Spanish bailout from the EU won’t help the Irish

Spanish Prime Minister Mariano Rajoy 

When is a bailout not a bailout? When it's a Spanish bailout, of course.

The Spanish Prime Minister, Mariano Rajoy, did his best on Sunday to portray the €100 billion bailout of his country's banking system by the European Union as anything but a bailout.   It was a win all round, he insisted -- a win for the euro, a win for the European Union and a win for Spain.

The bailout money coming from the EU would go directly into Spanish banks, he said, although he never once used the unspeakable word "bailout" in his press conference.   Instead of calling it a bailout, he said the funding being provided was a "credit line" for Spanish banks.

Because it was going directly into the banks, it would not be added to the Spanish national budget deficit. It would not involve any oversight by the EU or the European Central Bank or the IMF of Spain's budgets, state spending and fiscal policy. Only the banks would be under the EU microscope, not the state.
So it was completely different than the bailouts that Greece, Ireland and Portugal had been given. Completely different.  Not a bailout at all.

He may not have realized it, but the more insistent Senor Rajoy became, the more hilarious he sounded.   Manuel from Fawlty Towers would have been proud of his countryman.

In fact it was a performance that should win Senor Rajoy the Brian Cowen Fiscal Comedy of the Year Oscar.  He looked like Cowen in the weeks before Ireland was force-fed its bailout when he was still insisting that no bailout was being negotiated and that Ireland's economic sovereignty was completely safe.

Funny though the Spanish hubris was, no one here was laughing.  Ireland's best hope of an escape from a large part of our national debt was vanishing before our eyes.

There had been intense interest last weekend here in the Spanish bailout, because anything that Spain got in terms of better conditions or interest rates, we were going to demand as well.

In particular, if Spanish banks were going to be bailed out directly by the EU, we would want our banks to be directly funded by the EU as well.  

Instead of that, the Irish state had been forced to take the bailout money as a loan; the Irish state then gave the money to the banks so they could repay their debts and bondholders in full and recapitalize themselves. The enormous cost of this was then added to our national debt and is being carried by the Irish taxpayer through relentless cutbacks and tax hikes, the so-called austerity program.  

Was there a chance that Spain had done the impossible and that we were going to benefit as a result?
Watching Senor Rajoy being hilariously dogmatic, I had immediate doubts.  The details he provided of exactly how the EU is going to give the money to Spain were very sketchy.

One thing we do know is that the Spanish banks are up to their necks in bad property loans (just like Ireland) and are effectively bust.  It is clear they will never be able to pay back the bailout money they are being given.

So is the EU just going to wave goodbye to the funding?  The answer is no.

When Senor Rajoy finished his press conference on Sunday he flew off to Poland to watch Spain play Italy in the Euro 2012 soccer tournament.   While he was in the air, EU officials were already "clarifying" what was going to happen.

Yes, the bailout was going to the banks.  But it was being underwritten by the Spanish state, they said.   So if the banks default on their repayments, the Spanish taxpayer will be on the hook.

Just like Ireland, in fact, a helpful German official put it bluntly.

And with that the hopes of Irish taxpayers for an escape from the burden of Ireland's banking debt were sunk.    

It's true that Spain appears to have got something, but it's mainly a gloss aimed at avoiding the public humiliation of Europe's fourth largest economy.

The main thing is that the IMF is not providing the funds, so it's not an IMF bailout. The funds will come either from the euro zone's temporary rescue fund, the EFSF, or the new permanent rescue mechanism for countries in trouble, the ESM, which is due to start next month.  It's an indication of how unclear all this is that we don't even know which it will be.

The Spanish made a big deal out of the fact that the IMF is not providing the money.  The oversight by the EU and the ECB would only be of the Spanish banks (avoiding the humiliation we go through every three months when the EU/ECB/IMF troika come to Dublin to examine the state's books and basically tell us what we should do).

The IMF was not directly involved because the money was coming from the EU, the EU officials explained. However, they said that the EU had invited the IMF to help them in monitoring Spain's banks.  Which is not the kind of thing that the Spanish prime minister wants to hear at all.

The other big difference is that the €100 billion bailout for Spain is to solve their banking crisis.  No money is being given to the Spanish state to get it through its fiscal crisis, with huge budget deficits as it tries to grapple with a double-dip recession and unemployment at 24%.  

The hope was that shoring up the Spanish banks would allow the Spanish state to go on borrowing on the money markets at sustainable rates.   Sadly, that is not happening, with the interest rate being sought on Spanish bonds back up around 6%.

What this means is that Spain is unlikely to be able to continue very long without needing an injection of funding into the state to avoid a collapse.  It won't be as bad as Greece, but it's similar to Ireland and Portugal.  

There won't be any avoiding the bailout word then, or the involvement of the IMF.
Adding to the pressure on the Spanish state is the fact that the €100 billion euro bank bailout funding now being put in place is being underwritten by the Spanish state, according to EU officials.

Ultimately that means the state carries the can for the bank bailout loans if the banks cannot service them. Given the state of the Spanish banks, that's an accident waiting to happen.

There is another unexplained problem ahead for Spain.  The new ESM fund, which will have pledges from all the EU countries, is different from the temporary EFSF, the temporary fund used to help Greece.
Bailout money from the ESM will be treated as senior debt, first in line for repayment if anything goes wrong.

So if the Spanish bank bailout money comes from the ESM, existing and future commercial lenders to the Spanish government will rank behind euro zone governments if Spain is unable to repay all its debts in full.    

The money markets will not like this, and the effect will be to make it even more expensive for Spain to borrow from the markets in the future.  Which would hasten the day when Spain will need a full bailout and will no longer be able to pretend that it is different from Ireland or Portugal.  

So we can't look to Spain for hope.  But eventually some solution will have to be found to all this by the EU, other than loading the cost of the banking collapse on to the shoulders of ordinary citizens in countries like

Spain and Ireland where there was  a massive property bubble. The European Central Bank and the EU did nothing about it when it was happening so they can't escape the consequences either.

Ireland will be watching Spain closely after 'Yes' result in EU Fiscal Treaty

Taoiseach Enda Kenny speaks to the media on Saturday after the yes vote was confirmed 

You never show your hand at the card table, and you certainly don't give away the ace you are holding before the game even begins.

Yet by voting yes in last week's referendum on the EU Fiscal Treaty, that is exactly what Ireland has done.
It's a huge leap of faith, one we made very reluctantly in the hope that the EU will feel duty bound to pay us back with a fairer deal on our crippling bailout.

It's a jump we would never have made if we had an alternative.  But there really was no alternative because we are likely to need more EU funds in the next few years, and a no vote would have made us ineligible for the new EU fund now being set up.  

Our problem now is that we have given away our best card.   Instead of holding the EU over a barrel, we are once again relying on the kindness of strangers, on the sense of fairness and justice of the Germans and the French.  Whether they live up to our trust and expectation remains to be seen.

There was something pathetic about Taoiseach (Prime Minister) Enda Kenny immediately getting on the phone to the other EU leaders last Friday after the yes victory was clear to give them the good news. It smacked of the old cap-in-hand poor Paddy.

The reality is that Angela Merkel, Francois Hollande and the others have bigger worries than poor little Ireland and are already taking our yes vote for granted, even though a no vote would have caused some embarrassment for them. Eaten bread is soon forgot.

The difficulty for us is that Europe is a churning vortex of fiscal and banking problems at the moment in which Ireland is a very small and easily forgotten part.

The fact that we have been crucified with a massive, unjust and unsustainable bailout can easily be overlooked as the EU struggles to cope with the much greater problems of Spain, Portugal, Italy and Greece.

We could have demonstrated our anger at the situation by voting no.  But we voted yes, and we are now expecting Germany and France to do the right thing and encourage the EU and the IMF to give us a fair deal.

When our banks went belly-up a few years ago and our budget deficits soared after the property crash, the markets stopped lending to us and the EU-IMF bailout was brought in to rescue us from financial and social collapse.

The billions came with a penal 5.8% interest rate, deliberately pitched high to punish us and show other countries there is no cheap and easy way out of national profligacy.

It also came with strings attached, mainly the diktat from the European Central Bank that no banks would be allowed to fail, no bank debts would be written down and no senior bondholders would be burned.   Instead the bailout would give billions to the Irish state so that it could pay its own bills and also recapitalize the Irish banks.  Our banks would then be able to go on paying back their debts even though they had lost billions in the property crash and were bust.

Not realizing the scale of what we were facing, the Irish government had already given a blanket state guarantee on all our bank debt. The bailout conditions cemented that in place.  The effect was to turn tens of billions of private banking debt into state debt.

On top of our budget deficits, it left the Irish state bankrupt and the Irish taxpayer carrying the can. It meant that the German and French banks which had lent billions to the Irish banks to fuel the property boom here and get a slice of the action for themselves were home free.

They got all their money back, even though the Irish property market had crashed and the Irish banks were bust.

The tens of billions of private bank debt which were shifted on to the Irish taxpayer adds up to around 40% of our debt mountain, the rest being the result of our accumulated budget deficits.

As we said here recently, it is arguable that without that extra 40% to carry, the Irish state might have been able to cut back and cope with our fiscal situation without having to take a bailout.

But we were forced into taking the bailout and into agreeing that the Irish state would pay back all the bank debt.  To put it simply, we were stitched up.

It took ordinary people here some time to grasp what had happened.  We can understand why state spending and services have to be cut and taxes raised to get our budget deficits down.
But why should the ordinary person here have to endure all this pain to pay back foreign banks who were gambling on the Irish boom?

The main reason our ongoing deficits have remained stubbornly high in spite of cutbacks in spending is that so much of our revenue is now going to pay the huge cost of the bailout.

And a large part of the bailout is being used to pay down bank debt. As more and more people here understand this, the anger grows.

Which is why a no vote here last week was possible.  The yes victory carries a huge expectation with it that the EU will do the right thing and give us a fair deal.

The cynicism here about the way we have been treated is widespread, and with good reason.
When we got our bailout it was at a 5.8% interest rate.  When it later became clear that the Greeks could not pay that much on their bailout, a new mechanism was set up to give them the money at between 3.5% and 4% over a much longer period.

This new deal had to be available to everyone, of course, so suddenly Ireland's 5.8% rate was slashed to the same level and our repayment schedule was shoved out from 7.5 to 15 years.

Kenny tried to claim it as a victory for the government's negotiating skills, which is sad.

We were told there could be no debt write down, yet Greece was able to give a chilling haircut to the banks and markets who had lent it money.

In recent months we have seen the European Central Bank making around a trillion euro available at around 1% to banks across Europe to prop them up and stop them going bust.

Again, there was no sign of this kind of quantitive easing (printing money) when Ireland's banks were collapsing.  But now that banks in big countries like Spain and Italy are in dire straits, suddenly the money can be provided.

Is it any wonder people here are cynical?

In the last few weeks as the situation in the banks in Spain (where there was a property collapse on the same scale as ours) reached critical level, it emerged that the new European Stability Mechanism (ESM) - the massive new permanent rescue fund now being set up for the EU - might be allowed to recapitalize bust banks directly.

In other words, the ESM would loan the money directly to the banks rather than to the state, thereby avoiding the Irish situation where private bank debt became state debt and the taxpayer gets screwed for years.  

Here in Ireland we are watching this stuff going on, and all we can do is smile at the bare-faced cheek of it all.  It's now clear that the real reason we were screwed in our bailout was because we were not big enough to be a threat to the EU.  Unlike Spain.

The upside of all this is that if the Spanish banks continue to wobble, the deal they are cut by the ESM will have to be offered to us as well.

Not because we voted yes and are the good boys of Europe.  And not because of Kenny's imaginary skill as a negotiator.

It will have to be offered to us because that's the way the EU operates.  And if it's not, there will be an outpouring of anger here that will make Greece look like a picnic.

No one wants to wish ill on others. But if a few more banks in Spain like Bankia start looking for tens of billions to see them through, the ESM plan may have to be used.  And if it is, it will also have to be given to

Ireland on a retrospective basis.  That kind of deal could slice 40% off the top of the Irish national debt mountain (the segment that is due to our bank debt).

Whether it ends up being a direct recapitalization of Spanish banks by the ESM remains to be seen.  It may even be a full bailout for Spain, as in the case of Ireland.    

Whatever happens, you can be sure that Spain won't be asked to pay the 5.8% we had to pay or even the 3.5% to 4% that we now pay.  And it will be interesting to see if there is a debt write down and how much of the bank debt becomes state debt and is loaded onto Spanish taxpayers.    

The bottom line is that whatever they get, we have to get as well.  And it has to be retrospective.
Ole!  It's the Spanish solution to the Irish problem.

Ireland's Fiscal Treaty: No is tempting, but we’ll vote yes

Sinn Fein leader Gerry Adams speaks at a media event on Tuesday to urge a no vote. 

It's tempting, very tempting. A big fat no vote in Ireland would feel so good.

We could watch the shock waves spreading across Europe. It would be so satisfying to get our own back on the European Central Bank and the political elite in the EU who forced us into the rotten bailout that is now robbing us blind, month after month, year after year.  

With nothing to look forward to in the coming years except more cutbacks and higher taxes, a huge drain on our economy which will be used by the state every year to repay billions of our bailout debt, the temptation to vote no in the EU Fiscal Treaty referendum here this Thursday will be very strong.

It would be the wrong decision, however, because we still need the backing of Europe despite the way we have been treated.

But the temptation to vote no will be over-powering for a lot of people.  No one likes being made a patsy.

As a country, we don't like being taken for a nation of fools.

So a lot of people in this referendum are going to vote no to make that point, and damn the consequences. They will do so even though this referendum has nothing to do with our bailout.

The referendum is on the fiscal treaty between 25 of the 27 EU states (Britain and the Czechs stayed out), all of whom were able to ratify it by a vote in their parliaments -- all except Ireland where our Constitution requires us to have a national vote.  

The treaty is an agreement on fiscal rules to prevent EU countries from over-borrowing in the future, avoiding a repeat of the current debt crisis across Europe that now threatens to collapse the euro.

Under this new treaty, EU states will have to keep their budget deficits below 3% of gross domestic product (GDP) in the future.  This annual deficit target implies a “structural deficit” which will not exceed 0.5% of GDP annually (the “structural deficit” excludes the effects of cyclical or unusual ups and downs in the economy).  The states also have agreed that in future they will not let their total state debt exceed 60% of GDP.

All of which adds up to pretty tight fiscal discipline, which if it had been followed over the past decade might have prevented the current debt crisis in a number of EU countries, including Greece, Spain and Ireland.

So there are strong reasons for us to vote yes, because the treaty will mean that future Irish governments will be unable to spend recklessly and drown us in debt the way our recent Fianna Fail led governments did.   That is one good reason for voting yes.

Another is our continued need for funds in the next few years as we battle to get our state spending and revenue back into some kind of balance again. Together, they explain why the polls are predicting a substantial yes victory here on Thursday.

Fear is a factor as well which will drive up the yes vote.  The introduction to the new treaty explicitly states that countries which do not sign up will not have access to the European Stability Mechanism (ESM), the new trillion euro EU fund which will be used in the future to help EU countries in trouble. Because we are still a few years away from balancing our finances here, it is vital for us to be able to access this cheap money.  

Without it, we could face Greek levels of cutbacks and chaos over the next few years. State services like schools and hospitals would be badly hit, and pensions and welfare payments would be slashed.  

Like it or not, we need to vote yes to be certain of EU funding in the next few years.  The hard fact is that no one else will lend to us now, and we will need to borrow a lot more to keep going after our present bailout money runs out.

On top of that, a no vote would send out all the wrong signals to international investors here because it would indicate that we were cutting ourselves loose from Europe and might even have to leave the euro.
The no campaigners in this referendum -- Sinn Fein and a few loony independents -- have tried to bluff their way through this reality. They've suggested we can get more money from the IMF or other sources.  

But we can't borrow from the markets, and the IMF is very unlikely to help us further.  The impatient comments about Greece made last week by IMF head Christine Lagarde (they should pay their taxes ... I'd rather give the money to Africa) may be followed by something similar on Ireland if we get out of line by voting no.

Yet in spite of all this, people here are so disenchanted with the EU that a no majority is still possible, if unlikely.

The known unknown is the number of people who are so angry and so disillusioned that they won't vote at all.  They are likely to be people who usually are EU yes voters, and if there are enough of them it could swing it.

The temptation to kick back or not to bother voting at all is huge.   And that is understandable.
Even sensible, reasonable people I know are saying they just cannot bring themselves to vote yes because of what Ireland is being put through.

We all know the last Irish government was grossly irresponsible.  But the boom was only possible here because the European Central Bank kept interest rates at very low levels because that suited Germany.

German and French banks loaned billions to the Irish banks to fuel the boom in Ireland because they wanted a share of the action. When the property bubble burst here and our banks were collapsing, our government stepped in at the end of 2008 with a state guarantee for all bank debt.

Although we did not realize the scale of it at the time, the effect of this was to transfer €70 billion in private debt from the Irish banks to the Irish taxpayer.  This means that the German and French banks are being paid back in full, even though property prices here have collapsed.

The present Fianna Fail leader Micheal Martin (who was a member of the government that took the disastrous decision to give the state guarantee) recently admitted that it was as much about saving the euro as saving the Irish economy.

The European Central Bank (ECB) and the EU put serious pressure on Ireland to stop senior bondholders being burned.  We were told that burning bondholders, writing down debt or letting banks fail would send a shockwave across Europe that would have derailed banks in other weak countries.

So we saved the bankrupt Irish banks by taking out their bad property loans and recapitalizing them, thereby enabling them to pay off all senior bondholders and German and French banks in full. We borrowed billions to do it, and the unfortunate Irish taxpayer is left to carry the enormous cost.  

Paying the cost is now bleeding the country dry, and it's going to continue for years.

It's true that the biggest part of our problem here was the collapse of our tax revenue.  Unwilling to cut state spending to match falling revenue, we ran huge budget deficits and built up huge state debt in a few years.
But that could have been tackled by determined budget cutting.  We might just have survived without a bailout.

What really sank us was the extra 40% of our debt mountain which is directly attributable to saving our banks, the €70 billion in bank debt we were forced to take on.  

That pushed us under, and the markets decided that we were in too deep to ever pay it all back and stopped lending to us. Which left us going with the begging bowl to the ECB and the IMF and taking the bailout, a condition of which was that there would be no burning of senior bondholders.  

Of course we now know that the unfair solution that was imposed on us did not stop the crisis emerging in Europe. Making the Irish taxpayer carry the can for all our bank debts turned out to be futile.

Europe has been in crisis almost non-stop since 2008 when we gave the state guarantee to our banks.  
Greece is a disaster, Spain had a property boom and bust just like ours and its banks are now teetering on the brink.

Portugal is almost as a bad as Spain. Italy is not much better.  It's all a gigantic mess.

Because of the scale of it, different solutions are now being put forward. It seems that it's now okay for some countries to write down debt or let some banks go bust or burn senior bondholders (even Denmark did it recently).  

It's also clear that the ECB is now accepting that it failed to police banks in the EU and is partly culpable for the mess.  It recently made a trillion euro available at very low rates to banks in Europe to prop them up.
But all of this has come too late for Ireland.  We are still nailed to the cross by the high interest bailout deal we accepted.  

That is why, even though this referendum has nothing to do with the bailout, so many people here will want to vote no this Thursday.  Even those who vote yes will be doing so with a heavy heart and a bitter taste in the mouth.

The Irish World War II shame - Irish soldiers faced hostility after arriving home

Bernard Kelly's new book: Returning Home

This week we're going to give you a break from the mind-numbing economics and politics of the euro crisis and the referendum here on the Fiscal Compact Treaty.  It will be unavoidable  next week in the run up to the vote in Ireland on May 31, so make the most of your time off!

So this week we will ignore all that euro stuff.  There also happens to be a good reason for switching the focus this week because it gives us the chance to take a look at an important new book which was published in Dublin on Tuesday, May 22.  

The book, Returning Home, is by the young Galway historian Bernard Kelly, and it investigates the shameful way the estimated 12,000 Irish veterans who returned to Ireland after the end of the Second World War were treated.

Let's put it like this -- it's a long way from Saving Private Ryan.

You would think that after fighting Hitler's armies the returning ex-servicemen would have got a hero's welcome home.  But they didn't.

Instead they came back to a country that was scornful of, ignorant of and indifferent about what they had been through.  In many cases they faced open hostility.  Their service in the British forces was seen by many at home as  anti-national, almost traitorous.

The book tells the stories of many of these Irish servicemen and women who fought in the war, but I particularly liked the one about a guy called John Kelly who left rural Kilkenny to join the British Army and ended up fighting the Germans in North Africa.

In 1943, after the heat of the battle to liberate Tunis, the capital of Tunisia, he was sitting in a bar in the city center having a drink.  Also there celebrating the liberation of the city were some American conscript soldiers.

Hearing his Irish accent, the Americans said, “Say, you guys are neutral, you’re not in the war at all!” Kelly explained that he was a volunteer.   The reaction of the Americans was, “Are you goddamn mad or something?”

It was a fair question.  Kelly, and thousands of other Irishmen like him, had left the safety of neutral Ireland and risked death or injury to fight in the Second World War.  They played their part in  defeating Hitler.
But they got no thanks for it when they came home.  It's a disgraceful and shameful part of recent Irish history.  It shows how small minded and inward looking Ireland was at the time.

De Valera had kept Ireland neutral during the war while the British and the Americans fought the most brutal and evil regime the world had ever seen.

Whether that decision was morally justifiable given the murder and mayhem unleashed across Europe by Hitler is arguable.  One can take the view that as a weak, newly independent country we had other priorities.
But at the very least the sacrifice made by thousands of Irish people who volunteered to fight Hitler should have been recognized when they came back.  After fighting the Nazis the 12,000 Irish veterans deserved that much.

Instead they came back to a country where the attitude to them was so poisonous they quickly learned to keep their war service secret.

Even worse, of the 12,000 Irish veterans an estimated 5,000 had deserted from the Irish Army to join the British and fight Hitler and they faced potentially severe punishment when they returned home.  All of the veterans also had a practical reason for keeping their mouths shut -- they came back to a country that was severely depressed, and being an ex-serviceman did not help in the search for a job.

There was a lot of ignorance in Ireland about the war.  Unlike in Britain, where the entire country had been caught up in the war effort and as a result had great admiration for the returning soldiers, the Irish public had little understanding of the veteran's experiences.

All the Irish public had been through were the minor inconveniences of what de Valera called "the Emergency,"  which involved keeping the country on alert and putting up with some shortages and rationing.
Even the terminology says a lot about Ireland at the time.  The rest of the world had a world war.  In Ireland we had "the Emergency."

Despite the ignorance here, however, by 1945/’46 many Irish people were aware that details of Nazi atrocities were emerging.  You would think that this might have changed attitudes. But it didn't.

"Word of Nazi atrocities were filtering back to Ireland, partly through the media and partly through people like Dubliner Albert Sutton, who visited Belsen soon after it was liberated and saw harrowing scenes there," Kelly said at the launch of his book.

"But the whole experience of neutrality had opened an emotional breach between the Irish population and the U.K. Censorship, isolation and neutrality meant that while many people in Ireland were well aware of the war, they had no attachment to it. There was a genuine sense of pride and satisfaction that Ireland had avoided the war, despite pressure from London and Washington.

"When ex-servicemen returned their friends and family were delighted to see them, but they encountered indifference from the government and much of the population. There were no bands out to meet them because most people did not see the Second World War as Ireland's war; it wasn't something to be celebrated.

"From the government's point of view, they had not fought for Ireland, so they were not Dublin's responsibility. As for the bulk of the public, they simply didn't understand what the veterans had been through," Kelly said.

One writer quoted by Kelly recalls that in his home city of Cork they "were more concerned with the horrors of rationing than with anything that was happening in Europe.”  Which sums up Irish attitudes at the time.
The whole business is still a very sensitive subject, even today.  When Kelly was doing interviews for the book many of the surviving veterans and the families of deceased veterans asked him not to use their surnames or addresses.  For that reason the servicemen and women are referred to in the book on a first name only basis.

A man called George returned to Dublin from service with the Royal Navy, and he said it felt "as if you didn’t exist -- nobody wanted us."

Another man called William, who left Dublin to join the RAF, was dumbfounded by the ignorance of the war in Ireland.  He was told by his neighbors that stories about German concentration camps were simply "British propaganda."

Another man called Larry, who left Wicklow to join the Royal Navy, was absolutely "shattered" by people’s attitudes when he returned home. He says that his fellow countrymen were interested only in "drinking themselves into oblivion, not a single thought about what was going on beyond the horizon. And they didn’t care a damn either."

One can understand the anger of many Irish ex-servicemen who had been though a lot during the war, in ways that changed their lives forever. Back home, however, people did not want to know or just didn't care.
John Kelly, the guy in the bar in Tunis, is an example.   He was aboard the Polish ship Chobry when it was sunk off the Norwegian coast in April 1940, and barely escaped with his life. He fought his way through North Africa and stormed ashore at Anzio in Italy in 1944, where he was severely wounded and almost died.

He says he was rescued by a Kerryman, but then was further wounded by an RAF airstrike. He was evacuated and was invalided out of the army afterwards.

His brother fought in the Far East. John died in 2009 and there are pictures of him in the book.
But my favorite picture is the one on the cover of the book, which you see here.  The two young men are Michael and  Paddy Devlin, both from Longford Town.

Like many Irish from the south, they crossed the border to join the British army in Enniskillen in 1939 at the start of the war.  They were posted to different units and fought in France.

Their units were smashed by the German attack in May 1940. Both were evacuated from French beaches.  The men survived the ordeal but are now deceased.

Based on interviews with surviving veterans and drawing on a wide array of archival sources, Returning Home explores how the Irish ex-servicemen coped with the frosty welcome they got when they came back to Ireland, with the difficult task of re-integration, their economic difficulties and psychological problems.

The treatment of deserters from the Irish Army who joined the British to fight in the war is only now being addressed, nearly 67 years after they came home.   The minister for defense here made a statement in February indicating that official steps are being taken to issue a formal pardon to all such veterans, alive or dead.

It's been a long time coming.  It's disgraceful that it has taken so long.

But of course the delay did not stop people here getting all misty-eyed over movies like The Longest Day or Saving Private Ryan over the years.

Overall, Returning Home makes an important contribution to how we view Ireland's connection to the Second World War and Irish participation in it.

The book is published by Merrion, the new history imprint of the Irish Academic Press.  Kelly is currently working as a post-doctoral research fellow at the University of Edinburgh.

Ireland will reluctantly vote "Yes" n the EU Fiscal Compact referendum

Labor Party launched their "Yes" campaign last month

Ireland is now just two weeks away from our referendum on the EU Fiscal Compact.  Even though the vote on May 31 is the most important one we have faced in years, you would not know it looking at the media here.  

Newspapers and TV are leading on other stories every day, clinging to any distraction they can find, because the fiscal issues and arguments are so boring.        

So instead of us having a searching national debate here, a resigned acceptance hangs in the air.  It's the last thing people want to talk about, or even think about. 

When pressed, most people seem to feel that a yes vote is the lesser of two evils.  And they are probably right. 

But they will be voting yes with a heavy heart and a feeling of resentment.   They know we've got a rotten deal from Europe. 

The problem is that the rotten deal we got which transferred billions in private bank debt into sovereign debt carried by the Irish taxpayer has nothing to do with this Fiscal Compact.  Voting no is not going to make that situation any better.

That is the basic reality and people here understand that.   They also understand that, tempting though it might be to vote no to "get our own back" on Europe, the consequences could be disastrous. 

So what's this Fiscal Compact all about?  It's a financial treaty agreed by 25 EU states in January this year, all of whom were able to ratify it by a vote in their parliaments -- all except Ireland, where our Constitution requires us to have a referendum.  

There's nothing revolutionary in the treaty. In fact it's basically a restatement of earlier EU agreements on fiscal discipline, with new mechanisms attached.  The aim is to prevent a repeat of the debt crisis in Greece and some other EU countries, and to avoid the potential collapse of the euro.

Under this new Fiscal Compact, or treaty, 25 of the 27 member states have agreed to keep their budget deficits below 3% of gross domestic product (GDP) in the future.  They also have agreed that in future they will not let their total state debt exceed 60% of GDP.  

This has been tried before and even Germany did not stick to the rules.  To enforce discipline this time the European Commission will monitor compliance, and countries which breach the agreed limits will face legal action in the European Court of Justice.

All of which sounds impressive.  The reality is, however, that all this is aspirational. 

Many countries in Europe are way beyond these targets at the moment and it will take considerable time, three or four years at least, to get budget deficits down to 3%, and far longer to get the debt-GDP ratio to the target 60%. 

In the meantime, countries will have to implement a program designed to bring them steadily into compliance over the coming years. 

This, of course, is exactly where Ireland is at right now under the terms of the EU-IMF bailout.  In fact ratifying and implementing this treaty won't make any difference to us here since the terms of our EU-IMF program are even more demanding. 

Why does Europe need this treaty?
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For years, in fact for decades, countries across Europe have been borrowing too much.  Governments have run budget deficits year after year to keep up state spending on services, state pay, pensions, welfare and so on in an effort to maintain a standard of living that their economies could no longer afford. 

Europe, its empire days long gone and its industrial competitiveness undermined by China and developing countries, has been in decline.  It's also been in denial. 

Accustomed to a standard of living far higher than in other parts of the world,  European populations wanted to preserve their privileged positions, but they did not want to work harder or longer or pay more taxes.  So politicians in Europe soon learned that the way to get power and stay in power was to borrow on a massive scale.  

Instead of cutting back or forcing through efficiencies, they ran huge budget deficits year after year, even when tax revenue was shrinking.

The problem is, of course, you can only do this for so long before the markets start to doubt your capability of ever paying back your debts.   Eventually the markets get spooked and the cost of state borrowing (the bond yields) soars to the point where borrowing becomes non-viable. 

In the doomsday scenario (like in Greece and Ireland) the markets won't lend to you at all, at any interest rate, so you become completely dependent on institutional sources of funds like the EU and the IMF. 
Preventing this kind of crisis in the future is what this Fiscal Compact is about.  It's about curtailing the freedom of EU countries to make eejits of themselves, like the Greeks and the Irish.   

But  you would not think that listening to Sinn Fein and the few loony lefties here who are the only ones advocating a no vote.  All the other political parties are calling for a yes vote, including Fianna Fail, to its credit, even though it is in opposition and could easily have tried to exploit the situation. 

The arguments being put forward by the no side include opposition to the introduction of water charges and a property tax, refusal to allow any cuts in welfare rates, demands for extra spending on health and education, demands for investment in job creation programs and so on. 

A lot of this is couched in language which talks about "growth promotion" as an alternative to the "downward austerity spiral" which is blamed for lowering domestic demand and shrinking the economy even further. 

The refusal of political parties in Greece to accept bailout terms, and the insistence of the French president-elect on new growth measures, as well as public anti-austerity demonstrations in countries like Spain, are all seen by the no side here as evidence that the tide is turning against the austerity regime and the Fiscal Compact. 

The problem is that all the solutions being advocated by the no side have one thing in common.  They all mean spending  more money, which means borrowing more money, which is the last thing Ireland, or any other European country, should be doing right now.  

Ireland's agonizing but steady reduction in our budget deficits, which aims to get down to a 3% deficit within two or three years, means that until then we have to go on borrowing to keep the show on the road.  We are still adding to our debt mountain even while the austerity measures bite. 

Those who advocate a growth agenda as the solution never discuss what it would take to make countries like Greece, Portugal, Spain, Italy, Ireland, even France, really grow.  Growth is always talked about in terms of extra spending, of investment, even though what that really means is extra borrowing. 

The trouble with that is that the money borrowed has a way of vanishing into extra pay or services rather than goods that can be sold at competitive prices on the world market.  

We're all in favor of growth.  But the real driver of growth is not borrowing.  It is keeping pay at competitive levels, increasing working hours and efficiency, maximizing output, cutting waste and overspend out of the system. 

It's all about making an economy a slim effective machine that can sell goods and services on global markets that people round the world want to buy. 

It sounds terribly simplistic.  But it really is that simple.   The rest is just a toxic mix of prevarication, self-interest and laziness. 

Because of the uncertainty across Europe, the no campaigners in the debate in Ireland are calling for a postponement in the referendum, at least until the growth element the French are calling for is agreed.

But there does not seem to be much sense in putting the vote off.  We can take any growth measures that come in the future as a bonus.  The most important thing now, however, is to show our support for a fiscal regime in Europe that will avoid this kind of mess in the future. 

One other point needs to be kept in mind.  Because we will need to keep on borrowing for another few years and are more than likely going to need a second bailout, we need to be able to access EU funds in the future, particularly the new ESM rescue fund.  Only countries that ratify the Fiscal Compact are going to have access to that fund, where money will be available at much cheaper rates than on the markets, assuming we can get the markets to start lending to us again. 

The no side have been making assumptions that the IMF or someone else will lend us money in the future instead.  There is no basis for such assumptions.

If it were to go wrong it would mean having to balance our budget immediately, in a single year, which would cause real suffering and possible chaos here. 

All of which means that the only sensible position for us to adopt is that of a reluctant yes voter.   It's a rotten deal, but it's the only one out there.

Catholic primate Sean Brady guilty of cardinal errors

Cardinal Sean Brady

Last week the political parties here began their campaigns for the referendum on the European Fiscal Compact, probably the most important vote this generation of Irish people will cast.  

Depending on how you see it, the outcome could make or break the Irish economy for decades to come.

It's not only a very important matter but a highly complex one.  It deserves all our attention for the next few weeks as we decide whether to vote yes or no.

It should have been dominating the headlines here last week, but it failed to do so.  Instead it was pushed to the margins as sex abuse by priests yet again took over the news agenda.

It's enough to make you despair that this country can ever be normal.

Unbelievably, even at this critical time, clerical sex abuse is back again to haunt us.  And this time it reaches right to the very top, to the man in charge of the Catholic Church in Ireland, Cardinal Sean Brady.

The latest revelations came in a BBC TV program just over a week ago about the notorious Father Brendan Smyth, the worst sexual predator in the church here, and what happened when the then Father Sean Brady investigated Smyth's abuse back in 1975.

You will, I'm sure, need no reminding of the appalling child abuse that Smyth perpetrated here north and south of the border and also in the U.S. when he was sent over there.

He was rampant -- there is no other word for it -- over four decades from the 1950s to the 1990s as he was shifted around from parish to parish and even from country to country.  
Dozens, possibly hundreds, of children were abused by him.

Eventually he was jailed in the north, and subsequently in the south.  His case was so controversial that it led to the fall of the Fianna Fail/Labor government here in the 1990s over the attorney general's handling of Smyth's extradition.

Having brought down a taoiseach (prime minister) back then, it seems certain that Smyth, who died in prison here in 1997, will now be responsible for bringing down a cardinal as well. 


Last weekend, Brady was “reflecting seriously on his future.” But he’s in a hopeless position.  There’s not much to reflect on, other than the timing of his departure.

The latest revelations are so damning that they have completely undermined his credibility and suitability as a church leader.  


We already know, of course, that Brady and two other priests were involved in a church investigation into

Smyth in 1975 after accusations of abuse had been made against Smyth. This investigation was conducted for the local bishop in the area where Smyth had been operating.
Brady, a canon lawyer, has always insisted that his function was simply as a note taker. He passed his report on to the bishop for action. 


Because Smyth belonged to a religious order, he had to be controlled though the abbot of his monastery, which complicated matters.  Smyth was banned by the bishop from some priestly duties, and the abbot continued to move him around to stop him forming “attachments” with children.  But nothing effective was done to stop his activities.

All that has already been known, including the fact that the children who were interviewed as part of the investigation were sworn to secrecy by Brady and his two colleagues, who did not send their findings to the police.  This was normal church procedure at the time.  Brady has always insisted that he did everything that was expected of him.  It was up to others, the bishop and the Abbot, to take action. 


What the BBC program a week ago has done is shoot that already flimsy defense to pieces.  It revealed that during the investigation one boy, Brendan Boland, had given Brady a list of names of children who were being abused, but Brady did not inform their parents.  


It also revealed that the boy remembers that Brady played an active role in the investigation, interrogating the children who had made complaints.  This was confirmed by one of the other priests, who has since left the priesthood.

Brady was not just a note taker. 
The questions that were asked during the investigation also seem outrageous.

The boy, who Smyth had got to masturbate him during regular visits to his home, was asked if he liked doing this. He was also asked what happened to his body during the sessions, and whether he would have done this with another boy or man.  


This line of questioning was, of course, totally inappropriate and also irrelevant.  Since the boy was only 13 or 14 he was not old enough to consent.

In any event, the boy told Brady and his colleagues that he did not like what he was involved in and only did it because Smyth was a priest.

Apart from his active role in the questioning and his failure to involve the police or to follow through on his report to the bishop, the most damning part of the BBC revelations was that Brady, although he had a list of names of children Smyth had abused, did not contact their parents to tell them.

In the eyes of people here that is absolutely unforgiveable, and that reason alone is enough to mean that Cardinal Brady must go.

A separate claim last week added to the pressure on the cardinal.  A former pupil at the college in Cavan where Brady was a teacher for years says that he was abused at the college when Smyth visited there.

Significantly, this happened after the 1975 investigation.  The pupil is now suing Brady, who says he was "completely unaware" that Smyth was ever in the college.

The revelations last week have shaken the already disgraced church here to its very core.  There is now a real possibility that Brady could face not only civil actions for damages but a criminal case as well, even though the law back in the 1970s was not as clear as it is now.

In an effort to finally reveal everything about the Smyth saga of abuse, the Archbishop of Dublin Diarmuid Martin last weekend called for an independent commission to investigate all of the accusations and how they were handled by both the church and the state over the years.

The last thing we need is another tribunal, but that might be the only way of getting all the information out of the church archives and onto the public record.

Smyth visited the U.S. twice.  In 1945, at the age of 18, he had joined the Norbertine monks, based in Holy

Trinity Abbey near Ballyjamesduff, Co. Cavan. In 1951 he began work as a priest in West Belfast and started abusing children there.

He was a consistent abuser, and complaints eventually led to the Norbertines sending him to the U.S., to Rhode Island, to work there as a parish priest.

This was part of a policy of shifting him around but it did not stop his behavior, and in 1968 he was brought back from the U.S. and sent for treatment for the first time in Belfast.   Five years later he was again sent for treatment in Dublin. But nothing stopped him.

By 1975, when he was investigated by Cardinal (then Father) Brady in Cavan he was a voracious abuser.

As we now know, nothing effective was done to keep him away from children, and a few years later he was sent off again to the U.S., to North Dakota, where he worked as a priest and continued to abuse.  It was not until 1990 that a complaint made to the RUC by a Belfast family finally led to a case that put him behind bars.

If Cardinal Brady had done the right thing back in 1975, Smyth could have been stopped a lot sooner.  That is why the cardinal now must go.

Paying the price on overpriced home - Irish property prices and the Irish banking system

A cut-rate home in Co. Leitrim.

Last week Ireland passed its sixth financial inspection by the visiting team of experts from the IMF/EU.   We're now a year and a half into our bailout program, and we have to pass these quarterly inspections to keep getting the money.

We need the continuing access to bailout money to bridge the huge gap between our spending and our tax revenue. Without that money, services like welfare payments and health care as well as state workers pay would be cut by a third, leading to possible serious social unrest. So until we can balance the books again here in a few years (we hope!), we have no alternative. 

The quarterly inspections are very demeaning, of course, since they are visible proof that we have lost our economic sovereignty.   The expert team comes in to examine the nation's books and make sure we are sticking to the agreed tax and spending austerity regime that is aimed at leading us out of the mess.  

Every time we pass one of these exams, our senior politicians congratulate themselves and tell us what  a great job we are doing and how we are an example to the other countries in Europe who are in trouble.   

But the problem is that the tighter the austerity squeeze becomes, the more difficult it is for people to hang on to their jobs and pay their bills. 

The Irish economy is still on the floor, with barely any growth, and austerity is making it worse, not better.  More and more, it looks a second bailout program will be needed.

The payments on the enormous national debt we are carrying, thanks to our huge budget deficits and the cost of paying off the billions our banks blew away, gobble up a big chunk of our revenue.  Instead of spending the money on recovery, we have to watch as it is sucked out of the system.  That's the macro problem.

On the micro level, there is also a big problem with our level of personal debt.  During the boom people here borrowed and spent on a phenomenal scale. 

As long as the boom kept going, they were okay.  But when it collapsed, they were caught.  Many are now struggling to keep up repayments, which means that banks have a huge problem on that level which is now starting to fully emerge.

There was stupid spending on all kinds of things here during the boom.  But the biggest problem, of course, was the spending on property. 

Experts in this area who are dealing with cases  every day estimate that over 10,000 people here will have to hand back the keys of their homes in the next year or two.  These are people who just can't cope with their mortgages, either because they have lost their jobs or they have seen their incomes shrink and all their bills go up.

Most of these people are  at least a year behind on their payments and have little hope of catching up.   Some have stopped paying altogether.

In Ireland, their problems don't end when they hand back the keys.  This is because property loans here, unlike in the U.S., are not non-recourse loans. 
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What that means is that even if you give back the keys and the bank sells your home, you are still liable for any shortfall between what the property sells for and the amount of the original loan.

Property prices here are now down an average 50-60 percent on what the were selling for at the height of the boom from 2004 to 2008.  So people who bought then have a big problem when they hand back the keys and the bank sells.   They not only end up losing their homes, they also end up still owing the banks large amounts of money.  

This situation has caused a lot of concern here, and the government is struggling to deal with it.  New personal insolvency laws are due to be published here in a couple of months which may see the banks being forced to write down some of the debts of people who bought properties during the boom.  

So far, however, the banks are playing hardball.  If you borrowed €500,000 in 2006 to buy a property that's now worth only €250,000, they still want their €500,000 back.  Period. 

But one case here last week showed a shift by one major bank.  It got massive publicity because it seemed to offer hope to many homeowners who are in an impossible situation.  

This case involved a nurse who had borrowed €245,000 from Bank of Ireland subsidiary to buy a two bedroom apartment in a gated development in Coolock on the North Side of Dublin in 2005.  

Now those of you who know Dublin will stop right there, because Coolock is one of the poorer areas in the city (which is probably why the development was sold as a gated community). 

The idea of spending almost a quarter of a million euro on an apartment there -- not even a house! -- is lunacy.  But that is the kind of madness that went on all the time during the property boom here because people were desperate to get on the ladder.  

The other aspect of this is that the single woman involved, presuming she was earning an average young  nurse's salary of around €30,000,  was able to borrow more than EIGHT times her annual pay from the bank. 

The old rule in banks and building societies (savings and loans) here used to be an absolute maximum of three times salary.   But during the boom the rules went out the window. 

The woman got into financial difficulty for various reasons in 2009 and built up mortgage arrears, and the bank took legal action against her in 2010.   At that point she handed back the keys, and after some delay the property was sold.

But even after the money from the sale was taken off, she still owed €170,000 on the loan (which shows how overpriced the apartment was in the first place).  

A settlement was reached under which the bank wrote off €152,000 of the outstanding €170,000,  leaving the nurse owing €18,000 which she is now repaying over six years at €250 a month.  That's all she can afford after paying rent and other bills. 

The deal for the nurse was secured by a group of pro bono lawyers called New Beginning which say they have hundreds of similar cases on their books.   The banks say that there is no change in policy and that they are agreeing debt forgiveness deals in only a tiny number of cases, which are assessed on a case-by-case basis.

But there is no doubt that this is a significant move, and some experts are now predicting that thousands of homeowners who are in serious trouble will be demanding similar debt deals.

This is a situation that is fraught with moral hazard, as the economists call it.   Many people here who are making big sacrifices in their lifestyle so they can pay their bills and their mortgage every month are now asking  themselves, why there is no debt forgiveness for them? 

They didn't borrow huge amounts of money to buy property they could not really afford.  And they don't have a lot of sympathy for those who did.  

Even landlords are now getting in on the act.  One bank chief last week claimed that some people who bought second homes to rent out have started to hold back on mortgage payments even though they are still collecting the rent.  They are deliberately trying to make their financial situations look bad so they can get in on any debt deals that may come up. 

The other problem with debt forgiveness is that the money lost does not just vanish into thin air -- it simply translates into extra tax that everyone else has to pay, since the state now owns the banks thanks to the government rescue.

Of course you can also apply the moral hazard argument to the senior people in banks.  They are the idiots who lent vast amounts of money to people who  could not afford it -- like the quarter of a million to the nurse to buy an apartment in Coolock.   If there is no penalty for them, how will they learn not to do this in the future? 

And extending the net even wider, how come moral hazard does not stop us repaying all those big banks in Europe who lent billions to the Irish banks so they could get a slice of the high returns available during the boom?

Why should the big European banks who did not take a gamble on the Irish property boom act responsibly in the future if there is no penalty for the ones who did?

Moral hazard -- it's a tricky one.  Meanwhile, the unfortunate nurse who lost her apartment is struggling to survive like so many other people here at the moment.