The Government should be rightly embarrassed at the mess which led to a Dáil motion from Labour, calling for the postponement of the AIB flotation, being passed. Fine Gael, amazingly, appeared so caught up with its own leadership contest that its TDs didn't turn up to vote. There is a strong case to float AIB and to do it now, when markets are good, but by allowing this to happen the Government has allowed opponents of the sale a real PR opportunity. And they are quite entitled to use it.
There is a case to be made against selling , even if the balance of advantage remains to push ahead. The core point of the opponents is that the cash proceeds – say €3 billion – will make only a small dent in the national debt of some €200 billion. But their counter-argument is less persuasive. The opponents of selling now – with Labour and the trade union movement in the forefront – argue that the money should be used not for debt repayment, but rather for infrastructure spending and other investment.
Euro-zone rules – which restrict the amount states can spend – are, indeed, too tightly drawn in relation to investment spending. But a once-off sum of €3 billion is not going to transform the public budget, either, or allow a host of other problems to be magically solved in short order. The required boost in investment spending requires not only easier European Union rules but also a long-term funding plan, likely to involve borrowing from the European Investment Bank and other sources and with implications for tax and spending plans elsewhere.
The most persuasive argument, however, is that the State can get a good price now for the 25 per cent it plans to sell. And paying down a bit of our national debt – one of the key exposures the State still faces – is far from a waste, as it will cut risk and free resources in the long term for other uses. Also, the State retains 75 per cent of the bank, so more cash should land in the exchequer’s bank account in future years as more shares are sold.
Ireland faces significant economic risks over the next few years. And AIB is a play on the Irish economy. Best to cash in some of our chips now.
