Let’s have a break from the politics and return to the quiet beauty of the Claddagh, Galway’s historic fishing village.
- The Claddagh At Low Tide (i.doubt.it)
Let’s have a break from the politics and return to the quiet beauty of the Claddagh, Galway’s historic fishing village.
True, but having a chance to claw back what we pay in is hardly a good reason to vote Yes. Really, this is a much better argument for not ratifying the ESM treaty at all.
Which is still an option (even leaving aside the Pringle case, which may yet decide that they can’t ratify it without another referendum), and I think this amendment failing would provide the government with the perfect pretext not to.
They may well do it anyway though – to bolster Ireland’s boy-scout europhile reputation (what good did that do us again?) and to not rock an already waterlogged boat. €1.27 billion over the next three years seems almost like small change compared to our deficit. Though of course that does rather overlook the fact that we’re liable for anything up to €11 billion – in the unlikely event of anyone, you know, actually needing a bailout.
Regular reader Azijn from The Netherlands said:
They tell us we have to vote Yes to access ESM (European Stability Mechanism) funding, in case we ever find ourselves unable to meet current expenditure. But will it really be our only option? It had better not be – the ESM may never come into being after all. Would it be the best? Only in the sense that it might be cheapest. As I argued yesterday, in every other way it is probably the worst option conceivable, less a loan mechanism than a sort of national receivership. I do not believe we can meet its terms.
So what are the other, officially-denied options? You could categorise them in different ways, but I basically see five. I put them here in not my preferred order, but in what I think is roughly the order of likelihood that they’ll be resorted to (though likeliest of all I think is two or more in combination):
1) The EFSF (European Financial Stability Facility). This is the fund we’re currently availing of for the EU/IMF bailout, and though the ESM with its stricter and (it is hoped) more sustainable rules is meant to replace it, the EFSF will continue to exist for more than another year. Hopefully in that time it will become clear whether we need to borrow more.
2) The IMF (International Monetary Fund). The IMF may have a reputation for setting tough conditions on loans, but unlike the ESM it has no entrenched ideological opposition to countries investing in growth. Some argue that they would refuse to loan to countries that the EU had refused, but the organisation itself has not pronounced either way. And as a partner in our current bailout, the IMF has invested in us already. It is not known for letting its investments go bankrupt.
3) Leaving the Euro. Get out in some semi-ordered way, before we’re forced out precipitously like Greece could be any day now. Devaluing our currency rapidly would solve a lot of our problems, but it would not be painless; imports would leap up in price, effectively making us all poorer immediately. But it would be a huge boost for industry and jobs, sparking immediate actual growth. Indeed, much as I am in favour of the single currency in (broad) principle, it is virtually undeniable that we’d be better off now if we’d never joined. Its inertia has only served to exacerbate both boom and bust.
4) Debt Repudiation/Restructuring. The nuclear option to some, the obvious first step to others. In part this is because we have two main sources of debt, so morally different that they need to be taken separately:
(a) Bailout Debt. However pressured we may have been when we agreed to this, there is a strong moral imperative to, you know, do what we said we’d do. But that is not the highest of all values. Debt repayment does not trump such imperatives as, say, not letting people starve. You can always repay a debt later, but people die for good. No one claims it wouldn’t be a drastic step. It is bound to have negative consequences on other countries, and after we did it we’d be pretty much on our own. But remember the adage – if you owe the bank a million, they have a problem. We shouldn’t be afraid to contemplate default if it can win us better terms.
Most likely of course 3 and 4 would need to be done together, as debts denominated in Euros would be so much more painful if we’re paying in Irish Fairy Gold or whatever. (If we’re getting a new currency we may as well have some fun with it). And by the same token, if we aren’t repaying our debts I think the Eurozone would prefer if we got the hell out.
(b) Bank Bondholder Debt. This though we should have repudiated long ago. The taxpayer has no conceivable moral duty to repay this private debt. And if the European banking industry will collapse if they don’t, then quite frankly the European banking industry deserves to collapse. Let’s call their bluff on this one.
5) Taxing the rich. This is last on a list in order of likelihood because of course the rich have considerable influence over these decisions, though in a sensible democracy it would be first. It has been pointed out that with only a moderate tax on capital and/or a new upper tax bracket we could pay off our debts without making cuts at all. That may be unrealistic, but could very significant new revenue be raised without causing capital flight or discouraging investment? I think it could. There is money to be made here, all we’d be doing is raising the price of making it. I think the market can bear that.
And let’s not forget that the richest have been consistently increasing their share of the wealth, while simultaneously reducing their tax contribution, since the 1980s. If they don’t start paying their share again now when will they start?
~ & ~
Well OK, the obvious next question is if all these alternatives exist, why does the government prefer the one that will wreak such havoc?
The answer has to be that they don’t really believe what they are asking us to sign. The draconian terms of the agreement are there to convince the money markets that they won’t profit by breaking up the Euro. In the real world exceptions will be made, just as they were made for Germany when they were in trouble. Right? Perhaps we can fudge what is and isn’t structural deficit; no one seems to know quite what that means so it’s a useful bit of ambiguity. Surely, when it comes down to it, we cannot be held to borrowing limits and repayment rates that would wreck our economy?
Perhaps they sincerely believe that, perhaps it’s even true. But to sign your name to a contract on the basis that you hope it will never be enforced is, to put it mildly, unwise.
So having looked at the reasons to reject the Fiscal Compact, let’s examine the government’s pro-treaty arguments.
Well that didn’t take long. Really there is no positive argument beyond the stability of the Euro. As good a thing as that might be, it seems a trifling technicality when compared with the very real and immediate suffering the treaty would impose. So it is perhaps not surprising that the government has focused instead on reasons not to vote no. Effectively they’re reduced to the null argument: Well what would you do? If we need more money, how would you raise it?
By asking this they hope to split opposition. Different opponents of the treaty have different ways they’d prefer to raise income, and if they can move the debate on to that then people may forget it’s not the urgent question. It’s like someone driving straight at an oncoming truck and saying “Well which way would you swerve?” The government’s case rests almost solely on the argument that we may require aid from the European Stability Mechanism (ESM), and that this would be preferable to other loan options. But that’s actually composed of two questionable assumptions:
Firstly, we are obviously going to avoid another “bailout” if we at all can. The necessity will depend very much on global markets, how fast we can regrow our economy and so on. The really mad thing here is that if we sign up for the Fiscal Compact, the restrictions it will place on our opportunities for growth make it so much more likely that we will need a further emergency loan.
If we do, will the new ESM be the best lender? Well it will almost certainly offer the lowest interest rates going – for sure lower than any we’ll be able to get on the open market for a long time. The problem is the conditions. Obviously the ESM won’t lend us money to invest in growth, because that’s what the whole Fiscal Compact is ideologically opposed to. We can borrow to pay for emergency things, like public wage bills or – irony warning – loan repayments we can’t meet, but not to invest.
And the mad part of this is that if we do sign the treaty, we are committing ourselves to these conditions even if we borrow from somewhere else. Even if we raise funds on the open market, even if we go to the IMF, even if the European Social Fund never comes into existence – which is a very real possibility – we still have a commitment not to borrow to invest, on pain of having our budgets dictated to us. Joining the Fiscal Compact is agreeing to abide by the conditions of a loan we may never get. Who does that?
Quite opposed to there being no other option for funding except the ESM, there is almost an embarrassment of of them. None of them is a picnic of course, but I would argue that any one of them is preferable to the Fiscal Compact. This post is already too long, but tomorrow let’s play the government’s game and see what other options we have apart from destroying our own economy just to be obliging.
Well the optimism of Tuesday has been smartly kneed in the crotch. I will still apply for the course, but any hope of actually being able to do it without starving to death is rapidly receding. There is basically no money now to help people do postgraduate studies. No wait, I tell a lie. The exception is postgraduate-level teacher training. There is no funding to employ teachers of course, but you can still train to be one.
Since the last budget there will be no further grants or other maintenance aid for students continuing to the fourth level. So much for the knowledge-based economy. Austerity trumps that, like it’s trumped every other strategy and aspiration.
And this is just a taster. The government plans something like a further eight percent in cuts next year to meet borrowing reduction plans. Where will this come from? It’s hard to say. We’re already cutting deeply into the things, like education, that led to our economic growth in the past. Sure, I can get by without investment in myself to improve my earning opportunities. But the country as a whole?
We’re burning the future to fuel the past. Whatever cuts we make further affect our opportunities to recover and so reduce our ability to pay off our debts. They’re essentially counter-productive, and it goes without saying that they will also cause real harm to real people as health, welfare, pensions and services come under increasing pressure. The more we cut, the worse lives become, and the longer it’s going to stay that way.
But note that I’m talking about the government’s current plan. This is without taking the Fiscal Compact into account. If we pass that, we will be committing ourselves to repay debts at a significantly faster pace than the government apparently thinks possible right now. They accuse the No campaign of offering no alternative strategy, without even beginning to attempt to explain how we can meet the criteria the Fiscal Compact sets for us.
The truth is, we simple cannot meet those criteria. How much more will we have to cut back compared to current reductions? Nearly twice as much. Who believes for a moment that’s possible humanely, never mind politically?
But wait, what’s politically possible doesn’t matter any more! Because the treaty provides that if we are too merciful on our own population and fail to cut deeply enough, the Eurozone will be able to impose budgets on us – essentially turning our democracy into a puppet administration. And as this outcome seems pretty much inevitable, voting for the treaty really is voting to wind up Ireland as a meaningful state. You think a foreign administration we can never vote out can’t do a worse job than our own shower? I invite you to consider how that worked out in the Great Famine.
I do believe that we’ll need some sort of budget management agreement if – an increasingly big if – we continue to have a common currency. But the one we’re being asked to swallow puts the interests of the larger Eurozone economies so completely before our own that it amounts to tyranny. For their sake we are being asked to take actions that run absolutely counter to our most urgent needs.
This is an anti-overspending compact just when we desperately need to spend. It exists because other countries overspent in the past, not us. Compared to the European average we underspent. Compared to Germany and France, we were choirboys. Our problem was that we took too little tax from far too few people, creating a tax base that was utterly, idiotically dependent on the boom. We need more tax income, desperately. Slowing down the economy instead – and so further reducing the tax base – is fighting fire with ostriches. It’s insanity.
But the larger countries do not give a damn because they have their own problems. All the really care about is that the Euro doesn’t fall in value, because basically that’s what their wealth is in. There are no two ways about this. We are being asked to sacrifice ourselves – really, do something quite suicidal – in order to be a bulwark for the Euro. Our reward for this? The right to apply for loans we may or may not need, at rates that may or may not be better than we can get elsewhere, from a fund that we have no guarantee is ever going to exist.
Are we fucking mad?
Well the last couple of days have been intense. So much so that I’m far too tired to tell stories now. Here then are some pictures, of Galway’s photogenic Claddagh. Where the rings come from.
Incidentally, a shout out to all the people who visited the blog from Switzerland today. I have no idea why you came, but I was very glad to see you.
A shameful day for political freedom in this country. Occupy Galway – the last Occupy protest camp in Ireland – was uprooted this morning. The Council cite safety as a reason to suppress the protest. As ever. It’s simply counterfactual. Increasingly dangerous at night in recent years, Eyre Square became a friendlier place thanks to the constant human presence. That encampment was the best things to happen to the Square since they took the feckin’ railings down. But this real increase in safety means nothing when compared to the unspecified dangers posed by tents.
It was something to be proud of, symbol of the freedom of thought and action so damn rare now in this cowed country. The kind of person who found this shameful and untidy is the same sort who granted planning permission to a hundred concrete tumours. Unbelievably, their main pretext for removing the protesters is to tidy the place up for an international yacht race. That’s a bit rich.
Indeed, super-rich. The symbolism is grotesque. Because the ludicrously wealthy want to come and play, the protest against what the ludicrously wealthy are doing to us must be silenced. Shut up and cheer the corporate toys.
But the race is good for everyone in Galway, right? Hmm. It was easier to believe that during the boom times. The rising tide may lift all boats. But when it’s going out, you’d better have a big one.