Having caused then denied problem, Fianna Fail is in firing line

AS ANY counsellor knows, acknowledging the existence of a problem is the first step to solving it. Unfortunately when it came to Ireland’s banking crisis, the ruling Fianna Fail-led coalition chose to remain firmly in denial until the contagion had spread out of control.

As recently as Wednesday, finance minister Brian Lenihan told the nation that Irish banks had “no funding difficulties”. It was an unprovoked “attack” on the euro, he claimed, that precipitated the discussions with the International Monetary Fund in Brussels.

But if Mr Lenihan wanted to calm an increasingly restive national mood his comments had the opposite effect. Respected economists and political commentators reacted angrily to the ailing minister’s half-hearted attempts to restore confidence, accusing his government of duplicity and a failure of leadership.

Having spent two years playing down the banking crisis as a minor liquidity problem, Fianna Fail, the party of government for the past 13 years, finally admitted yesterday that the Irish banking sector needed European funding.

The Irish commentariat are in little doubt where blame lies. In a leader yesterday the normally restrained Irish Times decried Fianna Fail, saying the party’s “ideals are in tatters”. Born out of the East Rising and War of Independence against British rule, Ireland’s most successful political party must now oversee a shameful ceding of sovereignty.

The international credit crunch slayed the Celtic Tiger but it was the disastrous 2008 decision to guarantee all Irish bank debts that sealed the country’s fate. Fianna Fail’s economic policies helped create a climate in which lenders, most egregiously Anglo-Irish Bank, were able to accrue massive – and increasingly toxic – loan books. Tying the financial viability of the Irish state to that of its ailing banks made bailout a question of when not if.

How long the Fianna Fail-Green Party coalition can maintain its grip on power is a moot point. Sinn Fein is poised to win next week’s by-election in Donegal – reducing the government’s majority to just two. Meanwhile, the Green party is expected to try to claw back some credibility by collapsing the administration before the 2012 election.

Fianna Fail seems certain to pay dearly at the polls for its role in losing Ireland’s cherished self-determination. Recent opinion polls show the party on 18 per cent, a historic low

For now the big political issue is not who will form the next government but whether Ireland can get an agreement from the IMF to keep its 12.5 per cent corporation tax rate.

Tanaiste Mary Coughlan, the deputy prime minister, yesterday described as “non-negotiable” the concession enshrined in the Lisbon Treaty and the basis for much of the country’s growth.

However, after the events of the past week, another Irish government denial hardly seems worth the paper it’s printed on.

This piece first appeared in the Scotsman on November 19