ANALYSIS:Lenihan tries to keep calm but Anglo chaos is quickly spilling over into the political arena
THE ESCALATING cost of Anglo Irish Bank to the taxpayer and, more significantly, the knock-on impact on the State’s ability to borrow the cash needed to keep the country going is beginning to scarify Government TDs.
The clamour from the Green Party and Fianna Fáil backbenchers for an orderly wind-down of Anglo asap reflects the panic now rippling through the political world at the possibility that the country could be facing a financial meltdown.
Minister for Finance Brian Lenihan tried to bring some calm to the debate yesterday by insisting that an immediate wind-down of Anglo is simply not an option. He insisted a long-term solution of some kind is the only feasible approach.
The shape of the eventual solution will depend on the judgment of the European Commission and the European Central Bank but, either way, the bank will be a millstone around the country’s neck for many years. The scale of the increase in the estimated cost of dealing with Anglo has spooked the financial markets in recent weeks and that has now spilled over into the political arena. In recent days TDs from both Government parties have begun to adopt an increasingly populist line in the rush for the political lifeboats. The danger is that will in turn fuel more market uncertainty.
The decision of the Green Party Ministers to let it be known that they now want a much quicker wind-down of Anglo than envisaged in the plan submitted to Europe came as a shock to their senior Coalition partners.
Not to be outdone, a number of Fianna Fáil backbenchers then piled in with similar sentiments. To be fair, one of them, Seán Fleming, who as an accountant has some expertise in the area, has been calling all along for an orderly wind-down.
Indications of divided views between the Coalition parties and internally within Fianna Fáil have added to the uncertainly about what form the solution will take.
Today’s cabinet meeting should give the Coalition parties an opportunity to at least come up with a common coherent approach to tide them over the next few weeks until the European Commission decides what to do in response to the plans put forward.
While the chairman of Anglo, Alan Dukes, has made clear the bank’s own preference to continue in operation with a good bank and bad bank arm, the Government has not publicly committed itself to such an approach and may be equally content to accept the orderly wind-down option, as long as it is conducted over a lengthy period.
Mr Lenihan has consistently said that a short-term wind-down is not feasible and he reiterated the point yesterday. “There have always been various options. And we have to be very careful in evaluating them. But can I say that a very rapid wind-up of Anglo would of course expose the taxpayer to a very substantial cost, and that’s not on the table at present.”
The basic line from the Government is that the longer a final solution takes the better. If, for instance, the final cost is going to be €25 billion, then coming up with that sum in five years would cost €5 billion a year which could cause the public finances to implode. On the other hand a 10-year wind-down – or preferably one over 15 years – would be much more feasible.
The Government’s problem is in selling this to the public and, probably more crucially in the current circumstances, selling it to the financial markets who are now keeping the country going in the style to which it has become accustomed.
The need for certainty is now imperative but that will not happen until Europe signs off on the solution. That can’t come soon enough for the Government.
By contrast, the Opposition is now in full cry in pursuit of what it believes is a badly wounded administration. Fine Gael can point to the fact that it called for an orderly wind-down of Anglo nearly two years ago while Labour opposed the bank guarantee in the first place. Both parties yesterday accused Mr Lenihan of not knowing what he has been doing for the past two years.
There is no doubt that the public is now very angry at the way the Anglo situation has developed, not least because of the links between Fianna Fáil and the bank during the glory days. The collapse of the bank will have very negative consequences for the senior partner in the Coalition and that is why Fianna Fáil TDs are so bothered at the moment.
When the Dáil resumes in the autumn, the Opposition will do everything in its power to move in for the kill and bring the Government’s life to an end. The toxic impact of Anglo for the Coalition will be a very powerful weapon in that struggle.
