This article originally appeared in Irish Left Review, Issue 2, Vol 1., published in November 2013.
Recidivism (from recidive and ism, from Latin recidivus “recurring”, from re- “back” and cado “I fall”) is the act of a person repeating an undesirable behaviour after he/she has either experienced negative consequences of that behavior, or has been treated or trained to extinguish that behavior.
In June 2013, the ongoing rumblings of discontent at the blanket guarantee decision exploded on to the front pages with the publishing of the ‘Anglo Tapes’ recordings by the Irish Independent. After three bank inquires of a sort, through the Nyberg Report, the Honohan Report and the Public Accounts Committee Inquiry, the remaining fog around the events leading up to the guarantee and what happened on the night and early morning of 29th and 30th of September 2008 was such that it only took the selective leaking of a fraction of the tapes held by the ongoing criminal investigation to stoke up public rage and renew calls for a proper inquiry or tribunal[i].
This continuing fog and the far reaching consequence of the decision have led many to reach all sorts of conclusions about who ultimately was responsible. In 2013 commentators like Fintan O’Toole[ii] and Stephen Donnelly TD appear to think that the protection of Irish banks provided by the 2008 guarantee was so devastating for the Irish economy that it must have been insisted upon by the ECB.
More often than not, however, this regularly repeated belief is a conflation of the 2008 guarantee with what Brian Lenihan, and later Michael Noonan, suggested was the insistence of the ECB that unguaranteed senior debt must be paid back after the 2010 bailout.
There is no indication of ECB involvement in the 2008 decision despite Brian Lenihan’s retrospective claim in 2010 that it was impelled by Jean Claude Trichet’s voicemail directive in 2008 to ‘save our banks at all cost’[iii]. On the contrary there is plenty of evidence that there was widespread surprise and anger in Europe at the ‘unilateral’ move and the problems it created, as well as pressure to change it.
It is important to understand that the original guarantee was an Irish decision alone, without any outside involvement, because it helps us dissect the nature of power and class in Ireland. The facts need to be separated from the myths in order to appreciate how decisions like it continue to determine the shape of the economy and the nature of Irish society.
The action in September 2008 is an illustration too of how a type of ‘rentier’ class in Ireland are able to exploit Ireland’s resources without consideration of the consequences for wider society. These rentier capitalists benefit from the managing of assets, whether through financial services, the movement of corporate profits tax-free or investment property. Their interests are boosted by the state leading to the side-lining of productive capital and the continually undermining of labour’s position[iv].
The guarantee was not put in place simply to maintain liquidity to Irish banks. Officials and politicians knew enough to be aware that the problems at Anglo Irish Bank and Irish Nationwide were far greater than one of a temporary lack of liquidity due to a crisis elsewhere. Funds from the Central Bank of Ireland had been provided to Irish banks through unprecedented quantities of Emergency Liquidity Assistance. Banks in other countries were experiencing similar problems and received extraordinary quantities of emergency funding from their central bank during the crisis in September. Yet, significantly, no other EU country provided an unlimited guarantee.
In Ireland’s case the problem was twofold. One, to keep cheap interbank lending available to Irish banks, they needed a guarantee that would remove the sense that Irish banks were increasingly high risk because of their over-exposure to collapsing property markets.
Two, in order to keep the level of emergency liquidity available to ensure that Anglo Irish Bank and Irish Nationwide remained open they needed a guarantee that would make an insolvent bank ‘solvent’. The dangers of this approach were clearly outlined before the decision was taken, yet we are still asking ‘why did they do it?’
To try and answer that question we have to go back to the last time the Irish government provided an unlimited guarantee to the banks to enable them extract themselves from a speculative fiasco even though there was incredible risks to the wider economy by doing so.
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