The Irish answer

In trying to fix a national crisis, Prime Minister Enda Kenny may be finding solutions for Europe

Catherine Mayer

Cover photo: Levon Biss for TIME

Enda Kenny is due to attend the Sept. 20 opening of the new premises of Arvato Finance, a German-owned billing and payment-services company, in Dublin's docklands, but has delayed his convoy to take a call. Conversations with Ireland's Prime Minister are often pleasantly discursive; if words were money, Kenny could have easily cleared the national debt since coming to power in February 2011. And so, at the appointed hour, he finds himself gridlocked in traffic, facing the skeleton of a building that was to have housed the headquarters of Anglo Irish Bank, the country's third largest lender until red ink overwhelmed the institution in 2009 and pushed the building's developer into liquidation. Arvato's good news is small beer by comparison; the expansion of its Irish subsidiary is expected to create just 100 additional jobs. These days, though, Kenny leads cheers for even the smallest of beers.

When Kenny finally reaches Arvato, he springs from the car and soon he's glad-handing for Ireland, enjoying the craic, the chat. Mayo, the Gaelic football team he supports, hopes to clinch the All-Ireland title on Sept. 24 against Donegal. Ahead of the game, Kenny will attend a papal audience in Rome as part of an international gathering of center-right politicians. "I intend to ask the Pope for divine intervention," he says, grinning.

The joke backfires a few days later when Mayo goes on to lose, gallantly. But Ireland's irrepressible Premier is keeping his sights set on a far bigger miracle: saving the country's economy. Ireland's intertwined bank failures and property bust of 2008 — 09 proved at least as devastating as the parallel crisis now engulfing Spain. In November 2010, Ireland was forced to beg for a bailout from the E.U. and the International Monetary Fund. The country could not afford to keep its debt-burdened banks afloat or finance its commitments by raising capital in international bond markets. Its problems infected the euro zone, and the euro zone's sickness spread across the globe. At home, businesses bankrupted; main streets shuttered. For every high-profile collapse, there were thousands of smaller calamities: families left without breadwinners, people left without hope.

Kenny aims to return his nation to health through a program of taxes and tax hikes, cost cutting and public-sector restructuring. As these efforts begin to bear fruit, the little republic with a population of just 4.6 million is proving, once again, that size isn't everything. Its poets and musicians have entranced global audiences; now its policy statements are studied like great literature. The second member of the European single currency, after Greece, to take a bailout, Ireland could be the first to provide a model for tackling the euro zone's wider blight.

The granters of the bailout have lauded Ireland's progress. "Exemplary," said IMF managing director Christine Lagarde. European Central Bank president Mario Draghi described Kenny's government as "a model of compliance with the macroeconomic adjustment program."

Kenny bats away the praise. "It's not just about fulfilling a program; it is about creating a different space for the country, for the people, for the brand we carry." He's right to be cautious. In Greece and Spain, belt-tightening has triggered eruptions of public anger. Nor is Ireland anywhere near home and dry. The government will unveil the 2013 budget in December and needs to find more and deeper cuts; growth is slowing. Yet for now, a majority of the Irish population, from householders stuck with properties worth a fraction of the mortgages they can't afford to public-sector workers on shrunken salaries and billowing hours, seems prepared to share in Ireland's painful rebirth.

As Premiers elsewhere seek to rally their rebellious citizens or burnish tarnished investor confidence, some of them are seeking advice from Kenny. They wonder what it is that Kenny is doing better, whether lessons learned in Ireland apply to their own countries. The Irish example raises other questions too, about national leadership in a crisis that pays no respect to borders. One person who should have at least some of the answers is Kenny himself. 

Born to Run
The office of the Taoiseach (pronounced Tea-shock), as the Irish call their Premier, is cluttered with images that hold special meaning for its current occupant. There's Kenny with Muhammad Ali, whom he once quoted after a bruising election debate: "Do I look as if I was marked?" Another photograph shows Kenny with President Obama. Pride of place goes to a family portrait of Kenny, his wife and three children nestling up to Bruce Springsteen. The Taoiseach loves the Boss. He also admires Irish independence hero Michael Collins, who gazes impassively on the cozy corner where in May 2011 Kenny chewed the fat with Elizabeth II, the first British monarch to visit Ireland since the country's break with the Crown almost a century earlier.

"There are occasions when you have to be rebellious, about issues you have to be rebellious about," says Kenny, when asked why the Irish, with their history of fighting foreign oppressors and one another, are not rising up against his regimen of austerity. "In the case of the current problem here, Irish people know what caused this, and they know how it's going to be fixed, and they know that it's not going to be easy to fix it."

‘Irish people know what caused this, and they know how it’s going to be fixed, and they know it’s not going to be easy’

The scale of "the current problem" was laid bare in an IMF working paper published in June, which ranked Ireland's banking crisis in terms of fiscal costs, increases in public debt and output losses as the world's most expensive since the Great Depression. Financial services had not only been a cornerstone of the economy since the 1990s, as Ireland moved away from its agrarian past, but Irish banks invested heavily — and stupidly — in another sector, the construction industry, giving loans to just about anyone with an ambition to buy a house or build a whole town's worth of houses, the combination that has blighted Spain.

Kenny inherited a kingdom of derelict developments. Credit, until recently too easily available, had dried. Scores of the country's brightest youth were voting with their feet, leaving at rates last recorded during the Great Famine in the 19th century. Kenny has not yet stanched that desperate outflow, and despite the exodus unemployment has risen to 14.8%. Yet on several other measures, his country's turnaround looks compelling. He has maintained an agreement struck by the previous government with public-sector unions to improve efficiencies and reduce costs; he's cut his own pay and that of his ministers. His government has worked to protect homeowners threatened with foreclosure while levying a new flat-rate charge on property. Ireland has secured an interest-rate reduction on its bailout and is now pushing E.U. leaders to make good on their June promise to green-light direct payments from bailout funds to banks. Such a change would mean Spanish banks could be refinanced without inflating Spain's national debt. Ireland has already spent 64 billion euros ($83 billion) on propping up its banks and hopes to see its sovereign debt adjusted downward.

As economists debate the feasibility of cutting and growing, Ireland is sticking to its deficit-reduction targets and managed to grow its GDP, by 1.4%, in 2011. In July, Ireland made a successful return to the bond markets after a two-year hiatus. In September, yields — the interest it must pay to borrow — fell below 5% on existing nine-year bonds, from the unaffordable 9% that forced Ireland to endure the ignominy of accepting a bailout.

Ceding control of its finances to foreign institutions was a bitter outcome for a country that still bears the scars of its war of independence and the civil strife that followed. Collins was assassinated by opponents of the treaty he signed with the British in 1921. The divisions of yesteryear are still reflected in Irish politics, with Kenny's Fine Gael party (the Gaelic name means Tribe of the Irish) descended from Collins' protreaty pragmatists and Fianna Fail (Soldiers of Destiny), until the past election Ireland's largest party, heirs to the antitreaty faction.

Going into the election, Kenny found himself in the unfamiliar position of being on the winning side of that historical conflict. Fianna Fail had dominated democratic politics, heading governments for 56 years to Fine Gael's 19 since the enactment of Ireland's constitution in 1937. The Irish economy began to motor under John Bruton's Fine Gael government in the mid-1990s, but it was Fianna Fail, back in charge from 1997 until last year's ouster, who claimed credit for the Celtic Tiger. And it was Fianna Fail whom voters blamed when the tiger proved a chimera. Kenny's greatest electoral asset was not to be the incumbent.

Being There

That piece of luck — if riding to power on the back of an economic disaster can be described as luck — makes Kenny, on electoral mathematics, the most successful Fine Gael leader ever, the only one to trounce his rivals. But it also has done little to convince doubters — including those in his own ranks — that Kenny deserves his high position or has the skills to keep it. Vincent Browne, who hosts a popular political TV show, once suggested that Kenny, as opposition leader, was such a liability to his party that he should "go into a dark room with a gun and bottle of whiskey." Five months later, Kenny won the general election. Despite mounting evidence of his government's competence, a swath of the Irish political establishment remains unconvinced, ascribing every fresh achievement to luck.

"He has had success in Europe, with a reduction on the interest rate for the troika [the European Commission, the ECB and the IMF], and catching French coattails on the banking debt, but does anybody really believe those achievements are down to Kenny's political nous?" wrote columnist Michael Clifford in the Sept. 8 Irish Examiner. "As of now, Enda Kenny continues to resemble an accidental Taoiseach."

At 61, Kenny appears every inch the alpha politician, with hair as thick as Mitt Romney's, an avuncular twinkle and a face equally suited to the somber and the celebratory. People trust him. There's no taint of venality — and Irish politics has a long, ignoble history of politicians on the take. He is the longest-serving living member of the Dail, Ireland's lower house, with 36 years of experience. Yet few people saw him coming.

‘We have borne the burden for every other body in Europe by doing what we did. Europeans banks would have suffered a catastrophic collapse.

That is at least in part because like Angela Merkel, the first East German — born woman to lead her party and country, Kenny doesn't fit his own party's image. He speaks with the lilt of County Mayo, a rural part of western Ireland, and goes hiking when he wants to think. He became a Member of Parliament by happenstance, after his father died, vacating a seat held by Fine Gael and endangering the tenure of the Fine Gael government of the day. He has never radiated ambition. "Take the job seriously," he says, "but never take yourself too seriously."

It seems that quite a few of his compatriots take him at his word. One insider recalls a dinner with officials from the E.U. and the IMF. Throughout the meal, the Irish guests listed all the defects of Kenny's government: "At the end of the meal, a senior official said you have one of the best administrations that he'd come across and itemized a whole series of things that had been delivered." Kenny reveals that other leaders tap him for advice, but he declines to name them.

Politicians rarely endure as long as Kenny, or attain high office, without a palette of skills, sensitive antennae and an iron constitution. Kenny's enduring good humor and busy schedule indicate stamina; his 2003 ascent of Mount Kilimanjaro attests to physical endurance. There must be some grit too. In 2010 he withstood a leadership challenge; once in office, he installed the most talented of the former rebels in his front-bench team. Kenny's isn't the neatest of governments — ministers sometimes contradict him and one another; there was a messy fumble over cuts to health care — but the raft of legislation passed in the past 10 months shows Ireland's a long way from Washington's gridlock.

So why do doubts about Kenny's leadership persist? An effective and engaging communicator in smaller groups, he is often wooden in broadcast appearances and Dail debates. His predecessor as Taoiseach, Brian Cowen, denied calling him a "fool" during one exchange; others are less shy of that implication. Mario Rosenstock, an Irish comedian and satirist, compares Kenny to the character played by Peter Sellers in Being There, whose simplicity is mistaken for profundity. "There's a touch of Chauncey Gardiner about him. 'I think what we need to do is we need to let the plants grow, and when the plants grow, the garden will be taken care of.' Right. 'And when the garden is good, Ireland will be good,'" says Rosenstock, mimicking Kenny's cadences if not his actual words.

It's easy to find Chaunceyesque passages in the transcript of Kenny's long sit-down with TIME. Here's an example: "If you have a good base of a thriving economy where people have the opportunity to do what it is they can do, which is be creative and different and helping others, that's the kind of Ireland that we like." It's also easy to find much that makes sense. He doesn't promise to restore Ireland to the illusory wealth of the Tiger years. "There was a veneer, there was a falsehood, it was built on the foundation of sand."

Joyless messages handed down from on high inflame other European capitals. Dublin has seen polite protests, but there's surprisingly little anger directed at Kenny himself. He walks to and from work, to increase his contact with the people on whom he is inflicting austerity. "Sometimes they give out a bit," he says.

There are cultural reasons for this apparent docility. The Irish are as inclined to emigrate as to stay and fight; there is also wide acknowledgment that Ireland's downfall can't just be blamed on politicians and bankers and that ordinary people got carried away by availability of cheap credit too. But they also warm to Kenny. "He's a person it's not really possible to dislike, and that's very important. It's a quality that not all of us have," says Bruton, the last Fine Gael Taoiseach, ruefully. "It's really good for the country that we have someone like that at this particularly difficult moment in the job of Taoiseach."

Oh Kenny Boy

Likability is a useful quality for someone maintaining a coalition government. It also has helped him build key relationships in Europe. Through Fine Gael's membership of center-right groupings like the European People's Party, Kenny befriended Merkel as both were rising through party ranks, dispatching rivals and turning their colleagues' tendency to underestimate their steel to political advantage.

In 2007, when Kenny first led Fine Gael into an election, Merkel endorsed him against his still popular Fianna Fail incumbent, Bertie Ahern. Kenny needs Merkel's support going forward. In September her Finance Minister, with backing from Finland and the Netherlands, sought to limit the scope of the change to bank bailouts agreed at the beginning of the summer by limiting funding to exclude "legacy assets" — old liabilities. That would mean the change helped Spanish banks but left Ireland on the hook.

"We've borne the burden for every other body in Europe by doing what we did here, because European banks would have suffered a catastrophic collapse if things had happened differently," says Kenny, who will argue Ireland's case at the E.U. summit on Oct. 18 to 19, emphasizing its model behavior and the brakes that tumult elsewhere is putting on its growth. "What we don't want is that you make all the difficult decisions here, and you still struggle on. But at the end of the day, your growth rates are never going to be strong enough to deal with the level of debt."

There's another friend abroad who Kenny hopes will prove a friend in need: the U.S. and especially Irish America. He's made five trips since becoming Taoiseach; on Oct. 12 he heads to Ohio and Pennsylvania. With Ireland's small domestic market, the country has always needed foreign wealth to create jobs and buy its goods and services. U.S. corporations account for 74% of inward investment in Ireland, and 17% of Irish exports are bound for the New World. One of Kenny's first objectives on taking office was to seek to reassure the U.S. that Ireland was a safe bet. If Ireland offers a useful blueprint for other countries, one key lesson is about the importance of convincing investors and trade partners that the boat has stopped rocking.

A yearlong festival to celebrate and attract the worldwide Irish diaspora will help to showcase Ireland in 2013. The presidency of the E.U., which Ireland assumes on New Year's Day, could do the same thing for Kenny's leadership. In his own country, his personal ratings, 53% after the election and now at 36%, are likely to keep sliding. Even if he can finagle fresh E.U. money for Irish banks, Ireland faces an uphill struggle. And if he finagles E.U. money for Irish banks, commentators at home will likely ascribe his achievement to luck.

That wouldn't faze Kenny. As he goes through the day, applauding every small piece of good news and absorbing the bad, meeting as many people as he can, running ever later, he seems less like a man in it for the glory than the craic. And he believes he can make a difference. That may look like foolish optimism, given the scale of the challenge, but perhaps it takes someone prepared to be labeled a fool to try. "The time for courage in politics is at a time like this," he says. "Who is prepared to stand up and say, well I'll take the flak here, because this is the right thing to do for the people and country?" The luck of the Irish may be that Kenny stepped forward.

Catherine Mayer, Dublin, TIME, nº 16, october 15, 2012

Grifos: JP