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Yes vote a sign democracy is key to euro crisis
By Joe Gill
Having some time on my hands last week I was flicking between those TV channels that specialise in finance and economics.
The morning after our treaty vote, it was being discussed by a panel on one station.One academic could hardly contain his sneering about Ireland’s irrelevance in Europe and argued a yes or no vote did not matter. The presenters were equally dismissive. I was about to put my boot through the TV screen at this point.
If Ireland had voted no last week the ramifications inside and outside the country would have been significant.
Firstly, the eurozone system is, as you’ll have noticed, short of positive news as it grapples with enormous issues. Second, whatever smidgen of goodwill we have across those institutions that matter — such as the IMF, EU Commission and within Germany — would have been gravely damaged. Third, the euro would have suffered even more in a no context because market players are using any piece of negative news to weaken the currency further.
Voting yes of course was not some elixir that solves our problems overnight. Ireland is still in the Intensive Care Unit and don’t believe for a minute we are free of an economic emergency. It has, however, sent a laser beam out that differentiates us from those who choose to push the nuclear button on economic affairs, such as Greece.
The huge task now is to convert that democratic decision into actions that matter on the ground. Nowhere is this more evident than in the banking system. It becomes more obvious by the day that European banking needs the equivalent of a Marshall Plan to address its role in a functioning economy.
Nothing short of a huge debt relief programme is required to bring banks onto an even keel and provide the oxygen needed to have them function properly. Proper banking, in my mind, is ordinary but conservative lending practices that occur within a regulatory system that protects consumers while encouraging the banks to get on with supporting growth and investment.
Getting this outcome will require dramatic actions by the most powerful in Europe and around the world. I’m not surprised to hear Germany sticking to its guns about debt relief and eurobonds this week. She wants clear evidence the peripheral economies truly accept the need for structural reform, tax compliance and conservative economics before budging an inch.
So, expect fireworks as we stumble through a Greek general election and further twists in Spain’s economic pain over coming weeks. It will, unfortunately, have to get worse in the eurozone before the drama of an Herculean action plan for European finance is completed.
The original Marshall Plan, led by the Americans and technically named the European Recovery Plan, was introduced after World War II. It led to renewed economic growth and, by 1951, Europe’s economy had grown 38% above its 1935 level.
That created jobs, cut unemployment and triggered decades of expansion. The same trajectory of performance is now needed if Europe, and Germany, is to avoid a calamity whose economic consequences would be as grave as those caused by war after 1939.
Without a dramatic series of events the risk Germany and others run is of a collapse in the democratic order as ordinary people revolt against an increasingly punitive system.
Last week, we had many reasons to choose such an option as unemployment grows, incomes continue to fall and a coercive economic restructuring continues. The fact that we chose otherwise is a sign that democracy can play its role in solving Europe’s gigantic challenge. Neither the muppets on that TV channel, nor Germany, should ignore this point.