Letters

The long shadow of the property and banking crash

Ireland had no choice about “austerity” if it wanted to avoid what was subsequently imposed on Greece

Tue Dec 20 2022 - 00:11

Sir, – I share the anger expressed by Fintan O’Toole over the short-term and long-term term social and economic costs visited on the Irish population as a consequence of the property and banking crash of 2008. However, I am disappointed by his use of dubious and selective representations of what happened and why and what has been said in order to give substance to his highly personal and unfair interpretation of Leo Varadkar’s involvement in, and responsibility for and concern for, the consequences of, the implementation of “austerity”.

“Austerity” may be summed up as further State borrowing (with taxation to service that borrowing), reduced State spending and increased taxation to pay off the losses made by Irish banks. The consequences were reduced household real incomes, higher costs and reduced State social and productive investment. All this was to cover repayments to foreign banks that had made loans to Irish banks to help the latter make loans to property developers.

Fintan O’Toole’s message is that “austerity” was adopted by the Irish government of which Mr Varadkar was a member and therefore bears responsibility for it. Confronted with the pain and suffering caused by the policy, he shows little concern and interest in apologising. All we got from Mr Varadkar was “a verbal shrug of the shoulder”, a novel oxymoron. Worse, he is only now acknowledging the consequences because criticism of “austerity” has become more widespread (” . . . because the wind is blowing in a different direction from a decade ago”).

The irony in all this is obvious if you look at the evidence your columnist uses to unmask the real uncaring and feckless Varadkar he detected behind the plausible public image. First, he cites what Mr Varadkar said to an Irish Times journalist, when he said that during this period “a more interventionist approach by from government would have been better”. I am not sure what Mr Varadkar had in mind, but the difficulty is that the scope for interventionist approaches was restricted by EU policy (aids to industry, etc, competition) and usually involved spending, meaning tax or borrowing.

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Then Fintan O’Toole cited two recent comments to an Irish Times journalist emanating from the European Commission and one from the International Monetary Fund (IMF) nine years ago criticising the use of “austerity” and the measures involved in implementing it.

He treats this as supporting his position that the decision to implement “austerity” was “one of the worst policy failures of the century”. He is right about that, but he should have gone further. If Fintan O’Toole had chosen to reflect a little he might have asked himself who designed and demanded the policy and why. The answer is the European Commission, not the Irish government. It was a response to French and German pressure to protect their banks, and was accepted, if not enthusiastically, by the IMF.

There was indeed a better alternative, described colloquially as “burning the bond holders”. But this was ruled out, and it was made clear to the Irish government that if liquidity funding was to arrive to tide the Irish banks over this depended on implementing “austerity”. Just read the leaked Trichet letter. Committed by the decision to opt into the euro zone, Ireland had no choice about “austerity” if it wanted to avoid what was subsequently imposed on Greece. – Yours, etc,

MOORE McDOWELL,

Delgany,

Co Wicklow.