Wednesday, July 20, 2011

Kenny is not listening

Tomorrow state leaders from across the Eurozone will be meeting in Brussels to try and fix the crisis in the Eurozone economies. It’s a big ask!

The agenda is already clear. Much of the focus will be on Greece. The leaders need to agree measures to ensure the sustainability of Greek public finances; the role of private sector involvement; whether it is possible to put more flexibility into the European Financial Stability Facility; to take measures to mend the outstanding faults in the banking sector; and to agree measures to ensure there is liquidity – money - within the banking systems.

The Irish government has set as its priority a reduction in the interest rate being paid on the loans it has taken out as a result of the EU/IMF/ECB (European Union – International Monetary Fund – European Central Bank) bailout.

The stated goal by Fine Gael at the time of the election earlier this year was to reduce the interest on the total bailout of the loan by 1%.

This, it was claimed, would save the Irish taxpayer some €400 million per year.

However, the Minister for Finance then moved the goalposts. According to Minister Noonan the government’s goal now is an 0.6% reduction on any further drawdown of EU money. This would save taxpayers in the region of €150 million a year.

There is no sign at this time that even this significantly reduced demand in the interest rate reduction will be achieved, but even if it were the small amount involved would have to be set against the excessive profits our so-called partners in Europe are making at our expense; the tens of billions being pumped into banks to pay for their mistakes; and the hardship our citizens are enduring as a result.

But the real issue in all of this is, and the issue which should be the priority for the government going into Thursday’s summit, is the fact that our partners in Europe have imposed an excessive 3% handling charge on the loans they have made to the Irish government.

This means that our European partners – at least they claim to be our partners – are making a massive €9 billion profit. This is a cautious estimate based on a full draw down over seven and a half years and may increase if the cost of borrowing at EU level increases as predicted by some economists.

Last week the Department of Finance confirmed that the IMF is also going to make a significant profit on its loans to the state. This is estimated to be € 4.6 billion. Again this figure is based on the full amount being drawn down.

What this all means is that when added together the EU, European member states, and the IMF will make more than €13.6 billion profit from loans extended to the Irish government under the EU/IMF austerity programme.

This is money that ordinary citizens will have to pay for years to come through new stealth taxes and deep cuts to public services.

This is the issue that the Irish government should be placing on the agenda on Thursday in Brussels. This is the big issue. The unsustainability of the mountain of debt which this government, and the last, have heaped on citizens.

I used the opportunity to raise this matter during a Dáil debate on Wednesday but Enda Kenny was not for listening. His position is fixed. Other options, other choices, are not for him.

And there are other choices to be made.

The truth is that you can’t resolve a debt crisis by taking on more debt.

The Irish government should end payments to Unguaranteed Senior Bond holders. There is no legal obligation to make the payments and many other governments and those in the markets are surprised the Irish government is still paying out.

The implication of this short sighted position is that in early November €703 million will be paid over to unguaranteed senior bondholders in Anglo-Irish Bank – a bank that is dead – that doesn’t exist now.

This huge sum of money mirrors almost exactly the amount of money taken out of the Health budget in last Decembers budget.

The social consequences of this and of government policy is to be found in closed A&E units; in the almost half a million unemployed; in the decisions our elderly citizens are being forced to take between paying bills and buying food.

It is reflected in the downgrading of services in Hospitals, in the loss of SNA’s in schools and in the cuts to fuel and household benefits.

It is to be found in the Universal Social charge and in increasing energy and food prices.

The Irish government faces a huge negotiation and seems ill-prepared and out of its depth.

There is a lot of noise coming out of Europe which suggests that EU leaders are finally coming to realise that something radical needs to be done to avoid calamity.

But with the larger states thus far placing self-interest above the interests of their neighbours, and the Irish government dug in on a ruinous strategy, Thursday’s Brussels summit promises to be the most important for Ireland in recent history.

1 comment:

Timothy Dougherty said...

You paint a dark picture Gerry. Man lives in a sunlit world of what he believes to be reality. All this seems like so much ambiguous economic nomenclatureNot. As only this prescription make more debt to pay interest on old debt, but the process of borrowing and “consolidating” debt with this comes devastating social and political, impose “fiscal austerity measures.”
The debt levels were assessed as a percentage of GDPIreland at 81% in 2010 and 93% in 2011. Debt levels are likely to continue to dramatically increase, as, “in many countries, employment and growth are unlikely to return to their pre-crisis levels in the foreseeable future. The true crisis is “an international banking crisis.” Global banks are insolvent. The middle class cannot survive the perfect storm of fiscal austerity, increased interest rates, inflation and ‘Structural Adjustment.’ Creating a massive global social, political, and economic crisis this massive global social, political, and economic crisis. The world is globalizing, in terms of power structures,as in terms of ideational structures and Ireland must look with a clear eye for its ideal stability.