CURRENT AFFAIRS: COLM KEENAreviews How Ireland Really Went BustBy Matt Cooper Penguin Ireland, 464pp. €14.99

IN SEPTEMBER there was a brief exchange between the Socialist Party TD Joe Higgins and the governor of the Central Bank of Ireland, and member of the governing council of the European Central Bank, Patrick Honohan.

Honohan was up before the Joint Committee on Finance, Public Expenditure and Reform, and Higgins was delighted by the opportunity to get up close and personal with someone he described as a creature of the international banking system.

“What is the moral justification and why does Prof Honohan support the fact that the Irish people should have been saddled with tens of billions of euro of private debts by private institutions in private deals between private speculators of private profit? How does he justify that finishing up on the shoulders of the Irish people?” Higgins asked.

Honohan’s reply seemed to please Higgins. The deputy, he said, would be surprised by the extent to which he shared his objectives and his analysis. Where the governor said he parted company with Higgins was in what could be done within the system as it existed.

This book by the journalist and broadcaster Matt Cooper reviews what Ireland did when suddenly confronted with the consequences of its disastrous financial mismanagement during the Fianna Fáil-Progressive Democrats coalition years. It does not deal with the issue raised by Higgins: the crazy international banking system that has wrecked so many economies and has become a threat to parliamentary democracy itself. Cooper’s focus is on how Ireland coped with the results of its bubble years in the context of the constraints that Honohan referred to.

The reader is tempted to expect the book to tell us how well Brian Cowen and the late Brian Lenihan performed and whether the decisions that they and (very few) others made were the best in the circumstances. That may be an unrealistic expectation: we do not, and will never, know what would have happened had different decisions been made.

What the book does is to recount, in detail and with admirable clarity, the succession of events as the muck hit the fan and the Ahern-era chickens came home to roost.

So much is going on: Ireland’s bank and building sectors collapse; one of its foremost business figures, Seán Quinn, is exposed as an extraordinary and delusional gambler; people throughout the land realise that they may never be able to pay off their debts; and the government’s tax take crumbles as unemployment soars.

In the midst of such an interlinked crisis it is difficult to point to particular decisions that could have altered matters dramatically. Nevertheless, Tuesday, September 30th, 2008, emerges as the day of one such event. Cowen and Lenihan decided that the State would guarantee the Irish banking system even though the sector’s liabilities were more than twice the size of the economy.

It was an extraordinary gamble, and it was made for the wrong reason. They thought that the Irish banks had a liquidity crisis – that is, that they had a short-term problem finding funding – whereas in fact they had a solvency problem: they had run their affairs so badly that they were bust.

That the decision was made while the rest of the government, unbelievably, were asleep in their beds remains shocking three years later. In fact one of the striking elements of this book is the absence from its pages of most of the ministers who made up the Cowen government.

Cooper’s recounting of how Ireland coped after the collapse is informed by his role as a senior journalist and by his off-the-record interviews with some of the principals. His consideration of Cowen’s position is fascinating. Cooper’s take is that Cowen rose through the ranks without doing much and then, after he was appointed taoiseach, realised that his performance as minister for finance had contributed to the partial destruction of the Irish economy. Cowen was both appalled by the enormity of what he was responsible for and reluctant to face up to it. He neglected his health and barked at anyone who approached him with more bad news. He may have been depressed, and he continued his lifetime’s practice of not being proactive. It is not a picture of the kind of person you want in charge in the midst of such a crisis.

Cooper is kinder to Lenihan, though he records concerns about Lenihan’s ability to stay on top of the unfolding crisis while being treated for the cancer that ultimately killed him. Lenihan’s crucial mistakes were surely the misplaced respect he appeared to have for the banks and the length of time he took to realise they were commercial basket cases.

On the morning the guarantee was announced an exhausted but determined Lenihan told this reporter that the US government had been wrong to let Lehman Brothers fail. Cooper recounts that Lenihan spoke on the phone with Jean-Claude Trichet, who retired this week as president of the ECB, in the hours before the guarantee decision. Lenihan was asked to do whatever it took to stop a euro-area bank from failing.

This remains the objective of the ECB, and it may well be a wise decision. Ireland bares a huge part of the blame for the position it found itself in. Much of the debt repaid by Irish banks in the past two years was financed by ECB loans and, in that sense, by the euro-zone public. These are points worth remembering.

Nevertheless, Ireland has bought into a system where its citizens are being taxed and their public services cut so that foreign banks can be repaid money they should never have lent to Irish banks in the first place.

The weight we have been asked to lift is huge – and may well be too much for us. As Cooper notes, Honohan has said Europe may yet relieve us of some of our bank-created debt.

Cooper’s success in organising all that has happened into highly readable chapters is a considerable piece of work. Read it and weep.

Colm Keena is an Irish Timesjournalist. His book Bertie: Power & Moneywas published last month