Austerity is no credible strategy for getting public finances under control

Fri, May 18, 2012, 01:00

OPINION:You cannot tax your way out of a recession. Investment in job creation is crucial

ON SATURDAY last when I finished reading The Irish Times’s editorial on Sinn Féin, I gave a wry smile. While I strongly disagree with its analysis, I couldn’t but think of it as a back-handed compliment.

There has been much commentary in the papers about Sinn Féin doing well in the opinion polls. The editorial was one take on the reasons for our apparent success. To be honest, and given the hardship faced by people across the country, I am not so interested in those stories.

What I am interested in is reversing the social and economic damage done to our country by decades of political mismanagement.

When our new team entered Leinster House last year we said we would oppose government decisions that were bad for citizens and bad for the country. We promised to support any proposal that would deal with the causes of the crisis and improve the wellbeing of ordinary people.

We have kept that promise.

Unfortunately, the many promises made by the Labour Party and Fine Gael have not been kept. Instead of a “democratic revolution” we have had a continuation of the same failed policies of bank bailouts and crippling austerity that was the hallmark of the last years of the Fianna Fáil/Green Party administration. In 2011 Fine Gael and Labour poured €21.4 billion into the banks, including €3.1 billion into Anglo Irish Bank. In the same year the Government invested less than €500 million directly into job creation.

With more than 400,000 on the Live Register and 1,500 people emigrating every week, it is hard to understand why the Government would not invest some of this money into job creation. Indeed, both Fine Gael and Labour promised multibillion-euro investment programmes during the election campaign. How quickly they have changed their tune once in office.

If The Irish Times’s leader writer thinks that highlighting such facts is evidence of populism, then so be it. For me, such comparisons demonstrate the bad political choices being made by a government that promised much and, to date, has delivered little.

The same point can be made in relation to the austerity treaty. I firmly believe this treaty is bad for Ireland and the EU. Of course we need rules if the single currency is to survive. Of course we need to reduce the deficit. Of course we need a credible strategy for regaining access to the sovereign bond markets.

Unfortunately, the austerity treaty will do nothing to assist us in achieving any of these objectives. In fact, there is strong evidence to suggest it will make matters worse. You cannot cut and tax your way out of a recession. Of course we need to reduce waste in public spending. Of course we need to increase our tax take. But unless these policies are combined with Government-led investment in job creation, they will fail.

In our pre-budget submission last November, we outlined how we would meet, in a fair manner, the Government’s own deficit reduction target for 2012. Crucially, we also outlined how an investment package of €7 billion taken from the National Pension Reserve Fund and the European Investment Bank could save and create up to 100,000 jobs.

More than €24 billion has been wrenched from the economy since 2008. A further €8.6 billion will be cut from now until 2015. If we sign up to the treaty, a further €6 billion of adjustments will be required post-2015.

All of this will damage the domestic economy, while a euro zone-wide contraction imposed by the austerity treaty will close off valuable export markets.

As for the issue of accessing emergency funding in the future, I have been genuinely surprised at the uncritical way in which The Irish Times has reported this matter. The necessary legal instruments required to bring the ESM (European Stability Mechanism) into being have not yet been dealt with by the Oireachtas. The ESM and the link between ESM funds and the austerity treaty are open for change. The question of future access to emergency funds is entirely in the hands of the Government.

The Irish Times is entitled to its opinion. What surprised me was the accusation that I and my colleagues are behaving in a shallow and cynical way.

Sinn Féin TDs are neither cynical nor shallow but committed to building a prosperous and equal Ireland. Maybe that is why we are doing well in the polls.

Pearse Doherty TD is Sinn Féin’s spokesman on finance

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