Be careful of wishing to jump on Greek default bandwagon

BUSINESS OPINION:IT DIDN'T take long. It was just hours in fact.

The ink was barely dry on the EU summit accord when the first suggestions emerged that Ireland should look for a similar haircut on our debt.

Both Fianna Fáil and Sinn Féin quickly berated the Government for its failure to piggyback on the Greek deal in seeking some relief from our own debt burden. Perhaps they would propose a summit recital of the Monty Python “We were so poor . . . ” sketch – with troubled peripheral states assuming the roles of the four Yorkshiremen trying to outdo each other in recollections of the misery of their predicaments.

We should be careful of what we desire. Much of the detail of the Greek deal remains to be worked out but no one is suggesting that it has got a free pass.

Taking Greek debt down to 120 per cent of GDP by the end of the 2020, as envisaged in the plan, will, even if it works, only put it on a par with where Italy is at present – Italy which itself is teetering at the precipice.

On the price to be paid, the communiqué issued at the end of the summit, said only that EU governments looked forward to the conclusion of a sustainable and credible new EU-IMF multiannual programme by the end of the year.

Whatever else, that programme is unlikely to be any less onerous than existing measures that have failed to deliver and have seen Greece descend into chaos.

What we do know is that Greece will be required to use any additional privations revenues to further reduce indebtedness, leaving little scope for economic stimulus vital to any long-term recovery.

We also know that there is going to be much tighter supervision by the EU-IMF troika. The communiqué alludes to a new permanent presence by the troika on the ground in Greece, presumably to ensure that a government under siege does not attempt to wander from the path of austerity.

The Greeks are right to bemoan the loss of sovereignty.

It is becoming increasingly clear that Greek governments of any hue will have little say over their economic affairs for a generation.

The haircut being “voluntarily” taken by the private sector in relation to around €200 billion of Greek debt – but not the €150 billion accounted for by troika lending or ECB holdings – does not actually provide any immediate benefit for the Greeks.

And it will certainly not impact the scale of the existing austerity measures and those which are being proposed for the next few years.

And, with all this, real doubts remain about the adequacy and the method both of recapitalising European banks and boosting of the European Financial Stability Facility.

After a fractious series of summits, the deal agreed is probably the best possible between governments that, for all their talk of need for closer fiscal union in Europe, seem incapable of taking any of the concrete steps required to step beyond narrow national interest.

It is not that they cannot persuade sceptical national electorates of the necessity of such action – though that is clearly a major issue. It is that they are not even prepared to try.

Ireland has invested a lot of effort extricating itself from our current crisis and undoing the damage to our reputation abroad, especially in Europe. That financial pain has been borne largely by taxpayers rather than by those who got us into this mess.

The chairman of the Irish Fiscal Advisory Council John McHale, writing in a personal capacity last week, drew attention to the sharp difference in reputational damage between a country that defaults as a last resort and one that can meet its obligations but chooses instead to default – the position in which Ireland currently finds itself.

Now is not the time to falter, even if the troika allowed it.

While the summit was not the place for it, the deal does allow the Government scope to seek EFSF assistance in meeting the cost of repaying bank debt, as other countries will now be able to do.

That should and will be pursued but, having worked so hard to recover from our brief, delusional spell as arrogant, and increasingly uncompetitive, lords of Europe, it ill-serves Ireland to return to the era when Europe was seen as little more than a source of free cash.

The future of the euro zone requires a broader vision.