Europe swoops into Ireland

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The arrival of the bailiffs at the front door is a humiliating moment for the head of any family, but for the man who leads debt-ravaged Ireland, there was a special shame Thursday night when the moment of truth came.

Brian Cowen, the Taoiseach (Prime Minister) of Ireland, is not just any leader struggling with debt; he is head of the Fianna Fáil party, created in 1926 to usher in Ireland's independence from Britain. And Thursday night, as lending-agency officials from Brussels and Washington filed into the hotels of Dublin to put the country into receivership, it felt like a repudiation of Ireland's hard-fought independence.

For months Mr. Cowen has reassured voters that, however bad things got, there would be no threat to the country's sovereignty. He slashed budgets savagely, reassuring the Irish that it would keep the outsiders at bay. As late as Monday, he told voters that the country would remain solvent through the new year and that foreigners would never be involved.

But the wolves were at the door, and yesterday they stepped across the threshold. The euro-zone debt crisis swept from Greece into Ireland this year, devastating the economy: Ireland's banks are close to insolvency; an estimated 200,000 homeowners - affecting about a fifth of the country - face default on their mortgages; unemployment has topped 13 per cent and the government's budget deficit has reached 30 per cent of GDP, largely because of bank bailouts.

On Thursday afternoon, the boom came down: A team of 12 officials from the International Monetary Fund arrived in Dublin and checked into the luxurious Merrion Hotel, across the road from the Government Buildings. They were joined by teams from the European Union and the European Central Bank.

On Friday morning, they will begin poring over his government's books in preparation for the creation of an IMF-European Union bailout loan and forced cost-cutting program, likely providing at least €80-billion ($110-billion Canadian), equivalent to putting $81,000 worth of debt onto each Irish household.

It did not help at all that a Brussels official was caught referring to the bailout loan as the "Oliver Cromwell Package," a reference to the British Lord Protector who invaded and colonized Ireland in 1649 - a name and date known to every Irish citizen.

Shame and humiliation became the words of the day. It is a particular badge of dishonour, for a people who marched under the banner "neither King nor Kaiser" in the last century, that Britain and Germany are extending their hands most generously.

Yesterday, British Foreign Minister William Hague told The Globe and Mail that his government would lend at least $10-billion to Mr. Cowen's government if they asked for help (they hadn't yet). This, he acknowledged, is because of Britain's corporate and bank exposure to Irish debt. While Britain is not a euro-denominated economy, British companies and banks are heavily exposed to collapsing Irish debt: Britain's trade with Ireland is more than its trade with China, Russia, India, Brazil and Turkey combined.

Mr. Cowen Thursday night struggled to deny that this was a moment of national abjection.

"I don't believe there is reason for people to be in any way ashamed or humiliated at all," Mr. Cowen said Thursday night. "It will be the sovereign decision of the Irish government on behalf of the Irish people that will decide what shape any package would be where we can decide that's in our best interests. At the moment we are in the process of working out what the best options are."

His Finance Minister, Brian Lenihan, acknowledged on national television for the first time that the country would need external assistance, but added: "I certainly don't feel a sense of shame."

But that cut little cloth with most Irish observers, even members of his party. Even though it is inevitable and even desirable that Ireland receives a Greek-style bailout from Washington, Brussels, London and Berlin, the country is responding with fury and derision to Mr. Cowen's acquiescence. For the Irish, there is nothing worse than dependency: It led, in previous centuries, to the death of millions. For a leader, there is no worse deed.

"Having obtained our political independence from Britain to be the masters of our own affairs, we have now surrendered our sovereignty to the European Commission, the European Central Bank, and the International Monetary Fund," the Irish Times wrote in a front-page editorial Thursday. "Let us not seek to assuage our sense of shame in the comforting illusion that powerful nations in Europe are conspiring to become our masters. We are, after all, no great prize for any would-be overlord now. No rational European would willingly take on the task of cleaning up the mess we have made."

Politically, it is almost certainly the end of the line for Mr. Cowen. On Nov. 25, his party will face a by-election that is likely to narrow his coalition (with the Green Party) to two seats; by Dec. 7, he will have to pass a budget. This will be a daunting task if, as is likely, the government's spending and taxing powers are completely under the control of the IMF and the EU. Analysts said it is likely that the bailout officials will assume control of the country's tax and spending powers and demand an increase to the country's famously low corporate tax rate.

Observers, and even party loyalists, are predicting a shattering defeat in the next election.

"Fianna Fáil is soon going to have to face an angry electorate and will likely be decimated," said Robert Cassidy, a Galway-based political consultant with close ties to the party.

"They will forever be remembered as the party that ruined Ireland. Through the last week they have either intentionally misled the people in just what was going on or else they had been totally kept out of the loop by Europe."

While Mr. Cowen ended the day defiantly telling interviewers that this was not a loss of sovereignty at the hands of foreigners, the less pleasant forces of reality were closing in around him.

Patrick Honohan, governor of the Irish Central Bank, was one of the few officials willing to acknowledge the full truth Thursday night.

"It's my expectation that this [a bailout]is what is definitely likely to happen. That's why the large technical teams are sitting down discussing these matters," he said. "I think this is the way forward. Market conditions have not allowed us to go ahead without seeking the support of our international collaborators."