Economies in crisis - Still taking comfort in delusion

AN exchange — it would be delusional to call them negotiations — will begin this morning between our Government and the EU/IMF on reversing cuts to our minimum wage, reducing the lowest VAT rate and changing tax arrangements for first-time house buyers to help them cope with the tsunami threatening their financial security.

There’s no point in pretending that there’s any significant latitude to make things easier or even fairer for all of us available to those involved in today’s meetings. The options are limited and the inevitable implications of our terribly skewed national budget make a whole range of cuts to wages, social welfare payments, services and jobs as close to a certainty as to make little or no difference. How can it be otherwise?

Our representatives are asking permission to impose a little less flogging if we agree to a bit more thrashing. Though it’s a long way from rearranging the deck chairs on Captain Edward John Smith’s ill-fated White Star liner — which hit its iceberg 99 years ago this Friday — we might yet contrive to get to that point unless we take one of those hard, honest reality checks that can be, to use another of the day’s awful phrases, kicked down the road for only so long.

Not only must we take it, we have little choice but to act on its conclusions not matter how unattractive, no matter how it challenges our idea of Ireland in 2011.

Against this backdrop the ever-more strident calls from extremists on the right or on the left to burn the bondholders adds a surreal and dangerously bizarre air to the proceedings. It is as if these people want us to accelerate as our very own iceberg looms into view.

Though the incomprehensibly expensive attempts to stabilise the banks and rescue European investors have dominated the public discourse and discontent for some time, the Government’s success or otherwise in confronting the crisis in our public finances is at least as important. Whatever arrangements we might come to in time over bank debt the two-and-two-makes-six lunacy of our public finances will not go away.

This crisis can be broken down to show in a very direct way how it might reach into every pocket in the country. Another €20 billion for the banks seems almost academic, but a pay cut of, say, 10% is not too hard to understand.

Bad as that may be it pales into insignificance compared to the situation we’d find ourselves in if those who would burn the bondholders get their way. That would, as Argentina proves, mean a serious long-term decline, not to mention the collapse of all incomes derived from the State. It would be back to the terrible, sanctimonious days of de Valera’s miserable frugality and worse while we wait for a Lemass or Whitaker to come to our rescue.

Delusion was our default position for a decade but it seems we are still determined to take refuge in it. Surely it’s time to be honest with ourselves because if we are not we’ll surely have our Titanic moment sooner rather than later.