Monday, 19 January 2009

Nationalisation of Anglo - Irish style

In many developed countries, governments make some attempt to obscure their cosy relationship with the powerful and wealthy – but not so in Ireland. That’s one area of Irish life that is, to be fair, admirably transparent. In fact, the relationship between elected representatives and various golden circles has been so well-documented over the decades that you might wonder why we bother holding elections at all, so obvious is the oligarchy.

Transparency of course, was not always to the fore in the decline and involuntary rescue by the taxpayer of Anglo Irish Bank. It’s last chairman, Sean FitzPatrick, famously managed to hide his €87 million in loans from the bank’s shareholders and auditors alike.

Now, however, it seems that the resulting near collapse of Anglo – which was, in common with other Irish banks, overly exposed to property debts – will see a typically Irish form of nationalisation.

You might have thought that those who got the economy into such trouble by running up debts and inflating capital assets through the Government-fuelled property boom (you’ve seen it elsewhere on this blog: Section 23 and other property tax shelters, capital gains reductions) might have to take some of the pain that the rest of us are being instructed to endure – but not a bit of it.

When plans to nationalise Anglo were drawn up, one condition was that customers who owed the bank more than €20 million would not be allowed to remove funds from below the level of that debt. Most people might say that’s reasonable enough. Predictably, however, that proviso has now been removed, as it “would have created a disincentive to those customers lodging money with the bank” and might be “legally flawed” according to today’s Independent.

If you can’t quite see the economic logic behind that, and it gives you a vaguely uncomfortable “this isn’t right” feeling, don’t worry. Minister of State Martin Mansergh assured us yesterday - before this announcement was made - that Ireland is “not a banana republic”, and all that is needed is for us to retain our Celtic Tiger optimism.

That’s reassuring. But did “Celtic Tiger optimism” – based as it was on nothing more tangible than that - not get us into this mess in the first place?

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