Economic update – Gerry Adam’s was correct in 2011 hard-line stance to the IMF with the aim of getting a better deal

Gerry Adam’s hard-line stance to the IMF can be justified in the context of the terrible deal which Ireland received on it’s debt.

A government that was spooked and stampeded by the small-time bullies of the Irish banks was never going to be able to stand up to the International Monetary Fund (IMF) and the European Central Bank (ECB).  Part of our plan was to burn to bondholders, this is now accepted as EU law in a repeat situation.

There is no debt write-down for Ireland and  we are massively exposed to ECB interest rate fluctuations in future through the ‘extend and pretend’ policy of our national debt, whereby we pushed it out for decades….. aka as ‘Austerity without end’ as money is sucked out of the economy to meet debt and interest repayments.   

For every €1 we took in last year, 13c went on paying back the debt we owe. And although this will fall over the coming years, we’re still stuck for money to invest in the economy and means that growth will be stifled. This, in turn, means that the debt-to-GDP ratio will remain high.   

Affordable and repayable

Last year, Greece paid €8 billion to service debts of €315 billion. Last year too, Ireland paid €7.5 billion to service debts of €214 billion. So it cost us almost as much to service €100 billion less. Why? Well at least in part because, even before Syriza took office, the Greeks didn’t go around telling everyone that their debt is “affordable and repayable”. 

Greece won lower interest rates resulting in marginal decreases in interest rates for Ireland.

IMF Chief Economist in agreement with Gerry  

Sinn Fein stands over it’s stance on burden sharing and debt writedown.

Kenneth Rogoff, Former IMF Chief Economist stated last Sunday  that Ireland would be “far better off if the government had not taken over so much banking debt and allowed the creditors to absorb a significant loss”.  

The influential economist says Ireland should be among a number of countries “that should receive a significant debt writedown”. 

Also Ashoka Mody, the former IMF chief of mission to Ireland said this year that the current government blew an opportunity to get a debt write-down deal and a “slower pace of austerity” from the EU/ECB/IMF troika when it took office four years ago.

 Ireland is no model for Greece – reference Guardian article by Michael Taft

Ireland is held up as an example for Greece: we took the pain, engaged with the troika, and worked our way out of crisis to become the fastest growing economy … but this couldn’t be farther from the truth.

The government had been pursuing a troika-like programme for more than two years before the three institutions – EU, IMF and ECB – arrived in December 2010.

Ireland commenced its austerity programme in 2008 and accelerated it with four budgets in two years. In autumn 2010, the government proposed a further four years of severe austerity in a national recovery plan. When the troika arrived they just rubberstamped it.

So if Ireland was following the troika plan before the troika arrived, why did it still need a bailout? Precisely because it followed the orthodox troika prescription – deflationary fiscal policies (i.e. internal devaluation, in the absence of monetary tools afforded by the external devaluation possible with a national currency) combined with banking policies that socialised private debt. The troika arrived to fund the already existing austerity programme that international lenders had lost faith in: they became austerity’s lender of last resort.

Over €30bn (£21bn) in austerity measures were introduced – public spending cuts and tax increases (mostly the former), over 15% of GDP. But for every €3 of austerity measures, the deficit was reduced by only €1. Two-thirds of austerity went to destroy Irish social and economic life, with unemployment, poverty, liquidations, suicides …

More than 30% of Irish people live in deprivation, according to the government’s own statistical agency, not far below Greece’s 37%. Over 40% of children suffer deprivation experiences. One in 10 people is at risk of food poverty – hunger.

A falling unemployment rate would normally be a signal of things coming right. But in Ireland, this disguises another social blackspot: emigration. For each person taking up a job in the last three years, two people of working age emigrated. One in seven young people has left the country.

What about growth?

Irish headline growth rates are highly suspect given the impact of foreign multinationals. The Irish Fiscal Advisory Council recently estimated that half of Ireland’s strong GDP growth in 2014 was a statistical fiction, while Ireland’s Central Bank said a substantial proportion of growth was due to our low-tax financial services centre, which scarcely touches the domestic economy.

Alternative measurements of the Irish economy – which seek to remove the impact of foreign multinational accountancy practices (that is, aggressive tax avoidance) – show the recession to have been much deeper and the recovery more muted.

Luck a factor in increase in exports not government policy

Furthermore a large portion of actual growth here can be attributed to the Euro’s very low exchange rate against the dollar and sterling which would of improved our export environment.

Ireland shouldn’t even be a model for itself  – Michael Taft

“Many in Ireland proudly proclaim we are not Greece. That’s true. Ireland is Ireland – learning little from the speculative boom and bust, doing little to address its deficits in productive sectors, ignoring the profound social costs that it imposed on itself. Ireland is not only not a model for Greece and other European countries; it shouldn’t even be a model for itself.”

This entry was posted in ECB, Economy & Employment, For the record, Sinn Féin Alternative and tagged , . Bookmark the permalink.

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