Call for ‘unsustainable’ bank debt to be cancelled

IRELAND’s bank debt should be cancelled on the grounds that it is “unjust and unsustainable,” a justice advocacy group has said.

Action from Ireland (AFRI), which seeks to influence policy in Ireland and internationally on human rights, peace and justice issues, will today launch a report, The IMF and Ireland: What we can learn from the global south. The group is also calling for a renegotiation of the EU/IMF bailout.

Chairperson Andy Storey, a UCD lecturer in the school of politics and international relations, said the group’s report draws on its experience in working with developing countries. It will outline what IMF policies have meant in those countries, how some have resisted the policies and what lessons can be learned for Ireland.

The report says that Ireland would not be isolated from international financial markets and be unable to raise the funds to keep basic state services running in the event of defaulting on bank debt. According to Mr Storey, the report makes the case that the debt will still end up being restructured at the end of the bailout period — but that, by then, the private institutions will have gotten off the hook to a significant extent and the writedowns will be largely borne by the public sector.

He described this as the “the privatisation of profits and the socialisation of losses.”

AFRI, which has been in existence for 35 years, believes the loans from the EU and the IMF will be used to repay the bondholders, mainly European financial institutions, who lent to those banks that have now crashed and burned, and whose liabilities the state has recklessly guaranteed.

Mr Storey said these debts were not incurred to run public services but by private speculators chasing a quick buck and questioned why should ordinary citizens now pick up that tab.

He accused the Government of acting as debt collectors for foreign banks. AFRI, he said, has extensive experience of the negative impact of the IMF, especially in developing countries, and, based on this experience, is well placed to warn of the danger of accepting diktats from such international institutions.

Mr Storey, citing research by Irish and international economists, points out that the markets are currently punishing this country, and ratings agencies are downgrading Ireland’s credit rating because they see the attempt to repay bank debt in full as futile.

“Drawing a clear line between the portion of the debt that guarantees the bank bondholders (and which should not be paid) and that portion that is the Government’s own debt would actually serve to calm the markets.

“This would allow Ireland to borrow the money necessary to cover government running costs at a reasonable rate of interest.”