes and instead issue long-term Government bonds has its good points and bad points.
In very simple terms, the Government has basically swapped a short-term loan for a long term loan. While it brings some short-term benefits, the Irish people are still carrying a massive debt that wasn’t their’s in the first place.
On the one hand, the deal will mean we are not faced with a €3.1 billion repayment next month. We won’t have to borrow as much in the short term which means that next year’s budget doesn’t have to be as harsh as was originally planned. And it means that investors thinking of bringing jobs to the country in the next few years can be more confident about their investment in Ireland. All of these things are important, and on these points, the Government deserves credit for its efforts.
But we’re terrible in Ireland for looking at the short-term benefits only and not paying attention to the long-term consequences.
So you also have to look at the down-side.
Firstly, we haven’t got a deal that fixes our debt problem. Surely, that was the whole point.
If anything, the Irish people are even more shackled to the gambling debts of the former Anglo Irish Bank. The Government has in fact cemented our debt problems, meaning we will be re-paying the Anglo Irish debts beyond 2050.
And we don’t yet know how much this deal will cost us. Interest rates are at an all-time low. When they start to rise again, the interest rates attached to this deal will also rise. There is no knowing what the ultimate cost will be.
But the worst part is that, despite the promises, not one red cent of the Anglo-Irish gambling debts has been written down. The Government admits that it didn’t even ask for the Anglo debt to be written down. If there is one golden rule of negotiations, it’s that if you don’t ask for something, you’re never going to get it.
It means that, despite the short-term benefits of the deal, the Irish people, including those not yet born, will have to pay all of the former Anglo-Irish debt. How is that fair? How could that ever be acceptable?
We heard a lot of talk from our own Government and from senior EU and IMF officials about the importance of solidarity and burden-sharing. But the only solidarity in this deal at the end of the day is with bond-holders, and the only people doing the burden-sharing is the Irish people.
No-one will pay for this debt except the Irish people. Not other Eurozone countries or the ECB. Not unsecured bond-holders or well-secured politicians. Not disgraced bankers or failed regulators.
It is the Irish people who will pick up the tab – in its entirety.
In effect, the latest deal is a bit like being convicted of an offence that you didn’t commit and having your 20 year sentence commuted to 10 years. It’s welcome, it’s better than what you had before, but you’re still not free.
The last Government gave us the “bank guarantee”, but the new Government has given us the “debt guarantee”, and we will be stuck with this for a very long time to come.