ECONOMIST VIEW: PAUL SWEENEY, Irish Congress of Trade Unions
THIS SO-CALLED national recovery plan is nothing of the sort. It will do precisely the opposite of what it says on the cover. It is a roadmap into deep recession.
It was the practice of bad economics in the boom years which has almost destroyed what was a sound Irish economy. That bad practice reached its zenith on September 28th, 2008, when the blanket bank guarantee was introduced.
The IMF and the ECB are in Dublin because of the banking crisis. If we could get the banks off the back of taxpayers, the economy might stand some chance. Instead, the Government proposes to load us with more debt and penalise those on the lowest incomes.
Sucking a further €15 billion out of an already fragile economy will simply make things worse. In budget 2011 it is proposed to cut €6 billion – a staggering 4.7 per cent of GNP. This is on top of €14.5 billion in cuts in the three austerity budgets to date.
This time last year, we were promised green shoots. Instead, the deficit is higher, the numbers out of work significantly higher and our young people are emigrating.
The fiscal crisis is manageable – with good, strategic economic policies. After the election, this so-called recovery plan must be radically amended to reverse its deflationary policies.
Those who say that this savage “adjustment” is necessary are deluding themselves. It is a deeply ideological exercise, with its origins in the same delusional school of economics that brought us the property bubble and the bank bust.
Cutting the minimum wage and taking more taxes from the lowest paid will reduce domestic demand further. A mere 4 per cent of those in the workforce are on this wage. They work in sectors that do not compete internationally. Equally, it is a lie to say our rate is the second highest in the EU.
There are many models of minimum wage across the EU and when all are included and purchasing power is taken into account, our rate falls to ninth position.
It is likely that the proposed one euro an hour cut will require a change of legislation and it will be down to individual Government TDs to vote in favour of that cut.
The fiscal adjustment of €15 billion must be seen in the context of the staggering bank bailout. Is this what we have come to? The wages of the lowest paid are cut so we can meet the €60 billion plus bill run up by reckless senior bankers and their boards?
Incredible mistakes were made and continue to be made on banking.
Rescuing Anglo and Nationwide, letting bank bosses stay in place, not bringing bank bosses and directors to trial were all grievous errors – but to continue even now to guarantee the bank bondholders defies logic.
The claim by Olli Rehn that “it is essential that Ireland passes the budget” is a totally ideological point of view.
It is based on the bad economics which got Ireland into this almighty hole.
It is the political economics which demands the poor must always pay for the screw-ups of the elite.
Never has there been a clearer example of such bad economics than now. Working people did not create this mess.
With the so-called recovery plan, the Government is attempting to make them pay for it.
Paul Sweeney is an economist with the Irish Congress of Trade Unions