Bruce Arnold

Critic of Public Affairs, writing about art, theatre, music and politics

It is like the Icelandic volcano, a dark cloud of ash threatening to close Europe for business

The main concern over the weekend was to complete the deal in time before the markets opened yesterday morning, thus offering a form of Irish sacrifice that was clearly aimed, not at the reassurance of the Irish public, but at the reassurance of foreign markets on behalf of the euro.

The dreadful deed was done. Briefly, the markets seemed to respond positively but then fell back. And another sacrifice on the altar of political ineptitude took place. Too early to say that Europe is in freefall, but whatever is happening we are at the centre of things, which is what we voted for in the second Lisbon Treaty referendum, though what is happening now is a long way from what we thought was saving us.

There is a catalogue of sacrifices made on Ireland's behalf by the present Government and it has been greatly augmented in the past two weeks, most notably when it threw away control over our public finances in order to lose control over our banks.

Irish banks will be the death of the Irish economy, if they have not already done the job. But that they should be aided in this form of financial suicide by the whole Government has rightly caused growing alarm and intense anger.

I put sovereignty fairly high on the list of those sacrifices, since it has been repeatedly offered up for burning and is now only a charred and unrecognisable object. But it is of great importance to try and define it. This is because, though concern for Irish sovereignty is shared by many men and women in Ireland today, understanding what its loss means becomes increasingly difficult to grasp.

Over the past weekend we watched in dismay as the EU, through the ECB, and abetted by the IMF, dragooned Ireland into the urgent and express need to conclude the Irish bailout agreement before the markets opened, not for Ireland's sake, but for the sake of Europe and for what faced Europe in Portugal and Spain as well as Belgium and Italy.

And it is beginning to look as though we were duped into an exercise that looks increasingly close to failure. It is a bit like the Icelandic volcano, a dark cloud of ash over our heads threatening to close down Europe for business. This is a cloud on the periphery threatening the whole continent. And briefly it has been our cloud we have deposited on the rest of Europe, at Europe's request.

What was done, roughly speaking, was that private balance sheet risk was moved by legal decree on to the public and sovereign balance sheet of Ireland. This was unconstitutional, not only in the way it was done, but in the motive behind it.

Brian Lenihan attempted to reduce our sovereign exposure by creating the NAMA 'master' special purpose vehicle as a majority private entity. By this act it meant that the Irish Government did not have to put the NAMA debts on its balance sheet. Instead, NAMA has been kept off the balance sheet.

The markets, all along, have seen through this manoeuvre. They know that Ireland has guaranteed 95pc of the debt issued by NAMA to take the debts off the banks' balance sheets, which are now nationalised debt. But the sovereign guarantee of 95pc of the NAMA bonds remains.

We have gone around in circles. We have wasted time and money. We have been wasting time and money since the bank guarantee. And, since the banks are still there and are more of a public liability than ever, they are still costing us money and will go on doing so into the future. This will use up a substantial part of the bailout cash.

Can one blame the markets for not being interested in Ireland, other than to make money at our expense, and otherwise to laugh at how foolish we have been? The markets see that Ireland is spending its own equity -- the National Pensions Reserve Fund -- into the banks and this is not going to add a halfpence to confidence in us.

If the banks had been allowed to fail, there would have been decisive pain, but new growth could have started.

Ultimately, it is easier to understand what has happened if we refer back to our Constitution, a document surprisingly sharp on all issues connected with how the State spends our money. In Article 17.2 it states: "Dail Eireann shall not pass any vote or resolution, and no law shall be enacted, for the appropriation of revenue or other public moneys unless the purpose of the appropriation shall have been recommended to Dail Eireann by a message from the Government signed by the Taoiseach."

Of course the Lisbon Treaty vote made our Constitution largely irrelevant. But, personally, I hold it dear. There has been no intelligible message. How could there be when Patrick Honohan, Noel Dempsey, Brian Cowen and Brian Lenihan are neither putting the full story before us, nor understanding or explaining it in any coherent way. We don't even have the text of the agreement. What 'agreement?' you say. Why, the agreement to abandon our sovereignty.