The debt crisis in Ireland worsens
After years of austerity the debt crisis in Ireland is only deepening, argues Joseph Loughnane
You can’t help but feel something bad is about to happen when the Dáil decides to push through legislation overnight. Sure enough, the scenes in 2008 when the previous government mortgaged Ireland to bail out the banks were repeated on the night of 6 February. To ensure the deputies voted through the deal, the Dáil Bar was kept open, and those representatives who knew as much about this as the rest of us watching our TV screens at home were told they had less than an hour to read through a document that was almost 60 pages long; a document that aimed to turn private debt into public debt for generations. One Fine Gael deputy said openly on Irish TV that he hadn’t read it but he would be voting for it.
The legislation that was passed by Fine Gael and Labour with the help of the main “opposition” party Fianna Fail liquidated the Irish Bank Resolution Corporation (IBRC) – the institution holding the promissory notes guaranteeing the debts of Anglo-Irish bank and Irish Nationwide. Overnight it doubled the debt from the €30 billion debt we were initially expected to pay into €64 billion due to the longer interest rate which must be paid over the next 40 years. The promissory notes are IOUs that were formed when it was decided that Anglo Irish Bank needed €30 billion but the state didn’t have the money. This was €30 billion “owed” to the bondholders who had lost all their money when Anglo collapsed. Most of the bondholders are other banks.
In the eyes of the European Central Bank (ECB), if these banks were to lose their investments they may go bankrupt. This would cause great economic damage and launch a domino effect that threatens the entire European financial situation. Despite the Government claiming they wouldn’t pay the promissory note this year and despite claims that the European Central bank was the friend of Ireland and would write down the debt as a reward for our unquestioning application of austerity, this internal debt restructuring that we were forced to accept, has proved beyond doubt the historical bankruptcy of Irish capital.
Despite this fiasco being the result of a gamble, the result of which was that the bondholders had lost their money; the Government in 2008 guaranteed that they’d get their money back by hook or by crook. Due to the uncertain nature of the promissory notes and the possibility that Ireland could default on them, the ECB was pushing for the loans to be converted into bonds – loans that the government has to pay back. The legislation helped turn the promissory notes into sovereign bonds which we now have to pay.
Debt for generations
What this night brought home to us all was that this debt which the Irish people had denied was theirs over and over again was now enshrined via the laws of the land as the debt of the Irish people. This debt includes the €2.2 billion owed by disgraced businessman Sean Quinn, €8.5 millon owed by former CEO David Drumm, a loan of €87 million that the Chairman of the bank got for himself as well as debts owed by Denis O’Brien, Bernard McNamara and other developers.
The legislation also abolished employment rights for IBRC workers. We were told by the Minister for Finance that these people would be taken on by other financial organisations which would have to deal with the aftermath of the legislation. No more attention was given to these 800 people or the fact that financial decisions were moved even further away from any form of democratic accountability. No attention was drawn to the Austerity Treaty that was forced through via referendum in Ireland last May. This new arrangement marks the failure of months of diplomacy when Ireland tried to follow up vague promises that the Irish banking debt would be included in a European Stability Mechanism, a mechanism facilitated by this Austerity Treaty and written into Irish law through a dishonest election campaign last Spring.
What does all this mean to the people of Ireland? The Irish people are aware that it means more austerity for their children and definitely for their children’s children. Yet again a solution was found that spares the banks and bondholders and heaps more debt on the Irish working class. Yet again the hope is that capitalism will recover and that a new spurt of growth will shrink the debt. Yet again parliamentary democracy proves how transparency is just a buzz-word and that when the ECB wants us to agree to something, we will agree to it; even it does mean having the staff in the Dail Bar working through the night.