OPINION:With their response to the bank crisis, Cowen and Lenihan risk bringing the country to the edge of an economic and social catastrophe, writes VINCENT BROWNE.
BRIAN LENIHAN on RTÉ television's The Week in Politics, on Sunday night, was asked if the Government knew the extent of the bad debts of the banks the Government was bailing out. The following is his reply: "We have done a detailed assessment both from the point of view of auctioneering and valuation, as well as from the point of view of an assessment of the loans themselves. But we will of course do a due diligence, if we conclude the capitalisation, as any investor would and that will give us the final picture in relation to the banks."
You have to assume that our Minister for Finance knows what he is talking about in dealing with the issue that is by far the most crucial element of his brief, given the exposure of the State to the banks.
Well, you want to assume that, although the blather about “auctioneering and valuation as well as from the point of view of an assessment of the loans themselves” is not at all assuring.
But the second sentence. Could this possibly be true, that only afterthe Government has concludedthe capitalisation of the banks – ie given them €7 billion – that only then will "due diligence" take place? That they would give €7 billion to the banks without knowing what the position is with the banks? And he thinks this is what "any investor" would do!
Either what is said is compete rubbish or else the Government is going ahead and giving the banks €7 billion, not knowing whether this will go down the drain.
It’s one or the other, and neither is reassuring.
An economist friend said the other night: “We are ruined.” He was referring not just to Brian Lenihan’s extraordinary remarks on Sunday night, but to the potentially catastrophic mess the Government has made of the public-service pensions levy.
It seems now that either the Government would have to back down, as they were forced to do over several of the budget measures, or there will be strikes in the public sector.
Either way, my economist friend believed, we would be unable to borrow the money we need to keep the show on the road. Therefore ruin.
And ruination is certain if they have made a mess of the bank bailout, which Brian Lenihan’s remarks seem to suggest they have done, or are about to do.
We have gone a long way past ridicule of the Government’s performance. Gone past even anger over what they have done. We are now, or should be by now, in a state of alarm over what they are doing. For they are bringing the country to the edge of an economic and social catastrophe.
Just look at what they have done on the pensions levy. That they proposed to levy pensions on those earning €15,000 a year is inexplicable. That they come up with this at 4am at the very end of the talks with the social partners, without themselves understanding what they were doing, as Fintan O’Toole chronicled here yesterday, is just staggering.
Even to have contemplated the levy as a stand-alone proposal, without any presentations of how this fitted into an overall plan involving tax increases aimed primarily at the relatively wealthy and the actually very wealthy, is incomprehensible.
Incomprehensible not just in terms of fairness, but in terms of simple public relations.
What did they expect the unions to do on being presented with this ludicrous proposal right at the end of social partnership talks that were fairly pointless anyway? And at the same time to be talking in terms of further underwriting the banks in which the chief executives will still be paid multiples of what the most senior bank people in America are to be paid under Barack Obama’s plans. Obama is insisting bankers’ pay be capped at $500,000, which works out at less than €400,000, but Irish Life and Permanent think they have bitten the executive pay bullet by capping their chief executive’s pay at more than twice that, and the AIB chief looks like getting four times that.
And they expect the lowest paid in the public service to think it is okay to have their income of €15,000 or €20,000 or €30,000 levied? It is no longer an issue of them pursuing a policy that is wrong-headed or unfair.
We are now well past that.
We are talking of survival.
Brain Cowen and Brian Lenihan are capable of doing lasting damage to this country, damage that will cause pain not just for now or three to five years or even 10 years, but for a generation or generations.
This bank crisis managed or mismanaged by the two Brians could prove a calamity. I don't know. But I do know that the duo who devised this pensions levy caper and who are talking about doing due diligence on the banks, afterthey have given them €7 billion, cannot be trusted not to do us in for decades.