Last week our Government presented a crippling budget in an attempt to save €3.5 billion next year.
In 2010, the government of the day provided promissory notes, made by the State, to fund the bailout of Anglo Irish Bank and Irish Nationwide, now merged as the Irish Bank Resolution Corporation (IBRC).
This financial rescue was in the form of IOUs at a cost of €31 billion to the taxpayer. The promissory notes were given to make a zombie bank solvent as it now had an asset and it was on this basis that the Central Bank lent the IRBC €31 billion, which is then paid on to third-party bondholders.
Under article 123 of the Treaty of the European Union it is expressly forbidden for a Central Bank to lend to an insolvent credit institution like Anglo. The clever promissory note ruse circumvented this prohibition.
While matters were kept within EU rules, Anglo was made to look solvent so that the Central Bank could give it the money to repay its bondholders.
The European Central Bank had no banking default nightmare to deal with, but the Irish people were on the hook for the whole amount. And so every March the Irish people must repay over €3 billion.
And the payment is not to anybody. The money is just destroyed
(taken out of the system). The sick are not treated, the young are not educated, hundreds of thousands face unemployment and emigration and at least one in five private residential mortgages are in severe trouble – and we burn €3.1 billion!
This is a truly staggering amount of money. A billion is a difficult number to comprehend but one US marketing agency helped demystify its sheer magnitude as follows: “a billion seconds ago it was 1959, a billion minutes ago Julius Caesar was alive, and a billion hours ago our ancestors were living in the Stone Age”.
Seven hospitals
The sum to be paid in March could build seven national children’s hospitals – and we are to repeat this insanity every year!
This all-too-smart accountancy trick destroyed our national finances and has led to the loss of our economic sovereignty.
So in this context we are duty bound to ask ourselves whether it is acceptable to pay out the €3.1 billion next March to get nothing in return.
To answer such an important question we ought to look at both sides of the story.
There is an established argument which supports the payment. It is this – we agreed to pay and we are bound by that agreement. There is force to this argument. If we cannot be sure that people will honour their commitments this makes us less likely to trade or exchange with them and that is damaging to us all.
But the law has always recognised that a party to a contract must have agreed to its terms. If a party has not agreed then the contract is not a contract at all and the party is not bound.
Did the Irish people, who must make these staggering payments year on year and for no benefit, agree to be bound in this way? It appears to me that the Irish people did not.
The Constitution, which forms the basis of how we operate as a nation, created a number of institutions of State and mandated those institutions to operate according to defined roles.
One of those institutions is Dáil Éireann. It is the most important of all the institutions for it is the “law-making” body. Apart from making the laws the Dáil has a very important power. The Dáil holds the chequebook.
Like all other democratic systems around the globe the people’s elected representatives must agree to the spending of public monies and that is a solemn responsibility placed on the Dáil.
Put simply, no minister can spend a cent of public money unless the Dáil has approved such spending.
Did the members of Dáil Éireann vote to make and provide the promissory notes or did they vote on any payment made on foot of the notes? It is critically important that the people of Ireland realise that the answer to this question is that the elected members of the Dáil never voted to make those promissory notes and have never authorised payments on foot of them.
It was the minister for finance alone who made the notes and who then made payment on foot of them. The lawfulness of this unprecedented situation will be tested in the courts early next year.
In simple terms, the question posed to the High Court relates to the essence of our democratic system. Can the elected representatives of the people of Ireland be bypassed when making such monumental decisions affecting the people for generations to come?
‘Inability to pay’
Pat Rabbitte is the first senior member of the Government to flag the country’s “inability to pay” argument. Provided this does not turn out to be a dressed-up reinvention of “kicking the can down the road”, it is to be welcomed.
But surely the same principle can and should be applied to our own people struggling to save their homes?
It is expected that the latest Central Bank figures will show a further escalation in mortgage arrears for homeowners and this is when the Government has decided to unleash a property tax.
There is no reality in expecting people in significant mortgage arrears to pay this tax when they already are unable to pay their mortgages.
This tax will only pile on further misery on middle-income Ireland, and is akin to throwing water on a drowning man.
Surely our country’s struggling homeowners also should be entitled to plead “inability to pay”.
Vincent Martin is a practising barrister
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