December 2009: Brian Lenihan, Minister for Finance

Delivering one of the most important budgets in the history of the State, Brian Lenihan, Minister for Finance is this month’s worthy winner.

Because

The Minister delivered the most swingeing budget in the history of the State on December 9th. That hardly seems like a reason for recognising him with this accolade, but in view of the yawning chasm between national income and expenditure, it was exactly what was needed to get the country back on the road to economic stability. Ireland’s fall from grace in the European league of economic performance has been startling. Coming into the credit crisis in 2007, this country had one of the lowest debt-to-GDP ratios in the EU and one of the soundest budgetary positions. This year, the budget deficit was one of the worst in the EU and debt-to-GDP is rising at one of the fastest rates in the Eurozone.

Reasons to be cheerful

Against this gloomy backdrop it hardly seems appropriate to be talking about causes for optimism, but there are. The Greek government has just announced that its Government debt has reached a record €330bn, which is 113% of GDP. But what is really setting alarm bells ringing around Europe is the Greek government’s apparent unwillingness to introduce the tough measures that would restore order to the national coffers. Consequently, spreads between Greek sovereign debt and the benchmark German bund have widened with alacrity. There were fears that Ireland would get caught in this debt spiral trap, but there has been a very positive international reaction to Lenihan’s budget, which has persuaded investors that the Irish Government is serious about tackling the deficit.

Reluctant minister

Prior to taking up the most important portfolio in the cabinet, Lenihan was the Minister for Justice. He was carving out an impressive reputation in that position when he was shunted over to Finance following Brian Cowen’s ascension to the top job. His first few months hardly inspired confidence. Not least bemoaning his own misfortune at taking over responsibility for the country’s finances when the “economy had come to a shuddering halt.” But he soon grew into the role. When question marks first arose over the country’s solvency at the end of 2008/start of 2009, Lenihan went on a roadshow to meet international investors. The benefits were immediate as bond spreads between Irish government debt and the benchmark bund narrowed.

And then …

But it is one thing calming the nerves of the market and quiteanother thing to put a cap on an escalating budget. Tough decisions had to be made in the run up to the December 9th budget. It was never going to be easy to take €4bn out of the economy. And even though many of Lenihan’s cabinet colleagues looked as if they would backtrack on politically unpopular decisions, he never strayed from his path. Indeed, it is believed that Lenihan was unyielding in the face of increasingly tough demands by public sector unions.

It remains to be seen if Ireland can emerge from this fiscal crisis without blowing up along the way, but the chances that it can have improved considerably. Most of the credit can be laid at the door of Brian Lenihan. 2010 promises to be another very tough year, but if the Minister for Finance continues as he signalled, then Ireland will take a step closer to economic stability.

Life of Brian

• Born Dublin, May 1959.
• Educated Belvedere College, Trinity College, Cambridge University and Kings Inns.
• Prior Career Trinity College law lecturer; Minister of State with special responsibility for children; Minister for Justice.