November 1, 2011
With the agreement on Greek default last week, the government has missed yet another gilt-edged opportunity to renegotiate our odious bank bondholder debt
Did your granny have a ‘good room’? I bet she did. Mine did. In fact, my granny had a good room that was so good I wasn’t good enough to go into it. In truth, none of my family was good enough to go into the good room. The good room was kept for people who were obviously ‘gooder’ than us. The key was hidden and the door opened only on special occasions.
On the odd Sunday, someone important might call by, the priest or the local doctor. The good room was opened, china and delph dusted off and our family, on our best behaviour, pretended that we ate from Wedgewood china every day. My granny was pretending to be posher and richer than she was.
The interesting thing was that, not only was my granny pretending that we were posh, but the truly posh were also pretending that we were posh.
They went along with the good room charade, knowing full well that the minute they left the house, the room would be evacuated, the china wrapped in old copies of the Irish Independent and the key hidden away. But for one afternoon, everyone pretended that we were socially equal and, when the pretence was over, we went back to our real existences until the next time the good room was opened.
The key was that no one was embarrassed. They wouldn’t embarrass us by pointing out the ‘special occasion’ and we wouldn’t embarrass them by making them feel superior – even though they clearly were, and everyone knew it. My granny and all the others who had a good room weren’t secure enough to tell the truth and to accept what they were, rather than what they might have liked to be.
In reality, the good room – far from narrowing social inequalities – reinforced them. Really posh people didn’t have a good room, because they didn’t need one. The good room is unique to Ireland and lives deep in our national psychology.
It suggests an insecurity, and it hasn’t gone away, you know. This insecurity resurfaces again and again. We Irish prefer to be liked more than be feared. And the last thing we will ever do is embarrass anyone by being awkward. I have asked German friends does the good room exist over there. They have never heard of it.
This deep national characteristic may go some way to explain why our government did nothing last Thursday in Europe, when a gilt-edged opportunity presented itself to renegotiate our odious bank bondholder debt. Something must explain the fact that the Greeks got a huge write-off on their debts and we, with our debt/GDP ratio approaching 120 per cent – far above that which is regarded as sustainable – did nothing.
This column has argued (in the face of the usual hysterics from official Ireland) that a default would prompt a market rally. That is exactly what has happened after the Greek default. Markets rallied – as any basic understanding of finance would have forecast. Indeed, the rally would have been more significant had we cleared up our balance sheet.
Basic economics tells you that a debt-burdened balance sheet is never made better by more debt, but always by less debt. So standard economics argues also for debt relief. Furthermore, the EU is based on political reciprocity – what goes for one country needs to go for all. For example, the internal market is based on the equal treatment of capital in each member state. If Greece gets a write down, so can others.
Despite all this, we did nothing. Why? Clearly neither economics, finance nor politics explains our position. What does?
Keep the good room story in your head and leave Ireland. Let’s go to Brussels. The new good room is Brussels, where our negotiators are like my granny, never feeling quite secure enough to state the real bottom-line position. They are too insecure. They don’t want to cause a fuss or be an embarrassment to anyone. So, rather than stand up for ourselves, we sit in the good room, only too delighted to be treated as equals by the French and the Germans. We swoon at their tacky flattery.
Our real position is that we should look for the same or similar treatment to Greece because that is the way a monetary union works. We should also have had the self-confidence to highlight the duplicity of last Thursday’s deal, which looks set to lead, in time, to the rest of the EU helping to bail out bust banks, perhaps even some French ones.
The enlargement of the EU rescue fund surely makes it inevitable that EU funds will in future be used to bail out banks, as the full scale of their losses emerges. Yet the EU expects us to still pick up the bill for our banks.
And we sat there in the new good room and said nothing, despite the fact that the EU was laughing at us.
Worse still, not only did we not point out the evident duplicity in the way the banking systems of different countries will be bailed out by the union while we were asked to sort out our house ourselves, but we actually said it was a good deal for Ireland. It is a disastrous deal for Ireland, because we could have used Thursday’s negotiations to our advantage in order to co-opt Europe into our banking bail-out.
After all, wasn’t this how this government was elected? Do you remember that? Worse than defeat is acquiescence, because we are so craven in the good room of Brussels we actually came out cheerleading a deal that gave us the two fingers.
Why is it that the Irish government never misses an opportunity to miss an opportunity? Why is it that we will pay over â‚¬700 million to Anglo bondholders this week, when we could have had all this written off last week?