Mick Wallace (Wexford, Independent) | Oireachtas source

If the Taoiseach ignores the irreparable social damage austerity has caused and the destruction of our domestic economy, the test of whether austerity and structural reforms are working, according to those who manage to live out their existence in the financial bubble, is the ability of countries that have received bailouts to return to the capital markets. If this means anything, it must be that a country can borrow long-term funding from private investors at a sustainable interest rate that roughly resembles what it paid in the past. In 2005, Ireland could borrow for ten years at under 3%. Right now, it's notional ten year borrowing costs are 4.3% and may be higher in practice. If we find ourselves borrowing at rates close to double those for the stronger countries, we will continue to play catch up, falling further behind all the time. If the European Union is to take best care of all its members, there will have to be some form of debt mutualisation. The alternative will leave us permanently on the periphery.

It was interesting to read the views of leading Financial Times correspondent, Wolfgang Münchau on Monday, when he said at the European summit that the German Chancellor said she rejected a mutualisation of debt and hidden transfer payments. In other words, she will reject a bank resolution mechanism that does what such a policy is supposed to do, take taxpayers' money and rescue a bank. Without a real resolution mechanism, there can be no banking union either, so what happened last week was that the political process stalled in a very big way. What was agreed last week is virtually cost-free, a single supervisory mechanism for about 2% of the banks in the Eurozone and based at the ECB. The common supervisory structure will affect between 100 and 150 banks out of a total of 6,000, those with assets of more than €30 billion. The €30 billion will become a target to circumvent. The practical outcome of this agreement will be a two-tier banking system, one for large banks and one for small banks. The ECB will deal with failing banks just as the Eurogroup has been dealing with failing states. It will replace existing debt with new debt and impose conditions. Just as the eurozone will try never to allow a member to default, the ECB will never close a bank, no matter what its problems. Bank resolution becomes a euphemism for exactly the opposite. This is about the pretence of resolution, not real resolution.

That Financial Times commentator is well respected and he is not very impressed by what happened at the Council meeting last week. If we are to look at the status quo for the foreseeable future, continuing to drive down earnings and undermining the social welfare system, allowing women and children to suffer most from austerity, the brainchild of today's version of neoliberal thinking - austerity - will lead to the price being paid as a result of our adherence to the European powers being too high.

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