Ireland’s rebound is European blarney
In a column written for the New York Times, Fintan O’Toole argues that Ireland is suffering to maintain an unreal image of slimmed-down perfection
Behind both of these propositions looms the great contradiction in the supposed success story of Irish austerity. It was austerity only for citizens.
Running parallel to all the cuts in public spending and all the calls for fiscal responsibility has been a program of spending so lavish that it makes a drunken sailor look stingy. One part of the troika program was to cut wages, welfare, health care and education. The other was to insist that Ireland continue to put vast resources into its teetering banks, including the notorious, now liquidated, Anglo Irish Bank.
The policy of No Bondholder Left Behind, on which the European Central Bank insisted, has been staggeringly expensive. To put it in perspective, the European Union has just agreed to create a fund of $75 billion to deal with all future banking crises in its member states. Tiny Ireland has spent $85 billion bailing out its own banks.
Particularly galling to most Irish people is that there is now an almost casual admission that this was a pretty crazy idea. Olli Rehn, the European Union’s economic affairs commissioner and one of the chief architects of Irish strategy since the crash, now says, “In retrospect, I think it is quite easy to spot some mistakes like the blanket guarantee for banks.” This admission, though, does not imply any change of policy. “But that is now water under the bridge,” he went on to say, “and now we have redirected the river.” Ireland, Mr Rehn reassured us, is in “a better place for the moment.”
But the river has not been redirected: A torrent of debt continues to flow from the catastrophic decision to save bad banks at all costs. Hopes that Ireland’s debts might be alleviated by its European partners in recognition of the country’s role in saving the euro are now fading.
Little Ireland took one for the team. In return, it gets a pat on the head and the dubious pleasure of being called a success story.
This is why, in the end, the austerity program has not succeeded even in its basic aim of bringing down Ireland’s sovereign debt, which actually rose sharply over the last five years. In 2009, it was 64 per cent of GDP. Last year, it peaked at 125 per cent. The debt has doubled while public spending has been slashed.
In this, Ireland may be a model indeed: suffering to maintain an unreal image of slimmed-down perfection.
Fintan O’Toole, a columnist for The Irish Times, is a visiting lecturer at Princeton.