Ireland presses EU for deal to reduce bailout debts
It rained in the early hours of Tuesday, 30 September 2008, as the elements dampened the spirits of Ireland on a landmark day in the country's economic history.
As the world was swept up in a financial crisis, the Irish government introduced a guarantee covering the debts of the country's banks, a move that eventually torpedoed the economy.
The guarantee was a 400 billion euro ($539bn; £342bn) bluff, as Ireland did not have the money to cover it and, eventually, the markets called that bluff.
On 11 November 2010, Dublin was hit by storm-force winds, as once again the Celtic elements produced conditions to match the economic situation. Ireland was under so much financial stress, the government had to seek an emergency bailout of 85 billion euros from the European Union (EU) and the International Monetary Fund (IMF).
Five years on, and the Irish are using their presidency of the EU to try to persuade their European partners to reduce their debt burden. That extra clout could prove useful this week as a team from the EU and IMF are in Dublin, conducting their ninth review of how Ireland is following their economic roadmap back to recovery.
The next key date for Ireland's campaign to get their debt burden reduced is 31 March, when Dublin has to pay 3.1 billion euros to honour promissory notes, essentially IOUs, on debts owed by its banks. Could a deal be hammered out by then?
During a recent visit to Dublin the French Finance Minister Pierre Moscovici sounded positive.
"I'm confident we can find the solution this year. I trust Ireland will be the first country to exit this programme, set up by the EU area and the IMF, at the end of this year," he said.
However, Ireland's Taoiseach, or Prime Minister, Enda Kenny, is determined to secure a deal before then.
He recently told reporters outside the European Parliament in Brussels that "promissory notes will be negotiated with the ECB [European Central Bank]".
"I am confident that we will have a conclusion and a deal on that before the payment date of the end of March," he said.
Brenda Kelly, an economist with CMC, says the Irish people have lost faith in their government's ability to deal with the nation's troubled banks.
"No other country has been burdened with similar levels of bank debt. Given that the funds, along with Ireland's Pension Reserve Fund, were essentially used to prop up zombie banks, then Anglo Irish and Irish Nationwide are perceived, quite rightly, by Irish citizens as a waste of money," she told the BBC.
Irish taxpayers would prefer to see money that is pumped into the financial black hole of the banks used to create jobs, especially when about one in eight of the workforce is unemployed. On Tuesday, the Central Bank of Ireland predicted unemployment would fall this year to 14.5%.
Constantin Gurdgiev, an economist at Trinity College Dublin, worries that pumping money into dead banks like Anglo Irish, now renamed IBRC, takes money away from boosting the economy.
"Barring a swift and significant reduction in the burden of banking-sector-related debts, Ireland is facing into a decades-long economic stagnation, putting at risk the country's ability to sustain private and public debts servicing," he told the BBC.
"Ireland's debt overhang is of historically unprecedented proportions. Unlike other peripheral states, Ireland faces critical levels of debt accumulated by all three core components of the real economy - the government, the households and the non-financial corporations," he said
Deal or no deal
As protests in the streets of Athens turned violent, stoking fears that the eurozone was about to break up, Greece's creditors were strong-armed into accepting significant losses on what they were owed.
However, Ireland has failed to get a similar break on repaying the loans granted to bail out its banks.
It is worth noting the money loaned to Ireland by its European partners is sent to Dublin, pumped into dead financial institutions such as IBRC and then channelled to bondholders such as banks in France and Germany. Ireland cannot use the billions of euro to kick start its economy, which makes a deal to reduce the interest payments on the debt vital.
Austin Hughes, chief economist at the Irish arm of the Belgian financial group KBC, is convinced the outline of a deal on the bank debt will soon be unveiled.
"The Irish economy is showing tentative signs of a turnaround, [but] any recovery is likely to remain modest and fairly fragile for some time to come. So, the economic case for supportive action is clear cut," he said.
Ireland's governing coalition of Fine Gael and the Labour Party swept into power in 2011 with the popular promise "to burn the bondholders", but the controversial step of refusing to pay foreign investors in Irish banks, not covered by the guarantee, has not been taken.
The government has become unpopular as its austere budgets, featuring spending cuts and a raft of new taxes, have hit hard-pressed Irish homes. Thousands who are unemployed are emigrating every month, seeking work in places like Australia and Canada.
Emigration, long a way of life for pervious generations, is a new and tragic experience for those who came of age in the boom years of the "Celtic tiger" economy.
Mr Gurdgiev believes the prime minister has made the age-old politician's empty promise.
"In effect, the taoiseach is repeating exactly the scenario that played out during the last general elections, when both ruling parties committed themselves publicly to deliver specific policies, virtually all of which have been publicly and cynically abandoned since," he said.
What kind of deal?
Ireland is unlikely to get any Greek style write-off for any of the debts owed for its bailout. But a deal to repay the loans from the EU and IMF over a longer period is possible.
"A substantial lengthening of the maturity of this debt accompanied by relatively low funding costs will ease what is enormous pressure on Ireland's budget position," says KBC's Austin Hughes.
"The promissory notes are adding a little over 1% of GDP [gross domestic product] to Ireland's deficit this year and, after six austerity budgets, finding new savings without major economic and political costs is becoming hugely difficult."
Mr Hughes told the BBC the solution could involve Ireland issuing a special bond to be repaid decades from now.
"Any deal would need to involve an instrument with a maturity of at least 20 to 30 years. Anything shorter won't ease near-term pain much. This also means the interest rate will need to be relatively low," he said.
Even though Ireland would still have to pay back the same amount, Brenda Kelly from CMC believes stretching it over a longer period would help.
"The time-value of money is important, 3.1 billion euros in 20 years' time could well be a much smaller amount than at the present time," she said.
"Ireland would also need to borrow less in the short term, which would ultimately save money."
The fighting Irish
In three years, Ireland will mark the centenary of the 1916 Easter Rising, a rebellion against the British Empire that successfully led to independence for most of the island - freedom after 800 years.
The surrender of Ireland's economic sovereignty to Brussels and Washington has shaken the nation, but the EU and IMF would do well to remember this is a country with a long history of fighting adversity.
The powerbrokers will throw a bone to the embattled politicians in Dublin, who have defied public resistance to enforce austerity on their behalf.
But they will have to give Ireland a credible deal to reduce its debts and not one that merely looks the part, because the country's citizens will examine it carefully.
There is an old Irish saying I recall from my grandfather in Derry: "Put silk on a goat and it is still a goat."