Tom Fleming (Kerry South, Independent) | Oireachtas source

Prior to the Maastricht treaty the creation of the European monetary system in 1979 functioned fairly well due to the residual capital controls and the frequent exchange rate alignments. After 1987, however, the system became far more rigid while capital controls were abolished as a result of the Single Market programme. Countries were increasingly obliged to follow the German interest rate policy which became more restrictive in the wake of the unification of Europe. The subsequent collapse in 1992 and 1993 can be seen as inevitable since there was a limit to the extent to which the national governments were prepared to subordinate national monetary policy to the requirements of a fixed exchange rate regime or to tolerate higher interest rates and growing unemployment in order to stay pegged to the Deutsche mark.

In our case, within the eurozone, we have become victims of excessive lending and a rapid growth economy fuelled largely on the assumption that the lending was reckless and was channelled through the books of the banks and other financial institutions. The result has been a property bubble, wage and cost inflation, the loss of competitiveness, the eventual crisis associated with the rediscovery of risk, the reversal of capital flows and the insolvency of the banks through which the capital flows had been channelled. It is our misfortune that unlike Finland and for instance, even the United States and the UK we do not have our own currency to devalue in order to regain our competitiveness.

Since 2008 we have been pursuing a policy of disproportionate slashing of public expenditure. For such a strategy to succeed and to have any chance of working everything else has to go right. In particular, foreign economies must remain buoyant since export markets become vital when our own domestic economy is being squeezed. The chickens are now coming home to roost as a result of our compliance with European austerity since 2009 and 2010. This was egged on by the conservative-minded people who saw this as a great opportunity to shrink the State and at this stage it is an unmitigated disaster for the country. In order for such a strategy to work debt burdens also need to be reduced which is one reason among many why saddling the Irish taxpayer with the debts of the now defunct banks is unconscionable and unethical in the extreme.

The recent Croke Park II deal was rejected and that is a rejection of the servitude which the Irish people have had to endure over the past four years. Hopefully the Labour Relations Commission, with Kieran Mulvey, Kevin Foley and Anna Perry will succeed in achieving an amicable settlement with all the people employed in the public service through the revived discussions in which they are now engaged. If they achieve this they will have done what the Minister for Public Expenditure and Reform, Deputy Howlin, failed to achieve with his initial proposals in those talks. Some of the proposals put to nurses, teachers, gardaí and local authority workers and all the others employed in the public service were toxic.

We all recognise that the gap between current expenditure and revenue has to be gradually closed in the medium to long term but we cannot achieve growth in the economy and therefore growth in employment by this means solely. If this course is to be pursued further and is the only option we are going to take we will grind gradually to a halt, employment will grind down and eventually the economy will be ground down to the floor. The ECB should look at what the Fed in the US is doing under Ben Bernanke and the UK Central Bank under Mervyn King. Both have controlled policies of systematic quantitative easing, in other words, they are printing their own money. Although everyone realises that this is a policy that one can pursue for only two or three years at least it improves the liquidity in the economy. The problem in the eurozone is that there is a paranoid relationship with the German economic psyche which fears the slightest increase in inflation and no matter how irrational this may be or how short to medium term it has not allowed the ECB to pursue the policy being pursued in the United States and the UK.

In addition to this, the Central Bank, in association with the European Central Bank, should carry out an econometric analysis of the effects of a devaluation of the euro which would make exports for the eurozone more competitive. I support the motion tabled by Deputy Thomas Pringle and the Technical Group.

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