Ireland should join in calls for a European debt conference

A man casts his vote at a polling station in Athens on Sunday. The far-left Syriza party of Alexis Tsipras came out on top and is poised to made radical changes to one of the recession's worst-hit countries.

With the rise of Syriza in Greece, it is time Ireland stopped its impoverishing debt payments and stood up for its people, writes Rory Hearne.

THE historic victory of the left-wing Syriza party in the Greek elections offers the potential of a real debt deal for Ireland but only if the Government decisively supports the call for a European debt conference. Wouldn’t it be great if the Government offered Dublin Castle or Farmleigh as the venue to hold it? Now that would be standing up for the Irish people, the Greeks, and Portuguese, who have all been pummelled by austerity in order to bail out Europe’s financial system.

We should no longer be asking but demanding, just like Syriza, an end to the immiseration and impoverishment of our population, and the holding back of our economy, in order to pay back illegitimate debt.

It’s time the Government stopped distancing itself from the Greeks and pretending we don’t face a similar debt crisis. Our national debt is neither manageable nor sustainable. It is time to stop pandering to the international markets and asserting that the Irish people will continue to pay all of the debt accumulated from the crisis and bailing out the banks, irrespective of its impacts.

In 2009, Ireland’s national “general government” debt was €104bn. This year it stands at a staggering €210bn. In 2009, the Irish debt to GDP ratio, the figure used to assess the sustainability of national governments’ debt levels, was 62%. This year it has risen to 108%.

In 2009, we paid €2.5bn in interest on the national debt. This year we are paying three times that figure — €7.3bn. How is an economy that has undergone such a deep recession expected to pay double in debt payments what it was paying during an economic boom?

That €7.3bn debt interest is 20% of all taxes taken in by the Government. It is equivalent to the entire education budget. But these repayments and the debt are going to get even worse in the coming years. The national debt will be €214bn in 2018.

So what the Government really means when it continues to argue to Europe and the markets that our national debt of €214bn is manageable is that the Irish people accept that one fifth of all taxes collected will go to debt interest repayments.

The interest on this debt will be paid each year through the massive diversion of resources away from the education system, social housing, employment creation supports, disability services, etc. The domestic economy will underperform as personal taxes are diverted to debt repayments.

Ireland’s debt to GDP figure is also misleading in a way that hides the true size of the debt relative to the economy. Ireland’s GDP figure is inflated by multinational economic activity, some of which is not real activity taking place here in Ireland.

The GDP growth figures (which are used to claim Ireland is in recovery) are also artificially inflated in this way. This means Ireland’s debt to GDP ratio should be even higher and we have even less economic capacity than our GDP figures suggest to pay back this debt. This is worsened by the fact that corporations pay low levels of tax in Ireland which leaves a disproportionally higher burden of the debt with the general population. This is a major downside to the way in which multinational activity and taxation is organised in Ireland that is often overlooked.

What this shows is that Ireland’s debt crisis is being ignored and downplayed to the detriment of the economy and public services. That is why the Government should take the opportunity of the Greek election result to be honest with its people and Europe and support Syriza’s call for debt resolution.

Syriza is calling for a European debt conference similar to the ‘London Agreement’ after the Second World War, which wrote off around 60% of Germany’s debts and extended the timeline for repayment by decades.

It proposes a writedown of all eurozone debt over 50% of GDP. This is not to be done through unilateral debt default but requires the ECB to play a central role. Under the proposals, the ECB would buy up the excess debt and convert it to zero-coupon bonds which would ultimately be paid back by governments. This includes a five-year grace period (a moratorium) on debt repayments. It is obvious how Ireland would gain dramatically from this.

Our debt would be more than halved from 108% of GDP to 50% and interest payments would fall to just over €3.5bn. If interest payments were suspended for five years, that would leave us with an additional €7.5bn per annum.

At a macro level, the euro, ECB, and EU are in danger of falling apart. They have become a corporate and financial superstate imposing the will of the wealthy core countries on the poorer peripheries. The cost of the bank crisis and recession was disproportionally paid through austerity by the populations of Ireland, Greece, Spain, and Portugal.

Syriza’s plan would be a major economic stimulus and act of social solidarity for Europe and Ireland. Rather than distancing us from these proposals, the Irish Government should stand up for ordinary people suffering across Europe and offer Ireland as the venue for the European debt conference.

  • Dr Rory Hearne is a lecturer at the department of geography faculty of social sciences at NUI Maynooth

 


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