EUROPEAN DIARY:The EU is preoccupied by the risk of contagion from the Irish banking crisis but no one wants to talk up the problem
THE MOOD is cautious, apprehensive. In Brussels these days, Ireland’s woes are viewed with no little anxiety as the EU authorities weigh the risk of European contamination from the appalling devastation of Dublin’s burnt-out banks.
Most striking is the extent to which normally chatty officials simply don’t want to talk about Ireland any more. As if under instruction to say nothing at all, senior figures are reluctant to discuss the effort to keep the State afloat.
Pose a couple of gentle questions to a well-placed individual and the person declares he knows nada and wouldn’t talk anyway if he was in possession of the slightest factoid. Probe a mite more and the subject is politely changed.
Thus do simple queries about Anglo Irish Bank morph into a vague discussion about dear old Silvio Berlusconi and Gianfranco Fini, an ally turned foe of the Italian premier.
Lively, though not very illuminating on the Anglo front, which of course was the point. You might as well talk about gardening.
What is clear, however, is that the return from summer holidays a couple of weeks ago – la rentréeas they call it here – has seen Ireland move back onto the front-burner so far as Brussels is concerned.
Dublin’s dismissal of that downgrade by Standard Poor’s didn’t work: searching questions posed by its rating agents haven’t gone away.
Investor types who lend billions to Ireland want final figures for the Anglo wind-down; the Government can’t provide same yet, its credibility over the bank is in some doubt anyway and Europe anxiously wants the brouhaha to quickly go away.
But will it? Can it? When people do talk here about Ireland it’s whispery stuff and great seriousness is implied. So too is the sense that the reliance of Ireland’s banks on the State is increasingly seen as a point of significant weakness in the wider European scene.
The weakest link? Maybe it’s best not to ask that too loudly.
Crucial to the focus on Ireland is the lingering fear of an EU-wide double-dip recession and worry that the outbreak of another banking crisis could undermine the nascent but fragile recovery of its wider economy. With 23 million people unemployed in the EU, almost 16 million of them in euro-zone countries, any slip back into recession would be very costly indeed.
Thus the system is on high alert. Spain felt the heat before the holiday season, but came back from the brink. Now it’s Dublin’s turn.
To read the European papers is to read of concern expressed in diplomatic circles, as clear a sign as any that Ireland is in the economic equivalent of intensive care with monitors attached and drips a go-go.
That is what is meant when one hears that the really powerful people in Brussels routinely refer to the Minister for Finance by his first name.
Not Brian Lenihan, nor Mr Lenihan, nor the Minister. They know him very well at this stage, and they observe closely the vicissitudes of the drama in fine detail.
Hence the Minister’s talks last week with competition commissioner Joaquín Almunia quickly led to a deal on extending the guarantee scheme and on winding down Anglo.
People who have met Almunia say he commands a very impressive grasp of the problems besetting Ireland’s banks. But that can hardly be a surprise. It’s his job.
The same must go for Klaus Regling, who as chief of the €440 billion EU rescue net for the euro zone is charged with keeping an eye on distressed members of the single currency.
Regling knows well what went wrong in Dublin; it’s not long since he analysed the meltdown for the Government. He is a serious and stern figure. He went to Luxembourg in July to take charge of the rescue net, but it cannot have escaped him that Ireland’s borrowing costs have since jumped to record levels.
Indeed, the sense of some well-placed observers is that a further test on the markets may yet be in the offing as the Government tries to quantify the totality of its exposure to Anglo. Whatever the answer, it is not going to be pretty.
Still, determining whether the cost is in fact “manageable” will not be a matter of aesthetics.
At the same time, the wariness that prevails around Brussels seems to reflect the view that talking too much about the Irish problem risks making it a lot worse. That was a feature of the political cat-and-mouse game between Berlin, Brussels and Athens which accompanied Greece’s collapse into the arms of the EU and the IMF.
Yet chatter is unavoidable as the Government battles to solve the riddle.
With the cost of the bank’s bailout still unknown, speculation fills the vacuum and most of that speculation doesn’t do Ireland any favours at all because the figures are so huge.
Tricky, very tricky indeed.