Central Bank insists austerity is only real option

Fiona Muldoon tells MacGill summer school Government must get State’s finances in order

Fiona Muldoon of the Central Bank who argued  the Government has no realistic option but to continue its policy of austerity. Photograph: Cyril Byrne/The Irish Times

Fiona Muldoon of the Central Bank who argued the Government has no realistic option but to continue its policy of austerity. Photograph: Cyril Byrne/The Irish Times

Fri, Aug 2, 2013, 14:13

A senior Central Bank official today said the Government has no realistic option but to continue its policy of austerity.

Fiona Muldoon, Central Bank director of credit institutions and insurance supervision, insisted there is no alternative to paying down our debts and getting the State’s finances in order.

“The real choices to be made are whether some areas should be cut more than others or in how much we cut and whether we get value for money in what we spend,” she told the final day of the MacGill summer school in Glenties, Co Donegal. “That is a matter for democratically elected government and its electorate.”

During a session on restoring confidence in the financial sector, Ms Muldoon said a stable credit system was vital. “It is too easy to criticise the regulatory system, but much harder to put forward positive proposals which would oversee Ireland’s financial services sector,” she said.

She said she looked to a future where those in the financial sector would look to regulation as sensible parameters rather than as a contest between those in the sector and those attempting to govern it.

Meanwhile Siptu president Jack O’Connor warned austerity is a form of violence against the people. “This is a brutal recalibration of economies to suit the euro rather than the other way around,” he said.

“It is the Americanisation of Europe – even the Ryanair-isation of Europe,” the union leader added.

“Austerity is never actually societally neutral,” he warned. “It is a violence perpetrated against working people and those who depend most on public services.

“Until now at least, it has been administered through a deadly concoction of fiscal retrenchment accompanied by Labour Market Reform – a euphemism for the most sustained attack on the gains made by organised workers since the second World War.”

In a passionate speech against current Government policy, he added: “Unless there is a change of course entailing some sort of write off or mutualisation of debt, accompanied by a major fiscal initiative to facilitate the generation of jobs and growth, thus enabling countries to manage and reduce their debt to GDP ratio, it will end in the demise of the euro or the collapse of the democratic system itself, in some countries at least, or both.”

It may not happen today or tomorrow, he warned. “But more likely following a prolonged period of stagnation and anaemic growth interspaced by recurring false dawns, which will always be heralded as ‘the end of the recession’. Indeed we may be entering such a false dawn now,” he said.

“I don’t do optimism. I do realism which if often confused with pessimism,” he said, claiming Ireland’s “comfortable voices” are blackmailing the Government to screw the ordinary man.

“Social Democracy is committing political suicide as its attempt to ameliorate the impact is mistakenly perceived as collaboration, no less here than anywhere else,” he added. “We do need assistance on the bank recapitalisation, otherwise we are condemned to bear an impossible burden for more than a generation in a low growth, low inflation environment, if we do not succumb to it altogether.

“While the Government does not have a great deal of leverage, it does have some, because the failure of our programme could bring down the whole euro zone pack of cards. They must display nerves of steel in face of this tyranny. It is one thing having to inflict misery because it is the least worst of the available options, but going along with it when it is unnecessary is not only economically unsustainable but worse, it is morally indefensible.”

John Moran, secretary-general of the Department of Finance, said Ireland would emerge from bailout and governance by the Troika. But he added that a strong Ireland “was also dependent on a strong Europe” and the problems of the EU as a whole was on an entirely different scale to those faced in Ireland. That sense of scale needed fuller acceptance and understanding here at home, he said.Mr Moran said it was wrong to mock Ireland as a meek and subservient “poster boy for Europe”. He said the Government has no choice but to deliver a tough budget and that he believes the Irish people have the determination to see it through. “The actions undertaken have been and continue to be for the economic and social betterment of Ireland,” Mr Moran said. “It is imperative therefore that we remain committed to returning Ireland to a sound fiscal footing, that our better judgement is not clouded by wishful thinking and that the efforts up to now are now undone by complacency.”

Dr Alan Ahearne, an economics lecturer at UCG, accepted that although painful for the citizens, large-scale fiscal consolidation in Ireland since the bursting of the property bubble has been absolutely necessary to prevent outright national insolvency and a much worse economic situation.

“Without these adjustments, there would be no prospect of economic recovery in this country. Looking forward, the Government should continue in its efforts to restore order to the public finances, although given that much progress has been made, there is a legitimate debate about the optimal pace of fiscal consolidation over the next few years.”

Actions at the European level will be critical for recovery in Ireland, he said. “But there are resources here at home that we could perhaps use more effectively to better position Ireland to take advantage of a European recovery, if and when it comes.”

This evening’s final session of the 2013 summer school will open the topic more widely, asking: Where are we going?

The keynote address will be given by Maureen Gaffney.

Also speaking will be Gerard O’Neill, chairman of Amarach; and Tony Griffen, founder of SOAR and author.

Brother Martin OSB, headmaster of Glenstal Abbey School, will also make an address, as will Eleanor Fitzgerald Loftus, a GP and coroner in Co Mayo. The final address will be made by Vincent P Martin, a barrister and co-founder of New Beginnings.

The final session will be moderated by Judge Yvonne Murphy.