Ireland has “no real alternative to cutting back” on spending in an effort to fix the banks, a senior Central Bank official has said.
“Never again can we have the socialisation of losses and the privatisation of profits as the business model in banking.” Fiona Muldoon of the Central Bank told the MacGill Summer School in Glenties, Co Donegal.
She offered four options to lay down a marker for what we would like to be in 2016. Confirming she saw no alternative to paying for what went wrong, she said: “The real choices to be made are whether some areas should be cut more than others or in how much we cut, and whether we get value for money in what we spend.”
Ireland, as a small and peripheral EU member, would be subject to the fortunes of its bigger, more powerful neighbours. But she insisted that, within the wider EU, there were alternatives to austerity for creditor countries.
She said she was confident that the large EU economies and the US would start growing again. Fixing Ireland’s debt problem would ensure we were well placed to join the recovery when it came. A fixed and stable banking system was essential to this.
"Finally, we can continue to build a new regulatory system. The strength of our application to that task should protect or future-proof the next asset bubble and can be a lasting positive from this last crisis."
No popularity contest
New-look regulation was "not a popularity contest", she warned."Many in the industry will always dislike it intensely and many will believe they will know better. There will be some who will unfortunately lose their homes, and some who will need to enter insolvency proceedings."
Many people would have to face up to the results of poor financial decisions. She called for compassion for those in genuine trouble with the banks through no fault of their own and realism for others who were “‘trying it on”.
“This ability to distinguish between, and separate, the response to these two distinct groups needs to be part of the toolkit for bankers, the legislature and the administrative and judicial systems.”
She was challenged on this by Siptu president Jack O’Connor, who insisted that austerity was a form of violence against the people.
"This is a brutal recalibration of economies to suit the euro rather than the other way around, he said. "It is the Americanisation of Europe – even the Ryanair-isation of Europe."
Violence
Austerity, he warned, was "never actually societally neutral. It is a violence perpetrated against working people and those who depend most on public services".
“Until now at least, it has been administered through a deadly concoction of fiscal retrenchment accompanied by Labour Market Reform – a euphemism for the most sustained attack on the gains made by organised workers since the second World War.”
John Moran, secretary-general of the Department of Finance, said Ireland would emerge from the bailout and governance by the troika. But a strong Ireland “was also dependent on a strong Europe”. He said the problems of the EU as a whole were on an entirely different scale from those faced in Ireland.
UCG economics lecturer Dr Alan Ahearne accepted that although it was painful for citizens, “We must focus on ‘creating sustainable value’. That is our best hope of a return to sustainable growth.”
Closing the school last night Maureen Gaffney, addressing many contributions this week, insisted: “We must struggle against this emphasis on the fallen state and corrupted nature of political endeavour. We cannot allow our feelings of political learned helplessness to sunder us from our sense of citizenship and from our sense of our best self.”
