Economic sovereignty - Founding fathers turn in graves

THE founding fathers of the state are turning in their graves. Not because Britain wants to lend us money but because a major erosion of Ireland’s economic sovereignty looks inevitable.

In politics as in life, perception is everything. The inescapable perception in the public mind is that this administration has cynically misled the Irish people regarding the sheer scale of the country’s fiscal problems.

Ireland’s taxpayers, having already poured over €30 billion into a black hole, now face a debt so large it threatens the stability of the eurozone. The problem is nobody seems to know how deep the hole is.

In a state of denial, the Government refuses to concede it is in bailout negotiations with the European Central Bank and the International Monetary Fund. This despite the fact that “technical talks” – a political euphemism for negotiations – have been going on behind the scenes. In a word, this administration is not trusted and the lack of clarity from Taoiseach Brian Cowen is disturbing. The Government will now be forced to accept the terms spelled in the Dublin talks with hard-nosed IMF-ECB officials.

No matter what construction the Coalition put on negotiations in Dublin today, the process will be short, focused and painful. Inevitably it will result in a surrender of sovereignty in the hope of stabilising a banking sector mired in a crisis of its own making, a catastrophe that has its roots in the raw greed of barely regulated bankers, fast-buck developers, and bad government.

There is general agreement that the banking sector must be made viable and sustainable. But at what cost – €120 billion or more? It is now patently clear that the Government’s hasty introduction of the bank “guarantee”, aimed primarily at protecting the interests of wealthy bond-holders who had invested in the Irish banks, has utterly misfired. On every score it has failed to achieve the triple aim set out by Finance Minister Brian Lenihan of shoring up the banks, reassuring the markets and getting lending going. Meanwhile, the banks are in intensive care and virtually owned by the Government. Irish banks have been priced out of the money markets. Every day of the week companies go to the wall, leaving workers on the scrap heap because banks refuse to lend money.

People are right to be fearful of the punitive charges the ECB and the IMF will impose. It is not inconceivable, for instance, the thorny issue of Ireland’s generous corporation tax regime, the envy of other EU states, could be brought into play under, if not on the table.

The Government has rejected such suggestions out of hand on the grounds that the scheme is safeguarded under European treaties. Undoubtedly, the lure of low corporation tax has played a key role in attracting foreign industry to Ireland. It would be a major setback were it to be dismantled. However, in view of the U-turns Ireland has been forced to make up to now, this possibility cannot be discounted.

For the man and woman in the street, the worry is that whatever loan package is put on the table by the enforcers of the ECB and IMF will have to be repaid – in full and with interest. For beleaguered taxpayers, the frightening prospect is that Ireland’s massive financial burden will not fall solely on their shoulders, but also on the shoulders of their children’s children.

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Saturday, November 27, 2021

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