We are duty bound to ask ourselves if it is acceptable to pay €3.1bn in March to get nothing in return, writes VINCENT P MARTIN
Last week our Government presented a crippling budget in an attempt to save €3.5 billion next year.
In 2010, the government of the day provided promissory notes, made by the State, to fund the bailout of Anglo Irish Bank and Irish Nationwide, now merged as the Irish Bank Resolution Corporation (IBRC).
This financial rescue was in the form of IOUs at a cost of €31 billion to the taxpayer. The promissory notes were given to make a zombie bank solvent as it now had an asset and it was on this basis that the Central Bank lent the IRBC €31 billion, which is then paid on to third-party bondholders.
Under article 123 of the Treaty of the European Union it is expressly forbidden for a Central Bank to lend to an insolvent credit institution like Anglo. The clever promissory note ruse circumvented this prohibition.
While matters were kept within EU rules, Anglo was made to look solvent so that the Central Bank could give it the money to repay its bondholders.
And the payment is not to anybody. The money is just destroyed (taken out of the system). The sick are not treated, the young are not educated, hundreds of thousands face unemployment and emigration and at least one in five private residential mortgages are in severe trouble – and we burn €3.1 billion!
This is a truly staggering amount of money. A billion is a difficult number to comprehend but one US marketing agency helped demystify its sheer magnitude as follows: “a billion seconds ago it was 1959, a billion minutes ago Julius Caesar was alive, and a billion hours ago our ancestors were living in the Stone Age”.
The sum to be paid in March could build seven national children’s hospitals – and we are to repeat this insanity every year!
This all-too-smart accountancy trick destroyed our national finances and has led to the loss of our economic sovereignty.
So in this context we are duty bound to ask ourselves whether it is acceptable to pay out the €3.1 billion next March to get nothing in return.
To answer such an important question we ought to look at both sides of the story.
There is an established argument which supports the payment. It is this – we agreed to pay and we are bound by that agreement. There is force to this argument. If we cannot be sure that people will honour their commitments this makes us less likely to trade or exchange with them and that is damaging to us all.
But the law has always recognised that a party to a contract must have agreed to its terms. If a party has not agreed then the contract is not a contract at all and the party is not bound.
Did the Irish people, who must make these staggering payments year on year and for no benefit, agree to be bound in this way? It appears to me that the Irish people did not.
The Constitution, which forms the basis of how we operate as a nation, created a number of institutions of State and mandated those institutions to operate according to defined roles.
One of those institutions is Dáil Éireann. It is the most important of all the institutions for it is the “law-making” body. Apart from making the laws the Dáil has a very important power. The Dáil holds the chequebook.
Like all other democratic systems around the globe the people’s elected representatives must agree to the spending of public monies and that is a solemn responsibility placed on the Dáil.
Put simply, no minister can spend a cent of public money unless the Dáil has approved such spending.
Did the members of Dáil Éireann vote to make and provide the promissory notes or did they vote on any payment made on foot of the notes? It is critically important that the people of Ireland realise that the answer to this question is that the elected members of the Dáil never voted to make those promissory notes and have never authorised payments on foot of them.
It was the minister for finance alone who made the notes and who then made payment on foot of them. The lawfulness of this unprecedented situation will be tested in the courts early next year.
In simple terms, the question posed to the High Court relates to the essence of our democratic system. Can the elected representatives of the people of Ireland be bypassed when making such monumental decisions affecting the people for generations to come?
‘Inability to pay’
Pat Rabbitte is the first senior member of the Government to flag the country’s “inability to pay” argument. Provided this does not turn out to be a dressed-up reinvention of “kicking the can down the road”, it is to be welcomed.
But surely the same principle can and should be applied to our own people struggling to save their homes?
It is expected that the latest Central Bank figures will show a further escalation in mortgage arrears for homeowners and this is when the Government has decided to unleash a property tax.
There is no reality in expecting people in significant mortgage arrears to pay this tax when they already are unable to pay their mortgages.
This tax will only pile on further misery on middle-income Ireland, and is akin to throwing water on a drowning man.
Surely our country’s struggling homeowners also should be entitled to plead “inability to pay”.
Vincent Martin is a practising barrister and co-founder of New Beginning, an advocacy group founded to campaign for Ireland’s financial recovery by reaching a fair solution to over-indebtedne ss
Above German Finance Minister Wolfgang Schauble
Ahead of today’s visit to Dublin by German finance minister Wolfgang Schäuble, German officials said retooling the emergency loans to the defunct bank was more politically palatable than transferring Irish legacy bank debt to the European Stability Mechanism (ESM) bailout fund.
Irish officials indicated yesterday that Minister for Finance Michael Noonan would concentrate in today’s talks on the promissory note – issued to pay depositors and creditors of Anglo Irish Bank and, later, Irish Nationwide – and would return to the legacy debt issue when there was more promise of political progress.
Mr Schäuble will hold talks with Mr Noonan and Minister for Public Expenditure Brendan Howlin ahead of a joint press conference. Both sides played down expectations of substantial progress today, ahead of Thursday’s talks in Berlin between Taoiseach Enda Kenny and German chancellor Angela Merkel.
“On the promissory notes it’s difficult to say anything in public as, officially speaking, this is European Central Bank territory,” said a German political source.
“A promissory note deal wouldn’t change the actual amount of debt,” said another official, “but would turn it into a 40-year mortgage.”
The promissory note obligations, an IOU issued to stabilise Anglo Irish Bank, have been the subject of ongoing technical discussions with the ECB.
The statement today by the minister for finance, Michael Noonan, calling on the European Central Bank to make a “declaration of intent” about some kind of solution in relation to the Anglo-Irish Bank promissory notes is a clear sign of desperation by a government that has neither the political will nor the courage to challenge this illegitimate and odious anti-people debt dumped on the backs of our people.
The Irish establishment has been claiming almost every time they come back from these jamborees that they have struck a deal; but no sooner have they their backsides back in their Mercs than their “deal” unravels.
This is the first time that any Irish minister has publicly admitted that there is strong link between the government’s budget strategy and the repayments of this odious debt. This he did when he stated: “It would help me doing the budgetary arithmetic if something could be arranged” in relation to the promissory notes.
The sick, the poor, pensioners, those who need and use government services and all working people are paying and will increasingly pay an unbearable price for a debt that is not the people’s. Our people are being crucified to pay the debts of bankers and speculators and to keep the EU and Irish elite in the wealthy life-style they believe is theirs by right.
There is no shortage of capital in Europe: it is estimated that nearly €3 trillion is accumulated within the EU that cannot be invested do to the fact that there are to few investment opportunities outside of financial speculation. All this unused capital is in the hands of the very same banks and speculators that demand the payment of this odious debt.
How can the Labour Party stand over massive cuts in spending while making the people pay for this corporate debt. �What we need from this government is a declaration of intent to stop paying this debt, to repudiate it as an anti-democratic imposition on our people by the external troika in co-operation with our own internal troika.
The main advantage of issuing a long-term bond is that the State would not have to pay the €3 billion a year it gives to the Irish Bank Resolution Corp (the former Anglo) on the back of the promissory notes. At present, the bank takes that money and gives it to the Irish Central Bank, which is funding IBRC through emergency liquidity assistance.
A Government spokesman declined to comment last night beyond saying that “complex technical discussions are ongoing and the objective is to deliver the best deal possible for the Irish taxpayer”.