Irish low-tax regime problematic - EU adviser

Ireland's use of competitive tax policies are in conflict with the concept of European solidarity, a Dulbin conference was told. COLM KEENAreports

THE IRISH economic model is problematic in the context of European integration, a senior adviser to the Party of European Socialists told a seminar in Dublin yesterday.

Prof Maria Joao Rodrigues said that Ireland’s use of competitive tax policies was in conflict with the concept of European solidarity.

Prof Rodrigues, who has acted as an adviser to the European Commission and to EU presidencies in relation to the Lisbon strategy for growth and jobs, presented a paper, A Progressive Recovery Plan for the European Union, to a seminar organised by the Irish think-tank Tasc, and the Brussels-based Foundation for European Progressive Studies.

She said the policy response to the current crisis required action on protecting jobs at the same time as seeking to support the banks, as otherwise the current recession would turn into a depression. The pursuit of deflationary policies would cause economic collapse, she said.

She said a European stimulus package could target energy, the creation of a smart economy, and climate change-related issues.

She said Ireland’s attempts to deal with its economic difficulties must be matched with a vision for Ireland’s future.

The general secretary of Ictu, David Begg, said it can never be “business as usual” for Ireland in the future, yet so much of the debate in Ireland was based on that idea. “We are basing the debate on a totally false set of premises,” he said.

He said if he could be sure that reducing Irish people’s wages in order to make Ireland more competitive internationally would work, he would be “okay with the idea”. However, Ireland was “caught in a false analysis”.

Prof Rodrigues said there were three scenarios for the European economy: long-term depression; the seizure of an opportunity to introduce reform; or a patchwork of the two.

Likewise with the European Union there were three scenarios arising from the economic crisis: fragmentation; a co-ordinated European response; or a patchwork response that might include the “bailing out” of some States.

She said Germany would impose constraints on countries that had to be bailed out. Also the failure to organise a co-ordinated response to the crisis would mean restructuring would be led by the most powerful countries and companies in Europe.

“Europe is at a crossroads because of this crisis,” she said. Uncoordinated national policies could undermine the single market while at the same time proving ineffective. “Either we move forward through European integration to tackle the crisis or there is a crisis for European integration.”

She said the crisis was a systemic one and the first real global crisis. A systemic crisis needed progressive reform of the system.

The restructuring of the banks was unavoidable and the question was what should be driving the process. She suggested that the concept of “good banks”, ie banks that were involved in sustainable, long-term support for business and individuals, should drive the process.

The stimulation of the European economy would not work if credit did not begin to flow again. There also needed to be work on executive pay and on tax havens, as well as reform of the pension system, which needed to shift to more reliable products.

Viable jobs were being destroyed because of current exceptional conditions and there needed to be active policies to counteract this, she said.

TCD academic James Stewart said that if the crisis was a systemic one, then the solution being proposed by the paper was not sufficient. He also said Ireland could not tackle its difficulties by itself. It needed to end its “arrogant” attitude towards the European project and the European project needed to abandon its “neo-liberal” tendencies so it would mean something again for the European people.

Michael Taft, of the Unite trade union, said deflationary policies would not work in Ireland. He said the “stunted” nature of the Irish Left meant that Ireland was left with Fianna Fáil and Fine Gael and their deflationary policies.

Several speakers said the reaction to the economic crisis must take into account climate change.

Exporters: credit access issues

IRISH EXPORTERS continue to have difficulty accessing credit, the Irish Exporters’ Association said yesterday.

It said the Government must revisit the issue of State intervention in the area, as had happened in the UK and across most of Europe during the past six months. It also called on the banks to become more proactive in marketing their letter of credit facilities.

Letters of credit substitute the bank’s creditworthiness for that of the exporter for the purpose of facilitating trade.

A recent survey by the association found that less than 10 per cent of exporters used letters of credit. “Many exporters stated they would utilise the [letters as a] method of securing payment and easing their cash flow requirements if the banks reduced the cost and the complexity of the system,” the association said.