Irish meltdown looms

Issue section: 
(353)

Ireland, once the poster-child of globalised, deregulated, neoliberal capitalism, is now in the midst of a spectacular collapse.

The Irish government is under intense pressure to accept a bailout from the European Union (EU) and the International Monetary Fund (IMF) as fears that the Irish debt contagion may spread and engulf the entire eurozone.

However, what is presented as a rescue plan for Ireland is really just an attempt to make Irish workers pay even more to bail out the banks and protect Irish and European capital.

Ireland boomed in the 1990s as multinational corporations flocked to take advantage of its low corporation tax rates. A policy of light-touch financial regulation saw the banking sector finance a monstrous housing bubble. Then the bubble burst. The collapse of construction sent the economy into a tailspin, while plunging house prices left many people owing more than their homes were worth. Now Ireland is, per capita, the most indebted country in the EU, with a deficit of 32 percent.

The government's first crisis strategy was to guarantee the deposits of the banks and ensure that no bank, however toxic, went the way of Lehman Brothers. It guaranteed a huge €440 billion worth of bank debt and embarked on the now notorious bailout of Anglo Irish bank (the world's most expensive banking rescue). The priority was to save the banks no matter what the cost.

To fund this massive bailout and to keep the markets sweet, the government responded with package after package of draconian cuts. Last year's budget cut amounted to more than €4 billion, equivalent to the British government slashing £150 billion. Yet despite the cuts, dubbed "masochistic" by the Financial Times, Ireland's economy has stagnated and its debt is still growing.

The strategy became unstuck when the government announced that the final figure for the bank bailouts was €50 billion. Even this figure is a lie, as it fails to take into account the looming mortgage crisis where one in 20 people are in arrears in a mortgage market valued at €110 billion.

Terrified that this would have a knock on effect on other banks in Europe, the European Central Bank (ECB) started pouring in money to shore up the system. They knew that Irish banks had borrowed €224 billion from British banks and €204 billion from German banks and were terrified that a default would cause their collapse.

In October, the ECB were forced to put a further €11 billion into Irish banks to compensate for money taken out by the Irish rich. In total, they have pumped €90 billion into Irish banks and have turned a blind eye to the fact that the Irish Central Bank, in breach of ECB rules, topped this up with a further €20 billion. Eventually the ECB had to acknowledge that a staggering one fifth of its total funding to European banks had gone into dodgy Irish banks and that the prospect of getting their money back relied on mortgage repayments on vastly overvalued property.

To save their own skins, they are now insisting that the Irish people take out another €100 billion loan from the IMF/EU to help Irish banks pay back money to the ECB. Even the Financial Times thinks that this is a ridiculous strategy to save a debt engulfed country, remarking in a recent editorial that "it defies logic to claim that adding to Dublin's debt will seduce markets back to Irish sovereign bonds".

In brief, they are socialising the private debts of the bankers and speculators and making Irish workers pay for them over and over again. In return for this loan, Irish workers are expected to accept another eye-wateringly painful budget cut of €6 billion to €7 billion through attacks on social welfare, health, education and more.

Irish workers need to take to the streets like the Greeks did and remind this government that the debts they undertake are not ours; they never were.


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