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.

The Company Store

What is the strange hold she has over Enda Kenny?

One reason a lot of people will vote for the upcoming “austerity amendment” is that they assume it must, when it all comes down to it, be good for us. Sure it’s going to hurt, but in the long run it will help us have a stronger, better economy – right? It’s a natural assumption. And it would be dead wrong. The wholesale destruction of government spending if we succeed in making its insane deficit-slashing timetable – or the fines if we fail – will shrink the economy precipitously. Disastrously.

But why would the EU want to do that to us? It’s puzzling, but it’s not out of any personal animosity. We are but a small cog in this, and we don’t squeak half enough. It’s just that it’s a one-size-fits-no-one set of strictures that would burden even the healthiest European economy.

The Fiscal Compact has two main objectives. The more obvious one is to outlaw the sort of behaviour that got Greece into trouble – essentially, excessive public borrowing and spending. But note that that’s absolutely not what we did. We were good. We paid back debts when we had the money, we ran a surplus. And though our public spending rose, the highest it ever went was still only the Eurozone average. Very arguably we should have been spending well above that, our public services were still grossly underdeveloped even at the height of the boom. Yet this referendum will have the effect of cutting public spending more drastically than ever. And aside from hurting our most vulnerable, that will of course crush the economy even further. As I said a few days ago, it is the cure for the opposite disease to the one we have.

The second and more covert purpose of the compact though is, putting it as crudely as it deserves, to save Angela Merkel’s political future. In order to win her next election – she has about a year and a half left to go – she needs to convince the German people… Not that the Euro is good for them, no. That’s not enough. That the Euro is the Deutsche Mark. A currency run to Germany’s peculiar rules, for Germany’s peculiar circumstances.

Which are peculiarly set against Keynesian economics, the (well-proven) theory that the best thing a government can do in times of economic depression is borrow and spend to promote recovery. This technique lost favour in Germany essentially because it was employed by Hitler. In the Post-War era a new orthodoxy was needed, and they found it in “Ordoliberalism“, a system in which government must play only the most minimal role. It has worked for Germany so far, but Germany has been in almost continuous growth since it started. That might seem a recommendation, but ordoliberalism is a theory for the good times, utterly lost when facing a crisis of these proportions.

It seems likely that only the introduction of the Euro averted the failure of the German system. From being overburdened by the costs of Reunification with the post-Communist East, Germany went rapidly back to being the richest and most productive economy in Europe. Essentially, by selling more goods than ever before to the rest of Eurozone – while simultaneously lending us the money to buy them.

Germany had become Europe’s company store.

It is worth noting that Merkel’s approval rating is at an all-time high back home. She’s getting to project herself as tough by beating us up. So why is Enda Kenny agreeing to this? Is there some secret backroom agreement where he gets to be her bitch now in return for favours down the line? It’s the only way you can make sense of his apparently acting against the country’s interests. But we can’t depend on the existence of covert deal. Even if it exists, it can so easily be repudiated. And in return we are being asked to write vows of poverty into our own Constitution.

If this referendum passes, the best thing you could do would be to get out of the country as soon as you can. And be sure to bring your more vulnerable relatives with you.

Austerity, That’s What We Need More Of

austerity (Photo credit: 401K)

So Britain has gone back into negative growth, fairly conclusive evidence that budget-cutting your way out of recession is like clearing a path through the forest with a flamethrower.

Yet in the eurozone, we seem determined to repeat the error. The forthcoming Fiscal Compact is a legal undertaking not to go into budget deficit. A good thing in principle; of course a country should, in the good times, be creating budget surpluses that will see it through the bad. That’s just prudent. The thing that appears to be escaping them here though is that these are not the good times. These are, in point of fact, the really, really bad times.

We can sign a treaty to promise to balance the budget, sure. What we cannot do, is balance the budget. Not without the wholesale destruction of not simply welfare and health systems, but everything. Policing, education, investment, the fabric of the state.

So are we signing this treaty with the intention of breaking it? Perhaps it is meant purely as a pro forma sop to the markets, Or indeed to the German taxpayers, who seem to forget that they profited vastly from the eurozone boom and so have to be wheedled and cajoled now that it’s come to payback time. “Yes yes, of course everyone is going to balance their budget.” That doesn’t seem a proper way to go about things.

I don’t mean that a fiscal compact is a wholly bad idea. If we’re going to share a currency there have to be some rules. But remember, we had rules. We had the Stability and Growth Pact, of which this is merely a sterner reiteration. Did we break those rules in the boom? Nope. Right up to the Crash of 2008, we ran a surplus. France and Germany broke them, reckless to the effect that had on other countries. They benefited from the conditions that drove our economy to meltdown, and yet somehow it’s we who have to suffer again. This new treaty is the Big Two’s more rigorous attempt to discipline themselves, but what is merely chastisement to them may beat us to death.

Here in Ireland, our Supreme Court has judged that this compact amounts to a new international treaty with constitutional ramifications, and must be put to the people. This is a great aspect to our Constitution, but it means we’re yet again going to have a fraught and confusing public debate. Highly technical and highly political, the text of the treaty is hardly going to make for clear and balanced discussion. So it’s unlikely to be for the right reasons whichever side wins.

The Yes camp will be monging fiscal fear: If we don’t pass it, we won’t be able to raise the money we desperately need to keep the country afloat. But wait, in order to borrow money we should pass a law against borrowing money? It doesn’t make a lot of sense. The No camp on the other hand will be upholding our economic sovereignty. A brave stand, which has been likened to defending the virginity of sex workers. There is only one economic sovereignty, and it’s called “having money”.

At the moment, it looks like we’ll pass it. The incorrect arguments of the mistaken pragmatists will be more persuasive than the incorrect arguments of the mistaken idealists. But it is not too late to change direction. We have a chance here to make a real and lasting difference.

Sure, the last time we turned down an EU treaty they pretty much gave us another chance to say the right answer. All we really did was delay it. But this time, a delay could make a difference. The cavalry – in the form of Hollande winning the French Presidential election – might just arrive in time. He has announced his intention to reopen the treaty, and at least take some of the emphasis off austerity. (Oh those crazy reckless Socialists.) Meanwhile, the other eurozone countries have a chance to absorb lessons like that coming out of the UK.

So Ireland could play a key role here in saving the EU from a tragic, destructive mistake. Enforcing balanced budgets in the long term is a sensible idea. Enforcing balanced budgets during an already murderous recession is not economics, it’s applied sadomasochism.


Let’s Get Fiscal: Women’s perspectives on the Austerity Treaty

Anyone in Dublin or Galway interested in a public meeting on austerity policies, with particular reference to their impact on women? You can attend the event physically at Feminist Open Forum, Central Hotel, Exchequer St, Dublin, or by live streaming at the One World Centre, 76 Prospect Hill, Galway.

Tonight, THURSDAY 26 April at 7pm.

A Different Titanic Tragedy

Ships - Best avoided really

You did know the Titanic was a real ship, didn’t you? Laughing Squid did a Twitter-trawl to find people for whom this came as news. Amusing as it is, it’s not so surprising that there are now adults who have no memory of the Titanic from before James Cameron’s film. Those who were five when it came out are twenty now. They’ve grown up in a world where Titanic is, and has always been, the most successful film ever.

And the opposite misconception – that it was the worst tragedy in maritime history – is far more widespread, and every bit as wrong. Believe it or not, it doesn’t come close. Even if you restrict the definition of disaster to accidental losses, it doesn’t appear in the five worst on record. If we include deliberate sinkings such as acts of war and piracy, it’s hardly on the radar.

So why is this the sinking everyone remembers? To be blunt, because it’s a great story. The key factor is that the Titanic had just become the largest ship ever afloat. At once you have a story of hubris; overambitious humans tempting fate is one of the great templates of drama. And to stoke the irony, the owners had unguardedly described it as  “virtually unsinkable”. Then there’s the needlessness of the deaths caused by the under-provision of lifeboats. That gives the story a terrible pathos. And her passengers included some of the richest people in the world, so you have the vital celebrity angle. The rich surviving at the expense of the poor makes it a story about injustice too.

No wonder so many people think it was invented for the cinema. It’s ideal. The first film about it was made within a month! And even before that it was entering folklore as story and song – hundreds and hundreds of songs, including one I remember my grandfather singing. The Titanic was an instant legend.

The actual greatest tragedy at sea? For a single ship, almost certainly the Wilhelm Gustloff, on which at least six times as many lives were lost as aboard the Titanic. Six times. Why is this not the subject of a wildly successful film?

Because we sank it.

Well, “we” if you identify with the Allied side in World War II. Though it was packed to the gunwales – literally – with civilian refugees, it was also carrying Nazi officers and troops retreating from the Russian advance in 1945. No icebergs, no Edwardian frocks. Germans sunk by Soviets as part of a bitter and ruthless war. Tragic, yes. But not in the least romantic. So no multi-Oscar film for the Wilhelm Gustloff and her nine thousand dead.

German Oversight

Reichstag building seen from the west, before ...
Head Office

Whatever the exact mechanism, it seems beyond dispute that the German parliament knew details of our budget before ours did. It may not have been the whole budget of course, but it still doesn’t look good.

Particularly in this context. What Merkel has proposed for the Eurozone is EU oversight of members’ budgets. Critics will say that that amounts to German oversight. So this is embarrassing even more for Germany than it is for Ireland.

11/11/11/11 – A Monument To Worthlessness

Serbian retreat through Albania in 1915.

The British seem to be going particularly overboard for poppies this year, presumably inspired by the calendrical happenstance of all those ones lining up in a row. But unthinkingly, they only emphasize the tragic aspect of this occasion.

Why eleven? The agreement to end hostilities had been signed more than five hours earlier. The war officially ceased only at the eleventh hour of the eleventh day of the eleventh month because that seemed a suitably grand and historic way to end a ‘Great War’. So they kept on fighting, and they kept on killing, until that eleventh hour came.

How can one feel anything but contempt for that?

But this act of inhumanity was just the start. The victorious powers chose to accept no portion of blame for the hostilities. On the contrary, and despite the fact that a great deal of the credit for the war’s end belonged to the German people for rising up against their leaders, despite the fact that the Kaiser had abdicated and the empire been abolished, they chose to heap all blame – and punishment – onto the people of the new German democracy. The terms of this ‘armistice’ would lead directly to disaster on a previously unimagined scale.

This hour marks not the end of war, but the beginning of revenge.

Scam Scum

Credit Card
Scammers will do you nicely

This morning my mother received a call claiming to be from some sort of technical support, warning her that everything possible was wrong with her computer. And more. Fortunately I was staying, so she passed the call to me.

If you haven’t heard about these scams, they call you up – often using your name, wherever they get it – and tell you horror stories. Sometimes they claim to be from Microsoft or perhaps a well-known vendor of computers or antivirus software, something that sounds vaguely familiar and worrying to the inexperienced user.

Then they may ask you for a credit card number to pay for their ‘repair service’, or tell you to download a program or security patch – which will actually be a virus. They will do terrible things to your computer and/or bank account. I regret now that I didn’t patiently sit through the whole spiel so that I could reproduce its exact details here. But the idea of what these people do, lying to me in a pleasant voice, out to rob my mother, that got to me.

So someone who works a scam for a living now has little reason to doubt that they are doing evil. I was fairly explicit on that point. They also have grounds to believe that the police are on their way. Far fetched as that claim might seem, I backed it up with action. It was German number – +495188859403 – and since the call I found a computer crime authority in Germany to forward it to.

I also had quite an exciting stream of invective lined up, of which ‘scum’ was perhaps the most – indeed, only – printable word. Sadly though she picked up on my general drift and hung up, on or about the word ‘arrested’.

I have too much anger.

Anyway, don’t believe the bastards. Legitimate companies simply do not call and tell you there is something wrong with your computer. So warn the less savvy computer users you know. If these people called one number in Ireland from Germany they’ll probably call many, and it seems likely they’ll be trying UK numbers too.

This has been an emergency interruption to your service. The usual (?) afternoon update will now go up in two hours’ time.