From Socialist Voice, May 2011

Saving the euro!

The problem for the Fine Gael-Labour Government is to try to legitimise policies that involve the Irish state and Irish taxpayers taking on the burden of paying back as quickly as possible the €150 billion that the European Central Bank lent to the Irish banks.
     Instead of the Irish banks owing this sum, the Irish state will do so and will pay it back over time by selling the banks to foreign buyers, selling off the NAMA loans at knock-down prices, and privatising state assets, thereby ravaging the social and economic fabric of Irish society for generations.
     Consider the following sample extracts from a “left” version of this politics, from a “manifesto” by the German section of the international organisation ATTAC warning that “the euro is in danger.”
     Formulations such as “If the Eurozone is to have a future, it is European statehood that needs to be strengthened, not the market,” might give an impression that the document represents a genuinely progressive outlook on the EU. It would be a serious misjudgement.
     What the document does not acknowledge is that Ireland, Greece, Portugal etc. and the interests of their peoples are being sacrificed in order to save the euro zone, whose dissolution would be a blow to the whole EU project of a European superstate under Franco-German hegemony.
     The core argument of the manifesto is stated thus: “In 2011, 20 years after Maastricht and twelve years after its introduction, the Euro is still no ‘optimal currency,’ but it is a European reality that has to be supported . . . in order to prevent a slide into economic chaos and the triggering of political conflicts that could otherwise have been prevented.”
     Let us examine a couple of the ATTAC assertions.
     “The euro is still no ‘optimal currency,’ but it is a European reality.”
     The Irish state’s economic crisis stems from the madness in joining the euro zone in 1999, impelled by the long-standing Eurofanaticism of Fianna Fáil, Fine Gael and the Labour Party and the leadership of the Irish Congress of Trade Unions.
     By abolishing the national currency at that time we adopted the currency of an area with which we did only one-third of our trade (i.e. exports and imports together). Another third of our trade was with Britain, and the other third was with the United States and the rest of the world.
     In 2010, two-thirds of our foreign trade was still outside the euro zone.
     The one-size-fits-all interest rate regime of the European Central Bank must always therefore be unsuitable for some euro-zone countries, for the seventeen economies concerned differ widely.
     Interest rate and exchange rate policy are fundamentally decided in the interests of the big states, for that is where most people of the euro zone live. Also, joining the euro zone led us to adopt negative real interest rates at the height of the “Celtic Tiger” boom and thereby to inflate the property bubble, which ultimately burst and left us broke.
     Abolishing the Irish pound was far worse that the blanket bank guarantee of December 2008, for if the country had not joined the euro zone there would not have been the pressure for the guarantee.
     The European Central Bank insisted on it, so that no Irish bank could be allowed to fail in case the German and French banks from which the Irish banks had borrowed would not be paid back.
     The Fine Gael-Labour Government, supported by the Fianna Fáil pretend opposition, have signed up to an amendment to the Lisbon Treaty to set up a permanent European Stability Mechanism from 2013, to which Ireland will be expected to contribute €9.8 billion but which will not have retrospective effect or alleviate the pain of the December EU-IMF stitch-up.
     The EU is determined that there will not be a referendum on this amendment to the EU Treaties.
     A breakdown of the euro zone could trigger chaos throughout Europe and beyond, a chaos that would endanger more than “just” social cohesion
     It is only a matter of time before the euro zone breaks up and some or all of its member-states leave it to re-establish their national currencies.
     The threat of default and of moving to re-establish the Irish pound is the principal weapon the Irish state has vis-à-vis the euro zone.
     Establishing an independent Irish currency, and with that its own credit and exchange rate policy, must be a central goal of all genuine Irish democrats, for without that there can be no truly independent Irish state.
     Having committed the act of utter folly of joining the euro zone in the first place, it would be foolish to pretend that one can get out of it without pain, especially when the powers that be have made such a mess of the Irish private banks and public finances.
     At present Ireland cannot restore its economic competitiveness by devaluing its currency, so it can become more competitive only by “devaluing”—that is, by cutting—people’s pay, pensions and profits instead for years to come.
     The main advantage of leaving the euro zone is that it would enable the Irish state to resume control of its money supply and credit and thereby stimulate domestic demand and employment, while simultaneously it could boost Ireland’s competitiveness by devaluing the exchange rate.
     The advantage of a country having its own currency is that it enables its government either to control credit and issue money for purposes of job stimulus and the like through varying the rate of interest or to influence its competitiveness with other economies by varying its exchange rate.
     The main drawback is that much of the state’s foreign debts would be in euros, if the euro zone still existed, and would be expensive to pay off in a depreciating currency. On the other hand, the boost to competitiveness and exports arising from having a more suitable exchange rate than the euro-zone one should enable the Irish state to earn more foreign currency with which to pay those debts.
     If the euro zone breaks up, a planned dissolution and an ordered reapportionment of debts would clearly be better than a disorganised one.
     People should remember also that the only period in the ninety-year history of the Irish state when it used its monetary independence, followed an independent exchange rate policy and effectually floated the currency—from 1993 to 1999—gave us the “Celtic Tiger” rate of economic growth of 8 per cent a year, until that was destroyed by the bubble induced by the low interest rate of the euro zone.

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