EUROPEAN DIARY: European media outlets have been scathing in their criticism of a 'Wild West' financial culture, writes Jamie Smyth
THE CRISIS gripping the Irish economy is clearly the big news at home this week. But it is also hard to avoid the topic in Brussels, where journalists and diplomats are busy reading the last rites to the Celtic Tiger and rethinking their past praise for the Irish economic miracle.
In the European Commission press room, colleagues from other EU states tend to broach the subject in one of two ways. Over a cup of coffee some ask concerned questions about what went wrong, who is to blame and what impact it will have on a second referendum on the Lisbon Treaty. Others invoke gallows humour, telling the in-joke: “What’s the difference between Iceland and Ireland? Answer: One letter and about six months.”
The BBC's daily current affairs programme Europe Todayrepeated this – by now hackneyed – joke on air on Friday in a lengthy segment on the debacle surrounding the nationalisation of Anglo Irish Bank. It also broadcast a sequence of angry comments made by shareholders at the bank's annual general meeting: "We are being watched all over the world and the world is seeing that this is a cowboy economy run by cowboys," said one, who stands to lose almost his entire investment in the company.
The Financial Times, the most influential business newspaper in Europe, has written extensively on the economy's decline. In an editorial entitled "The Blue Emerald", it focused on how the job losses at Dell signalled the end of the boom. A few days later its Ireland correspondent wondered if "the one-time 'Celtic Tiger' is destined for a protracted period as one of the continent's also-rans" in a feature under the headline "Things Fall Apart".
The damage to the country’s reputation as a safe and profitable place to invest is clearly suffering a pounding in the face of the current recession. An article published last week by Motley Fool – an internet site that provides advice to investors – raised the spectre of the country going bust. “Until last year, I would never have believed that the once-mighty Celtic Tiger economy could fail. However, since the collapse of the Icelandic economy and its banks, I’m going to admit the possibility that Ireland could default on its sovereign debt,” said a columnist, who acknowledged this was “unlikely”.
Ireland's economic meltdown has also raised eyebrows in Germany, where Der Spiegellast week strongly criticised the lack of regulatory oversight of German finance firms based at the Irish Financial Services Centre (IFSC). One article noted how state bank Helaba used its Dublin subsidiary to sell commercial paper. "At the start of this decade the Irish finance ministry unashamedly advertised to banks annoyed at the strict controls exercised by the German Bundesbank that – with some financial instruments – 'oversight by the Irish Central Bank is not absolutely essential'," it said, reinforcing the commonly held German perception that Ireland is some sort of European "Wild West" of finance.
The normally restrained financial daily Handelsblattsummed up the worsening situation under the headline "Panic Broadens in Ireland", while the Frankfurter Allgemeine Zeitungreflected last week on how "Europe's periphery is now losing the confidence of investors" and how states such as Ireland were finding it more difficult to borrow money.
On Saturday, Le Mondepicked up this theme and listed Ireland as one of "black sheep" within the euro zone that are destabilising the currency. Portugal, Greece and Spain also share this dubious distinction from Le Monde, suggesting to its readers that Ireland is now some sort of Mediterranean of the north when it comes to finances.
RTÉ’s mid-week gaffe over the need for IMF intervention in the Republic added fuel to the fire of an unfolding PR disaster when news wires picked up the story. Bloomberg noted how German stocks fell sharply, while Reuters reported that the euro dipped by a cent against the dollar before it stabilised following a strong denial.
This incident underlines how interconnected the economies of the 16 euro zone members (Slovakia joined the single currency in January) have become. Economic commentators and journalists are increasingly questioning whether the worsening economic problems in Ireland, Spain, Greece and Portugal could create real problems for the single currency.
As euro zone finance ministers gathered in Brussels last night for their monthly meeting, monetary affairs commissioner Joaquín Almunia did his best to allay these fears by stating unequivocally that IMF support would not be needed in Ireland. “Risk of default . . . always exists in the private and public sectors, but in the case of euro area members, I don’t think the risks are high or are significant,” Almunia told EU journalists.
With Government debt in Ireland still relatively low by EU standards, he is probably right. But after a decade of flattering news reports about the Celtic Tiger, it is not surprising that European colleagues are now questioning the basis of the Irish economic miracle.