THE TIME may come when the trade union movement will have to back calls for the Republic to default on its debts, outgoing president of the Irish Congress of Trade Unions Jack O’Connor has said.
In an address to its biennial delegate conference yesterday, he said there was no moral justification for the proposition that the country should have to pay the recklessly accumulated debts of those at the top of the banking system. He also said there was no possibility of 1.8 million people repaying €200 billion outstanding within any reasonable time frame.
Mr O’Connor said the State had to extricate itself from “the straitjacket” of the EU-IMF bailout agreement, which was depressing any prospect of growth in domestic demand. He said without such growth there would be no appreciable recovery.
“The question is how to trigger renegotiation? Opinion is divided as to the potential consequences of threatening default and we have not, thus far, supported the call. We may well come to do so and we are conscious that resources are being run down as time passes.”
However, he warned that such a move towards debt default could have serious consequences for jobs and public services.
“We cannot anticipate the response of the ECB which could withdraw support from our covered banks. Neither can we assume the way it would play with the global companies . . . upon which so many of our people depend for their livelihoods. We can be pretty certain it would mean balanced budgets overnight, which would be devastating for working people and all who depend on public services.”
Mr O’Connor said later that the stage had not been reached where congress would support defaulting on debts.
Congress general secretary David Begg warned the time may come when default might be seen as the lesser of two evils.
“There are consequences to a default . . . the cut-off of supplies of money to the country would mean the gap between income and expenditure to handle public services would become hugely compressed because where we spend about €55 billion a year, we take in something like €34 billion.”
Mr Begg said the long-term effects on foreign direct investment were unknown but that it would be reasonable to anticipate huge consequences for the banking system.
“However, that is not to say that that would not be an option in some circumstances. You can say the way things are evolving, austerity being heaped upon austerity, that the time might come that default might be the lesser of two evils. However, our view is that that position has not arisen at this point in time.”
Mr O’Connor argued the crisis in the euro zone could only be solved within a European context. This would involve “burden sharing and some kind of limited transfer union and a restructured and democratically accountable European Central Bank”.
He also maintained that even within the terms of the bailout agreement there were still steps that could be taken to construct a new all-island economy.
Mr O’Connor called on the Government to develop a scheme with pension fund trustees to secure 5 per cent of their assets, €4 billion, for infrastructure investment on the basis of exemptions from the pension levy.
He said this would more than offset the deflationary effect of the €3.6 billion cut scheduled for budget 2012 and create upwards of 80,000 jobs.
Mr O’Connor also argued that the €4 billion to €5 billion remaining in the National Pension Reserve Fund should be utilised to drive a job-generating investment programme.
The Government, he said, should provide people with a firm and absolute guarantee that their homes will never be repossessed as long as they made a genuine effort to service their mortgages.