[Marxism] The crisis in Ireland and Ireland's Greens

["Anthony Boynton" <anthony.boynton@xxxxxxxxx>]

The crisis in Ireland

http://debtonation.org/2009/01/the-crisis-in-ireland/#more-1459

Ann Pettifor



11th January, 2009.



Dashed across to Dublin this week-end, to address the Irish Green Party
Conference, and met up with Richard Douthwaite of FEASTA - the excellent
Irish think tank.  I was shocked by what is happening to our neighbours.   One
newspaper headline declared yesterday that in this country of just 5 million
people, 5,000 are being laid off every week. According to the Economist
Intelligence Unit, "in October there were 260,300 claimants on a seasonally
adjusted basis, up by a mammoth 57.1% on a year earlier, and by 6 .5% on the
previous month (the largest ever monthly jump in claimant numbers.)"



Readers will have heard about Dell Computers laying off 1,900 workers last
week; but you may not know that the venerable Waterford Glass company - part
of Anthony Reilly's Wedgewood empire - is threatened with closure too, if a
buyer cannot be found. That's an awful lot of pain, anguish and suffering -
for men and women and their families. It does not bear thinking about. And
it is severely damaging the banks that lent money to these men and women
during the housing boom.



Like all the Anglo-American economies, the cause lies in the bursting of a
massive and costly credit bubble used to finance and inflate Ireland's
property and other asset markets. And I am convinced that Ireland's crisis
has been exacerbated by the actions and policies of the European Central
Bank.  Indeed in my view, there is a direct link between high levels of
unemployment in Ireland in October, and the decision of the governors of the
European Central Bank, led by Jean-Claude Trichet, to raise the official
base rate (known as the marginal lending rate) in July, 2008 to a whopping
5.25% - at the very height of the financial crisis.  Since then Trichet and
ECB governors have lowered the base rate to 2.5%, but it remains higher than
that of the UK and the US. And I remind you again, that the base rate is not
the rate that determines the borrowing costs of most companies and
households; those are determined by much higher private bank rates - who
would have passed on the ECB rate to their customers in the months following
the July announcement.



The Economist Intelligence Unit had hoped that Ireland would compensate for
the loss in domestic demand and activity,  by increasing exports. However as
the crisis in Ireland deepened, so the Irish currency - the Euro - rose in
value, making Irish exports less competitive than say, British exports.



At the same time the steep rise in unemployment claimants rapidly helped
empty the Irish government's coffers. As recently as 2006 that government
had made prudent provision with a fiscal surplus of 3% of GDP. But by 2008
the deficit had risen dramatically - and unsurprisingly - to 6.5% of GDP.
The Economist Intelligence Unit (EIU) expects it to rise to almost 9% of GDP
in 2009. The EIU describes Ireland's "public finances" as in a "state of
crisis unparalleled in any other developed economy….In early November the
European Commission launched the excessive-deficit procedure against Ireland
for its breaches of the Stability and Growth Pact……..given the magnitude of
the deficits…Ireland may become the first country to be threatened with the
imposition of fines."



So: a small country faced by the massive debtonation of a privately-financed
credit bubble and by dramatically rising debt, unemployment and economic
failure at home, lacks all the major levers to deal with, and stabilise the
crisis.  Unlike Britain and the United States, Ireland has no control over
the key rate of interest, which is set far away in Frankfurt.  It has no
control over the value of the currency in which its citizens trade. And far
from emulatiung the US and UK by stimulating the economy through government
spending, Ireland's government is now obliged, by the European Commission,
to cut back government spending steeply - and faces costly financial
penalties for incurring the deficit.



The Irish Times believes that the people of Ireland must do what the Irish
have always done to avoid crisis: they must emigrate. So the Times provided
a useful guide in yesterday's edition to immigration procedures around the
world.  With unemployment rising globally, its going to be harder for the
huddled masses to find a welcome in a foreign country.



But it may not all be doom and gloom. This crisis may just give the  Irish
an opportunity to take back control over their own economy;. And the Green
Party is hoping that the new austerity will help lower consumer
expectations, and encourage the Irish as a whole to live more simply and
more sustainably. For, as Green Party speakers emphasised yesterday - living
more simply and sustainably could improve everyone's quality of life too.  A
tough message in tough times, but its the only hopeful one to emerge from
the encircling gloom.
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