Capitalism without bankruptcy is like Catholicism without hell. Although he didn’t say as much, this is what Mario Draghi meant when he announced this week that he was prepared to see banks go bust in order to clean up the balance sheet of Europe’s ailing banking system.

This means that Ireland, even if it exits the bailout, is still, if not quite in purgatory, then at least in a limbo-like state, because it is almost certain that at least some of our banks still need more money.

The EU is also envisaging that burning the bondholders will ultimately happen all around Europe in cases where banks are bust. This is obviously something that the ECB refused to countenance in Ireland – and it means that Ireland will have been hoodwinked.

In recent weeks, Germany has moved to protect its taxpayers from picking up the tab for non-German banks’ losses. This is despite the fact that, by definition, being the country with the largest current account surplus in Europe means that Germany had to have been the biggest lender in Europe and, therefore, has some culpability for where it lent to, though clearly a lot of blame lies in bank boardrooms and regulators’ offices too.

And if the Irish taxpayer had to foot the bill for debts that we had nothing at all to do with, then German taxpayers should do likewise. If this is not followed through, then the logic of all citizens being treated equally in the EU falls down.

This volte-face where rotten banks will be let go is bad news for us because obviously, we have already put money into our banks and we – unlike Italy and Spain – didn’t benefit from Draghi’s LTRO (long term refinancing operation) which was announced in 2011, a year into our bailout programme.

Back then, before Draghi, Ireland was pushed around and implicitly threatened that the ECB would cut off liquidity to the Irish banks if the state didn’t come in and shore up bondholders’ losses. The ECB policy was based largely on the notion that Irish banks couldn’t go under, because that might cause contagion all across the eurozone banking system. This could be termed the Trichet doctrine and it centred on the rule that no banks would be allowed to go bust in the crisis.

Now that Draghi’s LTRO has worked in terms of easing the immediate crisis in Spain and Italy, the new doctrine is saying something quite different.

Draghi is saying that next year there will be a fresh round of stress-testing of European banks – including our own – to see if, in the worst case scenario, they have enough capital to survive. Banks that do not have enough capital will be forced to go and raise money. Now here is the rub for Ireland, because he went on to say that if they don’t raise the capital or can’t, they will go bust.

In an interview with Bloomberg, the ECB boss said that ”banks do need to fail to prove the credibility of the exercise. If they do have to fail, they have to fail. There’s no question about that.”

Draghi went on to say that he’s sure that the region’s governments will be ready to fill any capital holes that emerge as a result of the stress tests.

”I have no doubt whatsoever that backstops will be there, which doesn’t mean that they will have to be used, because first and foremost it’s private money that needs to be used,” Draghi said. ”There’s an explicit commitment to have in place proper, adequate national backstops by the time the exercise is being carried out.”

Now if we read this carefully, it is saying to the Irish government that the Irish taxpayer will have to stump up even more for the banks. Mr Draghi may have no doubt about the government’s willingness to do this, but I do. I doubt the Irish state has money to plug holes yet again in the banks.

And it is precisely because we don’t have the money that the extra Euro 10 billion post bailout exit ”credit line” comes in. The government will be forced to take on an extra Euro 10 billion credit line – which will be drawn down if the Irish banks need more capital.

All this means is that the Irish taxpayer will be on the hook again and, amazingly, it is being dressed up as a victory, when what is happening is yet another bank bailout.

This is all a far cry from June 2012, when the Irish delegation came back from Brussels with a game-changer. Not only was any new capital for the Irish banks going to be injected by the European bank fund, the ESM, but we were told that we could claw back some of the money we stumped up because we were seen to have ”taken one for the team”.

Do you remember that? Well, now it looks as if that too will be reneged on, and Ireland’s taxpayers – having just come out of a bailout – will regain their sovereignty to give it away again, in the form of a forced loan to be paid for by future generations to pay for the banks today.

So all that guff about plucky little Ireland being rewarded for being a good boy is just that – guff. The Americans have an expression: ”You don’t get what you deserve, you get what you negotiate.” And we threw it away when we had the ace – when we were contagious.

Rather than using our contagion to extract concession, we turned it against ourselves. What does the clever leper do when he is knows he has the disease? He threatens the healthy folks that he might join them for dinner unless they give him something, to go away, that’s what he does.

But we didn’t do that when we were a hazard, we went away and we ended up losing our opportunity.

Now, from what we are hearing coming out of Brussels, Frankfurt and Berlin, the notion that Ireland would be rewarded with a post-dated cheque is in the dustbin.

According to the new Draghi doctrine, banks would be given time to raise the required funds if the stress tests deemed that they need capital. Initially, banks would try to raise money from private investors. But who is going to invest in the likes of AIB, with a mortgage book timebomb about to explode in its face? And if the investors don’t come in, who does?

Well that’s where you enter the drama.

Germany is moving as fast as it can to ringfence the ESM – the European slush fund – as much as it can. I don’t blame Frau Merkel for protecting her own people, that’s what national politicians are there for. Or at least that’s what I thought.

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