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Economics Irish Style

category national | irish social forum | opinion/analysis author Wednesday November 24, 2010 23:55author by Bryan Wall Report this post to the editors

E.U. IMF Budget Debt Default

With the economic future of the country very much in doubt, a change, politically and economically, is greatly needed. With the pressure from Europe building and the national debt set to soar, the future for Ireland looks bleak.

The last week will be remembered in Ireland as one of the most tumultuous periods in Irish history. We are hurtling downwards at an ever increasing speed. Future generations of Irish people are to be burdened with the debt of the bankers and the entire Irish banking industry. What was once unthinkable is now likely to pass and all of this is down to the actions of the government and their friends. In the two years since the banking guarantee was enacted, there have been no major steps taken to sort out the financial mess that the banks have gotten the country into and now that problem is having its final and fatal effects on the future of the country; a political party with no mandate from the people is in the process of turning Ireland into a debt serving nation and nothing more. The leader of said party is doing nothing more than cling onto power for as long as he can in order to serve out his own agenda, whatever that may be, and no “hair shirt budget” is going to change the fact that Ireland is both an economic and political basket case.

In a week when the Green Party demanded an election in mid to late January, everyone expected the Taoiseach, Brian Cowen, to step down as leader and call an election. Instead what we have is a beleaguered leader clinging on to his last vestiges of power in an even more beleaguered political party. This is the party which is currently negotiating, with the ECB and IMF, the conditions of the bailout of the Irish banking system and economy which will amount to €85 billion. What they are failing to tell us is that the interest rate on this bailout will likely be 6% or 7% which is something the country cannot afford to pay.

So, let’s break down the figures a little. Our present borrowings amounts to €110 billion, €23 billion needs to be redeemed on Irish bonds within the next 3 years, roughly a further €35 billion will be needed for the banks, sovereign debt runs to €45 billion, €100 billion from the ECB which has been given to the banks as emergency liquidity and the Central Bank has injected roughly €30 billion into the Irish banks. In total this adds up to €343 billion of nothing but debt. These figures come from economists Brian Lucey and Peter Sommerville who simply highlighted this issue on last night’s episode, the 23rd of November, of Tonight with Vincent Browne. To add further credence to their figures, David McWilliams has done some of his own calculations, in his most recent article in the Irish Independent, and has come to the figure of €275 billion or “just over 200% of GNP”. Simply put, Irish debt is heading for well over €200 billion and the country cannot afford this.

These figures have been mentioned nowhere in the mainstream media by government officials and Minister for Finance, Brian Lenihan, has been unsurprisingly silent on the issue. Along with his other party officials, he likes to obfuscate the facts and dodge questions by giving convoluted long winded answers to questions no one has asked. This is being done to protect themselves and their fellow PODS. In my previous writings, I have used the analogy of PODS to refer to the politicians, developers and bankers. They are one homogenous entity which for all intents and purposes is sucking the life blood out of the country in order to prolong their own financial gain and power.

We saw this perfectly this week when everyone expected Brian Cowen to resign, under pressure from the Green Party and backbenchers within Fianna Fáil. The bond markets even expected him to do so as they know, and have always known, that the current government has no credibility left whatsoever. Instead Brian Cowen announced that he is staying in power and a general election will be called once all of the legislation regarding the upcoming budget has been enacted. The problem with this is that the legislation could take months to be enacted and this means that feasibly Fianna Fáil and Brian Cowen could remain in power well into the New Year.

As I have mentioned, the markets have always known that the government ran out of credibility long ago. This makes the upcoming budget meaningless. You cannot please people by lying to them when they know that they are being lied to. It’s a rather elementary lesson which the government does not seem to take any heed of. At this stage, the budget is a method of punishing the Irish people for no other reason than an attempt to appease the masters in the E.U and the bond markets. With cuts to social welfare, education, health, minimum wage and rises in tax, the effects will be felt throughout all of Irish society. What makes it all the worse is the fact that the government’s budget will do nothing in terms of the Irish debt which, as I have said, we simply cannot afford to pay. We are being forced to accept the bailout by the E.U as they are afraid of the knock-on effects of a possible Irish default on the rest of Europe and wider banking system but this is something which can be played to our advantage.

Frankly and honestly, we need to say to the E.U that we will not accept the bailout at interest rates of more than 5% as the country can’t afford it or else, we’ll default. This isn’t a major advantage but it is an advantage that we have nonetheless. Despite this, I think Ireland shouldn’t accept any bailout whatsoever. We should default on our debt and default now. David McWilliams has been calling for this for over a year now. We bring the pain forward and have a short, sharp, shock instead of a long and drawn out recession which will end in a default anyway. Bring forward the pain so that the country can get out of the debt stranglehold which is killing it. It is simply bankruptcy but on an international level. Things are bad for a short time as massive deflation takes place but things soon pick up and can pick up very strongly within a short period of time. This has been shown throughout economic history but as usual, the current government ignores this as it attempts to appease those who cannot be appeased.

What we need is a new government with the willpower to make the hard decisions and not simply toe the line when it comes the E.U. Whoever is in power needs to tell those in the E.U that the German and French banks, who loaned the money to the Irish banks in the first place, are just as culpable or even more so than the Irish banks. Instead we are left with an incompetent government which is corrupt to the core and is unlikely to last into the second half of the next year. These are the people who are gambling with the economic future of Ireland. This is economics Irish style.

Related Link: http://bryanwall.wordpress.com/
author by Mike Novackpublication date Thu Nov 25, 2010 12:51Report this post to the editors

"Things are bad for a short time as massive deflation takes place but things soon pick up and can pick up very strongly within a short period of time. This has been shown throughout economic history but as usual, the current government ignores this as it attempts to appease those who cannot be appeased"

Define "short time". What is your evidence here about how long (how short a time) following a default on sovereign debt before a country has recovered. It might be instructive if in toting up the evidence you distinguished between the historical examples where the ensuing "depression" was ended by the upsurge of a war and ones where there was no war/arms race.

So yes, things can pick up very strongly in a short period of time -- if your neighbors engage in a war and you supply them (preferably both sides). Otherwise not a "short time" unless you consider say ten years a short time. Could even be longer. Your best bet here is if a lot of weaker economies default as when things elsewhere improve less likely to be singled out as "a bad risk".

author by opus diablos - the regressive hypocrite partypublication date Thu Nov 25, 2010 16:50Report this post to the editors

I reckon its time to drop the gambling compulsion and wishful thinking and maybe try a little rational calculation.

Rather than rationalisation of our sweetest dreams.
I do think thats what got us where we are.

Will Rogers was being ironic when he said ' If stupidity got us into this mess, then why can't it get us out?'

Dont be taking him literally.

author by opus diablos - the regressive hypocrite partypublication date Fri Dec 10, 2010 15:01Report this post to the editors

actually I believe its technically Chicago style, a la Milton Friedman and the boys. Mind you, there's plenty of paddy in Chicago.All that Boston r Berlin, I think we overshot Logan and Joe Kennedy's franchise and hit bootleg-central in O'Hare. Unfortunately its not proving to be duty-free.
Now they've backpedalled(peddled?) us up the Unter den Linden and we're ar ais in the black 'heart of Europe' as it says in all the best referendum spin. Not to be confused with just being back in the black. Thats a location-cubed retreating at a rate of knots as the transition to squeaky-klean Enda da Krisis looms over 2011.

but they are not being malicious, as is implied by 'punishing the Irish...to appease'. Its just business. Like it was for Allende on that other 9/11 they prepared earlier for Maggie's mate Pinochet. We are taking it all too personally. Its a global operation. Any action must take that, and co-ordination with that in mind, into account, if it is not to prove abortive. Be glad we only have the Corrib field, or its us would be getting special renditions. Mind, you Pat O'Donnell's rendition was hardly run-of-the mill....

and that bit at top where you say '..the future looks bleak...'. I found it far bleaker when that fucking tiger still had everyone hypnotised. At least now the scales are dropping from the eyes.

author by Idiocracypublication date Fri Dec 10, 2010 15:14Report this post to the editors

"If stupidity got us into this mess, then why can't it get us out?"

Sounds like the motto of the Irish people. They will just vote in tweedledee (FG/LABOUR) and they will privatise our state assets and carry on FF stupid destructive and morally bankrupt policies serving the elites

author by opus diablos - the regressive hypocrite partypublication date Fri Dec 10, 2010 15:47Report this post to the editors

the proportion of Irish(as with most)people voting as the professional actors got further and further up themselves and the TNCs has dwindled well down. Being busy trying to survive and maybe raise kids soaks a lot of your energy, intellectual included. Half the problem is that the con-men running this scamocracy are well tutored, like any sales and marketing force, and have enormous resources of skyscrapers full of PhDs in everything from abstract mathematical computer-modelling to neurological sciences and beyond to draw on, and that artillary gets rolled out with all the strategic planning of current black-ops on Iran and other pockets of dissent.Dont think they are not working away on Chavez, Morales et al just because we aint reading it from Modom at the Anglo-Oirish Times.

The smartest people can be fooled. Ask any pro con-operator. They know our blind-spots because they are the bastards have been building the blindfolds. Madison Avenue and PR Inc are reinforced with natural PLUS induced ignorance.Dont dismiss the people so lightly because they have been blindsided deliberately and with malicious premeditation. Their major failing is they dont realise the power they have, because they have been educated for generations by the Roman imperialism masquerading as the source of their 'salvation' from Britannia as well the terrors of the dangled hell into a culture of obedience and 'faith' in top-down authority. All atempts at lateral autonomy, from nascent soviets to co-operative agriculture have been subverted by organised dynasties that operate in co-ordinated concert.

author by Idiocracypublication date Fri Dec 10, 2010 16:14Report this post to the editors

I bet the Irish public will vote in FG + Labour tweedledee government with a FG majority. Care to make a counter wager?

If what you say is true then how come you and I (amongst plenty of others) who were exposed to exactly the same PR can see through all these tissues of lies and cynical global powerplays?

Fact is, the bell curve dictates our lives. Democracy: tyranny of the stupid.

Actually VB made the suggestion last night that real democracy be effected using internet tech. Been suggesting that for years. Another interesting possibility lost in the noise of personality politics. plus ca change.

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