Posts Tagged 'Austerity'

Fresh Perspectives: New TDs on the development of a more social Europe – Mick Wallace TD

This is one of a series blogs by new TDs to encourage an active debate between political representatives, EAPN Ireland members, and the broader public on the future of the European Social Agenda, and the role of the new Dáil in debate on Europe.

Mick Wallace is an Independent TD for Wexford. He was elected for the first time to the Dáil in 2011 and is a member of the Technical Group.

With a population of 4.6 million and a GDP of €150 billion, Ireland is a relatively small player in Europe (the EuroZone countries alone have a combined population of 330 million and a GDP of €9,200bn), so it can be difficult for us to make our voice heard – however, it is important that we play our part and as a member of the Oireachtas Joint Committee of European Union Affairs. I hope to make a constructive contribution by scrutinising legislation and proposals emanating from the EU as well as making sure the government is held to account in its dealings with Europe.

Today, one in five people in the European Union is at risk of poverty or social exclusion and 40 million people are living in a condition of severe deprivation. Although the media discourse about Europe is primarily concerned with banks and bondholders, the devastating social consequences (felt across Europe) of bowing to the interests of financial institutions and private speculators is what makes the financial crisis a reality for ordinary European citizens. Cuts to social welfare, education, and health in conjunction with tax increases and rising unemployment are the hallmarks of a European response to the crisis that is not only failing but making things worse. Here at home almost 100,000 children live in consistent poverty and nearly 230,000 live in relative poverty. Despite these shocking figures, the Fine Gael/Labour coalition is committed to implementing the policies of its predecessor which specifically target those who are already vulnerable. In education the cuts coming into effect in September 2011 will have a devastating impact on children with special needs and learning difficulties, Traveller pupils and the children of non-nationals as well as having a knock-on effect across the education system.

In working towards a more social Europe it is important that our focus is on protecting the interests of ordinary European citizens as opposed to those of banks or private companies. In this regard, a key area of concern is the proposed reforms to the Common Fisheries Policy. In Ireland alone the Seafood Industry contributes about €700 million annually to national income and employs somewhere in the region of 11,000 people – it is also a valuable industry for many of our European neighbours providing jobs not only on fishing vessels but in processing operations, in distributing and marketing seafood as well as other areas. In its proposals the European Commission has called for the introduction of a system of transferable fish quotas – this is worrying as it may lead to a situation where multinational companies acquire an unfair proportion of quotas resulting in an effective privatisation of the quota system with the knock-on effect of job losses in fishery-dependent communities. Coastal communities across Europe must not be sacrificed for the profits of multinational companies.

I welcome the acknowledgement a few weeks ago by IMF deputy director Ajai Chopra that the problems that Ireland faces are not just an Irish problem but a shared European problem. And whilst Minister Noonan jokes about ordering t-shirts with the words “Ireland is not Greece” printed on them, many of us outside government circles realise the importance of promoting solidarity between Irish citizens and our European counterparts. This is not about pitting Irish people against Greek or Portuguese citizens, just as domestic debate should not be stifled by creating an artificial divide between public sector and private sector workers. This kind of discourse is initiated and nurtured by governments in conjunction with a complicit media with the aim of dividing citizens and conquering dissent against austerity measures and socially unjust policies.

We were informed in the past that the European Union was supposed to be a family of nations and that we would all look after each other. The EU was founded on the principle of solidarity between the nation states of Europe, and their citizens. These ideals have fallen to the wayside as austerity gains a deeper foothold. It is our task as European citizens to restore our shared values of equality, solidarity and fairness to the centre of the European project and ensure that these principles are not consigned to the pages of history as elements of a bygone era.

Mick Wallace TD


Fresh Perspectives: New TDs on the development of a more social Europe – Pádraig Mac Lochlainn TD

This is one of a series blogs by new TDs to encourage an active debate between political representatives, EAPN Ireland members, and the broader public on the future of the European Social Agenda, and the role of the new Dáil in debate on Europe.

Pádraig Mac Lochlainn is a Sinn Féin TD for Donegal North East. He was elected to the Dáil for the first time in 2011 and is the Sinn Féin spokesperson on European Affairs, Foreign Affairs and Trade

Current EU economic strategies are driving more and more people within the European Union into poverty. It is estimated that eight per cent of working European citizens are now at risk.  The privatisation of public services, the free market and de-regulation have all contributed to bringing Europeto the edge.
The European project is being undermined by right-wing policies which are impoverishing more and more people.  Wages are being driven down. Job security is being undermined and welfare and social benefits are being attacked.

The debt problem is pan-European and requires a European response. The impact of deep austerity combined with the lack of a major investment plan will clearly negatively impact on growth across Europe. 
Sinn Féin advocates a policy of critical but constructive engagement with Europe. However, because the EU has become a dominant force in the political, economic and social life of this State, we must support or oppose each of the EU’s complex developments on its own merit.   
We have consistently supported EU measures that promote and enhance human rights, equality and the all-Ireland agenda. These measures are an example of the EU at its best. But we have also never been afraid to stand up against EU measures that damage Irish interests.
Now, more than ever, is the time to stand up for these ideals.
We want to build a Europe of Equals – a true partnership of equal sovereign states that co-operate in the social and economic development of Europe and beyond. We want an EU that promotes peace, demilitarisation and nuclear disarmament.  We want a Europe that seeks a just resolution of conflicts under the leadership of a reformed, renewed and democratised United Nations. Ultimately, we want a United Ireland that will take its rightful place and play an active role in such a reformed EU.
Consistent with our republican agenda at home, Sinn Féin’s Agenda for Change at EU level involves actively campaigning for:
– an independent Ireland of Equals in an EU of Equals
– an EU that respects and promotes national, collective and individual rights (including human, political, social, cultural and economic rights)
– an economically and socially just EU, not an EU that is merely another economic superpower
– a demilitarised and nuclear-free EU
– a globally responsible, fair-trading EU that leads the way on reaching the Millennium Development Goals for halving global poverty by 2015.
Unfortunately, in the name of fiscal restraint, the EU has adopted economic policies that now threaten the European social model, the democratic power of national parliaments, and the bond of mutual respect that must endure among member states. They are imposing severe austerity on weaker member states such as Ireland, Portugal and Greece which will push even more families into poverty and block any chance of economic recovery.
Worse than this our European partners will profit as much as €10 billion as a result of a 3% surcharge on their loans toIreland under the terms of the  EU/IMF austerity programme. Not only does this surcharge contribute to what is an already unsustainable debt level, but will starve the Irish government of much needed resources for job creation, public service provision and anti-poverty programmes.

These are not the actions of partners acting in solidarity with one another.
The EU mandarins appear to have learned little from the defeat of the proposed EU constitution in referenda across Europe only a few years back. And they ignore the wishes of their people at great risk. People across Europe are becoming increasingly disillusioned with the nature of a project that is being carried out against their wishes.  They, like Sinn Fein, want to see a Europe of Equals that is grounded in mutual respect.

We have always been told that the foundation of the European project is solidarity. The lesson from the recent austerity programmes in Greece, Ireland and Portugal is that solidarity amongst the EU “partners” is now in short supply. Unless real solidarity and partnership soon replaces harsh and punishing austerity, the damage to the European project may be irreparable.

Pádraig Mac Lochlainn, TD

Widening the Boundaries

Most commentators agree that the economic situation we find ourselves in will bring decades of debt and unthinkable social misery.  EAPN Ireland member Aiden Lloyd says we will remain where we are unless we widen the boundaries of discussion and analysis.

It is quite difficult to comprehend the credibility granted to the economic establishment in terms of defining the options that we can adopt to address our economic problems. This is all the more extraordinary when considered against what can only be described as the worst reputational performance by any set of associated professions in history. Over a period of a decade or more the combined wisdom and skill-sets of accountants, financial managers, regulators, economists, ministers and specialist departmental personnel failed to manage, predict, regulate or successfully remedy the crash of the national economy. Yet, these are the very same people now defining the parameters of rational discussion and acceptable comment. According to this conventional viewpoint all options must involve the socialising of speculation-incurred debt; the rejection of default options; remaining within the Euro zone; viewing personal indebtedness as a problem for families not the state; and subjecting all sovereign decision-making to EU/ECB/IMF direction.

What is truly disturbing is the level of stricture applied within the media, even by those facilitators whom one would consider liberal in terms of widening the boundaries of debate or admired for their ability to draw out alternative perspectives. Offering non-establishment options immediately brings a wall of ridicule and an aggressive pursuit of chapter and verse solutions – ignoring the fact that definitive solutions have been as scarce as hen’s teeth on the conventional side. So, those who advocate even limited default are faced with responses that paint a picture of desolation and breakdown – empty ATM machines, collapsed public services, no credit for business, irretrievable reputational damage etc. But these things might happen anyway if we maintain our present course of action, and perhaps the only chink of light that might compel us into some sort of realistic consideration is the growing consensus that sovereign default is now more likely given the sheer scale of the debt burden that has accumulated. Undoubtedly, there is no easy way out of the mess but a constructed solution is preferable to one eventually imposed by circumstance, and it is high time that we began to bend our brains to this end.

Even though Ireland is a particular and extreme case, the difficulties introduced by laissez faire capitalism are relatively universal. For some decades now the unfettering of global capital has resulted in a flow towards speculative investment rather than investment in production, because of the greater return (assisted by generous tax breaks) this afforded. To some degree, this is an outcome arising from the sheer efficiency of capitalism in increasing the output of goods, resulting in market saturation, over competitiveness and declining profits. What should have followed, in the developed world in any case, was a steering of capital towards technological development (especially green energy development) and growing the services sector, particularly leisure, learning, healthcare, child/elder care and personal development – a natural pathway for advanced societies, whose material needs have largely been met by existing production capability. However, this is not the time to begin an analysis of capitalism, even though it will undoubtedly have to be scrutinised for its applicability and relevance in an era of climate change and declining carbon energy resources. However, before returning to national problems let us contemplate some historical wisdom that emerged from the last great economic downturn that began with the Wall Street Crash in 1929.

John Maynard Keynes was the economist who described a normal functioning economy as a circular flow of money driven by worker’s consumption – basically one person’s wages contributes to the employment of others by virtue of their purchasing of goods and services. When this circulation gets interrupted through unemployment, hoarding of savings and declining demand – as happened with the collapse of the housing bubble in Ireland – then artificial means have to put in play to restore the flow, either by increasing the money supply or by intervening in the market to stimulate spending. In a recession private sector capability is much reduced, therefore this stimulus must be provided by the state. If the stimulus is focused on poorer people, through investment in employment-creating projects then the effect is more direct, since poorer people spend a greater proportion of their income on basic items such as food, clothing, heat etc. This is the strategy being employed in the USA by President Obama. Unfortunately, economic policy in the European theatre is driven by a different belief system.

Neo-liberal economists have an unshakable belief in market forces, the so called ‘invisible hand’, which they believe always ensures that the natural laws of supply and demand will right any aberration in the market. Neo-liberals do not like state intervention. Thus they advocate addressing spending deficits arising from a reduced tax take (because of unemployment and less spending) through austerity measures – cutting public services and selling off publically owned utilities. But they are perfectly happy for the state to capitalise busted banks at the expense of its citizens, and they justify this socialisation of private debt on the basis that the state has a duty to create the conditions for market forces to operate – a moot point, but there you are. You will have gathered at this point that the European Central Bank head Jean Claude Trichet is no Keynesian, neither is the EU (in its various forms) nor the International Monetary Fund.

It is a double misfortune that we as a country, having been driven to ruin by a reckless government, are now subject to the direction of neo-liberal ideologues. The ECB-EU-IMF is determined that Ireland will refloat its banking system even if it impoverishes its citizenry in the process. Paul Krugman writing in the Irish Times last week (29/3/11) lays out the outcomes of this process to those US cheerleaders who urged a similar strategy in 2009 to the Irish one – bond yields topping 10% for the first time, unemployment at 14.7%, a doubling of interest rates on debt and an unsustainable debt burden. Dan O’Brien writing in the same paper (2/4/11) outlines a worst case scenario that may involve stress testing Ireland Incorporated, creating a banking panic. All of this is set against a backdrop of negative growth and no real signs of recovery.

It is pretty apparent that European imposed solutions do not have our interests at heart. Whatever about the noble ambitions of Jacques Delors to create a unified, mutually dependent and collective Europe it is abundantly clear that that project has long since been colonised and diverted by fiscal conservatives and big business. Despite having engineered the biggest economic meltdown since the Great Depression neo-liberals continue to dominate the policy stage. Only this week Morgan Stanley listed Ireland as ‘good for investment’ because it is a fully liberalised and deregulated economy, making it apparent that bankrupting Irish citizens is secondary to maintaining a liberal market model.

So what sort of options other than ruinous loan repayments should be given space and consideration? Well, we could default – and may anyway, if we read the subtext of previously cautious commentators. How disastrous would that be? Despite the howls of horror and quivering fingers pointing to Argentina, an Irish default would be quite different, being confined to the private debt assumed quite rashly by the previous government. True sovereign debt would not be defaulted upon, so there would be every opportunity to convince the markets that we remain honour-bound to meet our sovereign obligations.

What of the banks? Well we did manage without banks for six months in the early 1970s, and while it was a bit awkward at first, commercial life carried on as normal. Nonetheless we would need to re-establish a banking system, and to this purpose we could invite in foreign banks or bolster the few existing clean institutions to carry out this function. Since our existing contaminated banks have no capacity to provide credit to businesses they are of little commercial use anyway, so why bother resuscitating them. Admittedly, this would add to job losses, but there will be a massive reduction in staff numbers anyway, as these banks are forced to reduce the scale of their operations under the EU/ECB/IMF agreement.

One other option would involve retaining the commitment to recapitalising the banks at the expense of generations of tax payers, but with repayments stretched over a reparation-type timeframe, say twenty or thirty years, perhaps even longer. This would allow the restoration of a normal economy alongside a debt repayment regime – something post war Germany was able to achieve with considerable success. Alternatively, we could simply write down the personal debt, which is the next big hurdle we will meet – fairly soon too, if the ECB persists with its intention to impose a gradual rise in interest rates to prevent inflation (conservative economists tend to be paranoid about inflation even though it has not been a critical factor since the 1980s). This would as a matter of course also require us to seek a write-down of state assumed debt.

Now for the crunch question, and perhaps the greatest inhibitor to a widening of discussion and the onset of lateral thinking: how, if we abandon the EU/ECB/IMF package, do we meet the day to day costs of services and salaries? Well, in the normal run of events, the straight answer is through taxation, like any other prudent state. Unfortunately the Progressive Democrat-Fianna Fail illusion that the provision of quality public services is compatible with a low tax regime means that an immediate restoration of responsible levels of taxation would be a tremendous burden for families, coming on the back of increasing debt repayments, ad hoc levies and increasing unemployment. In addition, the size of the deficit, €19 billion, is too big to plug with taxation alone. Difficult as it is to swallow there will have to be savings in public expenditure, which probably means a reduction in the public service wage bill.

Although it is an evolving situation, subject to wider political agendas and perhaps the very future of the European monetary project, it is becoming fairly clear that there are no ‘one stroke’ solutions to the problems we face. A combination of debt restructuring, burden sharing with bondholders and fiscal consolidation together with a targeted investment programme to stimulate growth is the most likely package to succeed.

Trying to deal with the debt problem while restoring growth is a difficult one, but we still have some €4.9 billion in the National Pension Reserve Fund and €9 billion in cash reserves. There are also high levels of personal savings, perhaps €100 billion, a portion of which could be elicited through a national bond issue – something akin to war bonds, which could be promoted as an investment in ourselves as a nation.

These are only some of the options that might be considered, but undoubtedly there are others that debate and discussion could throw up, if it was permitted.

Finally, while a debt burden of the magnitude that Ireland has accumulated may seem insurmountable experience shows that once growth returns and employment increases significant inroads can be made into the debts that a nation carries. As things stand we are in a very bad situation and are understandably over-focused on banks, debts and indebtedness. We need to concentrate on creating jobs, facilitating entrepreneurship and resourcing public enterprise, which will in turn bring a degree of confidence and a flow of spending – which brings us right back to John Maynard Keynes and the restoration of the money circle.

Aiden Lloyd is an independent researcher and consultant. He previously worked with the European Anti-poverty Network Ireland, was national community development & equality coordinator with Pobal and is a member of the board of the Society of Cooperative Development Studies Ireland (CDSI). He has been involved in a range of community development, local development and regeneration initiatives both in Ireland and Europe.



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