From Socialist Voice, November 2010

Campaign of cuts may not be enough


At the time of writing, our imperial masters from Brussels are in Ireland to approve the strategic assault upon Irish working people and their families that this Government (and future ones) will lead. The EU Commissioner for Economic and Monetary Affairs, Olli Rehn, is here to brief his generals, Lenihan and Co., on what is needed and to ensure that his staff step up to the mark and don’t waver in carrying out his attack.
     The Government plans an initial €6 billion in cuts in the coming budget. This will be followed by the rapid disposal of the assets of state-sponsored companies, including crucial infrastructural ones such as ports, airport authorities, the ESB, and other profitable companies that are of enormous value to Irish people, in a bid to make a quick buck.
     No doubt there will be further budgets and further cuts in the new year as the state fails to cope with the cost of the financial bail-out.
     It is an outright lie to lay the blame of the bankruptcy of the Irish state at the door of the public sector. The reason the state is on the brink of defaulting—which it is—is because of the massive aid given to the black holes that are Irish banks and their protection of senior bondholders (largely other banks and lenders).
     It is the bail-out that has brought this year’s deficit to 32 per cent of GDP. Without the bail-out it would be 12 per cent. And, as is always necessary in an Irish context, the percentage should be related to GNP and so sits closer to 40 per cent for this year alone.
     The real risk of the state defaulting on its debt is now widely accepted by the international establishment media, something that Socialist Voice has emphasised for some time. Indeed Bloomberg News recently reported that it is likely that the Irish state by the middle of next year will run out of cash, unless it can miraculously encourage investors to buy its debt.
     This does not seem likely, as the chief analyst at Danske Bank (owner of both Northern Bank and National Irish Bank), Jens Peter Sørensen, commented in relation to Ireland: “It’s close to a buyers’ strike at this point.” If only workers could take a lesson fom the bankers’ spirit of collective action!
     Ireland has recently seen a surge in the cost of insuring its sovereign debt. Investors are demanding extra yields to hold the country’s debt, and this yield is reaching record levels, as it has doubled over the last two months. Rehn, Lenihan and Co. hope that a vicious blitzkrieg-style attack on working people will show these investors that the state has the willingness and control necessary to do whatever finance capital demands and so is a safe place for it to operate. This is the precious “confidence” they speak of.
     But even from an establishment viewpoint this is not a universally accepted strategy, as one “money manager” (Sanjay Joshi) noted: “Ireland talking about austerity cuts—it just makes the whole situation worse, not better.”
     So this pain and hardship the state is inflicting on its people in order to please the precious moneylenders could all be in vain! And, given the underlying weakness of the economy—reliance on foreign direct investment, very little indigenous manufacturing, burst housing and construction bubble, weak controls or taxation of capital flows, very weak tax net, etc.—it is hardly surprising that a campaign of cuts might not be enough to “sell” the economy to international investors.
     Regardless, the war will rage on.
[NL]

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