A popular narrative has existed in many of the eurozone countries hardest-hit by the Great Recession that says the suffering of the people of [insert choice of Ireland/Greece/Spain/Cyprus/Portugal/Italy] has been orchestrated to save ze Germans from losing their geld. It's not a terribly convincing explanation and in some countries, most notably Greece, has been part and parcel of a fairly disgusting racist campaign against both those who are perceived as having money, and against ethnic and racial minorities (in times of worse economic crisis in 1930s Germany, these were one and the same).
|Tory MPs on their way to a stag do in Athens.|
Photograph: Action Press/Rex Features
So, the story goes, where you have irresponsible borrowers you also have irresponsible lenders, who really should know better and are really the villains of the piece. And now that the Irish taxpayer has had to shoulder the multi-billion euro burden of the mistakes of Ireland's banks, who was so irresponsible to lend so much money to Ireland's banks that they had to shove it down the throats of Ireland's borrowers, whether it was prudent for the borrower to take out such large loans or not?
And the answer of course is: Ze Germans!
It was German banks, and eurozone interest rates set at rates best suited to the German economy not the Irish economy, that cause Ireland to be awash in money and led Ireland's banks into such irresponsible and frankly amateurish lending practices. It follows, therefore, that (like Ireland's irresponsible lenders), Germany's irresponsible lenders should also feel part of the pain when the tide went out.
As I said, it is superficially an attractive argument, but the German retort is an unassailable one: the reason why national governments have regulators of the banking sector is to ensure this sort of thing doesn't happen. Ireland's failure to properly regulate the lending of Irish banks cannot be pinned on Germany.
|Lenders gonna lend|
And if you have any doubt as to the extent of the failure of regulation in Ireland, please have a look at the first 4, jaw-dropping, eyes-behind-a-cushion, is-he-really-the-man-in-charge-of-overseeing-the-banking-sector? minutes of this RTÉ interview, shortly after the Irish government gave its now infamous 'bank guarantee'. (If you are short for time start at 1:04). It is widely accepted in Ireland that this is the moment the nation collectively gulped and realised we were White Water Rafting on the Río Mierda without as much as a plastic bucket-and-spade between us. (Remember, at the time of making these comments, Ireland's banks were more busted than Justin Bieber in Miami Beach).
Anyway, the reason why all this is back in my mind is the above newspaper story in the Irish Times, which reports that the Bundesbank was in fact supportive of Ireland's attempts to 'burn the bondholders' (a phrase that entered the lexicon in Ireland somewhere alongside Érin go Bragh and Tíocfaidh ár lá), and that the real opposition came from the European Central Bank (ECB) and its president, Jean-Claude Trichet.
This should come as no surprise. From the very start of the crisis, Trichet was instrumental in bouncing two Irish governments into doing things they did not want to do: issuing the infamous bank guarantee, taking an international 'bailout', and in blocking Ireland's attempts to get relief from the debts that the banks saddled on Ireland's taxpayers and which bankrupted the country. (If you are Irish and watch the clip below, I recommend standing away from the computer so you don't attempt to throw it when you see the late Brian Lenihan's smug grin as he recounts how he was at "a Fianna Fáil event at a racecourse in Kilkenny on the Saturday" when Trichet was trying to contact him, and so didn't get the ECB President's messages until the following day.
(Now, it is perhaps unfair to speculate, given that Brian Lenihan tragically died from pancreatic cancer aged 52, and is not around to defend himself, but how
Jump to 4:18.
Trichet's attitude was that for the 'stability of the eurozone as a whole' Ireland had to take one for the team, but the team captain (the ECB) was determined that the team wasn't going to step in to make things any easier for Ireland. This was something that even the IMF official in charge of overseeing Ireland's bailout package, Ajay Chopra, considered to be "unfair".
If there is a villain of this piece (aside from Bertie Ahern and his Fianna Fáil government who, really quite unbelievably, were the third Fianna Fáil government to bankrupt the country in 40 years), it is M. Trichet, rather than Frau Merkel and the Bundesbank. (Though, I suppose Trichet's attitude that the regulatory failure was an Irish one and that Ireland should shoulder the resulting burden is not unreasonable; but surely if Ireland has to shoulder the burden then it should decide what is the appropriate policy measure to take, not have it forced on it by the ECB?)
|The ECB's Secret Letter to Ireland: Some Questions (Forbes.com)|
Oh, and what of the Financial Regulator, I hear you ask? What fate befell him for such neglect in his post? Was it sufficient for criminal sanction? Did he just get fired in disgrace? Resign in shame and embarrassment?
Don't be silly. This is Ireland we are talking about. He was forced into early retirement with a lump-sum payment of €630,000 and an annual pension of €150,000 for the rest of his life.
Because in Ireland, that's how we roll.