Seanad debates

Thursday, 2 December 2010

EU-IMF Programme for Ireland: Statements

 

12:00 pm

Photo of Dan BoyleDan Boyle (Green Party)

In the 1980s a friend of mine with whom I shared parallel periods of unemployment developed a deliberate Spoonerism for the phrase "fiscal rectitude", the phrase de rigueur at the time. Given our mutual situation, he constantly referred to it as "rectal fistitude". It was amusing then, but is probably more apt now. The situation this country is experiencing is formed on pain and on more anticipated pain.

The programme documents for financial support that we received carry a caveat on the front cover written in red ink. It advises us that the documents remain subject to editorial change and the final documents will be laid before the Houses in due course. I find that oddly reassuring, because I believe that during the course of the three years the circumstances in which the deal has been agreed may change. I accept what Senator Ross has said in terms of the growth projections, but while they are ambitious, they have been downscaled from original projections. The growth rate for 2011 cannot be taken as being the average growth rate for the three to four year period. That said, there is something in the programme that allows us a little leeway and the extension of the time period to 2015 will allow for some of that growth to happen. While the average interest rate of 5.8% is high, it is considerably lower than what the markets would make available to us in the short term and lower than the rates for the countries mentioned by Senator Ross, Portugal, Spain and Italy, in the short and medium term. That was the option before us.

I agree the set of circumstances that have arisen constitute a humiliation for us. This is something many economies have had to face in recent times. The United Kingdom faced it in the 1970s. Latvia faced it and had its Government re-elected. Hungary is in the process of facing it. Among the many ironies of the situation is that if Ireland had as a country gone directly to the IMF, it would have got a far better interest rate. However, behind all of this is the fact we are a member of a common currency and the combination of our failures over the past ten years or so, particularly the failure to regulate our banks properly. As a result, the weaknesses inherent in the single currency have been visited upon us. Senator Ross has represented it as us taking most of the weight and the first blow in the defence, but it can be argued differently. I suggest that because we have had to resort to this loan we are now, at least for the short term, out of the immediate firing line. The pressures that will be felt in the ongoing battle will be felt by the economies of Portugal, Spain, Italy and key economies such as Belgium.

If we do not look at this crisis in the wider European sense, we could be guilty of the type of political debate we see in our near neighbour, a type of little Englishness or little Britishness in the way we approach economic matters and deal with the wider world. Senator Ross referred to the fact that there might have been interests at play in the additional loans given by the United Kingdom, in terms of the Royal Bank of Scotland interests, and by Denmark, in terms of the ownership of National Irish Bank by Danske Bank. I do not know of any particular interests on the part of the Swedish Government to participate in this package, unless it is protecting the interest of IKEA. There is good will out there and it is necessary to look at the wider European problem. If we understand that, we will go some way towards solving the problem.

I share the view of Senator MacSharry that if we are optimistic we can and will come out of this difficulty. Some of the reason for the difficulties we continue to have - Senator Ross mentioned this on the Order of Business today - is that we are too slow and reluctant to make the necessary structural changes. When structural changes have been mentioned in the context of this programme, they have been in the context of competitiveness, minimum wage and social welfare payments. However, the real and continuing structural problems are those within our financial services industry. The culture and attitude that existed remain and the unwillingness to be involved in real reform remains. We have repeated this constantly in debate on the economy in this House. If the past three to four years have just been about a fire brigade or Band Aid exercise that puts the same regime in place for the future as brought us to this problem in the first place, that will be the ultimate political failure of the country.

I look forward to the legislation that will underpin this programme, the banks Bill, employment and competitiveness legislation and legislation on the pensions fund and minimum wage. I am slightly taken aback by the call for a single vote on the package being presented to us because every element of the package must be voted on following the budget. We will have additional legislation on each of the areas mentioned and that will be the opportunity for both Houses of the Oireachtas to put on their records how we feel. On the Order of Business today, Senator Bacik, on behalf of the Labour Party, talked about the need to discuss the alternatives. We have not lacked an opportunity to know what are the alternatives. However, there has been a lack of honesty with regard to the possible consequences of those alternatives. I, as well as many other members of society, would like to see an option that provided better burden sharing. We would like to see the role of the European Central Bank brought more into focus and to see the bondholders in many of our institutions share the burden. I do not rule it out that these options are off the table. If the situation changes, all of the options must be re-examined.

The major element of the money we are taking through this loan relates to our own budget facility, €50 billion of the €85 billion. That has come about mainly as a result of a culture of spending more and taxing less over a period of a decade. We should take a look a the reliance we had on property taxes, such as VAT on the sale of new housing and stamp duty, which in 2007 alone raised €6.8 billion. This year it only amounts to €1.6 billion. This brings us to the essence of why the country is suffering and why the hole, in terms of our annual budget, is €19 billion. Over the next three to four year period we must tackle this deficit. Much of this programme contains measures the Government had already indicated it intended to put in place, such as the €15 billion adjustment, €6 billion of it up front, and the fact that we need to get that fiscal health as soon as possible. Because of that, I believe the deal is not the worst deal available.

There are elements in the programme that cause me to bristle and I wonder about some of the negotiations although, unlike Senator Ross, I have total confidence in our negotiation team. I contrast the Secretary General of the Department of Finance, the head of the NTMA and the Governor of the Central Bank with their predecessors in 2008. I realise I am breaking the convention that one should not criticise the work of high level public servants, but the people concerned did not serve the country well. Their replacements are infinitely better and the confidence they inspire in our future will outlast the changing Governments of the next decade. That is the confidence we need to inspire in the political system with this package.

I have repeatedly made reference to the Order of Business and the recurring debate on the state of the nation and the economy. While the immediate future appears difficult, a key theme on the Order of Business today was the reaction of Irish people to the difficult weather conditions. An unfortunate narrative suggests we have failed as a country and that we lack the means to recover, but the co-operation Senators described in local communities illustrates our industriousness and ability to work together. If that is happening without recourse to the political system and despite a high level public service approach that dominates future policy direction, so much the better. The ones in whom we need to believe are the people and when they take responsibility for our situation, this will be a better country. That will happen soon.

Comments

No comments

Log in or join to post a public comment.