Jim Power: ECB has done well, the EU has been poor, and the Irish scorecard is mixed a year into Covid crisis

There is much criticism of the way that the Government has handled the crisis over the past year, to which this author has contributed.

Some of the criticism is justified, some less so.

However, if we put ourselves into the shoes of the Government, dealing with such an unprecedented crisis was always going to be a nightmare.

There is no real template available for dealing with such an unusual and dangerous situation. In many ways, it has been a case of learning as we go along and very much a trial-and-error approach.

Of course, the dysfunctional healthcare system was totally unable to cope.

If it is any consolation, most governments around the world are being pilloried over their handling of the crisis and, particularly, over the handling of the vaccine rollout.

The US and UK dealt very badly with the initial health crisis, but those countries have turned the situation around in dramatic fashion with their handling of the vaccine rollout.

Boris Johnson, the British prime minister, handed control over to venture capitalist Kate Bingham, and the results have been spectacular.

The UK became the first country in the world to approve a Covid-19 vaccine for emergency use in early December and, according to the British Medical Journal, its department of health began planning a mass vaccination programme before confirmation of the first infection.

Mr Johnson has managed to turn around his political fortunes in a dramatic fashion and is definitely on the front foot, at the moment.

In the US, president Joe Biden has prioritised the vaccine programme and looks set to achieve spectacular success in his first 100 days in office. Indeed, my 32-year-old nephew in California has been contacted to make a vaccination appointment, whereas my neighbour in his early 70s here has not heard a word.

Meanwhile, across the EU, the handling of Covid-19 itself has varied enormously from country to country, and likewise with the vaccination programme —
although the latter has had more to do with EU incompetence rather than incompetence of individual countries.

Nevertheless, the vaccine blame is being laid on the shoulders of individual governments, with Emmanuel Macron, the French president, now looking very vulnerable from the threat of the political right in France ahead of the presidential election in April next year.

The German chancellor’s CDU party is in deep trouble ahead of federal elections in September. The Financial Times ran a headline this week quoting a German business leader as saying “we are a laughing stock”, while Angela Merkel launched an attack on the leaders of Germany’s 16 states for relaxing their lockdowns just as infection rates were rising.

Germany was deemed to have handled the crisis very well at the start, but that is now a distant memory.

In a nutshell, the handling of Covid and the vaccine programme is causing serious political ripples across the world, and it will be interesting to see how it might change the global political complexion over the coming years.

In contrast, the economic policy response to the crisis has been quite aggressive and co-ordinated.

The EU immediately relaxed state aid and fiscal rules, and basically encouraged governments to borrow as much as necessary to support households and businesses in the face of a grave crisis.

The European Central Bank (ECB) launched a €1.9tn bond-buying programme, or quantitative easing, that sought to keep long-term interest rates down, thereby facilitating the massive borrowing underway by EU governments.

This general policy response has been strong but, at the EU level itself, there has been a marked reluctance to implement the fiscal approach that is undoubtedly needed.

As is always the case, agreement on an EU rescue plan has been slow, laborious and, ultimately, inadequate. It is likely to be less than half that in the US. The US growth recovery will far exceed that in the EU as a consequence.

In all, the ECB has handled the crisis well, but the European Commission has been very disappointing at all stages, but particularly in relation to vaccine procurement and delivery.

Commission president Ursula von der Leyen has not inspired confidence.

In Ireland, the Government’s scorecard looks mixed.

On one level, the Government has not been reluctant to borrow and has run up a big deficit.

Before the pandemic, there was an expectation that there would be a general Government budget surplus of up to €2.5bn in 2020. In the event, a deficit of close to €19.5bn materialised.

The deficit this year could exceed €20bn, depending on how long strict restrictions remain in place.

The Government quickly recognised that households would need to be supported and that economic recovery would ultimately be dependent on having as many viable businesses as possible still around to pick up the pieces and drive recovery.

Supports include the pandemic unemployment payment, the employment wage subsidy scheme (formerly the temporary wage subsidy scheme), a credit guarantee scheme, rates waivers, business loans and various grants. There have also been sector-specific initiatives, such as for the tourism sector.

Many of the businesses affected by the restrictions in sectors such as hospitality, non-essential retail, private transport and personal services, justifiably argue that the payments have not been sufficient to enable them survive and come back to life once the pandemic moves on in some sense of the word.

Data collected by the EU Commission suggests that in 2020, Ireland ranked last in the EU for the amount of state aid given to companies expressed as a percentage of GDP. Measured by GDP, it estimates that Ireland doled out the equivalent of 0.26% of GDP, compared to 7.3% in Spain and 6.4% in France. This is despite the fact that the Oxford Stringency Index shows that Ireland has had amongst the most restrictive regimes in the developed world over the past year.

Communications and leadership have been seriously bad in Ireland over the past year, but particularly since the current Government took office. Confusion, frustration and disillusionment have been sown by mixed messages, leaks, conflicting information, hesitancy and the lack of a coherent strategy or guidance for those sectors subject to stringent restrictions.

Government policy has been dictated by the National Public Health Emergency Team (Nphet), for the most part.

That body was given a very specific and narrow mandate. Unfortunately, it was not required to give any consideration to the economic, social and broader health consequences of a policy that rested on ongoing rolling stringent restrictions and little else.

Of course, the membership of Nphet does not contain anybody with even a remote understanding of business owners.

There has also been an abject failure to implement a proper system of test, trace and isolate, and rapid antigen testing. No consideration appears to have been given to the importance of ventilation either.

Furthermore, there was no proper attempt made to assess different risks, with for example, somebody on the side of an isolated mountain or on a golf course being deemed to be exposed to the same risks as those in a pub. Thousands of people packed into a public park are deemed safer than two people on a golf course. It defies logic.

Coming into the crisis, it appears clear the health service was totally ill-equipped to deal with a pandemic and, hence, the only viable option for the Government appears to have been an ongoing series of rolling lockdowns until a vaccine could be delivered.

Unfortunately, that is what we are now living with, and will be for a while longer.

No attempt has been made to carry out a cost-benefit analysis of this approach.

The economic, fiscal, health and social legacy of the approach pushed by Nphet and accepted in the main by Government will reverberate for years to come.

Hopefully, valuable lessons will have been learned for the next health crisis, as the cost of failure is horrific — as we are finding out.