The significance of the bank bail out

The decision of the government to guarantee the liabilities, the debt and deposits, of the Irish banks has been described by the Labour Party leader Eamon Gilmore as the ‘biggest blank cheque in history’. The guarantee amounts to around €400bn and will be nearer €500bn if non-Irish owned banks such as the Ulster Bank are included.

Beyond the nature of the decision and its suddenness, the sheer scale of this guarantee has been staggering. The US bail-out plan which was initially rejected by Congress was claimed to cost $700bn. In other words the Irish guarantee could grow almost to the size of the US bail out while the US economy is almost seventy times larger!

What we have seen is a financial shock and awe which most ordinary people have struggled to comprehend. Watching television, listening to radio or reading the papers they have learned that the guarantee is well over twice the size of the whole economy, over ten times the existing national debt, thirty seven years tax returns or over €100,000 for every citizen in the State – man, woman and child. How on earth could this be afforded?

On top of this they have heard a few absurd claims that the taxpayer could actually turn a profit, while the government claims that they are just using ordinary people’s taxes to save their own money. The extreme complexity of the financial system has frustrated many attempting to understand just exactly what is going on or efforts to orient themselves in the midst of a massive propaganda campaign which has hailed the bold and decisive leadership of the government.

It must also be stated that decisive in this confusion has been the role of the opposition, or rather the fact that the vote in the Dail to approve the plan revealed, not for the first time, that there is no opposition. Backed by a media increasingly controlled by a few extremely wealthy individuals there has been no room for a coherent alternative to be presented. At most we have heard doubts and criticisms of the precise way in which the bail out has been fashioned.

Claims

The claims of the government are lies. Last Tuesday’s front page of ‘The Irish Times’ reported a speech by Brian Cowan in which he said that the Irish economy was strong and that what we were witnessing was ‘part of the economic cycle.’ On Monday night, while that newspaper was being printed, the banks turned up and asked for the biggest bail out in history because one bank was about to go bust, another was likely to follow shortly thereafter, and the whole system would then collapse. A normal part of the economic cycle?