When is enough enough?

There is an overwhelming democratic case for a referendum on the EU/IMF ‘bailout’ which commits Ireland to swingeing austerity and the gutting of public services for years, if not decades to come. Voters in February’s general election thought that by voting in Fine Gael and Labour they were effectively saying ‘no’ to the terms of that bailout, but within three weeks the new government had capitulated on promises made during the election campaign, and committed themselves to exactly the strategy pursued by the former ruling coalition of Fianna Fáil and the Greens. The need for a referendum, then, persists, but, writes Sinéad Kennedy, the call for such a vote could move beyond a mere democratic demand, and become instrumental in developing a new and radical political movement that offers concrete and alternative ways to deal with the crisis.

Ireland has become both a frontline and a fault line in Europe’s economic crisis. Within the space of three years, it has moved from being the best-performing economy in the European Union to enduring the deepest, swiftest contraction suffered by a western economy since the Great Depression. It was forced, last November, to accept a €85 billion ‘bailout’ package from the EU/IMF amid fears that the Irish debt contagion would engulf the entire euro zone. In return, Irish workers are expected to accept an eye-wateringly painful €15 billion budget ‘adjustment’ that includes tax increases, pay cuts, significant losses to employment protection in both the public and private sectors, and a series of devastating cuts to social welfare, health and education. To put this figure in perspective: the equivalent budget cut in Britain would be £225 billion.

Since the general election in February, the EU/IMF bailout and the resulting austerity is no longer presented as a hardship, but as a responsibility – an unwelcome legacy of our collective mistakes. Specific class interests have been rapidly reclassified into national interests as the private debts of bankers and speculators are socialised to protect the interests of Irish and European capital. There is little or no understanding of how we ended up in effective IMF/EU receivership as the mainstream economic wisdom amounts to little more than a slightly more sophisticated version of ‘we lost the run of ourselves.’

The IMF/EU agreement has little or no democratic mandate and is deeply unpopular. For most people, the general election was an unofficial referendum on the deal. This was confirmed by the obliteration of former government parties, Fianna Fáil and the Greens, and the election of Labour and Fine Gael to power, both of whom used the election as an opportunity to talk tough with promises of ‘burden sharing’ and ‘burning the bondholders’. Labour went one step further, boldly declaring it was either ‘Labour’s way or Frankfurt’s way’. Less than three weeks after taking office, it was very clear that it would, after all, be Frankfurt’s way, as both Fine Gael and Labour committed themselves to following exactly the same strategy as the Fianna Fáil/Green coalition, and endorsed the EU/IMF deal. Eschewing all ambiguity, Minister for Finance Michael Noonan stood in the Dáil and stated baldly: “I want to be clear for the benefit of our people and for market participants, that we are committed to the EU-IMF programme.” [emphasis added]

How did a country that was once the poster-child for a globalised, deregulated, modern neoliberal economy experience such a spectacular collapse? Ireland boomed in the late 1990s as multinational corporations flocked to take advantage of its low corporation tax rates, while a policy of light-touch financial regulation saw the banking sector finance a monstrous housing bubble. Then, inevitably, the bubble burst. The collapse of the construction industry sent the economy into a tailspin, unemployment increased dramatically from 4 to 14% and collapsing house prices left many people owing more than their properties were worth. Now Ireland is, per capita, the most indebted country in the EU, with a budget deficit of 32.4% of GDP.

Back in autumn 2008, when the first wave of the global financial crisis hit, the Irish government’s crisis strategy was to put in place a banking guarantee that covered all the major financial institutions in the state, thereby ensuring that no bank, however toxic, would go the way of Lehman Brothers. It guaranteed a total of €485 billion worth of banking debt and embarked on the now notorious bailout of Anglo-Irish bank - the world’s most expensive banking rescue. From this point onwards, the fate of the Irish state and the fate of the Irish banks would be intimately entwined. To fund this enormous corporate welfare and to keep the markets sweet, the government responded with package after package of draconian cuts. Yet, despite these cuts, dubbed ‘masochistic’ by the Financial Times, Ireland's economy continued to stagnate and its debt levels increased. The strategy finally became unstuck when, last November, the government announced what was supposed to be the ‘final’ figure for the bank bailouts – €46 billion. (That figured would be revised for a fifth time in March 2011 with the latest ‘final’ figure now standing at €70 billion). The European Central Bank (ECB) became increasingly concerned about the level of the euro zone’s exposure to Ireland’s now toxic banking system. Terrified that an Irish sovereign default would produce a contagion effect on the entire euro zone, they poured in money to shore up a banking system that was also experiencing a dramatic deposit flight. Between October and December 2010 they injected a total of €90 billion into Irish banks with the Irish Central Bank adding a further €52 billion. Eventually the ECB was forced to acknowledge that a staggering 20% of its total funding to European banks had gone into the Irish banking sector and that the entire future of the euro zone was resting on what economist Brian Lucey memorably described as mortgages on ‘soggy fields in Leitrim’.

Having socialised the private debts of speculators and international bondholders, the Irish elite were now faced with a fait accompli as European capital came looking for its money. In November 2010, a ‘troika’ of institutions (EU, ECB and IMF) constructed an €85 billion loan package to ensure against a sovereign default. The agreement locks Ireland into a very specific neoliberal economic model dominated by policies that will impose immense pain on working people, communities, the poorest and most vulnerable sections of society through its focus on expenditure cuts, rather than on job creation or economic stimulus. It gives huge powers to unelected and unaccountable lenders in terms of economic decision making, and commits the Irish government to a total of €15 billion in cuts by 2013. The agreement also emphasises the need for a ‘business friendly environment’, ‘vigorous action to remove remaining restrictions on trade and competition’ and a strong emphasis on private sector involvement in, for example, public utilities like water, electricity and gas. It requires the State to empty all its reserve funds and demands that any additional revenue raised in the future through, for example, the sell-off of state assets, be utilised for no purpose other than debt repayment.

It is in this context that the demand for a referendum in Ireland on the EU/IMF deal has been raised. Obviously, there is an overwhelmingly democratic case for putting an agreement with such profound economic and social consequences for Irish people to a vote, but the call for a referendum can move beyond a mere democratic demand. It could be instrumental in developing a new and radical political movement that advances concrete alternatives capable of convincing significant numbers of people that there are other ways, beyond the fatalism currently on offer, to deal with the crisis. Antonio Gramsci famously argued that there has to be a struggle to replace ‘common sense’ with ‘good sense’. This cannot take place without continual confrontation in ideological as well as practical terms. Both Irish and other European people have been subjected to a powerful ideological argument that continuously asserts that there is no alternative to the current policies of austerity and large-scale banking rescues. One of the major challenges of a radical left has to be to offer not simply a critique of the ideological assumptions used to justify austerity, but some account of alternative ways out of the crisis. Simply reverting to some version of Keynesianism, as mainstream critics of austerity are prone to do, is not sufficient, most immediately because this approach fails to confront the fact that conflicting class interests are at play in the different economic strategies currently being advanced.

The specifically European dimension to the Irish crisis also means that any solution must be understood in European terms. The specific geopolitical character of the Irish crisis has been largely ignored; in particular, the specific way in which the crisis is unfolding within the EU and, more particularly, within the euro zone. Neoliberal policies and core/periphery divisions are embedded within the structures of the EU so it is necessary to break with the existing framework of the EU and its institutional pillars - the ECB and the euro zone. While resistance in Ireland has been muted thus far, there have been a series of important social mobilisations in Europe against austerity and public debt, beginning with last spring’s strikes in Greece, large-scale protests in Spain and Portugal, continuing in autumn 2010 with the French movement against pension reform and, more recently, with the mobilisations in universities in Italy and Britain. Linking in with these European struggles could be an important mobilising element for Irish resistance.

The politics of the current period will be determined by the clash between the pressure for governments to impose austerity and the reluctance of people to accept this. The key question will be what form those politics take. There is no easy ‘exit strategy’ from the current crisis available to either the Irish or European elites. Indeed, attempts by governments to find an ‘exit strategy’ is leading to an ideological crisis as tensions emerge within and between states. It is likely that we will continue to see conflicts emerge over the measures needed to overcome the crisis as national capitalist interests are played off against each other. This means that the current period will present enormous opportunities in both Ireland and Europe for a genuine radical alternative to the policies of austerity and public debt to emerge.




Image top via thru the night on Flickr.