We have bent over backwards to please Berlin. It has not got us as far as we want

My friend Eddie says the political plan for 2013 seems to be, like Chelsea in the Champions League, to stay in the game and hope we get a lucky break. Good analogy Eddie. But in the end, the Germans really only understand force.

Good faith negotiating is not a concept they get. They make only deals that either suit them or deals they need to make.

Essentially we need the Germans, and perhaps the French, to sponsor a deal to equitise most of our bank-supporting national debt .What does it take to get them back to the table to discuss and agree a long-term deferment of €40 billion of our bank recap debt at an attractive interest rate, say, 2.5 per cent for 30 years?

The Germans (we work with them closely and they are formidable partners) will react best to a reasoned plea followed up quickly by action to show we are serious.

Something that brings them off their section of the pitch and is in keeping with their perception of what we are – likable, courageous, independent-minded, emotional and dependable supporters of things European and things German. But bloody-minded when let down.

Uneven pitch

So, I agree, we stay in the game. But first we need to complain about the refereeing. It has been utterly awful.

There is no doubt the European Central Bank put us under irresistible pressure to resolve our banking crisis. Today it is accepted that we paid a price that was, and remains, unreasonable. Since that time, the European Stability Mechanism fund has been created and become the preferred route of dealing with the continuing European banking crisis. The effect of the ESM is to socialise the banking sector problems in Europe. The Spanish bank bailout, for example, will be borne across all European taxpayers.

Inequitable treatment for Ireland runs full in the face of the principles of the union. There is widespread support for this among EU member states.

Second, there was clear intent last May/June that there would be a special deal to address the unsustainable cost of our bank recapitalisation. There have been numerous delays largely driven by German politics. Screw that. Our Government should not seek to create an electoral advantage for one party in a national German election. What happens if Angela Merkel loses power? Based on current polls, the CDU’s coalition partners may not get the minimum share of the poll required to enter parliament. Even if Merkel prevails, a new coalition creates a new set of priorities for a new government.

We may be disappointed again. Also, and this is not trivial, what will our negotiating position be like when, around the time of the German elections, our troika funds are running out? Not pretty.

The central issue, most recently felt by our budget for 2013, is that we need to become solvent – financially and morally. We were supportive of Europe in 2008/2009 when called upon to effect emergency action by the ECB. The alternative, we were strongly advised, would have been financial contagion and wider European bank meltdown.

Ireland needed to act quickly and decisively for the benefit of all. We were then offered an emergency programme with massive economic retrenchment. We have delivered our side of the bargain here (so far, more through the private sector than the public – but this is a local matter). We were recently promised a variation of that deal. None is forthcoming. For us, partners that renege are not the basis of a union we can afford to be part of.

No walkover

So, if the ref keeps favouring one side – the big guys – we pick up the match ball and occupy the centre circle. This they will struggle with. They will need to deal with it, because seeking a walkover would cause the other contestants to see that playing the tournament to those rules is pointless. If everyone goes home, then what? No euro.

Our real leverage with the Germans is the currency exit option and default. And I know that everyone will say “But we can’t leave. We would be rudderless and a cork on a stormy ocean” etc. But, excuse me, we can most certainly leave. And we should not be afraid or embarrassed to say this. After all, we are the guys who have done everything asked of us. We are the country being reneged on.

We are being put in a position where something we all value hugely is being put at risk by our partners in Europe. Our independence. Regaining our national self-esteem or reaffirming our sovereignty is not optional. It is necessary.

The point is, all things being equal, we will have to default without a deal on our bank recap debt. Therefore, best accept this and accelerate the discussion to generate the best outcome for Ireland.

As soon as we get serious about planning an exit, chaos will break out in many markets.

The IDA Ireland, the National Treasury Management Agency and all the technocrats will say “our job is impossible”. And they may be right for a while.

For the IDA it will be a version of “Tesco won’t open another supermarket in Ireland. Facebook will leave.” All nonsense. For the NTMA it will be “I can’t manage the national debt.” To which I would say, start thinking about defaulting on the national debt. We can find you that job. In my mind, that agency has the potential to be most helpful on this strategy.

This strategy will damage our bond market re-entry while the negotiations continue. Especially if the Templeton guy gets nervous. But that has several attractions. It will scare the daylights out of the ECB. It will be wondering what to do with the Irish collateral it has. If we start looking seriously at leaving, then every other little neighbour may begin considering that too. Think of the ECB collateral pool then. Think of the BNP Paribas balance sheet. They can start all over again with the European bank recaps. It could cause fantastic chaos in euro-related financial markets. This is precisely the point.

This is the only way our partners are likely to engage in a real discussion about Irish bank-debt rescheduling. If we wait we might get a break, but I very much doubt it. We need to be braver and much more forceful in creating our own luck.

Conor Killeen is chief executive and founder of Key Capital