#Merkel & #EU need to learn the lessons of Germany’s own economic renewal

1957 Adenauer Election Poster: No Experiments

Yesterday (Thurs April 11th) the Irish Times ran a story saying that the German chancellor Angela Merkel is facing mounting political pressure at home to demand fiscal concessions from Ireland in exchange for granting extra time to repay crisis loans.

It seems that once again Germany is insisting that it not merely have an input into EU talks and discussion, but that it have a veto on the outcome. It is the ‘he who pays the piper calls the tune’ school of political thought.  While the approach is not unfamiliar in politics, it flies totally in the face of democratic process and accountability. But even more than that, in this instance, it contradicts the history of Germany’s own economic revival and the important role played by one of Ms Merkel’s most illustrious predecessors: Konrad Adenauer.

Germany’s Wirtschaftswunder – the economic miracle of the 1950s – was based in large measure on a generous programme of debt forgiveness given to Germany by its 33 debtor countries (including Ireland). The 1953 London Agreement on German External Debts, effectively wrote off half of Germany’s total mountain of debt and gave it additional time to repay the monies it owed. These debts included war reparations from both first and second world wars, plus the massive German 1930’s debt default, which was just as significant as the 2008 European financial crisis.

The West German CDU Chancellor, Konrad Adenauer realised that there would be no growth or revival of the West German economy for as long as it had to make huge annual payment to the Allied and other powers. These hefty payments, many of which Germany was even failing to make, were draining the West German economy of the ability to rebuild itself.  He recognised that the only way to achieve growth was to get some relief from this debt burden, hence the London conference on German external debts.

Adenauer managed to convince the others sitting around the table that the only way that Germany could recover and rebuild was for them to ease the burden on it – he managed to convince them to stop doing to Germany what Germany is now doing to Ireland, Spain, Portugal, Greece and Cyprus.

Easing the burden of West Germany’s debt did not make the country lazy and profligate, quite the opposite. The Agreement, along with the Marshall Plan very quickly enabled the West German government and industry to use the resources freed up by the easing of the debt burden to generate domestic economic activity and growth.

Not only did the London Agreement write off 50% of Germany’s debt it removed the requirement that interest be paid, though did say that this proviso would be revisited in the event of German reunification. The collapse of the Wall in late 1989 triggered that proviso but it was never implemented due to Chancellor’s Kohl’s protestations that demanding such interest payments would make it almost impossible for Germany to meet the considerable costs of re-unification. So, once again, Germany’s partners allowed it to walk away from its financial commitments in the greater good.

Kenny MerkelAs we know, both Enda Kenny and the Fine Gael party is deeply proud of its strong association with the CDU and Ms Merkel via their shared membership of the centre right European grouping: The European People’s Party EPP. Indeed, they regard the linkage as so important and significant that Mr Kenny manged to include a quick visit to Berlin and photocall with the Chancellor in the first week of the February 2011 general election campaign.

Perhaps the next time An Taoiseach meets up with the Chancellor in either Dublin, Brussels or Berlin he might gently remind her that her countries economic resurgence and dominance is due, in no small part, to the fact that 33 other countries, including Ireland, had allowede Germany to ease its burdens when it mattered and that it may now be time for Germany to allow others the facility they once extended to it.


A tough year for Martin – and it will get tougher

My column in Saturday’s Evening Herald (Jan 28 2012) on Micheal Martin’s first year a leader of Fianna Fáil


A year ago this week {or “today” if published on February 26} Michael Martin sought and won the toughest and possibly most thankless job in Irish politics today: leader of Fianna Fáil.

Looking back over the past year there must have been moments when he felt he hadn’t so much won the prize, as been landed with it. Yet he did win it.

The manner in which he took a stand and challenged for the leadership helped him throw off his previous reputation as an ultra cautious politician who preferred to kick problems to committees rather than taking tough decisions.

On becoming leader [this day one year ago] he found himself at the helm of a demoralised and dissolute party facing into an election for which it was woefully unprepared.

The once great election winning machine that had been Fianna Fáil limped and staggered its way over the line with its new leader’s energetic and impassioned debate performances as rare high points in an otherwise horrendous campaign.

The result was best described by a northern colleague of mine as the greatest political punishment beating ever. The public was not just disillusioned and angry with Fianna Fáil and its Ministers: it had no interest in its views or opinions.

While his first full year in the job has been tough, it could actually have been worse. At the outset many pundits thought the very best he could hope for was stemming the tide of Fianna Fáil’s decline.

Recent opinion polls and the unexpected second place showing in the Dublin West by-election point to the party not just halting the decline, but even reversing it a bit. But there will be no one around Martin popping the champagne corks for a long while yet.

While the party’s prospects may look a tad better now than a year ago: its future is still by no means assured. The party has a long way to go before the public will be ready to listen to what it has to say.

One of Martin’s successes, if this is the right word, has been to get the party’s membership to grasp the new political reality that Fianna Fáil can no longer take its continued existence or relevance as inevitable.

This was no easy lesson for the party to accept. In some ways it is still a work in progress. While there is much talk of reforming both how the party is run and how it develops policy, these have yet to be implemented.

Hopefully, the reconnection Martin has making between the leadership and the members through his constituency visits and personal engagement should enable him to drive through a meaningful reform package.

But it is not as if everything has gone his way. While the right decision was eventually made; the very public “will they/won’t they” row on running a candidate for theArastook its toll. Likewise, Martin’s sometimes over wordy and earnest contributions at Leader’s Questions in the Dáil have not helped convey the idea of a strong leader.

This latter criticism is often attributed to his need to attack on two fronts at once.  Martin is not just targeting the government; he is also targeting the other opposition alternative in Sinn Féin.

Another explanation is that Sinn Féin now has a much bigger back office and research resource than Fianna Fáil. Addams and Co may be reading from scripts, but they are well crafted and written ones

It is not as if his task will get any easier either.

In the coming weeks Martin faces the prospect of dealing with the fallout of the Mahon Tribunal’s report. While there is no confirmed date for its publication, there is much speculation that it may be released just before Fianna Fail’s Árd Fheis at the beginning of March.

Talk about bad timing.

Whatever happens, Martin’s own position is secure. He has from now until the Locals and Europeans in 2014, at least, to show that he can lead the party to recover some of the public trust and confidence it lost.

After one full year, the toughest job in Irish politics is going to get even tougher.


So tell me Minister, how exactly did we find €3.6bn?

My column from the Evening Herald (2nd November 2011) on the discovery by the Department of Finance that we owe €3.6Bn less than we thought; due to an accounting error in the Government’s figures. 


Wednesday November 02 2011

IN one of his early routines the American comedian Bob Newhart explained how he had to turn to comedy when his career in accountancy came to an abrupt end. He described how he had, as a fledgling accountant, developed his own theory of accountancy which stated that getting within 10pc of the total was enough.

While the idea did not catch on with his bosses in the 1960s, it appears the theory has been rediscovered and redeployed in the Department of Finance.

Finding that we have €3.6bn more that we had is a lot better than finding we have €3.6bn less — but don’t you just feel that if it had been the latter the cuts target for this December’s Budget would have doubled.

At this point I had intended to explain the discrepancy. Having spent about six years in Government reading and dealing with Government estimates and balance sheets I felt sure I was up to the job.

But after about 45 minutes of reading statements from various agencies my head melted and I needed to lie down in a darkened room.

Those who understand these things better, tell me that this has all got something to do with the amount being rolled over like a Lottery prize that isn’t won, though it is possible that I got the analogy wrong.


The one thing I know is that the problem stems from confusion between the National Treasury Management Agency (NTMA) and the Department of Finance.

Up to 1990 only the Minister for Finance could borrow money on behalf of the State. In 1990 that power, along with the responsibility to manage assets and liabilities and negotiate rates on the State’s borrowings, was given to the NTMA.

The NTMA proved itself quickly with savings on the interest paid on our debt roughly equivalent to reducing tax rates by about 10pc.

However, while the authority to borrow and manage the debt was delegated to the NTMA, the responsibility for the accounts and borrowings has always rested with the Minister for Finance and his officials.

There was a change in how the NTMA dealt with the State’s Housing Finance Agency and how it listed their assets and liabilities in its accounts which was not picked up on when the State’s general government debt was calculated.

It is vital that the confusion is cleared up and succinctly explained as soon as possible by the minister and his senior officials in both the Department and the NTMA.

The error is all the more embarrassing as the head of the Finance Department is due to take up an appointment in early 2012 as Ireland’s nominee to the European Court of Auditors.

This organisation is, according to its President , responsible for examining ” … whether financial operations have been properly recorded and disclosed, legally executed and managed so as to ensure economy, efficiency and effectiveness.”


It also raises an interesting general issue regarding the management of government departments. The Irish civil service uses a “generalist model”.

Department officials get a broad experience across a range of disciplines and policy areas. Across their careers, most civil servants can expect to be trained and work in a number of different areas. The benefit of this rotation system is that you get people with a broad vision, enthusiasm and wide experience of varying sectors.

Moving high flyers between sectors and departments helps stem the “it’s the way we have always done it here” mentality. But, it also has a downside. There are fewer specialists in those areas where they are specifically qualified and some posts that should require specialist skills and training are filled by people without them.

It’s just like Sir Humphrey said in a classic Yes Minister episode: “Well obviously I’m not a trained lawyer, or I wouldn’t have been in charge of the legal unit.”