December 2014        

Ireland’s odious debt: A wake-up call

Tomás Mac Síomóin

Those who think that only the “loony left” want to cancel or restructure Ireland’s odious debt have another think coming. For influential—and unlikely—voices on the other side of the ideological divide are calling for just that.
     Recent articles in two influential bastions of economic journalism, Bloomberg in the United States—the premier global source of investment information—and the Financial Times in Britain, call for the Troika to restructure the external debt of some countries that are in danger of defaulting. They fear that reaction to EU austerity policies will lead to left-wing governments in some European countries.
     The meteoric rise of Podemos (“we can”) in the voting intentions of Spaniards worries defenders of current restrictive EU economic policies. Scarcely eight months old but with 28 per cent of the potential vote, it now leads the ruling conservative PP, at 26 per cent, while the main opposition party, the “socialist” PSOE, trails at 20 per cent.
     The growing popularity of Podemos has to do with its promotion of participatory democracy, a programme of radical redistributive policies, and a gradual introduction of a universal basic income. The implementation of these policies is to be paid for by taxing the rich and big corporations, ending corruption, and restructuring Spain’s massive sovereign debt.
     So an unexpected heading, “The radical left is right about European debt,” grabbed the attention of surprised Financial Times readers recently. This article eulogises the Podemos debt-restructuring proposal. Of all radical European policy statements, according to the writer, Wolfgang Mϋnchau, the Podemos programme is the most promising. He supports its proposals: renegotiation of the rates of interest on Spanish sovereign debt, an extended time limit for repayment, and refusal to pay that part of the debt that was not directly incurred by the Spanish taxpayer. The writer considers these measures “perfectly legitimate,” comparing them with the stance of the traditional “centre-left” parties “who would never dare to attempt anything like that if they came to power.” He believes there is a “100 per cent probability” of such debt restructuring.
     A recent Bloomberg editorial asks investors and creditors to go easy on Greece. If not, it is argued, they could lead the euro zone to a disaster; “they must stop asking for the impossible and look for some way to alleviate that country’s debt.” The latest offer by the Troika to Antónis Samarás, the conservative Greek prime minister, is “toxic.” It demanded a reduction of the debt through applying yet more austerity and cuts in public expenditure. In exchange, a new rescue package was proposed and an emergency line of credit.
     This approach, according to Bloomberg, would plunge the country into “political instability,” so that the left-wing Syriza of Aléxis Tsípras could edge the “moderate” Samarás aside. Bloomberg’s fear is that an expanding wave of defaults will reach Spain and Portugal. “If the markets begin to fear defaults, the storm could sweep Europe to another crisis.”
     Bloomberg asks creditor-countries, beginning with France and Germany, to exonerate Greece from some of its debt to avoid “irregular defaults.” The sooner this need is recognised, the editorial concludes, the better chance there will be of avoiding a much worse catastrophe (presumably the ousting of the Samarás “moderates” and a debt-default domino effect). So the present ruinous debt repayment policy isn’t working in capitalist terms, according to these conservative commentators.
     Ireland’s massive debt per capita isn’t mentioned in these articles. But, according to Eurostat, the EU’s statistics agency, Ireland, with less than 1 per cent of Europe’s population, paid 43 per cent of the net cost of the banking crisis in all twenty-seven member-states: €41 billion out of €96.2 billion. That means that the cost of the bank bail-out was €8,956 for every man, woman and child in Ireland, compared with an EU average of €191.
     Maybe the country needs a massive left reaction, as in Spain and Greece, to confront this gross injustice inflicted by the Troika and an obsequious right-wing government on the working people of Ireland and begin to repair the damage already done.
     The “water crisis” campaign is important; but it needs broadening to encompass its root cause: Ireland’s odious debt and the vicious neo-liberal fiscal policies that—thanks to public apathy up to now—have led also to disastrous cut-backs in social, health and educational services.
     But a fight back is always possible if the people wake up—as the people of Spain and Greece are showing us!

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