Fine Gael and Fianna Fáil’s joint policy document has been widely derided as being long on aspirations but short on specifics. Dismissed variously as a colouring book or as the longest letter yet to Santa Claus, in truth, it could hardly have been no more than the opening gambit to persuade the smaller parties to join a coalition arrangement.
Little wonder, then, that it was heavy on promises and light on pain.
But if that was the intent, the glow of optimism did not last long.
By last Tuesday, the Taoiseach was on Prime Time to execute the swiftest turnaround in recent political history. In an echo of Churchill’s promise of blood, sweat and tears, Mr Varadkar told the nation that the next government would not be a place for the fainthearted. There will be disappointment, there will be criticism, there will be unpopular choices.
It was enough to scare the daylights out of any prospective leader who might have been considering signing up for the next government.
And any Independent TD who was listening must have done a quick calculation of what his prospects might be the next time he faced the electorate.
Perhaps earlier in the day Mr Varadkar had peered over the shoulder of his Finance Minister and into the yawning abyss that will be the public finances for years to come. The dire economic forecast of borrowing in excess of €30 billion, collapsing government revenues, and soaring unemployment was enough to shock any aspiring coalition partner into an appraisal of what needs to be done, and the electoral price of doing the right thing.
We are singularly fortunate, just at the moment, that our credit rating as a nation is so high that we are able to borrow all we want at rates that, for now, are easy to meet. Our prudence over the past few years – painful as it might have been – has stood us in good stead, and the financial markets are willing to advance us all we ask for.
On April 7, Ireland’s National Treasury Management Agency raised €6 billion in borrowings at a negligible interest rate of less than one-quarter of 1 percent. The bond-sale offer was oversubscribed five times, meaning that there was a queue out the door of would-be investors lined up to loan us as much as we cared to ask for.
Which is just as well, since we will, according to the Minister, need another €25 billion this year to make up the deficit caused by the Covid-19 crisis.
So all of this means that there is no need to panic. At least, not for now. Servicing the debt, at such low borrowing rates, will not be a problem, especially of the tide begins to rise again on a recovering economy.
But the real crunch will come, sooner or later, when the loan money has to be paid back. Conventional practice has been that, when a country’s borrowings become due for redemption, the answer is to refinance. You borrow the same amount to pay off the old debt, and start all over again. Which is fine, except that the next time round, the rates of interest for new money may be double or quadruple what they were the last time.
Which raises the question of who pays the piper then? The FF/FG document says there will be no tax increases and no cuts to services or welfare payments. The Green Party is adamant – we will not tolerate austerity again. And Sinn Féin is equally insistent – there can be no question of austerity. So where to from there?
Time for another letter to Santa Claus?