The new enticement of more bailout money and the easy option of living in debt will further ruin us
10 September 2023
What if Mr Mario Draghi's solution is the wrong one? It has happened before. In fact, all the solutions to the euro crisis so far have failed, which is why we now have the impossible offer of 'unlimited' bond buying, with a penal clause attached, that the bankrupt countries whose bonds will be bought have to sign up to for extensions to their terms of servitude.
The bond buying will not be unlimited. The use of that word by Mr Draghi was a deliberate mistake, but a beguiling one, and ensured the positive reception his press conference received. Mr Draghi is not going to buy unlimited amounts of worthless bonds from Spain and Italy. Our bonds are slightly different. They have the semblance of negotiability because we are being such "good boys" and will helpfully shoulder more high interest debt in order to co-operate with this latest scheme. In so doing we will contribute to what one commentator described as Mr Draghi's "three-card trick": the money will flow in a circle between the European Central Bank, the distressed banks that are being helped yet again, and the bankrupt states whose continued membership of the euro is being artificially sustained at an impossible cost to Europe if the process is 'unlimited'.
On the basis of this blatant trickery, and with the approval of the German constitutional court if it approves the European Stability Mechanism (ESM), we will have a further comic scene put into the drama ruining our lives.
The ESM will become a new, separate and largely self-regulating version of the European Central Bank, deriving its cash under the equivalent of a banking licence. We helped to legitimise the ESM by passing the fiscal treaty referendum. And though our Supreme Court judged the ESM to be legal in Ireland, it referred its legality under EU law to the European Court, thanks to Thomas Pringle. This will remain a problem after the German Constitutional Court has judged on the ESM since that court's judgment applies only to German law.
The ESM will draw vast sums from eurozone states, including distressed ones, who then need all of the money, for which we have endorsed an unlimited facility, in order to recycle it to the distressed states. Looking at the level of debt in Greece, Italy and Spain, it will -- if Mr Draghi stands by his 'unlimited' guarantee -- run out.
Mr Draghi was talking big last week. He was putting your money and my money up against the financial pirates whose target is a simple one. It is the whole of the circulating euro currency between those who are being bailed out and have to pay back their debts, the banks for whom we are doing it, and the countries that will soak up the cash as fast as it is circulated.
Mr Draghi has made a breathtaking leap forward in promising to purchase troubled EU bank bonds as a buyer of last resort. He will require exclusive decision-making on when to engage in purchases, the amounts purchased, and when the ECB stops, and we can shut up about this further control on our destiny. Actually, we have already shut up about it. We put in place the structures that will recirculate the money -- including most recently the ESM -- because it offers an easy way out of the underlying domestic need to spend less, to keep spending in line with tax revenue and to cut down on borrowing.
Ireland faces the new enticement of more bailout money and the easy option of living in debt forever.
Worse results will come from this, but it offers those in power another path to follow, polite and agreed on all sides, that will further ruin us by choosing the easy options offered to the electorate last year.
As Colm McCarthy has put it, bluntly but truthfully, last Sunday in the 'Sunday Independent', our immediate, huge problem as we face the Budget is this absurd package of electoral promises on public service pay, social welfare rates and income tax. Social welfare deserves to be saved but reformed as well.
As McCarthy says, in the national interest the country needs to abandon the promised extravagance and deal seriously with getting us back to a balanced and sane management of our affairs. As another excellent commentator, Eddie Molloy, put it, we need to start by ditching the Croke Park Agreement. This wretched example of state prodigality, inherited from the previous administration, should be buried in the past.
The main problem is Labour. Although Fine Gael is being circumspect, with only a few outspoken but courageous voices -- James Reilly and Leo Varadkar -- confronting this issue, the party knows that we are still tinkering with our problems instead of stating our intention to increase income tax and judiciously cut social welfare while also reforming it.
LABOUR is caught between an essentially conservative party which had had almost overwhelming approval for what it stood for in the last election, and the hard left, ably led by Joe Higgins and a couple of other good socialists alongside Sinn Fein, but otherwise consisting of an extreme rabble who are making life difficult for the junior partner by holding them to nonsensical promises.
Labour is divided, its radical side represented by the presence at the top of a leadership that comes from Workers' Party and Democratic Left roots, and is attempting to protect its presence in government by a strategy over essential cost-cutting that is increasingly mistaken (there was a glimmer of hope from Ruairi Quinn at the weekend, acknowledging the need for Croke Park changes).
The pressure on Labour of politicians further to the left and trade unions with a determined self-interest that is a disgrace in its 'not-an-inch' view of the Croke Park deal, together with fear of Sinn Fein and of a possible revival of Fianna Fail, are balking at the obvious needs of our economy. If we are to get out of Mr Draghi's "three card trick", which in the long run will be a death trap, we must change direction.
The bond buying will not be unlimited. The use of that word by Mr Draghi was a deliberate mistake, but a beguiling one, and ensured the positive reception his press conference received. Mr Draghi is not going to buy unlimited amounts of worthless bonds from Spain and Italy. Our bonds are slightly different. They have the semblance of negotiability because we are being such "good boys" and will helpfully shoulder more high interest debt in order to co-operate with this latest scheme. In so doing we will contribute to what one commentator described as Mr Draghi's "three-card trick": the money will flow in a circle between the European Central Bank, the distressed banks that are being helped yet again, and the bankrupt states whose continued membership of the euro is being artificially sustained at an impossible cost to Europe if the process is 'unlimited'.
On the basis of this blatant trickery, and with the approval of the German constitutional court if it approves the European Stability Mechanism (ESM), we will have a further comic scene put into the drama ruining our lives.
The ESM will become a new, separate and largely self-regulating version of the European Central Bank, deriving its cash under the equivalent of a banking licence. We helped to legitimise the ESM by passing the fiscal treaty referendum. And though our Supreme Court judged the ESM to be legal in Ireland, it referred its legality under EU law to the European Court, thanks to Thomas Pringle. This will remain a problem after the German Constitutional Court has judged on the ESM since that court's judgment applies only to German law.
The ESM will draw vast sums from eurozone states, including distressed ones, who then need all of the money, for which we have endorsed an unlimited facility, in order to recycle it to the distressed states. Looking at the level of debt in Greece, Italy and Spain, it will -- if Mr Draghi stands by his 'unlimited' guarantee -- run out.
Mr Draghi was talking big last week. He was putting your money and my money up against the financial pirates whose target is a simple one. It is the whole of the circulating euro currency between those who are being bailed out and have to pay back their debts, the banks for whom we are doing it, and the countries that will soak up the cash as fast as it is circulated.
Mr Draghi has made a breathtaking leap forward in promising to purchase troubled EU bank bonds as a buyer of last resort. He will require exclusive decision-making on when to engage in purchases, the amounts purchased, and when the ECB stops, and we can shut up about this further control on our destiny. Actually, we have already shut up about it. We put in place the structures that will recirculate the money -- including most recently the ESM -- because it offers an easy way out of the underlying domestic need to spend less, to keep spending in line with tax revenue and to cut down on borrowing.
Ireland faces the new enticement of more bailout money and the easy option of living in debt forever.
Worse results will come from this, but it offers those in power another path to follow, polite and agreed on all sides, that will further ruin us by choosing the easy options offered to the electorate last year.
As Colm McCarthy has put it, bluntly but truthfully, last Sunday in the 'Sunday Independent', our immediate, huge problem as we face the Budget is this absurd package of electoral promises on public service pay, social welfare rates and income tax. Social welfare deserves to be saved but reformed as well.
As McCarthy says, in the national interest the country needs to abandon the promised extravagance and deal seriously with getting us back to a balanced and sane management of our affairs. As another excellent commentator, Eddie Molloy, put it, we need to start by ditching the Croke Park Agreement. This wretched example of state prodigality, inherited from the previous administration, should be buried in the past.
The main problem is Labour. Although Fine Gael is being circumspect, with only a few outspoken but courageous voices -- James Reilly and Leo Varadkar -- confronting this issue, the party knows that we are still tinkering with our problems instead of stating our intention to increase income tax and judiciously cut social welfare while also reforming it.
LABOUR is caught between an essentially conservative party which had had almost overwhelming approval for what it stood for in the last election, and the hard left, ably led by Joe Higgins and a couple of other good socialists alongside Sinn Fein, but otherwise consisting of an extreme rabble who are making life difficult for the junior partner by holding them to nonsensical promises.
Labour is divided, its radical side represented by the presence at the top of a leadership that comes from Workers' Party and Democratic Left roots, and is attempting to protect its presence in government by a strategy over essential cost-cutting that is increasingly mistaken (there was a glimmer of hope from Ruairi Quinn at the weekend, acknowledging the need for Croke Park changes).
The pressure on Labour of politicians further to the left and trade unions with a determined self-interest that is a disgrace in its 'not-an-inch' view of the Croke Park deal, together with fear of Sinn Fein and of a possible revival of Fianna Fail, are balking at the obvious needs of our economy. If we are to get out of Mr Draghi's "three card trick", which in the long run will be a death trap, we must change direction.
