A fair amount of rubbish is talked about Irish sovereignty. Despite what some have said, it is not like virginity (ie, once it is gone, it is gone forever). But then again, like sex, it is not something that Ireland likes to talk about in public either. In our Lisbon essays (scroll down) it formed the base of some of our liveliest contributions.
I was particularly struck by Ben Tonra’s suggestion that the country was too timid to make any bold decision one way or the other on substantial issues relating to matters beyond its sea borders. It’s almost as though it suffers the kind of comic fear induced by Douglas Adams’s fictional ‘total perspective vortex‘:
“Have some sense of proportion!” she would say, sometimes as often as thirty-eight times in a single day. And so he built the Total Perspective Vortex–just to show her.
And into one end, he plugged the whole of reality as extrapolated from a piece of fairy cake, and into the other, he plugged his wife: so that when he turned it on she saw in one instant the whole infinity of creation and herself in relation to it.
To Trin Tragula’s horror, the shock completely annihilated her brain, but to his satisfaction he realized that he had proved conclusively that if life is going to exist in a Universe of this size, then one thing it cannot afford to have is a sense of proportion.
For a ‘TPV’ kind of sense of proportion, here’s Jim Saft – a Reuters columnist – on how some of Ireland’s sovereign cash reserves are being subborned to fill that big hole in European Bank exposure to Ireland’s now largely publicly owned banking system:
Ireland is kicking in 10 billion euros from its National Pensions Reserve Fund into an 85 billion euro package of support for its banks.
Trust me, this does not reduce the risk profile of the NPRF, which was set up as a sovereign wealth fund to help pay for state retirement benefits.
Putting aside jokes about sovereignty and wealth, of which there is appreciably less in Ireland than formerly, this is effectively a transfer of wealth from the Irish people to its banks. Or rather, to the institutions, mostly European banks, which hold Irish bank debt, none of whom as senior creditors will share in the pain.
In many jurisdictions if Ireland were a corporation and the NPRF part of the corporation’s pension fund, then making such a move would be illegal, and quite rightly so.
Of course this is not the first time that the NPRF has been used in this way. It has already “invested” 7 billion euros into Irish banks and has pledged another 3.7 billion to struggling Allied Irish Banks.
Also under consideration is a regulatory move that would effectively compel some private Irish pension funds to hold more Irish government debt, thereby providing the state with a captive investor base but hugely raising the risks for savers.
As P O’Neill notes:
Since these investments are being directed into a sector that will be downsized as part of the program, there’s not much prospect of a return. You don’t pour 10 billion into a shrinking sector — without any major debt restructuring — and expect to get your money back. GM, it ain’t. In fact, the new money for banks seals that there will be no bank bond restructuring, because you’d have to wipe out the equity before hitting the bondholders. The equity is that new money from the state.
So, for one of the bolder alternatives, here’s Guido looking for Ireland to follow Iceland’s example:
Ireland’s future thus looks a lot more bleak than Iceland’s path of debt default and a devaluation of 60% two years ago which has the country rebounding: exports and manufacturing are growing by 20%, tourism is back near all-time highs, real wages are rising, unemployment is declining sharply, interest rates fell from 18% to 5.5% and the stock market has rebounded 50% from its lows. In contrast this euro-banker’s bail-out will only burden the next generation of Irish who don’t flee with crushing debts not of their making…
So not quite the fire brigade many of us expected, perhaps? Now the Germans have finally woken up to the loss of all that free money their banks were pouring in to Ireland, they want their money back.
At the heel of the hunt this is a tough lesson in what national sovereignty actually means (very little, if it is not actively used), and that some European largesse comes along at a hell of a price. Just because you don’t engage with it publicly, doesn’t mean to say it cannot hurt you.