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Monday, July 27, 2009
I WOULD have loved to have watched Andrew Wray’s face when he wrote his letter (Friday, July 17) about the cause of this recession.
He cannot be serious that it was the market deregulation policies of Reagan and Thatcher many decades ago which caused our current financial turmoil.
Both believed in free markets many decades ago but not deregulated banks and free-for-all money supply. If there is one American who really caused trouble, it was Bill Clinton who stipulated that Fanny Mae and Freddie Mac lend to "sub-prime" mortgage-holders. However, that was not the immediate cause of our present hardship. Mr Wray said: "It is a cruel myth that low international interest rates control the ability of the Government to regulate the lending policy of domestic banks". That’s fine, because I did not say that it did (Letters, July 7).
However, as Brian Lenihan correctly pointed out it, was low interest rates from the ECB and a glut of cheap labour from eastern Europe which led to the Irish economy overheating and eventually contributed to this sharp downturn.
The ECB was lending money at 2% – when a rate closer to say 8% was necessary to cool the housing market. The main problem is that by the Maastricht Treaty we handed control of our interest rates over to the ECB and since that time they have been appropriate to Germany but detrimental to Ireland.
A prime example? Last autumn, when the Irish economy was going through the floor and needed the lowest interest rate possible, the ECB was raising the euro interest rate to suit a recovering Germany and France. The arrival of 500,000 people from eastern Europe after 2004, facilitated by the Treaty of Nice and the Government, led to an explosion of apartments being built to be let out to incoming workers.
Sadly unmentioned by Minster Lenihan was the related fact that since 2004 a vast number of manufacturing jobs have been lost to Ireland because factories have transferred to eastern Europe.
It was the Fianna Fáil government that told us to vote Yes for Nice, but in 2007, 90% of all new jobs in Ireland went to non-nationals. Last year €2bn was sent in remittances from Ireland to Poland (according to the Polish ambassador) and this year €22m will be sent in child benefit to children who live not in Ireland but in eastern Europe.
We weren’t told this would be a consequence of Nice, were we?
Lisbon advocates now tell us the treaty is needed for the EU to expand further into eastern Europe and Turkey.
Only a turkey would think we’re going to vote for more cheap labour competing with Irish workers for jobs while European Court of Justice decisions allow native workers to be undercut by lower wage rates by new EU workers posted from abroad. The good times are over, so self -interest will have to begin.
Brian McDermott
The Saltings
Annagassan
Dundalk
Co Louth
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