Ireland is edging closer to political uproar today, with Taoiseach (i.e. prime minister for goddsake) Brian Cowen being accused of “clinging to power”, and rumours that members of his own party, Fianna Fail, may vote against him.
A successful no-confidence motion would throw preliminary plans for an Irish bailout into disarray, since Germany, the EU and the IMF are all demanding that the government put in place a full austerity plan immediately, ahead of a more comprehensive budget, before any potential change of leadership takes place. But increasing numbers of Irish people are suggesting that that is to put the cart before the horse, and that Cowen should call an election immediately.
The Cowen government is a coalition between Fianna Fail (with 71 seats in the 150 seat lower house of the Dail) and the Greens with six seats. The Greens have already told Cowen that they will not support the government past December, obliging him to schedule a January election.
However, he would only need to lose the support of three Fianna Fail members for a no-confidence motion to have a chance of success. Realistically it would need to be a larger split, as the opposition is fractured between several parties — Fine Gael (51 seats), Labour (20), Sinn Fein (4), and 11 independents. Even if the three parties lined up against Cowen — by no means a certain proposition — he would be bound to get the support of some independents.
The centrepiece of the rescue package is a takeover of the (private) Bank of Ireland by the government — though it won’t be full nationalisation, it will be close enough. The plan is a full surrender to financial markets, and the purest expression of the socialisation of debt principle. As everywhere else, the whole austerity approach will simply trap Ireland into years of reduced demand and underdevelopment, as the gap between the European centre and its peripheries widens.
Meanwhile, politics in the Republic has come roaring back with a vengeance. At the beginning of the year, when Greece was in meltdown, the proud boast of those marching was “we are not Ireland” — a reference to the supine way in which the Irish had accepted their first austerity package in 2009.
But the situation has moved on from then. It’s precisely because the Irish accepted an austerity package so willingly that they are now doubly angry — having done everything asked of them they are still being punished by the markets and the EU. With a by-election in Donegal due on Thursday — one that Fianna Fail will lose (though the seat they held has been vacant for some time) to Sinn Fein — and mass rallies planned for the weekend, the pressure on Cowen will only increase.
At the moment all sorts of different approaches are being suggested as a way of kicking the politics to the next level. Sinn Fein has taken the running as the most clearly oppositional party, with Gerry Adams suddenly detached from the business up north to lead the charge in the Republic. Others, such as the writer Fintan O’Toole, are arguing for a mass civil protest movement and a caretaker government of minimal scope prior to an election
Various mouthbreathers and financial journalists will continue to say that the Irish should just knuckle under and take their lumps, that this was simply the fault of the banks, lax regulation regimes and so on.
It isn’t of course, anymore than froth drives the wave it sits atop of. The overwhelming cause of the economic devastation hitting the whole of the European periphery comes from the application of a failed and flawed laissez-faire economics, which allows untethered finance markets to take monopoly power over the process of capital allocation and development.
Those countries that managed to develop prior to this takeover — the northern European social democracies — laid a basis for themselves by developing a cycle of social investment that gave them a highly educated workforce with a highly developed export oriented economy.
The creation of the euro and the role of the ECB in setting national fiscal policy effectively made that strategy impossible for later contenders. The figures are clear: the euro has wrecked the export potential of the entire European periphery. Corruption etc plays no great role in this.
Greece was as corrupt in the 50s as it was in this decade — the difference being that in the 50s, with generous US funds and a national development strategy, it grew by 8% a year, for 15 years. The draining effect of the euro has left places like Ireland with no option but the reverse strategy — a race to the bottom (slashing tax rates), and a pumped-up, import inflated, funny-money economy in the place of real development.
Does the euro have two years left? It’s started to slide in the markets, and if the Irish troubles cause Portugal and Spain to start to creak at the joints, then it may go through the floor. Though people think of Europe as a dead place and the past, it’s suddenly stepping into the future again — a place where politically literate populaces confront obviously failed systems and a desperate political class trying to keep them going. Anything’s possible at the moment and symbolism abounds everywhere — such as the fire sale the bank of Ireland will be holding of its art collection. It’s scheduled for the Shelbourne Hotel — where 88 years ago Michael Collins and others drafted the Irish constitution and launched the Republic.
You couldn’t make it up and no one knows what’s next…
We need to surgically excise the Euroland’s gangrenous periphery.
Start with Greece and Ireland.
See if Spain and Portugal heal.
If not, cut them off too.
Put Italy in the hyperbaric oxygen chamber; where there is life, there is hope.
John,
This is not “our” problem. I get cranky when outsiders presume to comment on Australian issues, prescribing solutions which are none of their business.
It is a two way street, so pontificating from Oz about the makeup of the EU is not appropriate.
Having said that, though – if banking has become a gambler’s game, with the value of cards being determined by Moody’s and Standard and Poor, then let the gamblers and those who lent them the money to play with wear the problems as they arise.
Corporate share trading on their own account, so-called wealth management, insurance, overseas growth – these are the business of investors/gamblers with no-one to blame but themselves when it turns pearshape and are not part of banking per se.
Socialisation of debt, beyond perhaps support of personal (not corporate) savings, is not part of my view of government’s duty or society’s expectation. Any government, Irish or otherwise, that makes a pauper of the nation in order to protect the wealth of banks and those who own them, fully deserves to be driven from office by its citizens, and Ireland is no exception to this rule.
The situation in Ireland is untenable & shifting by the hour, with the Taoiseach (pronouned ‘Tee-shack’) about to put to try to push through a budget which his party Fianna Fail(ure) will not survive to implement.
Given the scale & intensity of the crisis, with contagion already begun and markets plummeting, there is untold pressure from the ECB/IMF on the Irish government to accept the ‘bailout’ of 85 billion euro.
At this moment, the Irish government is in a position of strength, because it has the power of default. Whether or not it can muster the spine to use this power is another question.
The figures are: if the bailout is accepted the total Irish debt will stand at an astronomical 343 billion euro. We simply can not afford this bailout. The interest rates being offered are north of 6%. This translates into over 6,000 euro per year for each working person, for generations.
‘The figures are clear: the euro has wrecked the export potential of the entire European periphery.’
Correct and nowhere can this be seen more clearly than in Donegal with it’s fishing industry decimated by decades of EU membership.
Are you under the influence of Marx or Tony Abbott’s mentor Bob Santamaria Mr Rundle when you write of “failed and flawed laissez-faire economics, which allows untethered finance markets to take monopoly power over the process of capital allocation and development”. I refer to the word “monopoly” which is surely just a tick to indicate your ideological allegiances rather then any consideration of fact.
To say that many critics of Keynes amongst economists who matched neither his intellect nor his worldly experience gave support to a regime of non- or inadequate regulation of financial markets (and worse, of which a little more) which should be classed as a major case of government rather than market failure (because government isn’t meant to allow gross market failure) would be pretty close to an adequate factual statement. But “monopoly” is meaningless as you have used it unless you are intending to say that much more of the allocation of capital (in some and which countries) should be directed by wise politicians and bureaucrats (and Greens and journalists if you haven’t already raised a laugh).
Pedantically, I note that my “worse” was intended to acknowledge that government attempts to make unaffordable housing available to people with no capacity to repay loans – or any need to try if they had a typical US non-recourse mortgage – was an important ingredient in the massive coming together of multiple failures in the US.
I wonder a little at your point about the Scandinavians simply because you don’t seem to be aware of their record of banking crises. I don’t refer to the Swedish silver debasement of 1572 but what Reinhart and Rogoff in “This Time is Different” crises of Norway 1987, Finland and Sweden 1991 – all related to booms in real housing prices…. I am less surprised when I also find you saying “The draining effect of the euro has left places like Ireland with no option but the reverse strategy — a race to the bottom (slashing tax rates), and a pumped-up, import inflated, funny-money economy in the place of real development”. The Euro had nothing (subject to proof to the contrary which would surprise me) to do with the very low Irish corporate tax rate. It was merely typical of the sort of strategy (conceptually perhaps to be classes as protectionism) which very poor and underdeveloped countries could usefully adopt to attract investment and entrepreneurship. Observing what it had done for Hong Kong might well have been the sufficient cause. Small countries could get away with it better perhaps than larger ones which weren’t large enough to resist pressures as China does wrt its currency.
But, as you seem to recognise, it is evidently true that the Eurozone was a predictably (and predicted) flawed concept when individual nations had to handle their fiscal affairs from very different bases (and levels of corruption broadly understood pace your apparent assertion of its irrelevance) without the ability to affect their exchange or interest rates. Germany’s quid pro quo for giving up the Deutschmark was a degree of control which meant that it got the low interest rates which suited it but were disastrous for some of the peripheral economies (as well, potentially, for German and French banks which is one of the facts that gives the Irish a stronger baragaining position in resisting attempts to control the Irish budget including its low corporate tax rate).
More fact mixed with well-informed opinion about Ireland from Kevin Myers in The Spectator for 20 November. It is not just the Scandinavians with their well-educated workforces which are able to export, as Myers puts it “There are two economies in Ireland: the private sector, which is still doing extraordinarily well – industrial output up 12 per cent in the past year, with Irish exports per capita nearly matching those of Germany. And then there is the tragedy of the public sector, and economic Chernobyl, endlessly spewing out toxic clouds of debt, and its adoptive cousin, the banking sector, which two years ago under the bank rescue scheme (obligatory under EU law) effectively became an arm of government.”
Marx, rather than Santamaria, might have guided you to an important ingredient for explaining Ireland that Myers puts his finger on. It is politically pre-modern, still tribal. The Fianna Fail government embodies Ireland’s lingering cultural deficiencies for modern life (education not being such a deficiency since so many smart Irish returned to booming Ireland: hence its privat sector successes). As Myers puts part of it, “…what is happening now is not new. The party that is now Fianna Fail was once the die-hard IRA which in 1922, in the ruins of a postwar Ireland, opposed the treaty with Britain, and went to war again with the new Irish Free State government. Ten years later, with its hair combed and parted and now in government, Fianna Fail launched and economic war with the British empire – rather like Cuba’s blockade of California. And Ireland nearly died. Fianna Fail ruined Ireland anew in the 1950s, and again in 1970 when it set up the Provisional IRA with government funds, and again in 1977 with an insaned giveaway budget that nearly broke the country, and again in the 1980s with borrowings that Ireland is still paying off.” Maybe it was Fianna Fail sources which gave you your picture of Ireland’s 1950s? Anyway, he makes a good case for a comparison with some of the seedier banana republics in politicians’ behaviour reflected in their pay, pensions and perks, including tax exemptions. Still it is less complicated and more capable of sustaining optimism than Afghanistan or African tribal mixtures.
In case any Oz readers are wondering, Kevin Myers is a cross between Bolt & Ackerman, a not a good one.