Political institutions face the ultimate test

Our national and European systems of government must step up to the plate in fighting the coronavirus, writes Dan O’Brien

THESE are the last days of anything resembling normality — for the next few months at least. There is every reason to believe that one of the biggest changes in our lifetime is upon us. There is little reason to believe that the coronavirus will burn itself out quickly.

We can only hope that a vaccine can be found and trialled at an accelerated rate to protect us all, and in particular the proportion of population that is really vulnerable.

How will society respond to life being disrupted as significantly as it is about to be? Will the inchoate anger that has infected politics across the western world in recent years be amplified as the virus takes its toll or will the mood change entirely? Could people suddenly become nostalgic for the recent past that some were desperate to change, coming to believe that things weren’t so bad after all?

Alternatively, will the overloading of the health system, daily reports of deaths from coronavirus, and the nightmare scenario of those who are infected but less likely to respond to treatment not getting rationed treatment, make people believe that how the Irish State is run really does need radical change?

The answers to these questions will be profoundly important for Irish society over the long-term. They are also important questions for politics and government formation in the short-term.

There is much talk about the need to form a government. Let me make an alternative case. It is entirely pointless for any grouping of parties to attempt to draw up a five-year programme for government right now. We have no idea where Ireland and the rest of the world will be in five weeks or five months, never mind five years. All focus must be on handling the health crisis and allocating the vast resources of the State in the most efficient way possible to save lives and limit the collateral damage of the virus.

The past week has shown that a caretaker government can do that perfectly well — the €3bn stimulus package launched at the beginning of the week was well timed and proportionate, and nobody is claiming that that the Government is behind the curve in managing the crisis. The WHO has explicitly praised Ireland’s handling of the crisis.

Changing government in the next few weeks would require new ministers to read themselves into their briefs. Most new ministers will have no expertise in their new areas. This is one reason to continue with the caretaker government.

There is another, perhaps more important reason. If the public reaction to the coronavirus outbreak is anger and a belief — whether justified or nor — that it has been mishandled, any new government established in the next week or so could lose the confidence of the public before it has even found its feet.

Surely it is better — in the interests of all parties, and the country — to allow the Government continue in its caretaker role for another month or two. Let it take the blame if anger is the dominant emotion. A new government could then start with a blank slate.

An alternative political option — mooted over the past week and more — has been the formation of a national government. Such a government would mean no effective opposition. Leaving a democracy without an opposition would only make sense if there were an external enemy trying to take advantage of openness, debate and public scrutiny. Though there may be warlike dimensions to the current crisis, there is no foreign power trying to take advantage of the situation. As such, the main case for a government of national unity, even in these extreme circumstances, is undermined.

The issue of legitimacy is also relevant. If a national unity government were to be seen to have failed to deal with the outbreak, the legitimacy of the entire political system could be threatened. Democracy should never be taken for granted. What is to come in the weeks and months ahead will be unprecedented. People could come to seek an unprecedented political responses.

The legitimacy of Ireland’s most powerful non-national political institution is also on the line. The European Central Bank will have to act as a lender of last resort in a crisis that will in all likelihood cause a painful recession and deliver a hammer-blow to the public finances of all its 19 member countries.

Last Thursday, the ECB launched a major response to the crisis. It deployed many powerful tools which should help limit the economic slump that is already under way. But the new president of the bank, Christine Lagarde, made a major error during the press conference, essentially saying it was not Frankfurt’s job to suppress fears that euro area governments could go bust.

This was rightly seen in Italy as recklessly irresponsible, because it was recklessly irresponsible.

In times such as these, technocratic institutions must fulfil their obligations to citizens. For the technocratics in Frankfurt, that means acting as the lender of last resort and making it absolutely clear that there are no doubts about that.

In normal times those who run the ECB and the Euro area central banking system have real concerns about how governments will behave if they believe the bank will bail them out. They have a particular concern about Italy.

As someone who had lived in Italy and covered it for many years as Europe editor at the

Economist Intelligence Unit, these concerns are valid in normal times. Few things in life have eroded my faith in humanity more than spending time in the company of Italian politicians. Most are in public life for private gain, and do little to hide the fact. My Italian friends are in constant despair about their country’s political culture.

In normal times, the discipline of the bond market is vital to prevent such a political culture from taking advantage of the single currency. Without market discipline, moral hazard becomes a real problem for everyone in the euro area.

But there is now no moral hazard issue. This is a public health emergency. The Italian political class, for all its flaws, is stepping up to the plate. Giorgio Gori, mayor of Bergamo, one of the worst affected Italian cities, levelled with his voters in a tweet during the week: “Patients who cannot be treated will be allowed to die.”

Such statements do not win votes. But they bring home to people the seriousness of the situation and the need for every single person everywhere to follow the advice of health policy experts.

The monetary policy experts in Europe’s central banking system need to be clear, explicit and unanimous in how they will fulfil their duties to European citizens. Last Friday the former chief economist of the IMF, Olivier Blanchard, succinctly set out what they need to do.

“The last thing the world needs at this juncture is another euro crisis. The ECB should and can avoid it. There is no moral hazard here, no need for punishment for past sins. Just help for a member country that needs help, which can be provided at likely zero cost, and in the process saving the euro zone,” he wrote.

“The ECB can act directly and stand ready to buy Italian government bonds at a given rate. This is what the Bank of Japan does, and it works.”

The legitimacy of national political institutions will be tested during this crisis. European supranational institutions will be tested too.

If they fail, Europe will fail.

‘It is entirely pointless for any group of parties to draw up a five-year programme for government right now...’