Tag Archives: European Central Bank

Irish Elections and Austerity

Irish Voters to Grade Austerity

Dispatches From The Edge

Conn Hallinan

Feb. 17, 2016

 

What looked like a smooth path to electoral victory for the Irish government has suddenly turned rocky, and the Fine Gael-Labour coalition is scrambling to keep its majority in the 166-seat Dail. A series of missteps by Fine Gael’s Taoiseach [prime minister] Enda Kenney, and a sharply critical report of the 2008 Irish “bailout,” has introduced an element of volatility into the Feb. 26 vote that may end in a victory by an interesting, if fragile, coalition of leftists and independents.

 

The center-right Fine Gael and center-left Labour Party currently hold 99 seats, but few observers see them maintaining their majority. Fine Gael has dropped from 30 percent several months ago to 26 percent today, and Labour is only polling at 9 percent. That will not translate into enough seats to control the Dail, and putting together a ruling coalition will be tricky, particularly when polls indicate that the independent bloc that has picked up 3 percent and is now the number one vote getter. In general, the independents are left or left-leaning.

 

The country is in the middle of an economic “boom,” but that is a relative term. Ireland is still reeling from years of European Central Bank (ECB) and International Monetary Fund (IMF) imposed austerity that doubled the rate of childhood poverty and saddled working people with onerous taxes, painful rate hikes and high unemployment. Wages have fallen 15 percent. Since 2008, almost 500,000 Irish—the majority of them young and educated—have emigrated from the country in search of jobs.

 

The government’s trouble began in December, when torrential rains swamped parts of the country and Kenny slow response to the disaster angered rural voters. Flood victims blamed the government for failing to invest in flood control, an infrastructure improvement that fell victim to the austerity regime.

 

Then the Fine Gael-Labour coalition was hit with a double whammy: a report by in-house auditors for the European Union and an Irish parliamentary study of the collapse of Irish banks from 2008 to 2010. The EU study found that the European Central Bank (ECB) had pressured the Irish government not to impose losses on “senior bondholders” and, instead, put the burden on taxpayers. According to the parliamentary study, the ECB threatened to withdraw emergency support for Irish banks—thus crashing the economy—if wealthy bondholders were forced to take losses. All of this came as news to most of the Irish.

 

The center-right Fianna Fail Party was in power when the great crash came in 2008, a crash that had nothing to do with government spending or debt, but was instead, the result of real estate speculation by banks and financial institutions. Irish land values jumped 800 percent, which should have warned the banks that a bubble was inflating. But the bondholders, speculators and banks did nothing because they were making enormous amounts of money. When the bubble popped, Irish taxpayers were forced to pick up the $67 billion tab.

 

Fianna Fail was crushed in the 2011 election, losing two-thirds of their deputies, and Fine Gael-Labour took over.

 

Part of the government’s problem is that for the past five years it has been saying that it had no choice but to enforce the savage austerity regime of the ECB, but it is now trying to take credit for the recent improvement of the economy.

 

The coalition’s mantra has been “stay the course”, good times are ahead. The term the government is using is “fiscal space,” or the estimated amount of money that will be available for investment if Ireland continued its economic recovery. According to Fine Gael that figure would be $12 billion between 2017 and 2021.

 

First, no one understood “fiscal space,” a term used by the IMF. Even Deputy Prime Minister Joan Burton, a Labour Party leader, called it “a new kind of ‘F’ word” and said voters hadn’t a clue what it meant. Asked to define it, Kenny said the Irish voters wouldn’t understand it, a statement that managed to insult everyone. The government subsequently knocked the figure down to $10 billion, and the opposition said it was more like $8 billion.

 

And while Fine Gael is taking credit for the economy, critics are pointing out that it wasn’t austerity, but a fall in world oil prices and a decline in the value of the euro that favors Ireland’s export industry, that got the economy going.

 

Finally Kenny muffed a question about whether Fine Gael might consider a coalition with Fianna Fail because the Labour Party was dropping in the polls and might not hold its 33 seats. This enraged Labour, and Kenny had to mend fences and pledge that Fine Gael would never go into a government with Fianna Fail.

 

In short, the government is looking inept, and it is taking fire for its shift from “we had no choice in applying the austerity” to “we take all the credit for the current situation.” Fintan O’Toole, the sharp-tongued columnist for the Irish Times and author of “Ship Of Fools,” chronicling the financial greed that led to the 2008 meltdown, wrote of the government, “If you had no power, you can claim no credit; if you did have power, you have to account for how unjustly you used it.”

 

Behind the cover of “It’s not our fault,” the government cut funds for caregivers, threw people off of National Health, cut support for the disabled, support for education, and did nothing about rising homelessness. As O’Toole points out, the improvements in the economy were because of oil prices, low interest rates and the falling euro, all “entirely outside the control of the Irish government.”

 

In any case, the country is still deeply in debt and, while the jobless rate is no longer 15 percent, it is still just below 10 percent.

 

The Dail is a motley affair, with a host of small parties and a bloc of independents. Currently Fine Gael has 66 seats and Labour 33. The center-right Fianna Fail (that inched up slightly in recent polls) has 21, and the leftist Sinn Fein has 14. The latter dropped three points in the poll from 20 percent to 17 percent. Other left parties include the Social Democrats, the Anti-Austerity Party, and there is a mix of mainly leftists in the independent bloc. The centrist Greens are showing some growth, as is the small rightist Renva Party.

 

Right now various stripes of the left hold 41 seats, a figure that is likely to go up in the coming elections. To control the Dail requires 80 seats, but if the independents do well, Sinn Fein holds its own, and Labour jumps ship, an anti-austerity coalition is possible.

 

In the end it may be a hung parliament, with no bloc of parties able to cobble together an effective government. Kenny may double cross Labour and join with Fianna Fail. But whoever takes over, the policies of austerity have been deeply discredited during this election and anyone who tries to “stay the course” is in for stormy weather.

 

—30—

 

 

 

 

 

 

 

 

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Europe’s New Barbarians

Europe’s New Barbarians

Dispatches From The Edge

Aug. 28, 2015

 

On one level, the recent financial agreement between the European Union (EU) and Greece makes no sense: not a single major economist thinks the $96 billion loan will allow Athens to repay its debts, or to get the economy moving anywhere but downwards. It is what former Greek Economic Minister Yanis Varoufakis called a “suicide” pact, with a strong emphasis on humiliating the leftwing Syriza government.

 

Why construct a pact that everyone knows will fail?

 

On the Left, the interpretation is that the agreement is a conscious act of vengeance by the “Troika”—the European Central Bank, the European Commission and the International Monetary Fund—to punish Greece for daring to challenge the austerity program that has devastated the economy and impoverished its people. The evidence for this explanation is certainly persuasive. The more the Greeks tried to negotiate a compromise with the EU, the worse the deal got. The final agreement was the most punitive of all. The message was clear: rattle the gates of Heaven at your own peril.

 

It was certainly a grim warning to other countries with strong anti-austerity movements, in particular Portugal, Spain and Ireland.

 

But austerity as an economic strategy is about more than just throwing a scare into countries that, exhausted by years of cutbacks and high unemployment, are thinking of changing course. It is also about laying the groundwork for the triumph of multinational corporate capitalism and undermining the social contract between labor and capital that has characterized much of Europe for the past two generations.

 

It is a new kind of barbarism, one that sacks countries with fine print.

 

Take Greece’s pharmacy law that the Troika has targeted for elimination in the name of “reform.” Current rules require that drug stores be owned by a pharmacist, who can’t own more than one establishment, that over the counter drugs can only be sold in drug stores, and that the price of medicines be capped. Similar laws exist in Spain, Germany, Portugal, France, Cyprus, Austria and Bulgaria, and were successfully defended before the European Court of Justice in 2009.

 

For obvious reasons multinational pharmacy corporations like CVS, Walgreen, and Rite Aid, plus retail goliaths like Wal-Mart, don’t like these laws, because they restrict the ability of these giant firms to dominate the market.

 

But the pharmacy law is hardly Greeks being “quaint” and old-fashioned. The U.S. state of North Dakota has a similar law, one that Wal-Mart and Walgreens have been trying to overturn since 2011. Twice thwarted by the state’s legislature, the two retail giants recruited an out-of-state signature gathering firm and poured $3 million into an initiative to repeal it. North Dakotans voted to keep their pharmacy law 59 percent to 41 percent.

 

The reason is straightforward: “North Dakotans have pharmacy care that outperforms care in other states on every key measure, from cost to access,” says author David Morris. Drug prices are cheaper in North Dakota than in most other states, rural areas are better served, and there is more competition.

 

The Troika is also demanding that Greece ditch its fresh milk law, which favors local dairy producers over industrial-size firms in the Netherlands and Scandinavia. The EU claims that, while quality may be affected, prices will go down. But, as Nobel Laureate economist Joseph Stiglitz found, “savings” in efficiency are not always passed on to consumers.

 

In general, smaller firms hire more workers and provide more full time jobs than big corporations. Large operations like Wal-Mart are more efficient, but the company’s workforce is mostly part time and paid wages so low that workers are forced to use government support services. In essence, taxpayers subsidize corporations like Wal-Mart.

 

A key demand of the Troika is “reform” of the labor market to make it easier for employers to dismiss workers, establish “two-tier” wage scales—new hires are paid less than long time employees—and to end industry-wide collective bargaining. The latter means that unions—already weakened by layoffs—will have to bargain unit by unit, an expensive, exhausting and time consuming undertaking.

 

The results of such “reforms” are changing the labor market in places like Spain, France, and Italy.

 

After years of rising poverty rates, the Spanish economy has finally begun to grow, but the growth is largely a consequence of falling energy prices, and the jobs being created are mostly part-time or temporary, and at considerably lower wages than pre-2007. As Daniel Alastuey, the secretary-general of Aragon’s UGT, one of Spain’s largest unions told the New York Times, “A new figure has emerged in Spain: the employed person who is below the poverty threshold.”

 

According to the Financial Times, France has seen a similar development. In 2000, some 25 percent of all labor contracts were for permanent jobs. That has fallen to less than 16 percent, and out of 20 million yearly labor contracts, two-thirds are for less than a month. Employers are dismissing workers, than re-hiring them under a temporary contract.

 

In 1995, temporary workers made up 7.2 percent of the jobs in Italy. Today, according to the Financial Times, that figure is 13.2 percent, and 52.5 percent for Italians aged 15 to 24. It is extremely difficult to organize temporary workers, and their growing presence in the workforce has eroded the power of trade unions to fight for better wages, working conditions and benefits.

 

In spite of promises that tight money and austerity would re-start economies devastated by the 2007-2008 financial crisis, growth is pretty much dead in the water continent-wide. And economies that have shown growth have yet to approach their pre-meltdown levels. Even the more prosperous northern parts of the continent are sluggish. Finland and the Netherlands are in a recession.

 

There is also considerable regional unevenness in economic development. Italy’s output contracted 0.4% in 2014, but the country’s south fell by 1.3%. Income for southern residents is also plummeting. Some 60% of southern Italians live on less than $13,400 a year, as compared to 28.5% of the north. “We’re in an era in which the winners become ever stronger and weakest move even further behind,” Italian economist Matteo Caroli told the Financial Times.

 

That economic division of the house is also characteristic of Spain, While the national jobless rate is an horrendous 23.7 percent, the country’s most populous province in the south, Andalusia, sports an unemployment rate of 41 percent. Only Spanish youth are worse off. Their jobless rate is over 50 percent.

 

Italy and Spain are microcosms for the rest of Europe. The EU’s south—Italy, Portugal, Spain, Greece, Cyprus, and Bulgaria—are characterized by high unemployment, deeply stressed economies, and falling standards of living. While the big economies of the north, France, Great Britain, the Netherlands, and Germany, are hardly booming—the EU growth rate over all is a modest 1.6 percent—they are in better shape than their southern neighbors.

 

Geographically, Ireland is in the north, but with high unemployment and widespread poverty brought on by the austerity policies of the EU, it is in the same boat as the south. Indeed, Greek Finance Minister Euclid Tsakalotos told the annual conference of the leftwing, anti-austerity party Sinn Fein that Greece considered the Irish “honorary southerners.”

 

Austerity has become a Trojan horse for multinational corporations, and a strategy for weakening trade unions and eroding democracy. But it is not popular, and governments that have adopted it have many times found themselves driven out of power or nervously watching their polls numbers fall. Spain’s rightwing Populist Party is on the ropes, Sinn Fein is the second largest party in Ireland, Portugal’s rightwing government is running scared, and polls indicate that the French electorate supports the Greeks in their resistance to austerity.

 

The Troika is an unelected body, and yet it has the power to command economies. National parliaments are being reduced to rubber stamps, endorsing economic and social programs over which they have little control. If the Troika successfully removes peoples’ right to choose their own economic policies, then it will have cemented the last bricks into the fortress that multinational capital is constructing on the continent.

 

In 415 BC, the Athenians told the residents of Milos that they had no choice but to ally themselves with Athens in the Peloponnesian War. “The powerful do whatever their power allows and the weak simply give in and accept it,” Thucydides says the Athenians told the island’s residents. Milos refused and was utterly destroyed. The ancient Greeks could out-barbarian the barbarians any day.

 

But it is not the 5th century BC, and while the Troika has enormous power, it is finding it increasingly difficult to rule over 500 million people, a growing number of whom want a say in their lives. Between now and next April, four countries, all suffering under the painful stewardship of the Troika, will hold national elections: Portugal, Greece, Spain and Ireland. The outcomes of those campaigns will go a long way toward determining whether democracy or autocracy is the future of the continent.

 

—30—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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