COLUMN: Ten years on, we all bear the scars of the Bank Guarantee chaos

The biggest memory is the sheer mystery of it. For the previous week, most of the news headlines had been about America’s $700 billion bailout package. Suddenly, on a chilly Tuesday morning, we were told the Irish government had issued an overnight guarantee to underwrite €440 billion of Irish bank assets, without any consultation or apparent warning.

It was an odd time to be a final year Commerce student in UCD. The 9am lecture that morning was overtaken by an open-ended Q&A session with a lecturer, earnestly trying to explain to us the differences between the two. The American bailout was an actual cheque, written by the taxpayers to bail out a failing industry. The Irish bailout was only hypothetical, intended only to be a statement of principle. Ireland was using its mouth in the hope its money would never have to follow.
The cheapest bailout in the world, Brian Lenihan later chuckled. 
If only.

The final cost, €64 billion, is the equivalent of five years’ social welfare spending. It is about as much money as the Irish government spends in a calendar year. Imagine: a whole year’s worth of public spending, almost vanishing into thin air. 
The Irish government, at a time when its tax revenues were collapsing, losing over a year’s worth of income.
But what other choice was there, when Cowen and Lenihan woke their colleagues from bed for a virtual Cabinet meeting in the early hours of September 30, 2008? A partial guarantee would not have sufficed: excluding some assets would only raise questions over their future. Besides, the banks had told us there was no major issue. The ‘credit crunch’ merely meant they were tight on cash; all they needed was a shot of adrenaline.
Only later did we discover how Anglo and Irish Nationwide had engineered a system to hide massive loans to Anglo’s own chairman. Only later did we hear David Drumm admitting that his bottom line was sourced from his actual bottom. Only later did we discover how Anglo had taken money from its depositors and lent it to its own debtors, simply to buy shares in itself. And only later did we realise just how violently the banks had thrown money at some developers. Prison followed for some, but catharsis did not.

_{The late Brian Lenihan was Minister for Finance back in 2008}

The effects will linger for decades. I remember writing an article in 2011 about an economist’s warning that Ireland was not building enough homes. Ha!, scoffed the commentators. Doesn’t she know how many ghost estates there are? But it was true. The housing stock stopped growing but the population didn’t, and look where we are now. The banks overdosed on building loans, took years to regain consciousness, and left the rest of us with the hospital bills.
Those bills killed this nation. Every job lost (for other reasons) cost money to the State, which had to curtail its own spending. But when the State was the biggest employer and spender, every cutback meant more money in private tills, and further cuts. Those cuts ravaged society; they ruined businesses; they wrecked marriages; they split families; they cost lives. How many human spirits, and human bodies, crumbled under the weight of mortgages they could no longer afford? How many honest businesspeople had to abandon their lives’ work? How many meals or doctors’ appointments were skipped to pay the bills?

There is one statistic that tells its own story. In the ten years after the bank guarantee, 343,000 Irish people left this country – the largest exodus of indigenous Irish since the Famine. Many will never come back. Over half of the students in that UCD Commerce class left the country on graduation. Class reunions are poorly attended.
And the nation itself was brought to its knees. It took 700 years to establish a permanent independent Ireland, and two for the guarantee to end it. The Troika checked into the Merrion and brought the pain with them.
Or did they? The reality was that the Troika were a useful bogeyman. Most of the savage austerity required to avoid outright bankruptcy was not dictated by the Troika. Fianna Fáil and the Greens had published a four-year ‘Plan for National Recovery’ only a couple of months before our overseas visitors showed up on Merrion Street. The foreigners who lent us the money to keep the lights on were cast as the joyless baddies, the useful bogeyman on whom the pain could be blamed. 

Loose lips occasionally revealed that the Troika merely demanded a bottom line and cared little for how we got there. Welfare cuts, water charges, and property taxes were all Ireland’s idea. Both downfall and recovery were home-made. The chronic shortage of housing is not the only modern hangover to the crisis: the legacy of the guarantee, and the obligations it placed on us, are felt everywhere. In 2008 Ireland spent just over €2 billion paying interest on its national debt. By 2014 that peaked at €8.2 billion. The cumulative cost of serving those extra debts has been over €40 billion. That’s not all down to the banking crisis – even without a guarantee, the Irish State would have had to borrow to pay the bills – but the impacts linger.

Simply imagine what could have been achieved with that money over the intervening years. Job initiatives. Housing. Education. Hiring more teachers. Recruiting more nurses. Filling all the empty jobs that no emigrant consultant will return to take. Social welfare. Culture. Sports.
Those are the modern scars of a decision for which there was little other option. The social destruction, the lost decade. We might all like to pretend it simply never happened. But it did. Lest we forget.

Gavan Reilly / gavan.reilly@virginmedia.ie - Read Gavan's column every Tuesday in The Meath Chronicle print edition