Gavin has dug out this instructive interview with Patrick Neary the former Irish Financial Regulator. It’s just after the Irish Government’s comprehensive bank guarantee. Neary repeatedly insists that the Irish banking system was adequately capitalised. This presumably is what he told Minister Lenihan too. But as Pete picked up at the time, the Guarantee was issued on Monday, by Thursday Morgan Kelly was already warning the real problem was not being addressed (emphasis added):
Effectively the Irish banks are heading in the same direction that the Japanese banks were in the 1990s: zombies that are kept on life support by the Government, but without the capital to provide firms and households with the borrowing that they need. However this cosy Japanese solution to an Irish problem could come unstuck if bank auditors refuse to sign off on the valuations that banks are still putting on their dead assets. This would precipitate a new crisis that would make last Monday seem like a picnic.
The details of the bank restructuring have still not been made public, and may not for a while. And for a country that’s just been bailed out (again), the bond markets are none too impressed. But neither is Lee, who argues that the Conservative and Lib Dem government in Westminster must address Northern Ireland’s over exposure to a virtually bankrupt Irish banking system:
…it was the Euro that negated the need for our participation in the bail-out. The IMF are sufficiently concerned about the world economy and the EU from an economic (and equally political perspective to keep propping up the Euro) that whatever borrowing Ireland needed would have been forthcoming. The absence of a £7bn loan from us would not have left Ireland wanting it would have beens ecured elsewhere. It would have also kept us out of the potential morass of further bail-outs for other countries. Any promises that we won’t should be treated with the sceptcisim any statement on Europe from this government deserves. For me the 55/45 comes down on the side of No.
The die is cast on our particpation but if the government’s concern for Northern Ireland is genuine there is a further step it must take. The Coalition government is to produce a paper on the future of British banks, the over-reliance of Northern Ireland on Irish banks must be addressed in that paper.
Mick is founding editor of Slugger. He has written papers on the impacts of the Internet on politics and the wider media and is a regular guest and speaking events across Ireland, the UK and Europe. Twitter: @MickFealty