We Need A Fiscal Compact

One size is not going to fit all

Sure we do. Just not this one.

It is good to have a clear plan for getting out of debt, and it is eminently reasonable to have a budgeting agreement between countries sharing a currency. We should all be playing by the same rules if we’re sharing the risks and benefits.

Just not these rules.

Let’s leave aside the pros and cons of the ESM if we can. Even if we never need it – and I don’t think we will – we should join it anyway; to support other vulnerable Euro members and discourage market speculation against the currency. We shouldn’t be looking at this mechanism as if we’re desperate to join. It’s a mutual benefit scheme that we should contribute to – if we can.

But if the price of joining the ESM is this Fiscal Compact, then the price is too high. And I don’t mean too high for what we get in return. I mean too high as in we can’t afford it, full stop.

Even if the ESM were a free rainbows and ponies club, even if membership entitled us to have cash sprayed over us from a hosepipe, we cannot join if we don’t have the price of admission. And we simply don’t.

We have a vast budgetary shortfall, imposed on us by the appalling financial mismanagement of the last government. Since then however we’ve been top of the class, attacking spending with a chainsaw, losing that deficit as fast as humanly possible. We’re suffering for it. We’ve seen employment, health services, education and welfare devastated. We gave away our pension reserve to save other people’s pension funds. But we have made exemplary progress.

The Fiscal Compact – which we join if this referendum is passed – requires us to redouble that cutting.

Look at the state of our public systems now. Imagine if we made cutbacks at nearly twice the current rate. I mean that, imagine it. What would it be like? What would you do, in a country like that?

Get out, mainly. Anyone who can will. We’re going to haemorrhage young, basically. The rest of us… Well, we’re pretty much buggered. We’re going to see an already shrinking economy fold like a ruptured Zeppelin, as further destruction of the tax base turns a nascent recovery into a plughole pirouette.

We’ll be another Greece.

Deficit spending can often be the wrong thing to do, a too-easy option in difficult times. But sometimes it is exactly the right thing, and it has paid off in the past. The Fiscal Compact however means that we can never do it again. No matter what the people vote for, no matter who is in government, even if we can borrow from other sources. It’s an economic straitjacket, one that no country could put on and still call itself free.

What’s more we have to force ourselves into that straitjacket, in far less time than is reasonable, humane, or indeed possible. If we pass this referendum we will be making a commitment that we simply cannot keep. We will be fined for being broke.

This Fiscal Compact was not designed for Ireland’s circumstances, but to stop major Euro economies like Germany and France from doing again what they did wrong before. It will punish us not for our sins but for theirs, prescribe diarrhoea medicine when we’re constipated, bring a wrecking ball when we need scaffolding.

Reject a treaty that will be our worst mistake since the bank guarantee.

Rabbit Of Government Versus Truck Of Euro

So having looked at the reasons to reject the Fiscal Compact, let’s examine the government’s pro-treaty arguments.

 

Fiscal Compact in Ireland - YES Campaign [MEP] Olle Schmidt support
But fear not, here’s the opposi… oh

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.

Burning Our Future To Fuel The Past

The panel of Why You Should Vote No!, a discussion organised by the Campaign Against the Austerity Treaty in Galway.  Big budget stuff this ain’t.

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?

Ó Cuív Looks Out For His Own Seat

Fianna Fail Party Logo
Yes it works quite well in the American sense of the term too (Photo credit: Slugger O’Toole)

The jokes write themselves. Or maybe jokes isn’t the term I’m looking for. Depressing ironies, that’s it. If his grandfather had been a little more flexible about treaties limiting sovereignty, there wouldn’t be a Fianna Fáil for him to not leave.

I have mixed feelings about this. My admiration for the man would have shot up enormously if he had kept campaigning against the Fiscal Compact, within FF or without. So I see this as a sad caving in to party machine politics, the antithesis of democracy.

But on the other hand, I think it’s good that Fianna Fáil are supporting the Fiscal Compact. Wait! I don’t mean that supporting the Compact is right. I mean that it was probably tempting for them to take a popular stand against it. (It would also have been unforgivably cynical of course, but they have done unforgivably cynical things in the past.) I’m glad they resisted that anyway.

Mainly though, it’s a good thing because it keeps all the bastards on the same side of the fence. I’d hate to find them on mine.