Economy

2t

Solidarity with Syriza: Challenging Austerity at Home

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An article by Brendan Young and Eddie Conlon

The election of Syriza has sparked a rash of speculation on the possibility of a left government in Ireland at the next election. Contributing to this were the recent inferences from SF sources that they would not go into a coalition with the Troika parties – in particular FF or FG. Such a commitment would be welcome.

This note addresses three issues:

  • there is little prospect of a left government coming out of the next election, so what should the anti-austerity movement do to build a political alternative in the light of the Syriza victory;

  • the movement against the water charge is the source of a new political alternative and new, anti-austerity candidates in the coming election; any slate of anti-austerity candidates must therefore champion the non-payment demands of the movement because otherwise it will remain isolated from it;

  • should any new political formation accept the rules laid down by the defenders of wealth and privilege – or be prepared to lead a challenge to those rules?

No to Coalition with the Right

Explicit rejection of coalition with the Right – FF and FG – is a pre-requisite for discussion of a left alternative in Ireland. We cannot develop an alternative to the ravages of capitalism by forming a government with parties committed to the preservation of the wealth and privilege of the capitalist minority. But as yet, no clear statement has come from SF on this matter. Nor is it clear that SF would not do something analogous to what Syriza has unfortunately done: formed a coalition with a party of the Right, in this case ANEL – a populist right wing, anti-immigrant party – rather than form a minority government and demand the support of the KKE on concrete issues. The fault in this lies with the refusal of the KKE (Greek Communist Party) to support a Syriza government.

Hopefully this coalition deal will not derail the pre-election promises by the Syriza leadership – or become an excuse for not implementing anti-austerity or socially progressive measures. Socialists across Europe should support the actions of the Syriza government against the continued imposition of debt and austerity in Greece and build active solidarity with Syriza. The best way to do that is to actively challenge the austerity regime at home.

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Celebrating the election of Syriza

Syriza’s Historic Victory and the Prospects of the Left

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The Greek elections of January 25th have given a decisive victory to SYRIZA. It is a victory not only of the Greek but also of the European Left, which can prove of historical consequences for the further course of Europe.

SYRIZA gained 149 seats in the Greek parliament, just falling short of the required majority of 151 to form a government of its own. However, it achieved a clear preponderance, with an 8.5% margin, against the hitherto ruling conservative party of ND, and was able to form a government with the support of ANEL, a small Right party.

The result of the elections was hailed by the Greek laboring people with relief as opening a prospect of escape from their sufferings, the austerity measures, unemployment and poverty, deriving from the Memoranda imposed by the Troika after 2010. It was these laboring people who gave victory to SYRIZA against the ruling parties of the establishment. These parties, PASOK and ND, had followed faithfully all directions of the Troika, resulting in an unprecedented fall of wages by almost 30% (and even more in some categories of workers) and record unemployment of about 25-30% (more than 50% in the youth). There is now broad expectation within the people that at least some of the burdens and misfortunes they suffered during the last years will be raised and that they will achieve a betterment of their condition. At the same time, besides a willingness to fight for their interests, there is also some anxiety and uncertainty about the next day. SYRIZA’s result has given hope to the people but has not completely eliminated fear, as everyone here in Greece knows that, in view of strong pressures and blackmail from the EU, it will not be easy for the new government to effect the promised changes.

SYRIZA’s victory and the formation of the new government have aroused great interest in the rest of Europe as well, provoking reactions from all sides. Conservative forces have hastened to “remind” that Greece must implement the obligations ensuing form the Memoranda – German chancellor Merkel, minister of Finance Schaeuble and French president Francois Hollande have already made such statements. On the other hand, Left parties, activists and intellectuals all over the world hailed the result as a great opportunity and spur to the fight to end austerity policies.

The elections have shown some other significant, even if secondary, trends too with regard to all other parties and the rest of the Greek Left. They witnessed the smashing up of intermediate “center-Left” parties, the formerly mighty PASOK and DIMAR, being replaced by the colorless Potami (the Greek word for “The River”), the firmness of the Golden Dawn Nazis coming out as the third party, a mediocre rise of the Anti-capitalist Left formation ANTARSYA and the relative stability of the neo-Stalinist KKE[1].

All these aspects have received extensive commentary in Greece from analysts on the Left and the broader political spectrum. In the present article we will commend on the result and the course taken, hoping to throw some light on the issues involved – issues that are crucial not only for the Greek but for the European Left as well.

 1. The result of the elections

Seven months ago, commenting on the result of the Greek EU elections in an article in this site, the present writer had called it “a clear, historical, but still not decisive SYRIZA victory”. The same thing may be said in an even stronger sense about the result of the present parliamentary elections. It was a still more imposing and great victory for SYRIZA but yet still not decisive.

Throughout the election campaign, SYRIZA’s leadership persistently called the electorate to give SYRIZA a parliamentary majority (i.e., at least 151 seats) in order to be able to fulfill unhindered its program. During the last days before the vote, polls showed this to be a realistic possibility. Yet, after a thriller lasting almost all the elections night, SYRIZA failed to acquire the majority needed by the narrowest margin.

The fact that there was something lacking in SIRIZA’s result in both contests cannot be considered purely an accident and some explanations have been offered.

SYRIZA’s momentous rise in the 2012 elections was due chiefly to the big social movements of “Aganaktismenoi” that developed in Greece during 2011-12. However, after ND won the 2012 elections and was able to form a coalition government with PASOK (and, initially, with DIMAR too) the movements subsided. Despite occasional outbursts, there was a general mood of weariness within the people, who saw their previous big struggles being defeated and, in an immediate sense, remain ineffective.

To this natural reaction may be added the fact that SYRIZA adopted, to a bigger or lesser extent, a tactic of waiting, expecting power to fall in its hands like a ripe fruit after the inevitable decline of the ND-PASOK rule. This does not mean, as a number of Leftists imply in their criticisms, that SYRIZA should be regarded directly responsible for the decline of the movements, or that it acted as a barrier to their revival. The retreat of the movements was to a certain extent inevitable and SYRIZA could not have reversed it at will. The point is however that during the last two years its stance was somewhat passive and inactive, consisting of excessive “realist” adjustments and failing to strengthen its ties with the people in the new situation.

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The Wrath of Kane: Banking Crisis and Political Power

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While his whole testimony requires examining in a little more depth, I think this is a good standalone clip from evidence to the banking inquiry given by Prof. Ed Kane on Wednesday 28 Jan 2015.

He was asked by Deputy Pearse Doherty to elaborate on the statement below which was made in a paper that Kane co-authored in 2004:

Realistically, every government-managed disaster relief program is a strongly lobbied tax-transfer program for redistributing wealth and shifting risk away from the disaster’s immediate victims. A systemic crisis externalizes – in depositor runs and in bank and borrower pleas for government assistance – a political and economic struggle over when and how losses accumulated in corporate balance sheets and in the risky portfolios of insolvent financial institutions are to be unwound and reallocated across society.

Professor Kane’s analysis is that the way a crisis plays out in terms of who pays for the crisis is an issue of power – that is, it is related to the nature of political and economic power in a state and the relationships between the worlds of finance and politics.

Anyway, the official transcript is below, with a video clip of the ecxhange. You’ll notice that the official transcript differs slightly from the actual exchange, but not in a significant way. The meaning is still captured and essentially stays the same.

the 2004 paper referenced is available here.

Deputy Pearse Doherty: [your] 2004 paper says that while policy-making during a crisis may be of the seat of the pants variety, the policy itself is informed by a political and economic struggle over who pays for the losses. How important in the view of Professor Kane is that dynamic, namely, the political and economic struggle of who pays for the crisis in terms of framing the terms of the resolution?

Professor Edward Kane: I think it is terribly important. I define a crisis as a battle over loss allocation. There are firms with losses and no one wants to hold them. People are contracted to take the losses, by writing insurance or lending money or bonds, but they do not want to pay and they have the political power, in many cases, to see that they are paid. My superficial understanding of Ireland is that many foreign creditors were paid off with Irish taxpayers’ money and it is astonishing to me how good politics, the way a republic or a democracy is supposed to work, would ever lead to that solution.

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Debt? What Debt?

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With the Dail to debate a private members motion from Catherine Murphy, TD calling for support for a European Debt Conference, it is worth looking over Ireland’s debt numbers; especially as we will get a flood of claims from some quarters that our debt level is fine, its’ sustainable, we don’t need debt relief, etc. etc. etc.

The starting point in such debates is the question:  is Irish debt sustainable.  This can, however, descend into a black hole of formulae.  Simply put, just about any debt can be considered ‘sustainable’ if the debtor is willing to starve the kids and live under the railway bridge.  ‘Sustainable?  Sure, but there will be sacrifices’ (which, in Ireland are never inventoried).  If you believe this is an exaggeration, consider the EU elite’s attitude towards Greek debt levels. 

Let’s go through some bald numbers.

Debt 1

Irish debt is among the highest in the 19 Eurozone countries.  Officially, it is at 110 percent of GDP; when measured against our fiscal capacity as suggested by the Fiscal Council, it rises to 122 percent.  We’re placed fourth though look out for Cyprus and Belgium in the next few years.

When we turn to what some call an ‘illegitimate’ debt – that private banking debt that we all ended up paying for – Ireland remains league leader.

Debt 2

While banking debt makes up a quarter of our GDP, in the Eurozone the total debt is less than 2 percent.  And for Ireland, this doesn’t count the nearly €20 billion taken from the National Pension Reserve Fund for recapitalisation – since this is categorised ‘investment’ and not debt.   Were it not for the official banking debt, our overall levels would be close to the average Eurozone level. 

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Tsipras versus Cameron: people versus bankers

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This article originally appeared on Socialist Economic Bulletin on the 1st of Feb 2015. 

David Cameron became the first elected politician in Europe to criticise the election of the Syriza government in Greece and was quickly followed by George Osborne. This might seem odd as Britain is outside the Eurozone and has limited direct influence over its policies. But the urgent and unrestrained nature of the criticism is very revealing about what is at stake in the anti-austerity struggle and specifically the very different roles being played by the British and Greek governments.

The Syriza government represents the popular will to end austerity. Only the parties of the left increased their vote in the recent election, and that was overwhelmingly to Syriza’s benefit with a rise of 9.4%. But entirely new parties and even parties of the traditional right adopted similar anti-austerity rhetoric in an effort to shore up their vote. The election showed the Greek popular majority wants to end austerity.

In Britain the banks have an extraordinarily large weight in the economy. Consequently, this dominance is felt through all areas of political and social life. A recent Global Financial Stability Reportfrom the IMF (pdf) demonstrated the dangerously lop-sided nature of the British economy by focusing on ‘shadow banking’, the artificially created networks of companies and vehicles to disguise the real liabilities of the banks. In Britain shadow banking accounts for over 350% of GDP. The next highest exposure of all the industrialised areas or economies is the Eurozone at less than 200% of GDP. The phrase ‘too big to fail’ is insufficiently grave to convey the threat posed by the outsized level of British bank liabilities.

This explains the sudden and intemperate Tory interventions against the newly-elected Greek government. The British government represents the interests of British big businesses and the most important of these is the banks. The banks have sharply reduced their loans outstanding to Greek borrowers. As Martin Wolf the Financial Times’ chief economics commentator explained recently, the banks in general were the key beneficiaries of the bailout, not the Greek economy or its population. Since the €254bn bailout organised by the Troika just €27bn was to support the Greek economy. The rest went to creditors with British, German and Dutch banks at the head of the queue for the taxpayer-funded bailout. But the huge debt is incurred by Greek taxpayers, and so the debt burden is unbearable.

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Photo credit: Euronews

Syriza’s Victory: Turning Hope into Reality

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This article by Michael Burke and John Ross was originally posted on Socialist Economic Bulletin on Monday the 26th of January

The Greek people have inspired every progressive force in Europe, and beyond, by electing the first anti-austerity government in Europe. Syriza has similarly inspired every progressive person with the great political skill with which it outmanoeuvred the forces in Greece and Europe who attempted to scare the Greek people into not voting for it. As Alexis Tsipras said immediately after its victory Syriza has opened up hope for the Greek people – and many others as well.

The key question now is how to turn hope into reality.

Syriza has outlined clearly its orientation – which should be supported by every progressive force. Syriza has said it is not seeking to exit from the Euro. It wants Greece’s unpayable and unjust debt renegotiated. The immediate priority of the left throughout Europe must be to organise support for this demand of Syriza during the coming negotiations. It is to be welcomed that not only the political left but also far wider groups arguing for a rational economic policy support this course – including eminent figures in their profession such as Nobel Prize winners in economics Joseph Stiglitz and Chris Pissarides. All efforts must be redoubled across Europe to gain support for the renegotiation of Greece’s debt – a course which corresponds not only to the interests of the Greek people but to the interests of rational economic policy across Europe, and therefore to the interests of the people of Europe.

Whether or not these negotiations succeed, however, the new Greek government is faced with key choices in economic policy. This is even more the case as, if the economic policies of the new government do not succeed, sinister forces that failed to win this election will seek to turn Greece backwards.

The first and immediate priority, of course, is to reduce and eliminate the appalling humanitarian suffering imposed on the Greek people by the austerity policies. Creating jobs, raising wages, restoring pensions, recreating the best possible social security are the top priorities. As always politics must take precedence over economics.

But to sustain the improvement in the living standards of the Greek people it is necessary to relaunch economic growth. And the key to economic growth is necessarily investment. Without rising investment an economy cannot grow.

Under the conditions of Greece it is even more unrealistic than normal to rely on the private sector for investment. It is the collapse in private investment which has driven economic collapse in Greece and economic recession across Europe. Since 2007 Greece’s GDP has fallen by €57bn of which the bulk is the fall in investment at €36bn. The only way to secure economic growth is therefore to embark on a programme of state investment. Those countries which have used state investment as their key instrument to promote growth have enjoyed outstanding success – for example Ecuador, Bolivia and China.

In a country such as Ecuador, which has enjoyed 5% GDP annual average growth over 10 years, real incomes per capita have risen by over 2% a year, and 10% of the population has been lifted out of poverty. This has been driven by state investment which has now reached 15% of GDP.
Economic growth, led by state investment, will in turn create the conditions under which the private sector will begin to invest again.

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risingineq

The Very Real Cost of Rising Inequality

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Inequality is one of those concepts that for many people remain somewhat abstract and amorphous.  There are few that are against equality, but it has difficult gaining traction in the popular debate.  When you’re trapped in deprivation, debt, or low-pay then income or more hours of work becomes the measure of the solution.  Equality, however framed, remains detached.

It shouldn’t be.  For all of us are paying a real Euro-and-cents cost for rising inequality.  Inequality has many facets – economic, social, cultural, gender, sexual.  Let’s just look at one aspect – rising income inequality with the assistance of a valuable database:  the World Top Incomes Database.

Equality 1

In 1977, the top 10 percent income group’s share of national income was 27 percent.  By 2009 this had increased to 36 percent – a rise of 9 percentage points.  Two years into the recession saw a drop in this share as income from the speculative bubble fell faster than the national average.  However, don’t worry – Eurostat shows that since 2009 it has started rising again.  While the data isn’t directly comparable (the World Incomes Database is based on tax revenue data, while Eurostat which is based on a survey of households shows little medium-term movement), an indicative number would be that it has risen to 37 percent in 2012.

Another way of looking at this is that the lowest 90 percent saw their share of national income fall from 72.7 percent in 1977 to 63 percent in 2012 (using the indicative number).

Again, this graph is abstract.   So let’s play a little game.  What would be the impact on households if the share of the lower 90 percent had remained the same; that is, how much more money would the lower 90 percent have today if their share of the income was the same as in 1977?

The bottom 90 percent of households would have €10.975 billion more.  Nearly €11 billion spread out among approximately 1.5 million households.

  • For each household, this would mean approximately €7,400 more income

Of course, there would be differences given the variations in household types (single, couple with children, single parents, etc.).  And this is just a suggestive estimate.  But imagine the improvement in their fortune if a low-paid couple (on €30,000 per year) were receiving an extra €140 or more per week.  And compare this to the €4 weekly increase from the tax cuts, which won’t even keep pace with inflation.

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Always the Artists: Week Three of the Bank Inquiry

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“Shadows never go away.
Might be you don’t see them,
but they’re always clinging to your heels.”

A Song of Ice and Fire

When I was a child in primary school my way of dealing with Irish class was to find a word in the question that matched a word in the text and hope for the best. The sentence I would find would be the one I’d read out. Sometimes it worked, sometimes it didn’t. But, it was a plan, and it helped me get through the hour.

In the absence of any understanding of the grammar, of the way the words actually relate to each other, you grab what you can and try to make sense of the situation.

In terms of the bank guarantee and bailout, and the different narratives that are being thrown out there, we can’t really do this – we can’t just pick out single words, single events, and use them to make our story. We need to have enough of an overview of the dynamics at play in order to make sure we don’t stray from the path as we go forward.

In other words, we need to understand the grammar that holds it all together, and one of the objectives of the bank inquiry is to fulfill this role.

It helps, of course, to have witnesses that understand this, and with Professor Patrick Honohan last week I’m not sure it did.

On paper the purpose of Honohan’s appearance before the Bank Inquiry Committee was to discuss his 2010 report, which looked at the regulatory and operational failure within the Central Bank and the Financial Regulator’s office. On the day itself, however, the proceedings were dominated by talk of the 2008 bank guarantee – the decision itself and supposed cost.

Honohan initially said that the net cost of the guarantee would be somewhere in the region of €40 billion. When he was challenged on this he revised the figure and, indeed, the parameters, acknowledging that his figure wasn’t for the guarantee alone but for the subsequent bailout. Even with this, Honohan had not factored in added costs such as interest repayments. The moment he gave the definitive-sounding figure of €40bn, though, he had handed the journalists the following day’s headline.

He followed his €40bn with another brash statement – that Brian Lenihan had been ‘overruled’ by a more senior politician with regard to saving Anglo Irish Bank. It was obvious that the ‘more senior politician’ he was referring to was Brian Cowen.

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If This Isn’t an Emergency, What is?

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If five percent of the population suddenly fell ill to an unknown disease a national emergency would be called.  Government agencies and health professionals would be brought together under the direction of an emergency cabinet committee to first diagnose the disease, come up with a cure and then deliver it.

Well, we have such a disease – and it affects not five percent but 30 percent of the population. It is not unknown –   It is the economic and social disease of deprivation.  The CSO released the 2013 Survey of Income and Living Conditions and the data on deprivation is truly alarming.

Deprivation 1There are now 1.4 million who are categorised by the CSO as living in deprivation.  There are well over 400,000 children living in households suffering from multiple deprivation experiences.  Since the start of the crisis, these numbers have more than doubled. The disease is spreading.

You are classified as ‘deprived’ if you unable to afford or experience two of the following items:

 

Two pairs of strong shoes * A warm waterproof overcoat * Buy new (not second-hand) clothes * Eat meat with meat, chicken, fish (or vegetarian equivalent) every second day * Have a roast joint or its equivalent once a week * Had to go without heating during the last year through lack of money * Keep the home adequately warm * Buy presents for family or friends at least once a year * Replace any worn out furniture * Have family or friends for a drink or meal once a month * Have a morning, afternoon or evening out in the last fortnight for entertainment

This is not a welfare phenomenon.  Over 22 percent of all those experiencing deprivation are actually in the working force – well over 300,000.

Deprivation 2

The number of people experiencing in-work deprivation has more than trebled since 2008 – more than one-in-five working today.  Over a third of one-income households are in deprivation.  But a substantial number of two-income households also find their living standards marred – one-in-six.

Clearly, having a job is not necessarily a pathway out of poverty.

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elderly

The New Fiscal Enemy Within: The Elderly

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“Old people don’t need companionship. They need to be isolated and studied so that it can be determined what nutrients they have that might be extracted for our personal use.”

- Homer Simpson

The Irish Times published the highlights of a paper produced by the Department of Public Expenditure and Reform (DEPR) purporting to show the latest crisis awaiting us – the crisis of unsustainable public pensions.  DEPR produced some numbers:

  • The number of people aged 65 and over is projected to increase from 570,000 in 2013 to 855,000 in 2026.
  • Spending on the contributory and non-contributory State pension schemes already account for €4.93 billion, or 25 per cent, of the total cost of social protection services.
  • The State could have to provide annual increases in funding of nearly €200 million up to 2026 just to keep pace with the growing elderly demographic.  This means a 50 percent increase in spending on state pensions by 2026

These look like truly scarifying numbers – 50 percent increase in the number of pensioners and 50 percent increase in pension costs.   No wonder the newspaper headline read:

‘Cuts to state pensions “must be considered”

What can we do, short of setting up a kind of Hunger Game for the elderly?  Thankfully, DEPR has some ideas:

  • Cut the weekly pension by €8.50 per week
  • Scrap the €10 weekly top-up for people over the age of 80
  • Bring forward the scheduled dates for raising State pension eligibility
  • Abolish the free TV licence.
  • Means test fuel allowance for new recipients of the Department of Social Protection’s household package of benefits.
  • Abolish free travel passes for spouses and companions of the elderly

Or we could take another route:  increase PRSI contributions and/or cut back on expenditure in other areas (health, education, etc.).  Thankfully, DEPR is on top of things, laying out the painful but necessary reforms (i.e. cuts) necessary to sustain our public pension system.

What does all this add up to?  Rubbish.

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Syriza Comes to Ireland’s (and the Eurozone’s) Rescue

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Everyone in Ireland, regardless of their political orientation or party-political affiliation, should be hoping Syriza wins the upcoming Greek election and forms the next government. Why?  Because their proposals on public debt would be a major boost to Ireland and the Eurozone as a whole.   The headline to Denis Staunton’s excellent article said it best:

‘Why Ireland should support Greek plan to write down euro-zone public debt’

Leave aside your ideological predispositions.  Even Wolfgang Munchau of the Financial Times believes Syriza and Spain’s Podemos are the only parties talking sense about European debt.

Syriza is proposing a European Debt Conference – similar to the one held for Germany after World War II.  And the broad proposals they will bring to the Conference are based on this this paper written by Dimitris P. Sotiropoulos, Yiannis Milios and Spyros Lapatsiora.  In short:

  • The European Central Bank (ECB) acquires a significant part of the outstanding sovereign debt of the Eurozone countries – reducing national debt levels to 50 percent of GDP.
  • These bonds would be converted to zero coupon bonds with a 1 percent discount
  • The countries will buy back the debt when the ratio of those bonds falls to 20 percent of GDP

The impact for Ireland would be dramatic.  In one fell swoop our public debt would be more than halved – reduced from 108 percent of GDP to 50 percent.  This would cut interest payments by approximately half, saving €3.7 billion.  Imagine what we could do with that €3.7 billion every year – increase investment, improve public services, and boost social protection income (even cut taxes if that is your political perspective).  Whatever, this money would constitute a major stimulus programme for Ireland.

It would have a similar effect throughout the Eurozone.  All countries would benefit (with the exception of Estonia, Latvia and Luxembourg; their debt is already below 50 percent).  Over €4 trillion of Eurozone debt would be removed.  With the massive interest payment reductions, the Eurozone would receive a similar stimulus boost.  This would be the best way to escape the looming deflationary crisis.

The authors also hold out the prospect of a further boost, by presenting a slightly different alternative scenario to the one above:  interest payments would be suspended over the first five years and rolled up into the zero coupon bonds. Giving Ireland and the Eurozone a free pass on interest payments over the next five years would have an even more stimulatory and economically-galvanising effect.

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makingendsmeet

The Era of Making Ends Meet

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2015 will be all about making ends meet; or rather, not making ends meet.  Gone are the drama days of the last few years – NAMA, bondholder debt, collapsing employment and output, bailouts and Troikas (unless the EU decision-makers are determined to accelerate the European deflationary spiral; then we could have drama aplenty).  It’s not that these issues have gone away – but they are now embedded, hidden, in what can be called a ‘new normal’.  And this means we are entering into an excruciating and potentially protracted period of grinding things out; day by day.

So many commentators talk about the economy in recovery but ‘people not feeling it yet’.  I suggest there is a better way of looking at it.  The boulder has fallen down the hill – that’s what the gravity of recession will do; that, and austerity pushing it down faster.  Now people are pushing the boulder back uphill – it’s a big boulder and it’s a big hill.  And people are supposed to be ‘feeling it’?  They are supposed to be grateful?  Hmm.

We have discussed other indicators – deprivation, food poverty.  These are harsh benchmarks that affect a significant proportion of the population.  But there is another indicator, referred to as ‘soft’, which gives a more representative picture of this phase we are entering:  making ends meet.  It is called soft because it is not calculated on the basis of percentages of the median wage (relative poverty) or even a survey of people’s concrete experience (deprivation indicators).  It is based on asking people ‘are you having difficulty making ends meet’ – a highly subjective question that doesn’t define ‘difficulty’ or ‘ends’.  It is left to people to determine that.

The EU asks such a question in the annual Survey of Income Living Conditions.  They break it down by degrees:

  • Households making ends meet with great difficulty
  • Households making ends meet with difficulty
  • Households making ends meet with some difficulty

This is the result:

Making Ends Meet 1

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Peter Nyberg Bank Inquiry Evidence, 17 December 2014

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I do not think it is fair to say people partied. People just lived a little better than they otherwise would have done because of the bubble.” Peter Nyberg under questioning from Deputy Pearse Doherty, 17 Dec 2014.

Peter Nyberg’s appearance at the Irish bank inquiry marked the beginning of the context phase, the purpose of which is to set the scene for the causes and consequences of the bank guarantee and bailout. The context part is going to last for a few months, and it may not be until April before the committee starts calling people actually involved in the guarantee decision and its aftermath. So, for those looking for fireworks you may have to be a little bit patient I’m afraid. However, the context phase gives us the opportunity to do what it says – to place the guarantee within a wider framework than that of the personalities involved in the tense meetings of the night of 29 September 2008. It allows us to see the bigger picture; that is, if we want to see it. It is by no means certain that such a road is one that the various actors involved in Irish finance would choose for themselves. Alongside this, the committee is itself working within a context where narratives around the crisis have already been formed, most notably the “asleep at the wheel/regulators/bad apples/nobody understood/auditors/collective psychology” theme. I’ll come back to this later as this is something that popped up during Nyberg’s (quite dry and uninspiring) testimony, but it is worth flagging now because in the search for the truth as to what happened we have to deal with a story that has had six years to bed itself down. The analogy that is closest to explaining what I’m getting at here would be that of a cover story, but it is not as calculated and Machiavellian as that. We’re dealing here with an ideology – Nyberg admits as much in his testimony – and the way that the ideology of modern finance made sense of the world before the crash is the way that it made sense of the world after the crash. It couldn’t grasp the nature of the problem then, and it is incapable of making sense of it now. It knows that the problem was structural, but because it has such a vested interest in the continuation of those structures and practices, it has to find a way of addressing systemic failure without changing the architecture. Its solution, its way of squaring the circle, is to treat the crisis as a managerial problem. Asleep at the wheel / regulators / bad apples / nobody understood / auditors / collective psychology / etc etc etc. What is needed is better managers, better regulators, better auditors. It is a bit like if a car crashes because of faulty brakes, the solution is to find a better driver.

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For Some Vicious Mole of Nature: Making Sense of The Irish Bank Crisis

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God will forgive them.
He’ll forgive them and allow them into Heaven.
I can’t live with that.”

Dead Man’s Shoes (2004)

What are we to make of the Irish Banking Inquiry, which began its public hearings last week. For myself, as I said in Shop Floor in September, I think it provides an opportunity for progressives and we should make use of it.

As to what I mean by that, well, take this quote from a 2012 paper by Gregory Connor, Thomas Flavin and Brian O’Kelly, entitled ‘The U.S. and Irish credit crises: Their distinctive differences and common features’, published in the Journal of International Money and Finance (available as a pdf here).

It is not clear that Anglo Irish Bank represented a systemic risk. Anglo Irish had a limited retail presence; it operated by making large-scale commercial loans funded by institutional borrowing. Other banks may have wanted Anglo Irish included in the government support schemes since, as was subsequently revealed, many developer loans with different banks were secured with the same collateral, creating a complex web that would be difficult and costly to unwind if Anglo Irish alone were allowed to fail.” (Connor et.al. 2012: 63)

The key to the Irish bank guarantee and subsequent sovereign debt crisis is right there in that complex web of developer loans with different banks. That’s the rabbit hole, the one we need to fall into, in order to make sense of this whole mess.

But let us be clear: although the loan book is key, this is not just about developers and their bets.

For example, the loans for commercial property speculation cannot be separated from the tax incentives approved by the Oireachtas and various finance ministers; nor from the legislative and regulatory environment that finance and property speculation demanded of, and received from, the Irish State.

Alongside the finance/speculator/state core lie the professional sectors that benefited hugely from this environment – that is, accountancy, law and real estate.

There is also the issue of the media in Ireland – private and public, the newspapers as well as RTE – which as a sector not only benefited from property speculation via ad revenue, but at a deeper level shared (and continues to share) much of the ideological framework which gave an intellectual sheen to such base and futile speculation.

When we take these dynamics and place them within a historical time-frame, we start to observe a reconfiguration of the Irish State, from the late 1960s to the mid-1990s, which parallels the shift in profit-seeking strategies within Western capital, from production to rentier. Ireland’s role as a comprador state, that stays the same, albeit one that shifts from the grazing fields of Meath to the glass towers of the docklands.

The best way to make sense of a ‘complex web’ of social, political, economic and cultural forces is to apply a relational approach, not a causal one.

A world seen through causality is binary, whereas a relational approach is dynamic – it allows us to see the various forces in motion, bouncing off each other, as they create new tensions and contradictions.

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