Sir, – A Leavy (August 22nd) writes that the alternatives to austerity were default or even more borrowing. This is simply incorrect. No-one seriously suggested that the Irish state should default on sovereign debt but Ireland's deficit would have been about half the final outcome had we refused to pay the speculative losses of European banks, and the cutbacks which would have been necessary would have been much less severe. The Irish government paid out about €64 billion to these private banks, adding in over €3 billion not covered by the guarantee scheme at all, and Minister for Finance Michael Noonan has confirmed he will not even apply for retrospective relief under the new ECB guidelines ("Banking Union: Restoring Financial Stability in the Euro Zone"). That plan was hailed at the time of publication as the solution to our long-term debt crisis.
This transfer of billions of taxpayer money to private banks was never put to Irish citizens for approval, a major failure of the democratic system.
Furthermore, both Mr Leavy and John Sheehan (August 20th) fail to take account of the effect of austerity on different sectors. Mr Sheehan claims that a recent ESRI report shows relatively small changes in the overall degree of inequality of disposable incomes between 2008 and 213. In fact, the ESRI report states that “there has been a fall in the share of income of the poorest 10 per cent of the population. This falling share of a shrinking cake means that real incomes for the poorest decile fell by over 20 per cent, compared with an average fall in real income of around 13 per cent. The gap is greater when measuring real incomes after housing costs – a fall of 27 per cent for the poorest decile as against 15 per cent on average”.
This is the real impact of austerity, and it certainly is not a relatively small change. The ESRI characterised all the last government’s budgets as regressive. Austerity in some form may have been inevitable to cover Ireland’s sovereign debt but government policy determines who carries the brunt of the cutbacks and its surrender to the ECB set the size of that deficit.
Despite Mr Leavy’s assertion, it is far too simplistic to suggest that the only alternative to the market economy with its major inequalities is the centrally planned economy exemplified by the USSR.
The mixed-economy model of the Nordic countries supports free enterprise while using social policy to avoid the health, housing and higher education crises Ireland is now experiencing.
Finally, there is a huge irony in his espousal of the free market. Under that system, private firms operating for profit must also take their losses; if Ireland really did operate the free market system, there would have been no bank bailout at all. – Yours, etc,
DONAL McGRATH,
Greystones,
Co Wicklow.