ANALYSIS:There was much talk of the Coalition's 'ownership' of the bailout but yesterday brought no progress on central issues like corporation tax rate
THE NEW Government has taken “full ownership” of the bailout, the EU-IMF troika declared yesterday at the conclusion of the first review of Ireland’s rescue package. But apart from the troika’s acquiescence in the Coalition’s reversal of the previous administration’s reduction of the minimum wage, there was not much sign of Irish “ownership”.
Devilish detail will not be available until the revised memorandum of understanding is published in a few weeks’ time. Much more importantly, the central issues for Ireland – some sharing of the costs of the banking disaster, the interest rate on bailout funds and corporation tax – are all very much still in play, and they were not dealt with yesterday. These are matters for Europe’s politicians, not the troika’s technocrats.
Recent talks in Dublin, culminating in yesterday’s statements and press conferences by the Government and the troika, were mostly about putting the relationship between the two on a stable footing. In this, they have achieved that end.
Klaus Masuch, who leads the Ireland team at the European Central Bank (ECB), heaped praise on the Irish authorities. His counterpart from the European Commission, Istvan Szekely, spoke warmly of Irish officialdom, with which he has been intimately engaged for the past 10 days.
Driving home the ownership point, Ajai Chopra, the IMF team leader, described the slightly revised bailout package as “an Irish solution to an Irish problem”. There was not a hint of irony.
You could almost feel the love – even from the other side of the Atlantic (your correspondent watched the press conference while attending an IMF meeting in Washington). By coincidence, a few hours after that press conference in Dublin, Chopra’s colleagues in Washington gave a briefing on progress in all 29 bailouts they are involved in around the world.
The IMF staffers conceded that the bailouts of Ireland and Greece have “yet to achieve market credibility”. In other words, they are still not working.
They also found that sovereign debt restructuring has occurred in only three of the 29 cases, and all in poor countries in the developing world (contrary to ill-informed comment doing the rounds, Iceland is not one of these countries).
During the briefing, the word “ownership” was repeated ad nauseam in relation to the input of bailed-out governments everywhere in their own rescues. The staffers stressed how they had “protected” social spending and imposed fewer onerous conditions on rescued countries than they did in the past. This is the new kinder, gentler IMF. One can only be impressed by how slick the fund is at selling its softer side.
Yesterday’s press conference in Dublin suggested the Europeans are belatedly getting their own PR act together. In November, despite the Europeans calling the shots, much of the popular discussion focused on the IMF. Chopra became a household name, while the team leaders of the European institutions were anonymous. The IMF’s PR people ran the media management side of the operation then.
Yesterday’s press briefing better reflected the power dynamic among the troika. It was held in the European Commission’s Dublin office. The blue flag of Europe was in the background. The conference was chaired by a commission spin doctor (in November that role was played by an IMF man). The ECB and commission team leaders sat in the middle. Out on the edge was Chopra.
Even if the troika people put up a united front at the conference, it is very clear that they continue to differ on how to deal with the crisis in Ireland, and Europe more widely.
Chopra’s boss, Antonio Borges, had his own press conference in Washington yesterday afternoon. He said Europeans were still in denial about the crisis and displayed frustration when he opined that the continent’s banking sector problems could be “instantly” solved if big banks took over smaller troubled banks.
There may even be differences within the troika institutions. While the ECB’s Masuch was characteristically soft-spoken yesterday, one of his bosses was anything but during the week. Lorenzo Bini Smaghi told Irish taxpayers, with quite astonishing hauteur, that they “should not complain” about taking on tens of billions of euro of other people’s debts. Is he is a loose cannon? A bad cop to Masuch’s good cop?