Brian Cowen ducks out as Ireland prepares for crisis election

IRELAND’s prime minister Brian Cowen yesterday announced the dissolution of the Irish parliament, in what was probably the last act of his political career.
The move brought to a close one of the most controversial governments in Ireland’s history and paved the way for the first general election since last year’s bailout of the economy by the European Union and International Monetary Fund.

The taoiseach was forced to hasten the 30th parliament to a premature conclusion following a catalogue of political setbacks that saw him lose the leadership of his Fianna Fail party and his coalition partners, the Greens, withdraw their support from his government.

In his address, Mr Cowen, who earlier this week announced he would not stand for re-election, argued that the forthcoming 25 February election, would “define Ireland’s economic future”.

Speaking less than an hour before meeting President Mary McAleese to formally dissolve the Dail, Mr Cowen said the election would decide “whether Ireland moves forward from this recession or whether we prolong it or indeed succumb to it”.

During a 15-minute speech, delivered partly in Gaelic, a pale Mr Cowen suggested his government was leaving behind a country on the road to economic recovery with prospects for growth. Yet outside the Dail, activists protested against a €1 an hour cut to the minimum wage that also came in yesterday. The “Ireland’s Day of Shame” demonstration was led by a coalition of trade unions and community organisations angered by wage cuts and job losses.

Mr Cowen leaves office as the shortest serving taoiseach, the first Fianna Fail leader not to lead his party into a general election and as the man who oversaw the Irish economy’s collapse and November’s €85 billion EU/IMF bailout.

Unemployment has almost reached 12 per cent, and the country expects to see 50,000 people emigrate by the end of the year as job prospects evaporate. However, public anger is unlikely to be translated into sweeping political change.

While polls suggest Labour and Fine Gael will form a coalition, neither of the two main opposition parties have managed to seal a deal with the electorate.

Fianna Fail looks set to suffer a crushing defeat and could even trail a resurgent Sinn Fein when the new Dail opens on 9 March.

But no new political grouping has emerged.

Yesterday it was left to Ireland’s traditional political leaders to make their pitch to replace Mr Cowen. Fine Gael leader and bookies’ favourite as next PM, Enda Kenny, said he plans to rebuild. “We will make Ireland the best small country in the world in which to do business,” he said, inadvertently echoing former Scottish Labour first minister Jack McConnell.

Article first appeared in the Scotsman 2 February

Time for a Default?

“There is no reason why Ireland should trigger an IMF or EU-type bailout”, Irish Minister of State for Europe, Dick Roche, told the Today program on BBC Radio 4 this morning. But despite such government protestations, the scale of Ireland’s sovereign debt crisis is such that it seems only a matter of when, not if, the country requests a bail out. Indeed it could happen as early as 5pm this evening.

But is a bail-out such a bad thing? Not if it leads to much needed debt restructuring – or even a full default – it isn’t.

Last week German chancellor Angela Merkel said that bondholders to troubled countries would need to share the pain. Remarkably Irish premier Brian Cowen called Merkel’s comments ‘‘not helpful’’ – but the reality is that Ireland should accept its debts cannot be repaid in full and take the opportunity to make a strong deal for debt restructuring from a position of at least reasonable strength.

And Britain should do the same.

Currently our banks are exposed to zero risk, as the state is using the tax payer to insure against any risk. This is a morally – and economically – wrong situation.

Why reward those who lent recklessly to our banks? Why cripple a country with generations worth of debt?

As more and more people lose their jobs, fall into arrears in their mortgages and begin to repudiate their personal debt the social stigma around defaulting on debts seems certain to change. Many of these bad loans were made in bad faith, and it is the huge cost of shoring up the financial markets – in the UK, Europe and around the world – that has provided the economic (if not the ideological) rationale for austerity.

So what’s the answer? Well fair debt restructuring would be a start, negotiating a reasonable pay off with creditors rather than maintaining the fallacy that all creditors will be paid off in full.

Indeed there is even a strong case to be made for – whisper it – repuditating sovereign debt completely. Look at Iceland, as Irish economist David McWilliams did in a newspaper column a few weeks back. Here our troubled Nordic neighbour defaulted on its debts, closed its banks, and allowed its currency to fall. The result? Lower bond rates than Ireland and a serious increase in quality of life for ordinary Icelanders.

Maybe the difference between Iceland and Ireland really is one letter and six months after all.