Wednesday, March 14, 2012

Standing up for Ireland

If you want to know who is taking the real decisions about the economy of the Irish state then you need look no further than EU Commissioner Olli Rehn.

Since Fianna Fáil crashed the economy and Fine Gael and Labour won last years election they have repeatedly asserted that there can be no deviation from the bailout conditions set down by the EU, European Central Bank and the International Monetary Fund.

At the same time in an effort to tackle Europe’s worsening economic recession and satisfy the ‘markets’ the EU has embarked on a series of measures which have mostly failed. The most recent, the European Fiscal Compact Treaty or more accurately the austerity treaty, is about imposing stringent fiscal control by the EU over state governments.

The Irish government was reluctantly forced to call a referendum on this austerity treaty because of its implications for the Irish constitution. Thus far the argument from the government has been that the treaty is necessary to impose what successive Ministers have described as greater fiscal discipline over EU member states.

The Treaty was signed two weeks ago but before the ink was dry on the page the Spanish Prime Minister Mariano Rajoy, fresh from signing it, told his European colleagues that Spain would defy the fiscal targets being set by the Treaty. The austerity measures were just too severe for the Spanish people and economy, he said.

So, the Finance Ministers found a compromise. Spain doesn’t have to cut as much as the EU was demanding and the Spanish state is allowed to breach the fiscal targets. Not an auspicious start for a treaty which is supposedly about strict discipline.

Meanwhile the Irish government, depending on which Minister is talking to the media, has been involved in some sort of negotiation with the EU over the payment of the promissory notes.

These notes are essentially IOUs which were entered into by the last Fianna Fáil government to plug the hole in the balance sheets of Anglo-Irish Bank and Irish Nationwide which arose as a result of the greed and bad practice of those banks.

This €31 billion debt requires that the government pay €3.1 billion to Anglo Irish Bank every year for the next 10 years. As this money is borrowed the state has additional payments to make accounting for up to at least another €18 billion.

It appears the government has been trying to negotiate an arrangement under which the €31 billion is still paid but over a longer period and with less interest.

Rescheduling will simply mean that our great grandchildren will have to pick up the tab.

And it is at this point that EU Commissioner Olli Rehn has stepped in. According to the EU Commissioner the motto "pacta sunt servanda" - respect your commitments and obligations – is a key tradition in EU law.

Asked about Ireland’s promissory note payment he arrogantly and patronisingly declared that each and every member state has to respect the commitments it has undertaken and this is valid in the case of Ireland.

Of course this is a nonsense. Respecting commitments and obligations within the EU was never a strong point for either France or Germany who both regularly breached the stability and growth rules.

Germany breached the deficit rules in 1994: 1996 and between 2003 and 2006 and in each year since 2009. It has broken the debt to GDP rule every year since 2003.

France has broken the deficit rule every year since 2003 and has breached the debt rule every year since 2003.

And other states have equally poor records of compliance. But according to Mr. Rehn and the EU Commission the law as applied to the Irish state is to be applied rigidly.

This bullying and belligerent stance by the EU is inevitable given the weak and obsequious attitude of the Irish government. How often has the Taoiseach asserted; ‘We never looked to a debt write down’ or ‘we are not going to have the name defaulter written across our foreheads’, or we will not impose losses on bondholders?

Why would the EU or IMF or European Central Bank take the government seriously in any negotiation when it begins every sentence by telling the Troika that it plans to do exactly what they want?

The Irish government should reject Mr. Rehn’s self-serving advice, look to the Spanish example, and do what is in the interests of the Irish state and of Irish citizens and declare its inability to pay the promissory note.

Finally, there is a US delegation in Ireland this week led by former Congressional Democratic leader Nancy Pelosi. I met them on Tuesday afternoon and briefed them on the peace process and especially its outstanding issues, and on the current state of the economy north and south.

Congressional member Carolyn B Maloney; Congressional member Mike Doyle; this blog and Congressional member Nancy Pelosi.

1 comment:

Timothy Dougherty said...

Hello Gerry,
It starting to looks like Ireland is a special case. As you state, understands, its people come first. Ireland must do what is in the best interests of the Irish state and of Irish citizens. The EU must see Ireland as a test cast, testing to what extent one nation will endure. Ireland will continue to live, endure and last with courage. The forced austerity treaty, is not just refraining from some pleasures, but a matter of life and death, even a cultural death, by measure.
You have, once more hit the nail on the head. Ireland will do, in the end what is best for the Irish people, first serving and chief that need.