Statement from Socialist Party on political and economic situation in Ireland

national | politics / elections | opinion/analysis Wednesday November 24, 2010 17:20 by Jolly Red Giant - Socialist Party / CWI

Sunday 21 November, the day the Irish government formally applied for a bailout to the EU and IMF, should be marked as the day that the Irish capitalist class were exposed as a rotten, despicable failure, bankrupt in every sense and incapable of offering any way forward. The significance of these developments cannot be overstated; they are a turning point in Irish history and will impact on other countries in Europe and the EU itself.

“All changed, changed utterly”

“These are the times that try men’s souls. You will no doubt hear a great number of stories respecting the situation of this country, its present unfortunate state is entirely owing to treachery, the rich always betray the poor.” - Henry Joy McCracken following the betrayal of the 1798 uprising by the “men of property”.

Sunday 21 November, the day the Irish government formally applied for a bailout to the EU and IMF, should be marked as the day that the Irish capitalist class were exposed as a rotten, despicable failure, bankrupt in every sense and incapable of offering any way forward. The significance of these developments cannot be overstated; they are a turning point in Irish history and will impact on other countries in Europe and the EU itself.

The failure of the capitalist establishment to provide for the needs of people often provoked the bitter and ironic comment that we’d be better off giving the keys back to Britain and apologising for the mess! It is truly ironic now that a version of this black joke is becoming reality.

This is all about saving the Euro and capitalism

A bail out was inevitable, it was only a matter of when. But the government were bounced into it now at the behest of the sharks in the markets and the EU. This bail out is not about solving the crisis in Ireland. It and the new austerity programme that is coming will make the crisis much worse. Working class people in Ireland are being prepared as the sacrifice so profiteers can make more profit and so the Euro and the EU can be maintained.

Angela Merkel talked recently of orderly insolvencies. But this process will not be orderly; it will be convulsive. Right now the EU has forced Ireland into this bail out to save the Euro and the EU. However, in future they could force Ireland or other countries out of the Euro altogether, to safeguard their own capitalist interests. The existence of the EU as we know it is and will be challenged over the next years.

The worsening crisis in Ireland spelt crisis for the EU

From its high point, the southern Irish economy has declined by nearly 15% and the hopes of the capitalist establishment that the economy would begin to recover and grow this year have been dashed, mainly because of the depressive effect of the draconian cuts of €15 billion that the government has already imposed.

In a country with a workforce of less than 2 million, 450,000 are currently unemployed. The official figure is not beyond half a million only because very high levels of emigration have returned. With mass unemployment and attacks on pay, mortgage arrears are growing very quickly and indicate that a new crisis for the Irish banks was imminent.

The weakness of the banks was a vital factor in provoking this bail out. Notwithstanding the government’s bank guarantee, probably more than €25 billion worth of deposits have been taking out of the Irish banks this year in a flight of capital, with the bulk since September. Despite earlier bailouts, the banks do not have the necessary capital requirements to be solvent on an ongoing basis and they were not able to borrow on the commercial markets this autumn. Instead they borrowed huge amount from the European Central Bank (more than €90 billion) and from the Irish Central Bank (€20 billion). Irish banks currently hold 20% of all the monies loaned out by the ECB.

The prospect of the banks recovering was inextricably linked to a recovery in the property market and the economy generally. That hasn’t happened and in fact will be undermined further by the new IMF/EU austerity programme. More so even than in the case of Greece, British, French and German banks have very significant amounts of loans tied up in the property market and banking system in Ireland and a banking collapse here had to be avoided.

At the same time the value of the Euro and the interest rates being charged to Spain and Portugal were also adversely affected by the instability surrounding Ireland. A delay in acting, which was a feature of the EU during the crisis in Greece, was not an option this time round. The nervousness about contagion is a real indication that the fundamentals of the European economy and the EU are far from sound.

Rip-off and robbery already indicated

It looks like this bail out will be over €80 billion but less than €100 billion. Britain and Sweden have also offered additional direct loans to Ireland. There are indications that the EU/IMF will seek that a large amount of the money will be handed to the Irish banks who will then give it straight back to the ECB to pay off some of the €90 billion plus they borrowed. The remaining amount will be held by the government to help fund its own budgeting requirements.

At the stroke of a pen, the EU and ECB will get a lump sum back but also a huge additional payment in increased interest. This loan may be cheaper thanon the bond markets but it’s far from cheap. The original money that the Irish bankers borrowed from the ECB was at an interest rate of 1.5%. This money in this bail out will most likely be charged at an interest rate of between 5 – 6%! The EU has basically renegotiated the terms of its own loan to Ireland and given themselves three or four times the interest rate, robbing the working class again.

When the details of this bail out and of the new austerity programme become clear, they will constitute a declaration of war on the working class and young people. In September, Taoiseach (prime minister) Brian Cowen said that there would be €3 billion cuts in this December’s Budget. The government over the last weeks doubled its proposed cuts and are now talking about a staggering €6 Billion of cuts in the Budget, to be followed by another €10 billion cuts before 2014!

This was the austerity plan hatched at the behest of the markets but before the EU/IMF bail out. Now there is speculation about what conditions the EU/IMF will impose on top of these vicious attacks from the Irish government. Whether the EU would force the Irish government to scrap its very low 12.5% rate of corporation tax has also been a big issue.

The EU/IMF may not immediately force huge additional attacks on top of the governments’ austerity proposals or the scraping of the terms of the Croke Park trade union agreement. In reality both the EU and the IMF have had officials in the Department of Finance for many months and undoubtedly they have already been instrumental in pushing the government to double its proposed cuts since September. There is also likely to be increased taxes imposed on ordinary people. This will be the fourth and biggest austerity budget yet, to be followed by at least another three. By 2014 they aim to have cut over €30 Billion from the budget, which fi they are successful, would be practically a 50% reduction on the budget of 2007! The pain and destruction that such cuts would cause would be unprecedented.

Bail out will not work

But crucially, the EU and the IMF now have the power to enforce additionalconditions on this or any future Irish government. Given experiences the world over, they will undoubtedly insist on a destruction of pay and jobs and attacks on the working class generally. There is talk of cutting 20,000 plus jobs from the public sector. As a symbolic indication that all the gains from the Celtic Tiger will be attacked, just as the bail out was being announced so too that the minimum wage will now be lowered!

This neo liberal, slash and burn policy could well cause a deflationary spiral to develop in Ireland. The cuts being proposed are part of a plan to reduce the current budget deficit from 32% of GDP to 3% by 2014. They are basing this plan on an assumed growth rate of 2% over the next years. There is a collapse of investment and such growth will also be impossible with such
draconian cuts and that will cut government revenue further. In turn the EU/IMF is likely to demand more cuts to compensate for the lack of growth! Far from overcoming the debt crisis, this plan will not work and will likely result in spiralling debt crisis.

The Irish government, the EU and the IMF are preparing to turn Ireland into a wasteland. Rarely if ever in the history of capitalism will the working class have experienced such highs and lows over such a brief time frame. From the promise of the Celtic Tiger boom to the intense insecurity of a great depression. Now it seems the hopes of escaping from a past of poverty and emigration have turned out to be just a mirage after all.

Profound impact on working class - hatred of the government is tangible

The idea being touted in the media that people will be accepting of the EU/IMF and the austerity package, relieved that finally someone will take the hard decisions that have been avoided, is completely off the mark. The entry of the EU/IMF is a confirmation of the working classes worst fears. While hoping for the best, it’s been clear that most people knew that the crisis was getting worse. That the EU/IMF are now centrally involved will deepen people’s sense of foreboding about the future. People know that the IMF isn’t just along for a holiday and know of their reputation and record.

Right now the disgust of the working classes is mainly focused at the government and Fianna Fail in particular. The declaration from the Greens that they will vote for the budget but then in early January will demand that a general election takes place in late January, has completely destabilised the situation. All forces, including backbench TDs and Independents are now manoeuvring for advantage and this has raised the possibility that the government could even collapse and a general election held before Xmas but without agreement on a budget or the 3/4 year austerity programme. The political situation is now a mess and extremely unstable

Fianna Fail, along with their builder and banker friends, is seen as being primarily responsible for the economic crash. In the general election in 2007 they got 42% of the vote. The latest opinion poll conducted just before the bail out gave them an historic low of just 17%. The bail out, the fact that the country has been forced to go cap in hand to the major capitalist powers, has guaranteed that Fianna Fail, who have dominated politics in Ireland since the foundation of the state, will be decimated in the general election. The hatred and contempt that exists towards them is tangible.

Before this bail out the trade unions, under pressure from the working class, had called for a pre budget mass mobilisation in Dublin on November 27th. It was always likely to be big but this demonstration could now be huge and symptomatic of the potential that exists for a huge struggle
against the government, the EU and the IMF and their austerity policies. Depending on what happens, the demonstration itself could alter the situation and destabilise the government and create the conditions for struggle which the leaders may find difficult to sell-out again.

Since the crisis hit in 2008, the trade union leaders have sold-out and twice defeated the desire for a generalised movement that was developing in the working class, first in the spring of 2009 and then again last December. While the arrival of the EU/IMF can have initially have a shocking affect, their room for manoeuvre is about to disappear and the unions will be faced with a stark choice, either reflect the deep anger that exists or be pushed to the side. The TEEU, which organised the successful week long strike of 10,000 electricians a couple of years, has said that it thinks civil unrest the likes of which that hasn’t been seen in decades is on the cards.

Huge potential for the left, socialist ideas and for internationalism

This bail out by the EU/IMF is a watershed. It is now becoming clear that the hopes that there would be a recovery and the prospects for a future are being crushed under the jackboot of the dictatorship of the markets and capitalism. The shift in consciousness that had already been evident in the last months will be given a profound impulse as people, young and old, search for real solutions and a way forward.

That peoples lives are been destroyed so the banks can be maintained and so bond holders get huge profits, will create the conditions that will create revolutionaries. The extreme and brutal policies of capitalism will impose will create an extreme response. The Socialist Party will intervene into this crisis with a programme to point the way to how workers and youth can
fightback and the urgent need to build the socialist alternative.

Importance of the general election

The coming general election will be historic because of the hammering that Fianna Fail will get, which may even raise a question over its future existence and because undoubtedly the EU and IMF will interfere, albeit behind the scenes. But their hopes for a stable political outcome will not materialise.

Fine Gael and Labour are set to win a decisive majority, with the possibility that Labour could become the biggest party for the first time. Labour seems at least set to achieve its highest vote ever. Some commentators are speculating that so serious is the situation, that pressure will be exerted on Fine Gael to switch after an election and seek to have a coalition with Fianna Fail if the two parties had the numbers, rather than with Labour. What seemed certain just a couple of months ago, in these new conditions is less certain and we need to watch developments very closely, we are in completely uncharted territory. However, it remains most likely that Labour and Fine Gael will form the next government.

Regardless of what exact role the EU or the IMF plays, a new coalition government will not have any honeymoon to speak of and will quickly be a government of crisis. Labour in power will badly disappoint people and the vacuum for a force on the left could become very pronounced. In this
situation if there was a fraction of left/socialist TDs in the parliament, even three or four, they could act as a lightening conductor for the anger and radicalisation that is growing, and they could have an opportunity to launch a new mass workers party in Ireland. In order to maximise the chances of getting a fraction of left/socialist TDs elected, the Socialist Party, with others has established the United Left Alliance which will stand a slate of candidates in up to twenty constituencies across the country.

It is clear that the Labour Party is set to do very well and that could put a squeeze on the Socialist Party and the ULA. However, the fact that this four year austerity plan is likely to be agreed before the general election will mean that the basis of the election will have shifted. The election could well be dominated by the issues of the austerity plan and the EU/IMF and less so the need to replace Fianna Fail as regardless of whose is in power, people may feel that the policies are already determined. This may make the election more open than it otherwise would have been.

This poses a new difficulty for Labour and potentially a new opportunity for the genuine left. Labour will do very well but they are also likely to go along with the austerity plan, even though they will try to sound reluctant about it. Sinn Fein will oppose the plan and attempt to tap into the mood but they can be somewhat compromised on these issues because inherent in their argument is that the cuts should be implemented over a longer timeframe and because of their role of imposing cuts in the northern Assembly.

In this situation, the launching of the United Left Alliance could dovetail with the emergence of harder opposition amongst the working class and it could it could get some serious traction. We have to do whatever we can to maximise the potential for a breakthrough for the left on a principled basis and to build support for mass struggle and a socialist solution to this unprecedented crisis for Irish capitalism.

The Socialist Party is fighting for:

A one day general strike as the start of a programme of escalating industrial action to defeat the government/EU/IMF austerity plan.

For students and school students to organise now for strike action against fees, austerity and for a decent future.

Don’t pay the debts of the Celtic Tiger profiteers; don’t pay the bond holders.

Overcome the budget deficit by taxing the super rich and big business and policies that will create economic growth.

For the nationalisation of the banks and finance houses under the democratic control and management of working people, and the introduction of capital controls to prevent a flight of capital.

No reliance on investment from the markets to revive the economy. Immediately take the key wealth and resources into democratic public ownership.

Run the economy to provide the jobs and services that the majority of people need, not for the super profits for a tiny minority.

For the launching of a new mass party for the working class and a genuine left/workers government, committed to socialist policies.

For solidarity and a united struggle of workers and young people across Europe against EU/IMF austerity and against the dictatorship of the markets.

For a socialist federation of Europe.

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