Statement from the National Platform EU Research and Information Centre, March 2011
1. FIANNA FÁIL DOWN, FINE GAEL AND LABOUR STILL TO GO
One big party – Fianna Fáil - that supported Ireland’s blanket Bank bailout, the EU/IMF stitch-up last December, the 2009 Lisbon Treaty, the 1992 Maastricht Treaty which abolished the Irish púnt, and every other step towards EU-integration over decades, bit the dust in the February General Election. We must now wait some time to see the two other big parties that did exactly the same thing, namely Fine Gael and Labour, bite the dust also as they impose on us the savage rigours of the EU-IMF deal over the next few years. This should open the way for the new political forces that were reflected in the success of the Independent TDs, the trebling of Sinn Féin’s Dáil representation and the advent of the United Left Alliance, to become the genuine opposition force in Irish politics that is so obviously needed
2. IRISH LABOUR AS THE MUDGUARD OF FINE GAEL
If the Labour Party were really to act in the “national interest” which it prates so much about and in accordance with the programme it sought the votes of the people on, its leaders would let Fine Gael form a government on its own, with Fianna Fail and other support from outside. Fianna Fail would not dare to vote against a Fine Gael minority government for several years, so that such a government would be quite stable. Instead, as Sean O’Casey said of Labour at the time of the first Fine Gael-Labour Coalition of 1948-51: “Their posteriors are aching for the velvet seats of office.” Instead of Labour being the largest element in opposing the Fine Gael/Fianna Fail implementation of the EU/IMF stitch-up, Messrs Gilmore, Rabbitte, Quin and Howlin and Joan Burton have assumed Irish Labour’s traditional role of “mudguard of Fine Gael rather than advance-guard of the workingclass”! It used be said that Labour struggles with its conscience, and Labour always wins. . . Except that on this occasion a handful of ageing Labour leaders were so desperate to get into office for their own benefit that there was not even the pretence of such a struggle.
Since 1948 Labour’s role in Irish politics has been periodically to revive Fine Gael from near terminal decline by putting it into office, simultaneously enabling Fianna Fail with virtually identical policies to revive itself in opposition. Thus the Irish Establishment could afford the luxury of having two big parties to champion its interests rather than one. Labour Ministers got big jobs, good salaries and pensions for their services, while the Labour Party was decimated in the subsequent election. This has happened on four occasions since 1951. The difference on this occasion is that Fianna Fail’s electoral defeat has been so great that it may not be able to recover in opposition. There is no real objective social basis for its continuance as a political party, now that the impact of the financial crisis and the huge increase in its vote has enabled Fine Gael to morph into becoming Ireland’s “natural” conservative party.
Whether this will actually happen depends on the non-Fianna Fail forces on the Opposition benches working together in the period ahead to make themselves into a cohesive, credible and radical opposition, cooperating with one another at least on fundamentals. It is inevitable that there will be a major reaction against Fine Gael and its Labour junior partner in the next general election, as they spend years as the local administrators of German-sponsored EU-IMF austerity. The next election may also come about much sooner than five years because of the continuing national and international financial crisis.
3. THE EUROZONE FRAMEWORK OF IRELAND’S ECONOMIC CRISIS
The Irish State’s economic crisis stems fundamentally from its folly in joining the Eurozone in the first place in 1999, impelled by the longstanding uncritical Europhilia of the Fianna Fail, Fine Gael and Labour parties and others. By abolishing the national currency at that time, Ireland adopted the currency of an area with which it did only one-third of its trade (i.e. exports and imports combined). Another third of its trade was with the UK and the other third with the USA and the rest of the world. Last year two-thirds of the Irish State’s foreign trade was still outside the Eurozone! Moreover, joining the Eurozone led Ireland to adopt negative real interest rates at the height of the “Celtic Tiger” boom and thereby inflated the property bubble which has now burst, leaving both the State and its State-guaranteed banks objectively insolvent.
The 10 EU Member States outside the Eurozone – Denmark, Sweden, Britain, Poland, the Czech Republic etc.- have nothing like the Irish State’s problems. These EU Member States are thanking their stars these days that they avoided the course of folly that Ireland’s political elite pushed its people on to. A little thought will show one that abolishing the púnt was by far the worst decision ever taken by an Irish Government. It was far worse than the 2008 blanket Bank guarantee by Taoiseach Cowen and Finance Minister Lenihan, for if the Republic had not joined the Eurozone in the first place, there would have been no need for that guarantee. It was the European Central Bank which insisted that it be given: namely, that no Irish bank must be allowed to fail in case the German-French banks from which the Irish banks had borrowed, would not be paid back.
If we had stayed outside the Eurozone there would have been no ECB to bother us. The Eurofanaticism which led Fianna Fáil, Fine Gael and Labour to push through the Maastricht Treaty and push us into the Eurozone initially has been the most outstanding historical delinquency of Ireland’s political Establishment. Yet deference to the EU is so ingrained in 26-County official and media opinion that many who should know better are too timid even today to recognize and draw attention to these obvious points.
There are calls for a public enquiry into the infamous blanket bank guarantee of September 2008 and why it was continued last September. More relevant and useful would be an enquiry into the folly that led the Irish State to join the Eurozone in the first place, from which the financial collapse and the bank guarantee have both stemmed.
4. SACRIFICING IRELAND’S CHILDREN TO HOLD THE EUROZONE TOGETHER : THE 24 MARCH EUROPEAN COUNCIL MEETING
We are now trapped like rats inside the Eurozone, although it is only a matter of time before the Eurozone breaks up and some or all of its Member States leave it and reestablish their national currencies, for its structural faults are irremediable. The only question is how soon will this occur and in what circumstances – whether it will be done in an organised or disorganized fashion. In the meantime Germany, with France holding on to its coat-tails, plans for Ireland and the other peripheral Eurozone countries a punishing regime of austerity and national asset sales that could go on for years.
On 24 March the European Council meeting of EU Prime Ministers and Presidents is expected to agree an amendment to the Lisbon Treaty to set up a permanent EU bailout fund from 2013 – the European Financial Stability Mechanism. Ireland will be expected to contribute to this, but it will not have retrospective effect or alleviate the pain for the Irish people of last December’s EU-IMF stitch-up. The EU authorities are very anxious to avoid a referendum in any EU State on the establishment of this Fund even though it will entail an amendment to the EU Treaties. The EU Summit meeting will seek to push through this amendment by using the “self-amending provision” of the Lisbon Treaty (Article 48 TEU). Messrs Kenny and Gilmore will be under pressure to push it through in Ireland without a constitutional referendum on the grounds that it is only a minor technical change and does not increase the powers of the EU.
The Opposition TDs in Leinster House will need to consider a Court challenge to this likely course, if the incoming Government seeks to follow Fianna Fail’s policy of denying the Irish people a referendum on this EU Treaty change. At the same time there is likely to be an attack on Ireland’s 12.5% Corporation Profits Tax rate and a scheme for a common cross-EU Tax Base which would fundamentally subvert Ireland’s attractiveness for foreign investors. The Common Tax Base idea, which the Brussels Commission is proposing, is a scheme for so-called “destination taxes”. It envisages Corporation Tax being calculated centrally at EU level so that firms pay profits tax to the governments of the different countries in which they sell their goods, and not to the Government of the country where those goods are originally made.
The new Irish Government needs to coordinate its responses to the crisis with the governments of the other so-called PIIGS countries in the Eurozone – Portugal, Italy, Greece and Spain – and resist the Franco-German dictation now taking place. This depends on Messrs Kenny and Gilmore overcoming the decades-old habits of Irish deference and political kow-towing to the EU and our EU “partners”. It needs them to show some political backbone and willingness to stand up for Irish interests. Up to now Irish policy is to keep as far apart from the other PIIGS countries as possible. This is in line with the Iveagh House people’s policy of always seeing Ireland as being the “good boy” in the EU class, happy as long as it receives pats on the head for good behaviour from Franco-Germany!
5. HOLDING THE ECB TO RANSOM
The ECB has lent the Irish Banks some €150 billion. If the Irish banks all closed tomorrow morning, the ECB would not get its €150 billion back because that money is now in the system in Ireland. The ECB knows that Ireland’s banks have not got the money to pay it this vast sum. From the ECB’s point of view its best plan to recover the money it advanced to cover the reckless lending of the banks is to shift the burden of repayment on to the Irish taxpayers. Therefore the political and media suggestion that the ECB will close down the ATM machines so there will be no money in the system, is so much scaremongering to intimidate the public into agreeing to take on these debts it is not responsible for. The central issue at present is that the ECB wants the Irish State and taxpayers to take on the burden of paying this €150 billion back to the ECB as rapidly as possible, so that instead of the Irish Banks owing the ECB this vast sum of money, the Irish State/taxpayers will do so and will pay it back over years by flogging off the Banks themselves to foreign owners, selling off the NAMA loans at knockdown prices, privatizing State assets systematically and screwing Irish taxpayers for this purpose.
This is essentially what the EU/IMF Memorandum of Understanding commits the Irish Government to doing. The Irish public needs to be warned that what its political leaders are planning is a massive fire-sale to foreigners of the recapitalized Irish Banks and State assets generally – the NAMA loans, Coillte, An Post, the ESB, Bord Gais etc. and Ireland’s natural resources, so that we can pay back the money the ECB is putting in the Irish Banks, essentially in order to ensure that private banks in Germany, France and Britain do not suffer losses on their Irish operations. Until this fire-sale is completed, the ECB depends on us and we can in effect hold it to ransom. Hence the new Irish Government should be in no hurry to comply with the ECB’s wishes. It should act in accordance with the old truism: If you owe the Bank a million you are in trouble, but if you owe it a hundred million it is the Bank that is in trouble! The ECB stood irresponsibly by while the German, French and British banks punted huge sums on the Irish property market for years and made big profits thereby. As the Eurozone’s lender of last resort the ECB should now pick up the tab. The Irish State needs to repudiate the horrendous private Bank debts that it has so foolishly guaranteed, if it is to be able to repay its legitimate sovereign debts and return to the international bond markets at an early date in order to borrow at reasonable interest rates.
6. MONETARY UNIONS, FISCAL UNIONS, POLITICAL UNIONS
One cannot have an independent State unless it has its own currency, and with that control of either its interest rate or exchange rate policy, for these are fundamental economic instruments for advancing a people’s welfare. Those who fought for an Irish Republic historically took for granted that national independence meant that an Irish State would have its own currency and the related economic instruments. The rate of interest is the internal “price” of money, so to speak, and the currency exchange rate is its external “price”. A Government cannot control either unless it has a currency of its own in the first place. That is why former EU Commission President Romano Prodi exulted when the Monetary Union was set up for a minority of EU States in 1999: “The two pillars of the Nation State are the sword and the currency and we have changed that.”
The fundamental problem for the Eurozone and its 17 Governments is that there cannot be a stable, lasting monetary union that is not also a tax and public spending union, and hence a Political Union, so that its component Member States are compensated for loss of their ability to influence their competitiveness by varying their exchange rate – for they have no independent currencies any longer – by automatic transfers from richer to poorer States through a common federal-style Eurozone tax and public service system. The latter means a Political Union like the USA, and the dream of building a United States of Europe on similar lines to the US has for decades been a dream/fantasy of the Euro-federalists, of whom there are many in the leadership of the Fine Gael and Labour parties.
A system of common taxes and public services exists within national States, but it does not exist cross-nationally. It cannot exist cross-nationally because the social solidarity, the sense of community and mutual identification, the sense of being a common political “We”, which is what makes people pay taxes freely and willingly to a common Government because it is “their” Government, does not exist at EU level. A democracy or democratic State is impossible without a “demos”, a people; and there is no EU or Eurozone “demos”, in contrast to its component Nation States.
This is the fundamental fallacy of the EU integration project, the attempt to turn the EU into a quasi-State, even though already half or more of the legal acts made in each of the 27 EU Member States each year are on average of EU origin. Free trade is one thing, and is normally a good thing. A common currency, credit and exchange rate policy for very different economies is something totally different. The resistance of German public opinion to financing Greece, Ireland, Portugal etc. in the current Eurozone crisis is but one small example of this. The solidarity needed for such continual resource transfers between the Member States of the Eurozone to enable it hold together does not and cannot exist. Nor can it be artificially created.
7. REESTABLISHING IRELAND’S NATIONAL CURRENCY
The advantage of a country having its own currency is that it enables its Government either to control credit and issue money for purposes of job-stimulus and the like through varying the rate of interest, or to influence its competitiveness with other economies by varying its exchange rate. Governments can set a target for either the interest rate or the exchange rate, but they cannot achieve both targets simultaneously, for each rate affects the other.
In the Eurozone interest rate and exchange rate policy are quite properly decided in the interests of the Big States, for they contain most of the population of the Eurozone. The one-size-fits-all interest rate regime of the European Central Bank (ECB) must always be unsuitable for some Eurozone countries therefore, for the 17 economies concerned differ widely. Moreover, as the Irish State does nearly two-thirds of its trade outside the Eurozone, whereas all of the 16 other Eurozone members do half or more of their trade with one another, the exchange rate for the euro must normally be unsuitable for Ireland also. This is vividly shown these days as the euro rises vis-a-vis the dollar and pound sterling. This hits Irish exports to the dollar/sterling areas where we do most of our trade and encourages competing imports from those areas.
Having taken the disastrous step of joining the Eurozone in the first place, it would be foolish to pretend that one can get out of it without pain, especially when Irish Governments have agreed to stand over the mess in the State’s private banks and have built up such a deficit in the State’s public finances. However, re-establishing an independent Irish currency and with that its own credit and exchange rate policy has to be a central objective of all genuine Irish democrats, for without that there can be no truly independent Irish State. People should not be afraid to state this, especially as the pain of remaining in the Eurozone is mounting all the time and the historical trends point to continual strains within it and continual crisis as long as it lasts, and its eventual partial or total dissolution is inevitable.
The threat of repudiating the private bank debt now moved to the ECB and of reestablishing the Irish pound is the principal lever/weapon the Irish State has vis-à-vis the Eurozone. At present Ireland cannot restore its economic competitiveness by devaluing its currency. It can only become more competitive by “devaluing” – that is, by cutting - peoples’ pay, profits and pensions instead for years to come. The main advantage of leaving the Eurozone and rejoining the 10 EU Member States outside it is that it would enable the Ireland to resume control of its money supply and credit and thereby stimulate domestic demand and employment, while simultaneously it could boost the State’s economic competitiveness by devaluing the exchange rate. The main drawback of this step is that much of the State’s foreign debts would be in euros, if the Eurozone still existed, and would be expensive to pay off in a depreciating currency. On the other hand, the boost to competitiveness and exports arising from having a more suitable exchange rate than the Eurozone one, should enable Ireland earn more foreign currency with which to pay those debts. Temporary exchange controls would also be needed for a transitional period. It is in any case likely that some countries will leave the Eurozone in the next few years, if the Eurozone as a whole succeeds in holding together at all.
If the Eurozone breaks up, a planned dissolution and a related reapportionment of debts would clearly be better than a disorganized one. There are many examples of monetary unions that have dissolved and been replaced by national currencies. The Irish State itself left the UK monetary union in 1921, although it maintained an overvalued púnt at par with sterling until 1979. The USSR rouble was replaced in short order by 15 successor currencies in its 15 successor States in 1991. The Czechoslovak crown and Yugoslav dinar were replaced by successor currencies in the 1990s. In 1919 the Austro-Hungarian thaler was replaced by the different currencies of its several successor States.
What is happening now is that Ireland, Greece, Portugal etc. and the interests of their peoples are being sacrificed in order to save the Eurozone, whose dissolution would be a blow to the entire integration project of building a European quasi-superstate under Franco-German hegemony to become a big power in the world. The acolytes of that project in Ireland – in the leadership of the Fianna Fail, Fine Gael and Labour parties, in Foreign Affairs at Iveagh House, the Dept.of Finance and the Taoiseach’s Department, in the Central Bank, the Irish Times, RTE and the senior echelons of the Irish Congress of Trade Unions – are desperately afraid that their political life’s work may have been in vain, so they are quite willing that the welfare of the Irish people be sacrificed to save it. These are perhaps the most fundamental issues that are at stake in the current crisis.
People should remember also that the only period in the 90-years’ history of the Irish State when it used its monetary independence, followed an independent exchange rate policy and effectively floated the currency, from 1993 to 1999, gave us the “Celtic Tiger” rates of economic growth of 8% a year – until that was destroyed by the low-interest-rate-induced bubble of the Eurozone from 2000 onward.