Is the euro really to blame for Ireland’s financial crisis as the Europhobes tell us?

The journos of the Tory press have been practically tripping up over themselves to pass judgement on the causes for Ireland’s financial crisis. Most of them have blamed the crisis on the Euro. But how true is this?

In my mind, the real and immediate causes for the crisis lay with Ireland’s government and its desire to hang out with the big boys of the G20.  During the so-called Celtic Tiger years, Ireland’s banks offered cheap credit and generous tax breaks to foreign investors and the super rich. Add to this the hidden loans crisis of the Allied Irish Bank, the inherent corruption of Fianna Fáil, the inertia of mainstream Irish politics and the collapse of the property market (caused by over-speculation) and there you have it. It had nothing to do with the Euro as the Telegraph’s Europhobes like to tell us.

As  I write this the vultures from the EU and the IMF are circling around Brian Lenihan’s head.

The minister said the IMF, ECB and the European Commission were in Dublin to look at what shape a financial package might take.

Minister Lenihan said there was no question of loading an unspecified burden on the taxpayer.

As we all know there are strict conditions attached to IMF loans. Normally the country in question has to make swingeing public sector cuts. Those of us who are old enough to have been around in 1976 remember what those are like. Mind you, the coalition tell us that “cuts have to be made” even without the threat of an IMF loan hanging over us.

Johann Hari writing in The Independent says that Ireland has tried “Cameronomics” and failed.

Throughout the nineties and the noughties, Ireland was held up as a poster child by the right. People like John Redwood and (yes) David Cameron said its model of low taxes and almost-total deregulation showed the way forward for Britain. In fact it produced the most corrupt and over-extended banking sector outside Iceland. Just one bank – Anglo Irish – is now on course to receive a €30bn extended bailout, equivalent to every penny of tax collected in the country in 2009. The Celtic Tiger had its claws ripped out, and it’s shaking at the back of its cage.

But the Irish government has continued to cleave to Tory solutions. After the crash, its government rejected the case for a stimulus package, and insisted its “number one priority” was to “cut the deficit and get the public finances back in order”. It sawed deep into spending on teachers, pupils, the disabled, and childcare. Out of total annual spending of €60bn, they are en route to ditching €15bn. The government is paying off its debt as its first, second and third priority, just as Cameron demands.

So what happened? The economy has collapsed. As the economist Rob Brown writes in the latest issue of the New Statesman, the country is now embarked on “an astonishing 15 per cent shrinkage in the Irish economy overall – the sharpest contraction experienced by any advanced industrial nation in peacetime”. Unemployment has soared to 12.5 per cent: it would be even higher if so many young people hadn’t left the country. Only 14 per cent of Irish citizens are happy with the government’s performance.

Fianna Fáil has been in power, usually in coalition, for much of Ireland’s history. But it is a party with a tainted past.  Former Taoiseachs like Charles Haughey and Bertie Ahern were implicated in financial scandals. Haughey was once tried for gunrunning. FF politicians always seem to have an air of shiftiness about them. This former FF councillor has just been remanded in custody for accepting money to vote for rezoning of lands in Carrickmines in Dublin in the 1990’s.   More FF councillors are also facing corruption charges.

With incompetents and crooks running  the country, it’s little wonder that the economy is tanking.


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Filed under Economics, Ireland

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