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CHAPTER 2

IRELAND IN RECEIVERSHIP

At the time of the bank guarantee, Ireland was already in recession. By September 2008, the Irish economy had shrunk for two successive quarters and 80,000 jobs had been lost in the previous twelve months. The economy was collapsing. The complex international financial crisis, which had already taken down the Northern Rock bank in the UK and Lehman Brothers in the United States, played its part. But the main domestic cause of the collapse of Ireland’s ‘Celtic Tiger’ economy was more concrete – literally.

The ‘Rainbow’ Government of Fine Gael, Labour and Democratic Left was in power from 1994 to 1997, led respectively by John Bruton, Dick Spring and Proinsias de Rossa. I served as Minister of State for the Marine in that Government. With Ruairí Quinn as Minister for Finance, the public finances were back in surplus for the first time in decades; new jobs were being created at a rate of 1,000 per week and an era of economic prosperity was about to take off, led by export growth.

For most of the 1997 campaign, it was widely expected that the Rainbow Coalition would be re-elected. The three parties had agreed to run on prudent, steady policies. Opinion polls were in our favour, approval ratings were strong and the mood on the canvass was positive. Then, in the final week, in a desperate bid for support and power at any cost, Fianna Fáil promised tax reductions. The Independent Media Group weighed in to support Fianna Fáil, with an Irish Independent editorial proclaiming ‘It’s Pay Back Time.’

The Rainbow lost, and though no one would have predicted it at the time, Fianna Fáil went on to hold power for fourteen years, winning the next two general elections with further promises of tax breaks and increased spending. House prices had already begun to rise in 1997, but instead of managing an increased supply of new homes, Fianna Fáil drove a decade of frenzied speculative construction, which created the property bubble and, in turn, caused the economic crash in 2008. Developers were incentivised to build through a range of tax breaks. Local planning authorities, who were normally cautious and careful about their responsibility to the built environment and to communities, were incentivised to re-zone more land for building and to grant more planning permissions. Under a new Planning Act, both city and county councils could now generate additional income through new development levies attached to planning permissions.

To stimulate demand, elaborate tax incentive schemes for investment in apartments, nursing homes, holiday homes, car parks, student accommodation and office buildings were concocted. A landlord, who bought a single investment property in say, Carrick-on-Shannon, could get tax relief on his or her entire rental portfolio in Dublin. At the peak, the State was committing about €8 billion per annum in tax subsidies to construction. To drive it even further, Finance Minister Charlie McCreevy announced a plan to ‘de-centralise’ the public service, which would deliver reliable State tenants for office developers throughout the country.

To entice more buyers into the property market, cheap finance was needed, so the traditionally cautious banks were introduced to the concept of ‘light touch regulation’, and soon began competing aggressively with each other for new speculative business. Some stockbrokers and commentators cheered it on demanding that the other banks deliver the same kind of profits as Anglo Irish Bank. And the newspaper industry itself had a vested interest in the frenzy. They were doing very well from property advertising.

In my own constituency of Dun Laoghaire, the Council was required (under the new Planning Act) to draw up a housing strategy to meet house building targets set by the Department of the Environment. The strategy resulted in a stated need to increase housing units by 50 per cent in a county which was already well stocked. This necessitated additional re-zoning of land – including, for example, the lands of Dun Laoghaire Golf Club on Glenageary Road, which then moved to a new course at Ballyman on the Wicklow border. When a majority of the elected Council sought to challenge this particular instance of over development, they were met with an ‘instruction’ from the Fianna Fáil Environment Minister, Martin Cullen, and the re-zoning went ahead.

The Labour Party was consistently critical of the way Fianna Fáil pursued inflationary policies in the property market in those years. Following the merger of Democratic Left and Labour in 1998, the then leader Ruairí Quinn appointed me as Party Spokesperson on Environment and Local Government, with a specific mandate to address the problem of rising house prices and affordability. In early 1999, I established a Housing Commission, chaired by Dr P.J. Drudy, Professor of Economics at Trinity College, Dublin. This Commission produced a report that acknowledged the need to increase housing supply to serve a growing economy and population, but warned against incentivising property speculation and excessive lending. It included a comprehensive set of recommendations to address the housing problem. These were dismissed as ‘communistic’ by the Progressive Democrat Housing Minister, Robert Molloy. Charlie McCreevy’s answer to critics of his Government’s economic policy was to encourage people to ‘party on’. In a similar vein, as late as 2007, Taoiseach Bertie Ahern wondered aloud why those who were negative about the economy did not just go and ‘commit suicide’.

It was generally accepted that housing output needed to be around 50,000 units per annum, but at the peak in 2006/7, over 90,000 units were being completed. This was clearly unsustainable, as were average prices of €350,000 for a second-hand home – almost ten times the average industrial wage. And despite the wishful thinking that there might be a ‘soft-landing’, the property crash came forcefully and suddenly in early 2008. House prices dropped rapidly. By the end of 2010, they had fallen 40 per cent from peak. Many young families found themselves with mortgage debt considerably greater than the value of their properties. Builders were stranded on sites which would not now realise their costs, and with assets no longer covering their borrowings from banks.

The construction sector, which, at its peak in 2006, represented 23 per cent of GDP, was now in free fall and the wider economy was being dragged down with it. Sites were closing; construction workers were being laid off; builders’ providers, architects and conveyancing solicitors were among the first to be hit. House completions declined by 80 per cent between 2007 and 2010, taking 7.5 per cent off the country’s GDP. Real GDP fell by 3.5 per cent in 2008 and 7.6 per cent in 2009. By the end of 2010, GDP had fallen 15 per cent in just three years. As the economy shrank, purse strings tightened. Domestic spending dropped, such that the Central Statistics Office reported in 2009 the largest annual fall in retail sales since 1975. New car sales fell by two thirds in 2009.

As job losses mounted and unemployment soared, our Spokesperson on Enterprise, Willie Penrose, highlighted the unprecedented nature of the crisis numerically. The year-on-year increase in the live register was 146,000 in February 2009; 36,500 in the month of January alone. By April there were 200,000 more on the register than at the time of the 2007 General Election. Soon job losses were experienced in sectors unrelated to construction. In the first few months of 2009, redundancies were announced in Ericsson (300), SR Technics (1,200), Ryanair (200), LR Donnelly in Limerick (470) as well as Bulmers in Clonmel, Waterford Crystal, Elan, Dell, Schering Plough and Acuman. By the end of 2010, the live register had climbed to 13.4 per cent and was heading for half a million. We could see small and medium businesses closing in unprecedented numbers all around the country. This was very clearly the worst economic crisis in the ninety-year history of our State. No job was secure and no business safe.

Next, the State’s finances felt the impact. The exchequer had become overly reliant on taxes from the property sector, and this source of revenue disappeared almost overnight. People were spending less too, so VAT receipts were down, and every additional unemployed person cost the State €20,000 a year between lost taxes and increased social welfare payments.

The exchequer returns for January 2009 showed tax revenues down by €857 million (19 per cent) on the same month in the previous year. There had been a surplus of €630 million in January 2008. Now, a year later, there was a deficit of €744 million: a yearon-year reversal of €1.4 billion in the monthly figures. By December 2010, the State was taking in only €7 for every €10 it was spending. This could not continue for ever. The State would have to reduce its spending, try to increase income from new sources over time and, in the meantime, it would have to borrow the difference.

But therein lay a massive new problem. The State had guaranteed the banks and it turned out they were in a much worse state than Brian Cowen and Brian Lenihan had imagined. And it seemed no one knew to what extent. Estimates of the billions involved grew every month. International lenders began to doubt Ireland’s ability to keep control and to repay its debts. The interest on our borrowings began to rise exponentially. The ten-year bonds’ yield went from 4 per cent in 2006 to 14.55 per cent in July 2011. Eventually the ratings agencies – on whose somewhat arbitrary opinions international lenders partly base their decisions – consigned Irish bonds to ‘junk’ status. By the end of 2010, with a perfect storm of mounting debt and a deteriorating economy, Ireland was unable to pay its way and unable to borrow. The country was hurtling to bankruptcy or to bailout.

The Fianna Fáil-led Government was slow to see all this coming. Summer 2007 was a time for celebrating their three-in-a-row election win and for bonding with their new coalition partners, the Green Party. From September 2007 until April 2008, they seemed mostly preoccupied with their Leader’s difficulties at the Mahon Tribunal.

The Mahon Tribunal (originally the Flood Tribunal) was set up in 1997 to examine allegations of corruption in the planning process in Dublin, including the activities of Minister Ray Burke, who resigned from politics when the Tribunal was established. The Tribunal continued for over ten years, despite court challenges and considerable political hostility, eventually producing a set of reports which detailed and documented extensive corruption and malpractice in the rezoning of lands in County Dublin.

As I had served as a member of Dublin County Council during the period under investigation, I was very familiar with the subject matter. I was called to give evidence and I was ‘commended’ by the Tribunal in their final report. It was not so for others. In September 2007, the Tribunal began to publicly examine payments which had been made to Bertie Ahern at various times. These payments included a ‘whip-round’ among some of his friends during a difficult time in his personal life. The collection had taken place after a dinner in a Manchester hotel, and a suitcase full of cash was brought to him in Dublin, by a UK-based Irish businessman. All the money amounted to tens of thousands of euros. But there was difficulty in tracing it because the former Minister for Finance did not have a personal bank account for about five years. There was enormous uncertainty and confusion about who lodged what monies and when to a particular account.

Ahern’s answers were less than clear. In a Dáil exchange on the issue, I suggested to him that his explanations amounted to a cock and bull story. Eventually those close to him were called to give evidence, including his staff, and when public sympathy mobilised around one of his personal assistants, Gráinne Carruth, Bertie’s days were numbered.

In my office in Leinster House a few days after Ms. Carruth’s appearance at the Tribunal, I watched with my staff, the live coverage of Ahern emerging onto the steps of his department, surrounded by ministers, and announcing his resignation. I thought of all his successes, all the elections he had won, his insatiable appetite for constituency work, his reputation as a mediator, and above all, his indispensable role in negotiating the Good Friday Agreement in Northern Ireland with Tony Blair. His popularity, too, was epitomised for me by a night in St Joseph’s Boys Football Club in Sallynoggin when he officially opened the new club-house. When the formalities were over, I made my way towards the stage to welcome him to my constituency, only to find myself being pushed aside by a group of female constituents eager to get up close and personal with him. ‘Get out of our way, Eamon,’ they said with a smile, ‘we want to give Bertie a kiss.’

And now, it was all coming to a sad end for him.

Leadership of Fianna Fáil and the office of An Taoiseach was handed over to the only candidate offering to succeed, Brian Cowen. It was a long transition, with Cowen taking time away from the capital to celebrate in his Offaly constituency. The Government had yet to wake up to the recession, it seemed.

Brian Cowen’s first test was the referendum on the Lisbon Treaty now only a few weeks away. Very quickly it became painfully clear that the Government had not prepared for this. The Irish EU Commissioner, Charlie McCreevy, proudly proclaimed he had not even read it. In a radio interview, the new Tánaiste Mary Coughlan, seemed to have only the most rudimentary knowledge of it. It was a fiasco. Among citizens, there appeared to be resistance to this Treaty, even from among those who usually supported the EU. A new and credible opposition to Lisbon appeared in the form of Declan Ganley and his mysterious Libertas organisation.

My own first public meeting on the referendum was in Liberty Hall. To my surprise, the place was full when I got there, and when I started to speak, I sensed the mood was quite hostile. All of a sudden, I heard a voice asking gruffly from the audience: ‘What about the Passerelle?’ – a reference to an obscure detail in the Treaty. I knew I was in for a rough ride. When the meeting was over, one of my co-speakers, Proinsias de Rossa, who was an MEP at the time, was knocked to the ground and assaulted by a menacing group waving a video camera. What about the Passerelle, indeed.

Ruairí Quinn reported to the parliamentary party that on current trends the Treaty would be lost. It was decided that I should liaise with Brian Cowen and Enda Kenny, offer them our grim assessment and try to work out a joined-up campaign with them. This led to the plan that the Taoiseach and I would canvass together on a particular day in Dundrum Shopping Centre. When Tony Heffernan went out to reconnoitre the location for the photo shoot he discovered that the backdrop to the intended photo shoot was a Next shop front. I was repeatedly rejecting the notion of a Fianna Fáil-Labour coalition after the next election, and a picture of Cowen and me under a Next headline could not be allowed. But he couldn’t control everything: Cowen and I ended up –to the delight of the photographers and to the horror of my team – scoffing tea and scones together in a nearby café. We were joined on the canvass by local Fine Gael TD, Olivia Mitchell and by Seamus Brennan TD, then in the final stages of his illness. It was the last time I saw Seamus alive.

The Lisbon Treaty was defeated. In a poor TV interview afterwards, I came out with the words ‘Lisbon is Dead’. My intention was to say that the Treaty in its current form could not be put to the people again, but it was interpreted that I would oppose the holding of any second referendum. WikiLeaks later released a report by the American Ambassador of a conversation which he claimed that I had with him and which suggested that while I was publicly opposing a second referendum, I was privately indicating Labour support for one if held. I never met that particular US Ambassador at all!

We were halfway through 2008 and the Government had still not woken up to the fact that the country was in a critical condition, haemorrhaging businesses, jobs and reputation. It seemed that Fianna Fáil ministers who had become accustomed to government by auto-pilot could not mentally adjust to the new realities that economic circumstances had changed.

At first, nationalisation of the banks, as called for by Labour, was rejected by the Fianna Fáil-led Government. Eventually they were forced into it, first nationalising Anglo and later AIB. On the public finances, they were equally undecided. They began in July 2008 with a mini-budget which reduced expenditure by €1 billion. Reacting to the worsening circumstances, they brought forward the date of the 2009 Budget to October 2008. In a panicked attempt to compensate for some of their traditional overspending, they attempted to remove the automatic medical card to which citizens over 70 years old had been entitled. It brought thousands of angry pensioners onto the streets in an impressive show of strength.

The sudden economic implosion left people shocked at first, then frightened, and eventually angry. An entire generation of people with little or no experience of hard times were suddenly faced with the personal financial consequences of a recession. The past decade and a half had been one of optimism, growth, rising living standards, and unfortunately, massive borrowing. The payback would be different from anything Ireland had ever experienced. But it would not be the first time that some had lived through hard times, including myself.

I had grown up in rural Ireland in the 1960s when emigration was the norm, and I graduated from university in the mid-70s to see many of my contemporaries forced to leave the country to get work. I worked as a trade union official through the 1980s and recall the trauma of regular job losses. On many occasions I had to bring news of redundancy to meetings of union members, and I spent many hours in factory canteens talking through crises with men and women in their 40s and 50s who thought they would never work again.

I therefore had some understanding of the apprehension that now swept through homes across the country and I was determined that, in critiquing the Government’s performance, the Labour Party should always offer hope, clear solutions and a way out of the crisis. The situation and outlook were indescribably bad, but I felt things would get worse if the public mood turned to despair.

I travelled the country, addressing Party meetings, visiting workplaces, community centres, and accompanying candidates in walkabouts through towns and villages. We listened and gathered as much detail as possible on what people were going through, what they could be facing ahead and what solutions might help. These tours had an election focus; first, the local and European elections, in the first half of 2009; then the second Lisbon Referendum, in the autumn of 2009; and from then on, the general election.

Labour’s rise in the opinion polls came in phases. Through the summer of 2008, the Red C polls were showing Labour around its traditional 10 per cent. By the end of the year, it had nudged up to 13/14 per cent. The big breakthrough came in a series of polls in 2009.

I spent Thursday 12 February campaigning with Councillor Aodhán Ó Ríordáin in his new electoral area in Dublin North Central, visiting a school in Clontarf, meeting a community group campaigning for better bus services in Marino, a GAA club in Donnycarney, and eventually attending a meeting above a pub in Fairview to officially launch Aodhán’s campaign for re-election to the City Council. Broadcaster Eamon Dunphy had agreed to perform the launch, and as we gathered around before making our speeches, I was called out to a phone call from Tony Heffernan. He informed me that the IPSOS/MRBI poll in the next day’s Irish Times would show Labour on 22 per cent, only four points behind Fianna Fáil, who had fallen to 26 per cent. I knew it was just one poll, but couldn’t help feeling that the tectonic plates of Irish politics were beginning to shift. Fianna Fáil had never been this low, nor Labour so high.

Two weeks later the good news continued. A Red C poll in the Sunday Business Post showed Labour on 22 per cent and Fianna Fáil down to 23 per cent. We were now facing into the local and European elections with the wind behind us. The question was, could we convert favourable opinion polls into votes and seats in the elections on 5 June.

Our biggest challenge related to candidates and organisation. Outside the big urban centres, Labour was not organised at all or only minimally in many constituencies. In many Local Electoral Areas we had no candidate and no prospect of a candidate. Something drastic had to be done about this. I recruited David Leach to co-ordinate the campaign and Mags Murphy, who had worked in local radio, and had a good knowledge of the Party and local media, to trawl the country, especially the northern half, head hunting possible candidates. She, together with regional organisers George Cummins in Munster and Brian McDowell in Leinster, came up with several new faces for the Party to consider.

We had just one Member in the European Parliament: Proinsias de Rossa in Dublin. I persuaded Proinsias to stand one last time and he reluctantly agreed. The previous summer I had consulted the members of the parliamentary party in the Munster constituency. None of the TDs wished to stand for Europe, so the choice came down to the senators.

Senator Alan Kelly appeared to me to be the best prospect. He was from Tipperary and looked like he would be the only candidate from that county. He also possessed a great campaigning energy. Even if he didn’t win, a run in the European elections would at least assist him in the general election. I floated the idea to him in a conversation in my office in Leinster House. He, shortly after, arranged a breakfast meeting in the Westbury Hotel between himself, his brother Declan who flew in that morning from New York, Mark Garrett and I. We talked through the pros and cons of his candidacy, and he eventually agreed to run, provided we held the selection convention before the summer break, which would give him most of the year to campaign. I agreed and the convention was arranged for Saturday 25 July in the Silver Springs Hotel, Cork.

Then, unexpectedly, another candidate stepped forward. Arthur Spring, a young businessman in Tralee and nephew of Dick, had been expected to stand in the local elections for Tralee Town Council and Kerry County Council but now announced that he wished to stand for Europe. Within the Party I was put under considerable pressure to drop Kelly in favour of Spring. The argument was that the Spring name would harvest more votes than an unknown Senator from Tipperary, whose name had never appeared on a ballot before. I was repeatedly pressed to postpone the convention until the autumn. I refused. I thought a selection contest would be a good start to the campaign. It was intensely fought. At one point I felt it was getting a bit too rough and I asked the Chairman of the Parliamentary Party, Jack Wall, to travel to Newcastle West to meet both men and to cool things down a bit. Jack reported back that I should stop worrying; the future of the Party was secure with such fine young candidates available, and to let them at it.

Saturday 25 July was sunny and warm in Cork, as the buses from Tralee, Killarney, Nenagh, and Thurles pulled up in front of the Silver Springs Hotel. I had travelled there earlier to meet privately with Arthur and Alan and seek agreement on what each would say after the convention so that Party unity in Munster would be assured. As Jack Wall had indicated, there was no cause for worry: the two had already met that morning and worked out everything themselves.

Kelly won the nomination, and ran one of the most thorough and energetic campaigns I have ever seen. It included a rap song and endorsements from many well-known figures, such as rugby legend Peter Clohessy.

I had great difficulty finding a European candidate for the Leinster constituency. None of the parliamentary party would stand. I pressed Willie Penrose, Dominic Hannigan, and Liz McManus in particular, but they would not agree. I also spoke, unsuccessfully, to a number of suitable high-profile figures. I was getting desperate when out of the blue I was approached at a business dinner in Dublin by somebody whom I had known since my student days. He wondered if I had considered running two candidates in Dublin, and mentioned that Nessa Childers, daughter of the late President Erskine Childers, and at the time a Green Party councillor, might be interested. I had already agreed a one-candidate strategy with Proinsias de Rossa and I was not going to go back on that. I wondered, though, if Nessa might fit the bill for Leinster.

The Childers family was from Wicklow. Nessa’s grandfather, Erskine Childers, whose yacht The Asgard had smuggled guns into Howth harbour in 1914, had later been arrested in Wicklow during the Civil War and was held in Wicklow Gaol before his execution in 1922. Nessa had been a member of the Labour Party up to 2004, when she had sought a nomination for the local elections in the Clonskeagh Local Electoral Area where she then lived. She was unexpectedly defeated for the nomination at the selection convention, and she took it badly. I was the Party’s National Director of Elections at the time and I offered to have her added as a candidate in some other electoral area, but she declined and left the Party to stand successfully as a Green Party candidate in Blackrock. She was still a Green Party councillor when, as arranged, she called to my home in Shankill to discuss the possibility of standing as a Labour candidate for Europe in the Leinster constituency. She agreed to stand and we discussed the choreography for her to leave the Green Party and announce her candidacy. I advised her to avoid bitterness in her resignation from the Greens.

Liz McManus undertook to manage Nessa’s campaign, which was often rocky. Nessa had difficulties during some local radio debates. I recall offering words of encouragement to her during canvasses in Kilkenny and in Kells. Fine Gael’s Avril Doyle tore into her, an approach which, in the end, backfired to Nessa’s benefit. A colour piece by Lise Hand in the Irish Independent gave a flavour of the campaign:

... while Nessa is obviously sincere, it’s hard to get to grips with which issues she really feels passionately about. Ask her what her Big Issue is, and she simply sticks to the party line. ‘The’ answer that all the Labour Party candidates will give is jobs, and going out to Europe and representing people with integrity and competence’.

In Hennessey’s sports shop, Eamon and Nessa pose for photographs brandishing a pair of hurleys. Eamon gently pokes the candidate in the side with the stick. ‘A’ dig in the ribs –– this is how to do it, Avril, sorry, Nessa,’ he grins.

Outside of Galway City and Sligo, Labour had only a patchy organisation in Connaught/Ulster or the Ireland North-West constituency. There was no obvious candidate, and those who had stood in the previous two European elections had fared badly.

Former Labour Senator Kathleen O’Meara mentioned Susan O’Keeffe to me. Susan was the Grenada TV journalist who, in 1991, had made a documentary about the Irish beef industry which led to the establishment of the Beef Tribunal. Susan herself was the only one to be subsequently brought to court in connection with the broadcast. She was still working as a journalist and living in Sligo. She is a woman of great personal courage, and displayed it once again in standing for Labour in the North-West constituency, in effect risking her professional career.

She was a determined candidate, and raised many issues including the inadequacy of cancer services in the North-West. She debated effectively in the media with Declan Ganley, who, despite his high profile in European referenda, ran unsuccessfully as a Libertas candidate. Though she didn’t get elected, Susan polled a very respectable 28,708 votes, which set her up as a possible Dáil candidate for the future. Happily, Ganley called a recount and while it didn’t help him, an extra 2,000 votes were found for O’Keeffe. This brought her over the threshold for a State refund of election expenses. Ganley’s recount ended up benefitting the Labour Party by €38,000.

Proinsias de Rossa was comfortably elected in Dublin, as was Nessa Childers in Leinster. Alan Kelly’s result was a closer call, the count going to the very end before he became the third Labour MEP elected. I travelled to Cork to celebrate Labour’s best European Election since 1979, and indeed Labour’s best ever local elections. We won 132 city and county council seats, resulting in the highest numbers of Labour councillors since the foundation of the State.

I was the toast of the Party of European Socialists leaders’ meeting the following week in Brussels. Overall, it had not been a particularly good election for Europe’s social democratic parties, and in the post-election analysis, the party leaders felt that in the election the PES should have put forward a name for President of the European Commission. José Manuel Barroso was about to be re-appointed by default. The idea was born, that in future EU Parliament elections, the European parties should nominate candidates for the office of Commission President.

Europe continued to dominate the Irish political agenda through the summer and early autumn. The Government had negotiated some important changes to the original Lisbon Treaty to address the principal concerns of Irish voters in the referendum the previous summer. Each country would have the right to nominate a commissioner. Binding protocols would be added to the European treaties to guarantee Ireland’s neutrality and to underpin Ireland’s constitutional position on abortion.

A second referendum on Lisbon was set for 2 October. The campaign was difficult, and Labour’s pro-European position was attacked by Sinn Féin and the ultra-left, who had always opposed the European Union and who had campaigned for a no vote in every referendum to date. The Treaty was comfortably passed. I got a congratulatory telephone call from Commission President José Manuel Barroso.

Later the same day, at the Dublin count centre in the RDS, a journalist from the Sunday Tribune asked me for my reaction to documents the Ceann Comhairle, John O’Donoghue, had just released about his expenses. As I hadn’t seen the material, I gave only a vague comment, and undertook to examine the matter.

Earlier in the summer, O’Donoghue had come under pressure when the Sunday Tribune published details of expenses he had claimed for while he had served as Minister for Arts, Sport and Tourism. They included the hire of a limousine to transfer him between terminals at Heathrow Airport at a cost of €472, and the hiring of a car at the State’s expense for the duration of the Cheltenham Races. As the recession and cutbacks were impacting hard on the public, there was, understandably, considerable anger at such waste of taxpayer’s money. We heard complaints about the issue repeatedly during our canvass on the Lisbon Treaty. But O’Donoghue stuck to the line that as Ceann Comhairle he could not become involved in a controversy over a matter which arose while he was a minister. He left it to the Department to respond.

The Labour Party had issued a number of statements on the controversy, calling on O’Donoghue to explain his actions. I considered him to be a fair and very competent Ceann Comhairle, and I respected his office and the idea that it ought to be kept out of public controversy if at all possible. However, the latest information related to expenses he had incurred since he was appointed Ceann Comhairle and appeared to me to suggest an entirely unacceptable, sustained pattern of extravagance. I believed that the new revelations would bring the office of Ceann Comhairle, the Dáil, and the body politic into disrepute, and that firm and decisive political action needed to be taken to deal with the controversy. I felt this should be done on an all-party basis, and so I wrote to the leaders of Fianna Fáil, Fine Gael, Sinn Féin and the Green Party, suggesting a meeting of Party Leaders to consider the matter. I asked for a response in advance of the resumption of the Dáil at 2.30 p.m. on Tuesday 6 October.

Caoimhghín Ó Caoláin replied, agreeing to meet; Enda Kenny said he had ‘no objection to such a meeting, but for it to be worthwhile it must be attended by all leaders including the Taoiseach. I am prepared to participate on that basis.’ Brian Cowen replied on the day of the meeting, saying he did not agree to it: ‘In view of the Ceann Comhairle’s stated intention to make proposals to the meeting of the Oireachtas Commission to be held tomorrow, I believe that is the most appropriate forum in which to pursue these issues.’ The Oireachtas Commission is the body which oversees the Houses of the Oireachtas and is chaired by the Ceann Comhairle himself. It meets in private. Five of the eleven members represent the Seanad. In a statement responding to the Taoiseach’s proposal, I pointed out that ‘the Oireachtas Commission is primarily an administrative body. This is a political problem, which must be dealt with through the political process.’

I was disappointed with Cowen’s refusal to have a meeting of Party Leaders. It meant the O’Donoghue issue, already dominating the airwaves, would now have to be raised on the floor of the Dáil. There was growing public anger about it, and it was being made very clear to the Labour Party that people expected the opposition to do its duty and to confront the problem head on.

I travelled to Tralee to address the SIPTU Conference on Monday 7 October and discussed the matter at length with Mark Garrett over dinner in a restaurant in Adare, County Limerick. After my speech on Tuesday morning, members of the press asked me if I intended to raise the O’Donoghue issue at Leaders’ Questions later that afternoon. I confirmed that I did.

On the drive back to Dublin, I got a call from O’Donoghue himself, enquiring as to my intentions. I told him that in the absence of a meeting of Party Leaders, I intended to raise the issue during Leaders’ Questions. He pleaded with me not to, arguing that the Oireachtas Commission was where it should be addressed. I told him I considered it to be too serious at this stage to be passed on to a private committee meeting. It would be unthinkable, I told him, for the opposition not to raise it. He rang a second time pleading with me not to proceed, but again I refused, saying I believed the matter would not go away even if it was referred to the Commission.

In the Dáil, I asked the Taoiseach if he and the parties in government still had confidence in the Ceann Comhairle. The Taoiseach was visibly uncomfortable in his response, and said he regretted that I had raised the issue on the floor of the House, and that it should go to the Oireachtas Commission. He said nothing about the issue of confidence. It was hardly a ringing endorsement for O’Donoghue.

In response, I faced the Ceann Comhairle and said, ‘I regret to say this, but I consider that your position is no longer tenable. I think you will either have to resign or be removed from office. Following the order of business today, it is my intention to meet with my colleagues in the Labour parliamentary party and to recommend to them the tabling of a confidence motion.’ The die was cast. Later that evening O’Donoghue announced his intention to step down. I felt no sense of achievement or satisfaction. It was a necessary outcome, but travelling home that night I felt bad about what I had had to do.

Meanwhile, the economy continued to worsen. The Government was concentrating on the establishment of the National Asset Management Agency (NAMA). Shortly after the budget in December, Brian Lenihan was hospitalised. On 21 December he rang me from his hospital bed to consult with me about the membership of the NAMA Board of Directors, which he was shortly to appoint. He sounded in great form and joked with me about some of the contents of a book about the Workers’ Party, The Lost Revolution, which had just been published. After Christmas, I saw him at Justin Keating’s funeral on a snowy morning at Keating’s farm in Ballymore Eustace. He struggled bravely with his illness and I was truly saddened to hear of his death while I was on an Irish Aid mission to Tanzania in June 2011 and I attended his funeral on my return.

The endgame for the economy came quickly. Ireland’s bond spreads over Germany’s began to widen, as Ireland found it more expensive to borrow on international markets. Greece’s entry into a bailout programme gave rise to speculation that the International Monetary Fund (IMF) might step in and assume control here. But whoever heard of the IMF being called into such a prosperous, developed European state? Few took the prospect seriously, including some Fianna Fáil ministers who appeared on television saying they had heard nothing about Ireland making an application for a bailout. Within the week, however, the Governor of the Central Bank, Dr Patrick Honohan, was on RTÉ’s Morning Ireland telling a shocked nation that the Government intended to apply for a ‘programme of assistance’.

My first meeting with the Troika was on Thursday 25 November 2010 in the Labour Party parliamentary party room in Leinster House. A.J. Chopra of the IMF was accompanied by the other two members of the Troika (IMF, EU and ECB), Istvan Szekely from the European Commission and Klaus Masuch of the European Central Bank (ECB). With me were Joan Burton, Ruairí Quinn, Brendan Howlin, Pat Rabbitte, Colm O’Reardon, Mark Garrett and Jean O’Mahony. The meeting had been requested by the Troika. They wanted to brief the Labour Party on the contents of the bailout programme and how it would work. A.J. Chopra had a kindly bedside manner. The Irish economy was ill, was his line, and while a certain adjustment (11.9 per cent) had already been made, more was required. The financial sector needed to be ‘re-organised’ and ‘de-leveraged’ over a period of time. The public finances needed correction and it all needed to be done and done thoroughly.

We were conscious that within months we might be in government having to work with the Troika, so we were keen to explore what scope there might be for flexibility and for renegotiation of the programme. We emphasised the need for jobs and growth. They seemed positive about this and expressed confidence in the future of the economy, provided, of course, that the required corrective measures were taken.

We met them again on Tuesday 30 November, when they set out for us the deal which they had agreed with the Government, as defined in a series of official documents: a letter to be co-signed by the Minister for Finance and the Governor of the Central Bank, and a Memorandum of Understanding with all three institutions (IMF, EU and ECB), detailing the conditions for the loan finance being provided. The latter would indicate how much the State could spend on different programmes, what savings had to be made, what new taxes were to be raised, and what structural reforms were to be implemented. The programme would be supervised by Troika officials in Dublin, and the senior executives would visit every quarter for a review. Meanwhile, there would be a requirement for Ireland to report (sometimes weekly) on the measures being taken.

There, in the Labour parliamentary meeting room, between a mural based on the French Revolution and the 1916 Rising on one wall, and portraits of Labour Leaders back to James Connolly and Jim Larkin on the other wall, we were being shown how Ireland was in the process of losing its economic sovereignty. Being told so by the representatives of the economic institutions who were, in effect, taking charge of our affairs. As Ruairí Quinn put it, ‘the country is now in receivership’.

The documents now being agreed by the Fianna Fáil/Green Government would constrain the State, and of course the next Government, until the end of 2013. With Ireland no longer able to pay its way, and turning to the ‘lenders of last resort’, the conditions were bound to be onerous. To my mind, the worst was the interest rate. The institutions would borrow on the open markets for 22 per cent less than the rate at which they were lending it to us. I felt strongly that this mark-up or profit amounted to exploitation, and even a humiliation. I was determined to play my part in having these terms re-negotiated.

We used the two meetings to sound out where there might be flexibility, and we detected marginal differences in the attitudes between the Troika representatives. The IMF seemed the most reasonable. The European Commission, representing the Union, seemed to view us as errants in need of correcting. (Over time, the relationship with the Commission did improve.) The ECB was a bank, and behaved like a bank: Ireland was in debt; they were giving us credit based on terms; and we would have to stick to those terms.

One issue on which the Troika was insistent at these meetings (presumably because they were talking to the Labour Party) was privatisation. ‘We are keen to move on this,’ they told us. And when we pushed back, they countered by stating that Europe was putting up the money to keep us going. ‘Ireland is one of the richest countries in the EU. How much are you putting up yourselves?’ Such thinking was unacceptable to us. It was clear that our priority in government would be to re-negotiate the deal and to maximise flexibility.

As Christmas 2010 approached, there was a sombre and worried mood throughout the country. Uncertainty prevailed. What would the future hold? For jobs? For businesses? For families?

In the run up to Christmas every year, the Labour Party Leader hosts a drinks reception for staff, press and active members of the Party. It is normally held in the members’ restaurant in Leinster House a couple of days before the Christmas recess. This year there was no mood for celebration, and the public would hardly tolerate the idea of politicians celebrating while the people were suffering and the country was losing its economic freedom. We cancelled the Christmas party.