ECB Official to Irish Taxpayers: Pay Up and Stop Whining

In his article, Bini Smaghi wrote, “The principle of ‘no taxation without representation‘ should work both ways. If taxpayers have the right to share in decision-making, they must also accept the consequences.” He went on to say that while in principle it was correct that shareholders, bondholders and managers should be the ones to bear the burden of restructuring, in practice it did not work because of systemic risks and the inherent possibility for failure of a nation to see those risks in its own banks.

Regulation on a higher level, he added, while it might make euro zone taxpayers fear the eventuality of bailing out banks other than their own, would also provide them with assurance that all banks in the zone were subject to the same scrutiny and that excessive risk-taking would be reined in.

“Recent events,” he concluded, “have shown that, as long as the accountability of supervisors to taxpayers is primarily a national affair, and discretion in the implementation of national financial regulations and supervision is allowed, then there is a high risk that taxpayers will foot most of the bill. They should not complain when it actually happens.”