The Coalition has been in power for 100 days. It has failed to deliver on many commitments
AN ADMINISTRATION’S first 100 days in office are usually overhyped – any evaluation of a new government can only be partial after such a short period. This administration’s first 100 days are somewhat different, both because of the huge challenges it faces and because Fine Gael, in particular, placed so much emphasis on the period during its election campaign.
In the run-up to the election both Coalition partners spoke repeatedly of “hitting the ground running”. To do this, ready-to-roll-out policies are needed. Just as crucially, the steel to implement those policies – in the face of inevitable resistance – is essential. Although it is too early to draw definitive conclusions, on both counts the record to date is mixed.
There was reason for concern from the start. The tone of the programme for government did not signal a rupture with the past. “Review” (as noun or verb) appeared 56 times. The word “implement”, in its various forms, appeared 38 times.
In soliciting views in recent weeks on the new Government from people who have been involved in public affairs over decades, it was striking how frequently the Coalition was contrasted unfavourably with the first months of the administration that took office in 1987.
All agreed that the sense of urgency and aggressive resolve that characterised the early days of the Haughey-MacSharry government are for the most part absent now. Instead of shaking up their departments, too often Ministers appear captured by the system.
An exception has been on jobs. The Government’s initiative on employment announced last month has the potential – only the potential – to have an impact. The decision to fund it by expropriating parts of pension funds was dubious, but it showed a rare willingness to take action both bold and unpopular. Rarer still has been Richard Bruton’s willingness to be more radical than the official advice he received on reforming archaic rules and structures that hinder employment creation.
But the most important indicator of the Coalition’s readiness to be radical will be the degree to which September’s comprehensive spending review heralds change in what the State does and how it does it. Both Coalition parties sounded serious about this before the election. They have continued to do so since. Brian Hayes rattled private sector interest groups when he signalled an intention in April to seek better procurement terms from companies selling goods and services to the State. Brendan Howlin has not minced words when signalling further downsizing to the public sector.
But even if the will to act exists, there is some question about the institutional capacity to execute a truly comprehensive spending review. The new Department of Public Expenditure and Reform – the establishment of which deserves praise – is still in institution-building mode, something that will distract from the huge spending review task.
There are also doubts about whether it has the technical capacity to conduct a truly comprehensive spending review. At a recent seminar co-hosted by that department, a senior official said it was only now developing capacities to carry out cost/benefit analyses. Worse still, he noted this capacity had withered, having once existed at the insistence of the EU when it wanted its structural funds to be properly spent. When asked why the methods used in the past were not simply used again instead of trying to reinvent the wheel, he was silent.
A number of people, including those in the economics profession, have questioned why the Government has not used its honeymoon period to accelerate the budgetary adjustment process. Having implemented symbolically significant measures, such as cutting its own pay and ministerial cars, the Government bolstered its moral authority to cut spending and raise taxes. That it has chosen not to do so may turn out to be an opportunity missed.
But the budgetary adjustment being undertaken this year is already close to the point of being self-defeating, and is possibly beyond that point. That the usually fiscally hawkish International Monetary Fund opposes further adjustments this year is not insignificant. (None of this means urgency in eliminating wasteful spending is not needed.)
On banking and wider issues surrounding the EU-IMF bailout, the Government deserves all the derision it is getting. It has failed to deliver on its campaign commitments and its rhetoric is coming back to haunt it.
Two of the more blatant examples stand out. Within days of the election, Leo Varadkar said that not another “red cent” would be put into the banks. On a wider range of bailout issues, Eamon Gilmore thundered that he would dictate to the European Central Bank and not have it dictate to him – and dismissed the bank’s president as a mere civil servant.
There are only two explanations for what both men said: either they were engaged in cynical electioneering or they were inexperienced and naively uncomprehending of how little sway a bust and bailed-out government has over those holding the other end of its lifeline. The evidence points to the latter.
On the specifics of the failure to deliver on changing the terms of the EU-IMF bailout, it is well-known there has been no burden-sharing with senior bank bondholders and the interest rate on funds has not been reduced. Less discussed has been the commitment, included in the programme for government, to obtain medium-term funding from the ECB so that Irish banks would not be faced with cardiac arrest if Frankfurt began to normalise its liquidity provision practices.
This issue had been pushed by the previous administration repeatedly. With the ECB desperately trying to lessen its exposure to Irish banks, not increase it, Frankfurt ruled it out just as repeatedly. The new administration simply did not understand this dynamic.
As if to emphasise the non-availability of special treatment for Irish banks, the next president of the ECB, Mario Draghi, ruled it out at the European Parliament this week.
If non-delivery on changes to the bailout terms has exposed the Coalition parties’ misunderstanding of what could be realistically achieved, their inaction on banking is evidence of lack of steel. On March 31st, the latest (and, hopefully, last) injection of capital into the banks was announced. There would have been no better moment for the Government to fulfil its commitment to clear out pre-crisis directors (Fine Gael promised this in the first 100 days). Not only has this not been done, but Bank of Ireland on Wednesday reappointed four pre-2008 directors. The new Government takes bankers’ provocation as meekly as the last.
After 100 days the picture is far from complete. It would, therefore, be wrong to make any definitive judgments on whether this Government has the wherewithal to formulate and implement reforms that would not only extract Ireland from the deep hole it is in, but take advantage of the crisis to make changes that might lessen the risk of tumbling into another one in the future. But the evidence does not inspire huge confidence.
Dan O’Brien is Economics Editor