From Socialist Voice, April 2011

Stress tests needed for working people!

Thousands more working people and their families this year will be cast into poverty, unemployment or emigration as a result of the Irish state’s commitment to saving the euro and its masters in the European Union. But will families get a stress test, followed by injections of capital? I think not.
     The mask is truly off the European Union. Its political and economic institutions can no longer hide their naked imperialist character as it functions to serve the interests of big business and finance capital. While some, in particular social-democrats, have invested decades of political capital and personal reputations in the positive or benevolent character of the EU and will continue to see a full set of clothing on the emperor, for the mass of ordinary people it stands naked for all to see.
     As a clear political message to the new Government, and on the eve of the release of the bank stress tests and banking restructuring plans, the chief economist of the European Central Bank, Jürgen Stark, warned against any move to make senior bond-holders pay. The parameters of any government’s ability to act as a sovereign entity were clearly set in the context, first and foremost, of securing the capital of large European banks and ultimately the fate of the euro.
     Stark declared that “we are warning the Irish Government in case it wants to solve its problems at the cost of bond-holders.” The European Central Bank is clearly a political-economic institution. It represents and serves the interests of finance capital in Europe and in an economy that is not neutral but driven by class forces.
     Echoing the ECB, the Governor of the Central Bank of Ireland, Patrick Honohan, warned against imposing losses on banks’ senior bond-holders without the agreement of other EU states. “Unilateral action would not be a net gain for Ireland,” he said.
     The political and economic establishment are united on one thing, if nothing else: that working people must be made to pay for this crisis, and significant amounts of wealth—hundreds of billions—must be taken from working people and distributed among the wealthy and their institutions.
     What is rarely revealed by these “bankers” is, Who are the senior bond-holders that we cannot touch, and why? The answer is, of course, German, French, British, Dutch and Belgian banks. The banks that irresponsibly flooded peripheral countries, such as Ireland, Portugal, Greece, and Spain, with cheap credit to the benefit of the core economies are untouchable. Why? Because destabilising those banks would risk the future of the euro, and the whole European political project.
     It is estimated that the exposure of German, French, British and Dutch banks to the Irish, Portuguese, Spanish and Greek economies is in the region of €450 billion. This is the real reason for not touching the bond-holders.
     While this threat may be used by the right wing as a scare tactic or to create fear to further the designs of the European Union, it is a political reality that progressive parties, people and unions must face and not shy away from.
     But rather than further enslaving Ireland to the European Union we must ask, Why are we being sacrificed to save the very people who created the crisis, who blew up the credit and property and speculative bubbles in peripheral countries, in the process amassing private fortunes?
     Despite José Manuel Barroso’s recent defence of the EU, in which he laid the full blame at the door of Ireland and the Irish people, the reality is the very opposite. While the Irish ruling elite profited from the bubble and fuelled the speculative drive, it was on the basis of EU and ECB economic policy, determined not by Ireland but by its “partners” in Europe.
     This was well explained recently by the former chief executive of the National Treasury Management Agency, Michael Somers, when he stated: “The money that they claim they are lending to us—that’s money to replace the money that was lent to us on the interbank market by other banks within Europe.
     “So all they are doing is giving the Irish banking system money to pay back other banks in Europe . . . Our Central Bank was no longer an instrument of Irish public policy. They emphasised their independence and that they were part of the European system of central banks, with their head office in Frankfurt.”

     In addition, Dr Somers noted that at the time of joining the European Monetary System, Ireland was essentially bribed to join with the offer of cheap credit and further cheap lending; but, in an ironic twist, once you need their help they impose punitive interest rates to punish you even further and seek to make profit from your difficulty.
     “I remember very clearly when the major countries in Europe were trying to set up the European Monetary System,” Somers said. “They actually offered us interest subsidies at the time. They were so anxious for us to break the link with sterling and join the EMS that they gave us loans with an interest subsidy attached to them, because they knew it would be difficult for us, due to the close links we had with the UK. It was important for them politically to have credibility by having as many countries join the EMS as possible.
     “Now, when we get into this spot of bother, instead of giving us subsidies to help us get out of trouble they charge us this huge penalty of 3 per cent. I mean, it’s not exactly the behaviour you would expect of your European partners, that they make a profit from the help they give you.”

     Given the reliance of the state and its banking institutions on ECB funding, this means that the comments of Jürgen Stark are more than just casual remarks. Important to note, and not included in our national debt, is the €100 billion owed by Irish banks to the ECB that is covered by the state guarantee.
     These loans take priority over other sources of funding and so will potentially become sovereign debt if not paid by the banks. This risk means the potential for further recapitalisation.
     The reality of Ireland’s position within Europe is clear. Rather than the dishonest pro-Lisbon treaty slogans of “At the heart of Europe,” or the equally dishonest position of ignoring the role of the EU, Ireland is clearly a peripheral country, with a neo-colonial relationship to the centre.
     That is, we do not have sovereign control over our economy; the economy is used to benefit and meet the needs of the centre; and any expression of economic independence at variance with the centre will not be tolerated.
     The position of the coalition Government was made very clear by Michael Noonan when he assured his European political masters that there would be no trouble from his Government. “I want to be clear, too, for the benefit of our people and of market participants, that we are committed to the EU-IMF programme.”
     And he made it clear that working people would take the brunt of further recapitalisation required to pay back the ECB through the “other measures” that may be required, which of course include the plan for the disposal of state assets mapped out in the EU-IMF programme. “With these sales, recapitalisations and other measures the banks will repay their ECB and Central Bank funding and in time will be better able to raise their own funds.”
     The need to repudiate this debt is increasingly evident. The demand must be made into a campaign that mobilises the maximum number of people to make it a reality.
     Repudiation must be on our terms and not brought about by inability to pay, as that would lead only to further servitude to the European Union and International Monetary Fund.

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