Facing an unprecedented banking crisis and plummeting exchequer returns, the Minister for Finance has banished early nerves to exude calm and confidence at this seminal moment for Ireland.
Because …
Money is still coming out of the ATMs, bills and wages are still being paid and Ireland has not fallen into a financial abyss. That, according to everyone from the Taoiseach down, is the prospect that faced the Minister for Finance at the beginning of last week. And if that was the case, then Lenihan deserves every award going for his decisive action in instigating the Government bank guarantee scheme that averted the immediate crisis.
Jury out
Of course, the jury is still very much out on the scheme. Much depends on the detail. Will the banks be held accountable for their profligate lending policies? How much will they have to cough up in order to avail of Ireland’s sovereign good name? Will proper regulation be enforced to ensure there is a fundamental restructuring of an industry that threatened to bring itself – and the entire economy with it – to its knees?
If Brian Lenihan can satisfactorily lead the process that answers these and many other questions, then he will deserve many plaudits.
Share price volatility
But the world is full of doubters. Share prices in Irish financial institutions bounced significantly in the days following the guarantee. But the guarantee does little to sort out what many argue is Irish banks’ real problem – a massive exposure to the collapsed construction sector. So, at time of writing, shares in Irish banks were all, once again, significantly down in a troubled market. Minister Lenihan can only hope that such volatility works its way out of the system given that he has bought the banks time to get their houses in order.
Raising British hackles
Skepticism and criticism was also not hard to come by from our European neighbours.
The reaction in Britain, whose banks now face increased competition from government-guaranteed Irish banks, was particularly harsh with a definite touch of ‘those foolish Paddies’ about it. Yet it would be foolish to discount the opinions of some very reasoned commentators.
“This is, first, a ‘beggar thy neighbour’ policy, since it will attract deposits from competing banking systems. But it is also a ‘beggar thyself’ policy, since it gives management and shareholders the right to gamble with the public sector’s balance sheet,” was the reaction of The Financial Times’s chief economics commentator, Martin Wolf.
The Budget
And when Minister Lenihan is not worrying about the international credit crisis, he has the small matter of a budget to think about – a budget indeed that is being framed against the backdrop of the most difficult straits for the Irish economy in two decades. Last week, it emerged that the exchequer deficit had reached €9.4bn and that the Government expects to collect almost €3.6bn, or 11.2%, less tax than it did at the start of the year. The Minister inherited this situation from his predecessors. But the success or failure of Brian Lenihan’s time as Minister for Finance will be judged largely on how well his upcoming budget, the most important in at least 20 years, manages to tackle the gathering crisis. When the history of these tumultuous weeks is written will he be remembered as a Richie Ryan or as a Ray McSharry?
Life of Brian
- Born Dublin, May 1959
- Educated Belvedere College, Trinity College,
- Cambridge University and Kings Inns
- Career Trinity College law lecturer from 1984 to 1986; Minister of State with special
- responsibility for children; and Minister for Justice, Equality and Law Reform 2007
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