Marching for a fairer debt deal

TOMORROW’S public demonstrations around the country have been called by the Irish Congress of Trade Unions to ventilate the demand for a fair deal on bank debt and to oppose one-sided austerity.

They will offer the people who have been afforded no say, but who are expected to pay, a chance to influence the outcome of an on-going battle which will determine the quality of the rest of our lives and those of our children.

The cost of bailing out private banks by the Irish taxpayer, to date, is €64bn. This is equivalent to 40% of our annual GDP. As Unite economist Michael Taft has demonstrated, using Eurostat data, we in Ireland have been shouldered with more than 40% of the total net cost of the bank debt burden across all 27 EU member states. It amounts to almost €9,000 per head of population here, as against an average of €192 per person for the EU as a whole.

The debt outstanding from the cost of bailing out the financial institutions, (ie after excluding the €20bn which was raided from the National Pension Reserve Fund), exceeds €40bn. This equates to a staggering 26% of our GDP.

Horrendous and all as it is, this is not actually the worst aspect of the problem. No, the worst aspect is that the scale of the burden of this debt compromises our prospects of functioning once more as an independent sovereign state.

Unless the global financial markets believe that we will be able to pay back any funds they lend to us, we will not be able to borrow at sustainable rates. If we are not able to do so, we will have to revert to the European and International institutions, (ie the EU/ECB/IMF troika), for a further “bailout”.

We should not take it for granted that we would get one. However, assuming that we did, it would come with strings attached. These would dictate the pace at which we would repay our €190bn-plus national debt and the speed at which we impose draconian levels of tax and dismantle what remains of our public and social infrastructure to do it.

The “memorandum” would reflect the interests and the agenda of those at the top of the European banking system who are democratically accountable to no one.

The ensuing straitjacket would compromise our capacity to rebuild our economy and to provide for our people for decades to come.

Since the Jun 29 heads of government statement, which envisaged the ESM directly capitalising troubled banks, our credit worthiness in the “markets” has improved steadily. This is because they are confidently “pricing in” a deal on our overall bank debt.

Yesterday’s deal on the promissory notes element seems good enough as far as it goes, although the employees of the IBRC have been treated brutally in the process which will not go unchallenged.

The debt deal does not actually solve the problem. It addresses about half the outstanding bank debt burden. The overall stock of debt remains and none of it has been written off. That being said, about half of the problem has been kicked a considerable distance down the road. It should be sufficient to improve our credit worthiness and thus our chances of retrieving our economic sovereignty.

Sustainable levels of inflation combined with healthy economic growth would dwarf the burden in real terms, over time. However, here’s the catch — one-sided austerity will not produce the growth required in Ireland or in Europe. The best case outlook for this policy is prolonged stagnation periodically interrupted by recurring false dawns.

Until now, the agenda has been set by those at the top of the European banking system acting through the ECB which is democratically answerable to no one, (only other bankers). This has been complemented by the approach of the centre-right government of Angela Merkel in Germany, and others.

Thus far they have refused to tell their electorates what they need to know. This is that they can either underwrite the recovery of Europe and their own prosperity, at relatively little cost to themselves,or they will end up having to recapitalise their own banks at enormous cost and against the background of a collapsing European economy, when the pigeons of their one-sided austerity strategy come flocking home to roost.

It is time the victims had something to say on it all. The question is, can we the little people, in little Ireland, actually make a difference by turning out tomorrow? For once the answer is yes — yes we can.

We can because we carry 40% of the entire EU banking debt. If we turn out in sufficient numbers to demand a fair deal now, during Ireland’s presidency of the EU, the call will be noticed all over Europe.

Meanwhile, it is incumbent on our own Government to seize the opportunity presented by our improved credit worthiness to radically expand the very limited off balance sheet infrastructure stimulus package announced last July. This should now be trebled and accompanied by other measures to create tens of thousands of jobs.

In parallel with this, the approach to budgetary consolidation must be rebalanced. It is not just morally bad that the most vulnerable people should have their incomes cut while the wealthy escape the obligation to contribute to the degree that they can. It is economically unsustainable as well, because those on low to middle incomes must spend all their disposable incomes in order to live, thus recycling it into the economy.

Meanwhile, the better off can save, reducing economic activity in the process. The tragedy is that 60% of the people who voted in the last election supported those who had guaranteed the rich that they would not have to face a wealth tax or pay a higher rate of tax on their incomes either, despite the unprecedented nature of the crisis. Many of those who voted for them did not intend that they would veto a reasonable tax contribution by the ‘better off’, or that the less well-off should bear a disproportionate share of the burden either.

At this very moment, the coincidence of our presidency of the EU presents us with a once and for all opportunity to afford ourselves and our children a chance for the future. We must grasp it with both hands.

That is why we are asking everyone, trade union members and otherwise, to turn out tomorrow, because it is no longer just about justice, it is still about survival, despite yesterday’s relatively positive development.

- Jack O’Connor is general president of Siptu