Dumb and Dumbest

national | anti-capitalism | opinion/analysis Wednesday October 20, 2010 19:45 by Kevin Quinn - Irish Socialist Network

Every step this government takes drags us further towards the economic abyss.

If you’ve seen the film Dumb and Dumber, you’ll understand the economic policy of Fianna Fáil much better. Lloyd and Harry, the heroes of the film, accidently came into possession of a lot of lolly and rapidly blew it on a lavish but unsustainable life style. The pair adopted Charlie Mc Creevy’s maxim “If I have it, I’ll spend it” with a vengeance, rapidly emptying their suitcase full of money and replacing it with a bag load of I.O.Us. One scene in the movie is particularly apt. The boys are broke after yet another misadventure. Turning to his demoralised buddy, Lloyd proclaims: “Harry, we are in a hole and we have just got to dig ourselves out of it.” This is exactly the same strategy the FF-led coalition is pursuing to get us out of the economic mess they got us into in the first place.

Every initiative Brians Cowan and Lenihan have taken lands the country deeper and deeper into debt. The “digging us out of a hole” strategy began in September 2008 when the entire Irish finance industry virtually imploded before the government intervened to prop it up. The scheme dreamt up by the two Brians was truly amazing, granting as it did a blanket guarantee covering all deposits and borrowings of the banks. No other government on the planet was so generous with the money of its citizens. The guarantee potentially exposes the Irish state to liabilities of €450 billion.

In his report on the banking crisis, Central Bank governor Patrick Honohan ignored the government’s instructions to omit the events of September 29th 2008 – the day the Irish State went “guarantor” for the bank’s debts. Honohan commented in typical technocratic terms: “The scope of the Irish guarantee was exceptionally broad. The inclusion of existing long-term bonds and subordinated debt was not necessary to protect the immediate liquidity position.” In other words, the two Brians got us on the hook for gigantic debts even though it wasn’t necessary to protect the economy.

When the guarantee failed to work its magic spell on the markets, the government dug deeper and announced the recapitalisation of Ireland’s private banks. To date AIB and Bank of Ireland have each received €3.5 billion with promises of more to come. Michael Fingleton’s Irish Nationwide requires €2.7 billion to meet its liabilities, while EBS needs €870 million. After receiving this generous hand-out, EBS chief executive Fergus Murphy was asked about a possible bail-out for ordinary mortgage holders: “I don’t think it’s workable, I don’t think its there, I think moral hazard would make it very, very difficult.” The chief beneficiary of the recapitalisation was Anglo Irish Bank. This non-functioning, non-lending bank is set to receive €22 billion. According to the bank’s chief executive, most of this money will never be seen again.

Our two diggers had not finished yet: recapitalisation was to be accompanied by the NAMA bail-out. This involved the State borrowing €54 billion to acquire the toxic assets of the banks. Recent revelations that a slush fund of €5 billion can be drawn on by builder-developers to “complete building projects” completely demolishes the claim that NAMA was not a bail-out for the builders. How, you may ask, can a small country with a rapidly shrinking economy afford to be so generous to the builders, bankers and bond holders? According to some independent experts, the answer is “we can’t”.

Professor Morgan Kelly of UCD has warned: “It is no longer a question of whether Ireland will go bust but when … unlike Greece our woes do not stem from government debt but instead from the government’s open-ended guarantee to cover the losses of the banking system out of its citizens’ wallets.” Kelly calculates that when you add the hit Irish banks will take from property loans to anticipated losses in other commercial lending and defaults in residential mortgages, the total losses will be close to €70 billion. Kelly – a centre-right economist – believes the international money markets will conclude that serving the bank debt is not “manageable” and will thus be reluctant to provide credit. If that happens, Ireland Inc. will face bankruptcy and require a bail-out from the EU which will take away the last vestiges of economic sovereignty we still possess.

The Marshall Plan for bankers, bond-holders, building tycoons and the syndicates of wealthy professionals who speculated in the property boom may prove to be one rescue package too far for the tiny Irish State. Decades of indulgence from successive right-wing Irish governments have only served to fuel the greed of our monied classes. Fortunately for them, Fianna Fáil intends the burden of the crisis to be carried by those who benefited least during the so-called boom years: PAYE workers (public and private sector alike), pensioners, hospital patients and school pupils. Their patriotic duty is to accept their socially inferior status in our little Republic of the Rich, and suffer all the pain to ensure that our aristocratic elite continue to enjoy the lavish lifestyles they have become accustomed to.