Tussles in Brussels
It’s just approaching noon in Brussels and the temperature has plummeted, with a fall of light snow.
Taoiseach Enda Kennyis due to arrive here at about 1pm local time for the latest attempt by the EU’s alchemists to magic away the eurozone crisis.
On a practical level, the fiscal compact, if its text is agreed later this evening, will not make a huge amount of difference to Ireland, in the short run. Sure, the debt brake of 0.5 per cent of GDP will necessitate a futher round of awful austerity measures. It’s like a struggling runner in the marathon coming up the 20-mile wall and being told: oh, by the way, you will be required to run another marathon, and possibly two, the moment after you finish this one!
What do we get in return? A decade of austerity. Very likely. A decade where we will to do no more than gouge at the margins of our unemployment problem? Probably? And the tragedy is that there will be intergenerational cleavage – parents well before retirement age being the bed-blockers preventing their own kids from gaining employment. There is a cogent argument that too much austerity stick and not enough stimulus carrot will actually exacerbate – and not reduce – the debt. The argument is that if you prune the tree too much, it withers rather than regrows. And that is the case that Spain is making at the moment – that with an unemployment level in the 20s, it cannot sustain any more cuts because that will lead to greater depression and a kind of vortex effect.
There’s a lot of stuff (and guff) spoken about growth and jobs’ strategies. But very few of them seem anything more graspable than vague words and platitudes. All the stuff we hear about training and upskilling and reorientation is all very well but the programmes are so modest (and so poorly financed) that they will make a difference for (at most) a few thousand people (and that’s out of 400,000 on the dole queues).
My own opinion for some time is that most people are focusing on the bank bonds and the 2008 guarantee as if they were the cause of all our problems. They were part of the problems but were also the symptoms – like a botched operation on a serious ailment.
Enda Kenny was loose and foolish with his comments in Davos last week when he more or less said everybody went mad with borrowing. He was correct in so far as some (and more than we care to admit) people went mad and overextended themselves. My colleague Colm Keena had an excellent piece on Saturday showing how credit card debt exploded in the decade after 1996. I remember getting my first credit card around that time. It had a strict £500 spending limit on it. Five or six years later, I was getting letters from banks and finance companies, offering credit limits of €20,000, with a minimum of vetting.
People got duped by the whole property thing. And some duped themselves. When you removed property from the equation, Ireland had moved up the ladder since the 1980s but at a far more modest pace that any of us would admit. And the readjustment to that level will be very painful.
Morally, it’s unconscionable that we have to shoulder the debts of the banks and of the speculators. But we are also on the hook collectively for the debts (though to a much smaller extent admittedly) to debts of people who got carried away and overextended themselves.
But we dont’ have a choice. The ECB said no and that was that. Successive governments have been too timorous when it came to facing down Frankfurt. Indeed, Morgan Kelly had the best line on it when he said all Ireland was doing was rolling around on our back so that our European paymasters could tickle us in the tummy for being so obedient and following every command.
The problem with the alternative scenario is that nobody knows where it will bring us. Would it be a credit event that would pass almost unnoticed or would it start flipping over all the other precarious dominos that hold the whole of the European banking system together? Nobody has been able to give an authoritative answer to that and that’s why it has not been tried.
And our great prize? Well Kenny and Michael Noonan have been telling us (in a few different ways) that they are banging on doors to get concessions on the infamous Anglo Irsh Bank promissory note. The loan is for €30bn but the interest rates were hammered out before we went into the bailout programme so they are exorbitant (almsot €17bn).
This has been the focus of the Government’s efforts since last September. When the troika came to town earlier this month, Noonan signalled some kind of a breakthrough (a joint paper being prepared by the Troika). Does it mean we will get some slack? For guidance, refer to the New Testament and its notes on the Second Coming. It may happen, but it’s not going to happen anytime soon. The only way can be through some leeway that will come via a wider EU deal.
In any instance, as snow falls outside , the fiscal compact will be agreed later this evening. What it will amount to is a survival guide for traveling through the tundra we have become stranded in.