By Cormac Lucey
The row about the role of the government strategic communications unit (SCU) in promoting the national development plan rumbles on. Public money was used to insert advertisements in various newspapers that looked like regular editorial copy.
The opinions of several public commentators were sought and used without them knowing where they would appear and, mysteriously, some local newspaper advertorials featured photographs of candidates that the government plans to run at the next general election. Some of the coverage descended to Hall’s Pictorial Weekly and Ballymagash levels (image above).
In a Sunday World article focusing on Athlone and the Midlands, an article appeared under the headline “Ath’ to Freedom”. One sub-headline, referring to minister Kevin “Boxer” Moran, stated: “King of the Midlands Moran hails decision to designate town a key regional centre as part of the Government’s ambitious €116bn plan.”
The other sub-headline featured a quote from Gabrielle McFadden, Athlone’s Fine Gael senator: “My family always told me that Athlone is at the centre of the universe, so I am so vocal not only because I love the town but because I am from the town.” Cringe.
Earlier this week, The Times (Ireland edition) revealed Mediaforce Ireland, which was commissioned by the SCU to manage advertising campaigns including Ireland 2040 and Creative Ireland, had directed journalists to make advertorials look like independent stories.
The majority of the Oireachtas communications committee has now voted to invite Martin Fraser, the secretary general of the Department of the Taoiseach, to explain how the SCU spent public money.
Two key questions arise: why, if its benefits will be so evident, was it judged necessary to spend so much promoting the national development plan in the first place? And how did the promotion exercise become so politicised?
Another area of public policy that has become excessively politicised is mortgage arrears. In essence, the financial policy establishment — regulators, government officials, commercial banks and judges — have opted not to confront the country’s massive mortgage arrears problem aggressively.
This stance has been adopted despite Bill Clinton telling the 2011 Global Irish Economic Forum at Farmleigh that the mortgage crisis was the “number one” economic challenge facing us.
In 2013 John Moran, then secretary general at the Department of Finance, told the public accounts committee that there was an “unnaturally low level of repossessions” in Ireland.
In 2015 the Organisation for Economic Co-operation and Development issued a warning that the “repossession of collateral on non-performing loans is inefficient”. It called for the authorities to “accelerate through the court system the resolution of non-performing loans that require repossessions”. It did the same again this week.
Unfortunately, what may make expedient political sense in the short term has little long-term economic or public logic. While the aim of policymakers may be a kindly one — protecting those in financial distress — it risks being abused by those who elect not to service their mortgage, or even communicate with their bank.
Going easy on those who are in arrears encourages greater numbers to enter arrears. An American academic study found that high repossession rates were associated with low arrears rates, and vice versa.
Professor Gregor Connor, of Maynooth University, has estimated that more than 35% of mortgage holders are strategic defaulters — people who made a deliberate decision not to service their loans. In the same way, making treatment of the homeless an absolute public priority encourages greater numbers to register as homeless, if it helps them get a house. Politicising things often makes them worse.
Now the European Central Bank (ECB) has got tired of official tardiness here and is insisting that Irish banks’ mortgage arrears be reduced — and the only way to do that quickly is for the banks to sell off tranches of loans. Unable to manage our own problems, we must outsource to others, whom we then insult by labelling them “vulture funds”.
This has provoked its own political reaction, with Fianna Fail proposing that funds that purchase mortgages in distress be subject to regulation by the Central Bank of Ireland.
I don’t find that proposal intrinsically objectionable, but I do object to the political system allowing many mortgage defaulters to avail of free housing, which the rest of us end up paying for in the form of either more expensive mortgages or a reduced value of the state’s equity stakes in our commercial banks. And I object to the reaction of our political system to try to slow down or make more difficult the implementation of a solution to this problem.
The state should protect citizens who can’t look after themselves; it shouldn’t be protecting freeloaders.
The government’s decision to withdraw the nomination of Professor Philip Lane, the Central Bank governor, for an ECB vice-presidency is disappointing. The finance minister Paschal Donohoe withdrew Lane’s candidacy when it became clear that the Spanish candidate — Luis de Guindos, the Spanish economy minister — had the votes needed to win the vice-presidency.
A European parliament committee, which interviewed both candidates, regarded Lane as more qualified for the role but he seems to have been sacrificed as part of a wider deal.
It increasingly looks like the southern Europeans will be allowed the ECB vice-presidency for their man as long as the north Europeans can get their man — Jens Weidmann, president of the German central bank — into the ECB’s job when Mario Draghi retires. It’s another case of politics trumping expertise.
The politicisation of central banking is growing. In America, a non-economist supporter of President Trump got the top central banking job. In the eurozone, it looks like a political fait accompli. This is happening as both the US Federal Reserve and the ECB seek to scale back monetary policy from the ultra-loose towards something approaching normal.
This move back towards normality is only happening after unemployment levels have already fallen back towards levels last seen in 2006 and 2007. It suggests that monetary policy has already become heavily politicised.
Jürgen Stark, the ECB’s former chief economist, argues that monetary policy has become subordinate to fiscal policy, with central banks facing political pressure to keep interest rates artificially low. In his opinion, current ECB policy is “simply irresponsible”.
When we see how global authorities have used ever increasing levels of debt to combat the debt crisis unleashed a decade ago, it is hard to not to apply those words of censure wider afield.
Published in The Sunday Times (Ireland edition)