Bleeding the Irish people dry

The following is taken from the September (2011) Socialist Democracy bulletin:

A couple of years ago the Financial Times ran an editorial in which it called on the then Fianna Fail led government to abandon its costly bailout of Irish financial system. The FT leader writers declared it was “time to staunch the bleeding”. In the time that has passed since then and now the costs of the financial crisis have escalated; the Irish state has been shut out of the financial markets had to accept a bailout from the EU-IMF; and there has been further public spending cuts and austerity measures. There has also been a general election in which the government parties were comprehensively defeated. Despite the obvious failure of their strategy for dealing with the financial crisis the Irish ruling class continues to persist with it. There is almost unanimity across the political class as Fine Gael and Labour continue on from where their Fianna Fail predecessors left off.

So what is their strategy? To call it a strategy probably gives too much credit, but two main elements can be identified. The first is that international capital, whether in the form of financial institutions that lent to Irish banks or multi-national companies based within the state, should have an absolute guarantee of profitability. The second is that the Irish people should be made to bear the burden of such a guarantee. This reflects the relative weakness of the Irish capitalist class in the global economy and also its hostility towards its own working class. Indeed, subservience to international capital and class oppression within Ireland are completely bound up with one another.

Mortgages

The recent public discussion over the growing problem of mortgage indebtedness provides an insight into this how this class strategy operates. With the number of mortgage holders in arrears for more than three months reaching 50,000 and continuing to rise, and amid reports of people being driven to suicide and going without meals in order to keep up payments, there have been calls for the introduction of a debt relief scheme to offer some respite to hard pressed families. But this modest proposal, which is estimated would cost around €6bn, has been dismissed out of hand by Government as it would result for Irish banks and their European creditors. Such arguments are usually accompanied by sermonising on the need for “moral hazard” and the deterrence of reckless behaviour.

This is, of course, rank hypocrisy from a political and business class that encouraged the growth of a huge property based ponzi scheme which was fraudulent at its heart and which collapsed with disastrous consequences. It is an injustice that the victims of that fraud, such as families struggling with hugely inflated mortgages, face the most draconian sanctions while its perpetrators, whether those be Irish bank officials or their European financial backers, continue to be protected. However, it does serve as stark illustration of the mentality of the Irish ruling class.

Bailout

The assumption underlying all of this is that if Ireland faithfully follows the demands of international capital then it will be rewarded. The recent revision of the terms of the EU/IMF bailout has been held up as evidence that this will work. However, when we actually examine the EU agreement and its consequences for Ireland and also the prospects for the Irish economy we find that the grounds for such optimism are very tenuous. For a start, the revisions to the bailout, a reduction in the interest rate by two per cent and an extension of the loan period from seven to fifteen years, does nothing to reduce the overall burden of the debt. Indeed, under the new terms Ireland could actually pay more, with more being extracted over a longer period of time.

Despite revisions the terms of the bailout are still impossible to satisfy. That they were revised was a recognition that the original terms would have resulted in a default occurring much sooner. While the new terms are just as draconian they delay default and allow creditors to extract as much as they can from Ireland in the intervening period. The debt agreement also leaves open the possibility of a second bailout for Ireland. While the Irish government has dismissed the prospect of second bailout it has also highlighted the commitment of the EU to continue to fund the bailed out states if it is too expense for them to return to the markets. Of course such support is dependent on states continuing with deficit reduction programmes. So we have the prospect of more debt being loaded onto states such as Ireland accompanied by more savage austerity measures and an ever greater percentage of government income being taken up by debt repayments.

The Irish Government has already indicated that it will press ahead with planned cuts despite the supposed easing of the bailout conditions. Minister for Finance Michael Noonan has boasted that that government has met or “overachieved” in implementing the terms of the bailout. A modest proposal from the trade unions that any savings should be used to offset some of the planned cuts has been contemptuously dismissed. The government has said that it plans to press ahead with cuts of €3.6 billion in December’s budget and will be making cuts of at least €2.5 billion in next year’s budget. It is also due to outline plans for further cuts and tax rises spread over the next your years.

Trade unions

Having accepted the basic principal of austerity the trade union leadership has no answer to this. Indeed, as the EU agreement met the only “demands” that they had been making (that the interest rate on the loan be lowered and the period of payment extended) they really have nothing to say, and are reduced to making pleas for a slight softening of austerity measures. In many ways the trade union leadership reflect and encourage the ideas promoted by the ruling class – that if people are prepared to make sacrifices and go along with what is demanded of them the financial crisis will be resolved and prosperity will return. Of course this isn’t true, either in a political of economic sense, but the fact that they are propagating it shows the degree to which they completely identify with the interests of Irish capitalism.

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Posted on September 27, 2011, in Economy and workers' resistance, twenty-six counties. Bookmark the permalink. Comments Off on Bleeding the Irish people dry.

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