Bernie McAdam
The Irish Government’s deal with the EU/IMF will mean even more austerity and poverty for the people. Irish workers need to bring down Brian Cowen’s Fianna Fail led administration and replace it with a workers‘ government
The Irish government has finally applied for a multi-billion euro bail out from the European Union and the International Monetary Fund. The Fianna Fail-led administration of Brian Cowen accepted the rescue package after massive pressure from the EU, the European Central Bank and the IMF as fears mounted for other Euro zone economies.
This was the fourth rescue attempt in two years. Only last month, the Irish government pumped more money onto the three major banks, saying this was the last time and all was safe and sound. Last week Brian Cowen and his ministers were reassuring the country that all was well and that it didn’t need a bail out. Then at the weekend the IMF and EU came to Dublin and told the government to accept the deal in order to safeguard foreign banks and the Euro itself. If the government had failed then European banks would have been particularly hard hit.
The BBC’s Robert Peston said: „According to the Bank for International Settlements, total lending of non-Irish banks to Irish banks is around $170bn, of which British banks provided $42bn, German banks provided $46bn, US banks $25bn and French banks $21bn.“
The major imperialist powers and their organs of financial domination such as IMF/EU had every reason to step in and to stop any default. In this context the UK’s bilateral loan makes sense. The Con-Dems are lending 8 billion euros in order to save UK banks such as RBS from far bigger losses. Also the UK will make a tidy profit, it is lending at about 5 per cent interest while it borrows from the money markets at far less.
THE IRISH BAIL OUT PACKAGE
Under the bail out package, Ireland will receive about 90 billion euros in loans and allow external oversight for three years, in effect, Brussels will make the major decisions about the Irish economy. But, Ireland’s three previous bail-outs were not enough placate the money markets nor was the increasing attacks on people’s living standards, job losses, wage cuts and destruction of public services.
Brian Cowen’s increasingly beleaguered government is now deciding on yet another austerity budget to slash wages, public spending, welfare payments and public sector jobs. Again the living standards of the mass of people will be sacrificed in order to please the bankers and bond markets.
Minister of Finance Brian Lenihan said IMF and EU officials were ‘broadly satisfied’ with the government’s four year plan . This plan will involve the restructuring the Irish banking sector. More ominously for workers it will involve tax increases and reduced spending in order to cut government borrowing by a huge 15 billion euros over the next four years. Greece, which has also received a bail-out, has already cancelled welfare projects, cut capital spending, increased VAT, attacked pensions and privatised state assets. This is what the IMF/EU will want in return.
IRELAND: PROPERTY BOOM TO BUST
The massive housing bubble that underpinned the rapid growth of the Celtic Tiger burst in 2008 on the back of the global credit crisis. Property prices have tumbled by half since then. The banks have incurred huge debts. As they recklessly lent vast sums in an unsustainable property boom, their imminent collapse prompted the government to bail them out to the tune of 45 billion euros of taxpayers’ money. The bailout is the world’s largest when measured per capita and the state has now nationalised much of the banking sector.
The National Asset Management Agency (NAMA) or ‘bad bank’ was also created in 2009 to buy all the land and property development loans off the six Irish banks in return for government bonds. The ‘bad’ debt amounts to about 90 billion euros, the cost of the latest bail out. The Irish taxpayer bears this cost as it will the looming savage cuts in the next budget. Bank debt has become government debt.
Given Ireland’s exposure to the property bubble it was little surprise that the construction industry was the first casualty. When the housing market reached its peak in 2006, new homes totalled more than 93,000 and construction employment accounted for 13.5 per cent of the workforce. In 2009 this had plummeted to 26,420 homes built and 6.5 per cent of the workforce and still falling. The Irish government says itself that there are about 40,000 homes that are near completion but on which all work has now stopped – one solution gaining support is to bulldoze them all. There are another 200,000 mortgage borrowers in negative equity – and many of those are now facing redundancy or wage cuts.
This is the madness of capitalism: people and machines can build enough houses for people in need but private firms sack workers and want homes destroyed because they can’t make a profit.
Other sectors of the economy have also witnessed a sharp decline with a third of all jobs in computer hardware, about 10,000 jobs, having been lost due to relocation in the past 10 years. The most notable was the US company Dell that pulled out of Limerick for the low wage Polish economy with the loss of 1,900 jobs. This is despite the Irish government defence of its corporation tax level of 12.5 per cent – one of the lowest in the EU.
THE COST OF BORROWING
This devastating backdrop brings us to the current crisis Ireland faces in the financial markets.
The cost of the various bail outs raised Ireland’s deficit (ie the difference between the amount it receives in taxation and the mount it spends) in public finances from 12 per cent of GDP to a staggering 32 per cent. The Irish economy contracted 1.2 per cent in the second quarter, unemployment at 13.7 per cent has tripled since 2 years ago, public sector wages have been reduced by between 5 and 15 per cent, and public services have been slashed with tens of thousands sacked or facing the sack. But as fast as the government slashed spending, the recession and job cuts meant it had less money coming in
As the government takes over bank debt, which is mainly to foreign investors, any risk of defaulting would damage Ireland’s credit rating and make it more expensive to raise further loans from abroad. For example, Allied Irish Bank lost 13 billion euros in withdrawn deposits due to concerns this year. So as the crisis has unfolded, the cost at which the government can borrow has increased. Governments raise money through selling bonds or securities, they receive a lump sum in return for paying the holder of the bond annual interest. As concerns have grown over the Irish government’s finances, the bond prices have fallen while the interest payment has risen up to 9 per cent. Which meant the government was receiving less money for more interest – a level of payments that was unsustainable.
The ECB/IMF bail out provides more funds to Ireland without recourse to the bond markets. The question is whether other countries such as Portugal and Spain can escape the pressure or will also need to be bailed out.
IRELAND’S SOVEREIGNITY
Ireland’s media and politicians have bemoaned the loss of Irish sovereignty that this loan implies. Fine Gael’s Michael Noonan in commenting upon Fianna Fail’s “surrendering the state’s sovereignty” quoted approvingly from the editorial in the Irish Times asking “Whether this is what the men of 1916 died for: a bailout from the German chancellor with a few shillings of sympathy from the British chancellor on the side”.
Let’s be clear, Fine Gael and the media’s bleating about loss of sovereignty is sheer hypocrisy. Quite apart from them being as far removed from “the men of 1916” as they are from the northern nationalists’ recent struggle for civil rights and national liberation, such people have actually been complicit in Ireland’s present plight. Their real gripe is that the level of corporation tax might be raised by pressure from Brussels and this might “put off” foreign direct investment.
In fact successive Irish governments’ prostration to foreign capital is the key to understanding the loss of sovereignty and Ireland’s semi-colonial status. They offered a whole number of incentives for foreign capital that would ensure freedom to expatriate profits, which were above the international average. Of course, when times get hard the foreign firms such as Dell shut up shop and move to where the labour costs are lower – as many have done. Such is the nature of imperialist capitalism.
The domination of the Irish economy by foreign capital and the ability for the multinationals to secure the most favourable regime that they can marks Ireland out as a semi colony. In addition, the granting of supervision rights to Brussels also shows that Ireland is a semi colony.
The financial crisis stripped the façade of political independence off and revealed the inner subservience to imperialism. The claim that the Celtic Tiger was transforming Ireland into one of the richest countries in Europe was always wide of the mark. Those areas of the economy that did produce multinational corporations like Cement Roadstone Holdings, Ryanair and Smurfit were few and far between and remained small compared to the world’s largest multinationals. The Irish bourgeoisie was certainly on a high with the increased attentions of US and EU funds but rarely in serious competition with them.
FIGHT AUSTERITY IN IRELAND NOW!
The Fianna Fail government will be announcing 6 billion euros worth of cuts in the near future as part of a 15 billion readjustment over four years. This will be the fourth budget in two years having already lopped 14 billion off. Further savage cuts will greatly increase already rising levels of poverty.
Fine Gael and Labour Party are all agreed on cuts. Fine Gael would like 9 billion cuts and the Labour Party 7.5 billion in four years rather than 15 billion. Despite these small differences they will in all probability be the next coalition government. Labour has often joined Fine Gael in government and then been punished heavily by their own subsequently disillusioned supporters.
All the main political parties want workers to pay for a crisis not of their own making. Even the trade union leaders are not rejecting the cuts. Irish Congress of Trade Unions General Secretary David Begg and President Jack O’Connor merely plead for a longer readjustment period to 2017. Appeals for fairness are a betrayal of their members. Everyone knows that Irish workers did not cause this problem, so why should they be the victims?
We have already had three austerity budgets that have not stopped Ireland’s slide. However, according to Merrill Lynch and consultancy firm Cap Gemini, the number of millionaires in Ireland increased last year by almost 2,000 to 18,100! So the crisis has been good for the every rich.
We have also had a trade union leadership that has organised virtually nothing apart from a few demonstrations. A one-day public sector strike was organised last year as anger welled up among workers at pay cuts but nothing since to stem the vicious attacks.
GENERAL STRIKE
The people are angry and bewildered. They have bombarded newspapers and phone-ins with their fury over being lied to, the bail out and the coming austerity programme. The coming demonstrations and protests, such as the one this Saturday 27 November, will be big and militant. Workers want an alternative to the cuts, lies and being sold to the banks and bon markets.
The leaders of the Irish Confederation Of Trade Unions must build on that anger or stand aside and let the workers fight back unhindered. The time has come to say “enough is enough”. We are witnessing a class wide assault on workers by the government and its EU/IMF backers. We need a class wide response and that demands a general strike to stop all the cuts.
We now need a General Strike to stop the EU/IMF backed government attacks on workers and to demand the withdrawal of the forthcoming budget in its entirety and repudiate the foreign debt.
• Rank and file workers must start to organise within their unions independent of the bureaucratic leadership against the do nothing approach they espouse.
• Rank and file movements within and across the unions need to be built with the aim of developing a new fighting leadership. Militant action including solidarity strikes and occupations can turn the tide against the government.
• Strike committees democratically controlled by mass meetings should lead and decide on strike action and hold their leaders to account.
• Unions should launch mass indefinite strikes now and not wait for ICTU to prevaricate and sell out.
• Action Councils should be built in every area of Ireland to co ordinate such strikes and all resistance to the government. These should draw in workers, students, pensioners, unemployed, community activists and migrant workers to campaign and fight against the cuts. We should build on the fantastic 40,000 strong student demonstration a couple of weeks ago. These councils should become the organising centres of the revolt.
• For a united European struggle against austerity. Don’t let Portugal and Spain go the same way as Greece and Ireland. Workers on Europe should co-ordinate their actions to fight the bosses and their governments. Don’t let them make us pay for their crisis.
The coming General Election must not be used as an excuse to wait to see what the Fine Gael/Labour coalition will do. We should demand that Labour with its trade union affiliates refuse to implement the cuts. But it has promised more of the same medicine and will not challenge their Brussels masters. When the new government comes to power we will be faced with the same situation, that’s why we need a real workers government.
A WORKERS’ GOVERNMENT
We need a genuine workers government that sides with the workers and strikes out against capitalism. A general strike would pose the question of who rules in society most sharply – the workers or the bosses. Such a government would have to be accountable to mass democratic workers organisations such as action councils based in the workplace and the community. It would have to build a workers militia to defend itself from imperialism and their local agents in Ireland.
• A workers’ government would immediately repudiate the debt. Make the money markets and bankers pay for their own debts not the workers.
• A workers’ government would tax the rich and provide jobs for the unemployed with a public works programme that can build schools, hospitals and better public services. It would provide decent benefits.
• It would confiscate the wealth of the multinational corporations and the Stock Market made class of Irish millionaires. It would nationalise the banks and finance houses and put them under workers control. We would plan the economy based on what people need such as housing and public services not the leave it to the anarchy of the market with its bubbles, slumps and austerity packages.
• Finally it would start the task of building socialism in a Workers Republic free of the monied parasites that has brought the country and its workers to financial ruin.