Ireland: Economy on the brink

Governing Fine Gael/Labour party coalition facing bankruptcy

Within the first month of taking office, after 14 years in opposition, the shine has already come off Ireland’s Fine Gael/Labour coalition government.

The big noise made by both parties in the recent general election campaign about renegotiating the EU/IMF austerity deal and ’burden sharing’ between taxpayers and the bondholders (who recklessly lent to Irish banks) has been exposed as hot air.

The new finance minister, Michael Noonan, now admits that the senior bondholders will not be forced to take any losses. Now the governing coalition holds out hope for a reduction on the 5.7% interest rate on the austerity deal, which will have no perceptible impact on the cuts that are being experienced by workers and the unemployed.

If further proof was needed that Fine Gael/Labour represented ’more of the same’ capitalist politicians then it was provided by last week’s announcement that an extra €24 billion of ’recapitalisation’ would have to go into Irish banks. This brings the total bailout to €70 billion or the equivalent of 45% of Ireland’s GDP!

The shock and anger at this announcement was made greater by the fact that we were originally told to prepare for a €10 billion bailout. Where did the need for the extra €14 billion come from?

A ’stress test’ was carried out to identify the true scale of losses on the loans that remain on the books of Ireland’s banks and their capacity to absorb these losses based on their deposits and loans that are performing.

The reality, which has been virtually censored from official discourse, is that there has been a run on Irish banks since late last year with major depositors seeking a safer home for their wealth. So every time this government (and its Fianna Fail predecessor) think they have a handle on the true scale of the crisis and imply that each bailout is a full and final settlement they are in reality pouring water into a leaking bucket.

The various sources from which the current tranche of €24 billion is being drawn is a scandal within a scandal. Between €5 billion and €6 billion will come from the privatisation of a profitable insurance arm of a loss making bank that was recently nationalised.

A further €10 billion will come from the government raiding the National Pension Reserve Fund which is the fund into which public service pensions are paid.

With this bailout, which amounts to the Irish government buying shares in the banks, the entire system is either nationalised or under Irish government control. They now want to force mergers of the smaller banks into the ’big two’, Allied Irish and Bank of Ireland. One Sunday paper estimated that 6,000 jobs in the sector, mostly ordinary bank workers who are blameless for this crisis, could go.


The Socialist Party (a major component of the successful United Left Alliance which made a breakthrough in February’s general election) calls for a properly nationalised banking system shorn of private losses which should not be the concern of the working class.

Liberated from these losses, a publicly owned banking system, run under democratic workers’ control and management, would look after the needs of ordinary depositors and provide cheap credit to tradespeople, small farmers and businesses.

Moreover such a publicly owned banking system would not repossess the homes of those who have fallen behind in their mortgage payments as a result of the capitalist crisis. Instead, it would reduce payments of those who bought houses at the height of the housing bubble rather than enslaving them in negative equity.

Socialist Party TD (MP) Clare Daly said in her maiden speech in the Dáil (parliament) on 9 March that this government’s honeymoon would be the shortest on record. Prophetic words!

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April 2011