September 2014        

Who really owns us?


It was announced last month that the value of Government bonds at the end of last May was €113.216 billion—120 per cent of the value of the country’s annual economic output. 53 per cent of these bonds are held by foreign individuals and institutions.
     Along with Portugal, Ireland is one of the EU’s most indebted countries, and it has recently taken to share-switching to stave off an inability to pay its creditors. Short-term bonds due to be cashed in in 2016 are swapped for ten-year bonds, and so the evil day is postponed.
     Who are these bondholders, whose enrichment is bankrolled by our taxpayers and the elimination of the hard-won social and economic rights of our working people? Which class is grabbing significant aspects of our material infrastructure (hospitals, transport, water supply and public utilities in general) as the austerity-driven need for quick cash leads to galloping privatisation and the consequent destruction of living standards?
     Germany leads, with fifteen bondholders. (Is this why the Government submits its budget for approval to the Bundestag before announcing it in Ireland?) France is next, with ten; Britain is third, with nine. Switzerland has six; the United States has only three. Other countries include Spain, Belgium, Portugal, the Netherlands, Finland, Norway, Sweden, Poland, South Africa, and Italy.
     This data applies to 2010, and may be be approximate; but it is unlikely to have changed much qualitatively since that time.
     All these international parasites thrive on the Government-sponsored exploitation of Irish working people.
     A latter-day addition to this crew on the international capitalist circuit is the aptly named vulture capitalist. This bird of ill-omen buys government debt, sold as bonds and shares, at knock-down prices, with the calculating hope that he can sell when their value appreciates considerably. Heavily indebted countries like Ireland, desperate to acquire capital, sell cheap in order to acquire capital, holding out the promise of future appreciable gains for the investor. The vulture capitalist takes a calculated risk; but—unlike the gambler on horses—he is most unlikely to lose his bet!
     Argentina’s debt crisis reminds us uncomfortably of the weakness of Ireland’s situation and that of other European peripheral countries. When wealthy bondholders (and just one billionaire in the case of Argentina) decide, for whatever reason, to pull the plug on a developed economy, it sinks into ruin.
     Argentina incurred heavy debts during years of neo-liberal economic policies imposed by the International Monetary Fund. The grave economic crisis of 2001 resulted in the biggest suspension of payment of sovereign debt in world history. In 2005 Argentina—unlike super-submissive Ireland in its negotiations with EU bodies—renegotiated its debt. The majority of its creditors took a “haircut” of 70 per cent.
     However, the American hedge fund Elliott Management, operated by Paul Singer, doesn’t believe in such “haircuts.” This billionaire spent ten years trying to get the $1.3 trillion dollars he feels Argentina owes him, whose payment would ruin the country. Argentina offered to pay him $300 million for bonds he had acquired in the first place for $48 million.
     Last June a New York court, backed by the Supreme Court, upheld Singer’s claim for $1.3 trillion and blocked the payment of other creditors. In the absence of a standard international mechanism for dealing with bankrupt countries, Argentina applied last month to the International Court of Justice in the Hague to seek resolution of the issue.
     World financial interests blame this crisis, of course, on bad fiscal management by Argentina, which insists that it has adhered scrupulously to the conditions of the restructured debt. The record supports this claim. Argentina blames instead the ruthlessness of vulture fund investors, and the US legal system that protects them, insisting on this exorbitant payment.
     If creditors know that a few vulture funds can lead to a large-scale suspension of payments, it is highly unlikely that they would seek to arrive at an accommodation with other insolvent countries in the future, which could include Ireland.
     The IMF and the international banking system can be blamed for failing to devise a just mechanism for saving bankrupt countries. But realistically, what can be expected from these organisations, which justify their very existence by protecting and advancing the interests of neo-conservative (wrongly called “neo-liberal”) capitalism globally, who inevitably side with the vultures rather than their victims, and for whom the living conditions of the real wealth-creators, the working class, are matters of absolutely no consequence.
[TMS]

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