Ireland’s destiny is in the hands of the Germans writes our political and business correspondent Jim O’Brien.
I will begin by explaining my rather unusual title. For those of you who are Clint Eastwood fans, you may remember the classic scene in the Dirty Harry film which produced one of Hollywood’s best quotes of the 20th Century. There has been a bank robbery, all the money has been emptied out of the coffers and Clint Eastwood intercepts this by firing on the thieves. When he approaches one of the injured thieves, the man’s weapon is in touching distance, to which Dirty Harry gives him a threatening ultimatum. The thief must decide whether or not to gamble with his life and reach for the gun or give in to the threat of potentially being blown away. This now brings me to the 21st Century Dirty Harry scene. The ‘Fiscal Compact’ agreed by Germany and France last year, and then forced upon the rest of their EU ‘partners’ a few weeks ago, gives a clear indication of the continued decline in European democracy. Yes decision making within the Eurozone has been slow and nowhere near comprehensive enough to take a hold of our economic, social and political weaknesses. However, this does not excuse the over threatening take of power by Germany and copied by France due to a President’s ego and domestic problems.
In this scene, Ireland is the bank thief, which may be a good description of us in the eyes of many German taxpayers, which has fuelled a lot of the policy stances taken by Chancellor Merkel. ‘Merkozy’ are Dirty Harry and their line reflects a rule within the fiscal compact, which declares that member states who do not ratify this compact cannot seek funds from the European Stability Mechanism (ESM), which could see Ireland default on our debt in 2013. Although, according to the government, we will pay our way and we will re-enter the markets for funding next year. So why sign up to this treaty?
Well, in order for a monetary union to become sustainable and credible, a fiscal union that operates parallel with the ECB is optimal. This can work in theory, but if everything worked in theory, the USSR would still exist and the world would be ruled by communist dictators. In order for an economic policy to work, other factors come into play, such as political and social ones. Are politicians willing to balance the books indefinitely, regardless of flat and/or negative growth and persistent unemployment? Will citizens within our society have the patience and accept such conditions for the future of a political project and to satisfy zee Germans? To answer both these questions is easy….. No they will not.
Let’s go back to the theory side of a fiscal union again. Fiscal transfers must exist and a central bank with a pro-growth mandate and act as a lender of last resort for debt sustainability is needed to offset regional imbalances and the reality of economic inequality. But our rulers in Berlin object to this, because there is a high probability that Germany will foot this bill due to their ‘great’ economic policies, which has only came about after years of breaking the Growth and Stability Pact rules on deficits and debt ratios.
I often wonder does society shape politicians or do politicians shape society? Well, if the latter is true, then this fiscal compact formula will prove right. The German method has seen their unemployment rate remain low, achieving actual growth and enlarging their exporting capacity. However, income inequality has continued to increase in the last decade, there isn’t a German minimum wage, and the ordinary citizen must always settle for austerity to enrich large industrial employers. One good result from globalization is the rise in technological advancement, especially in areas such as healthcare, and it has also created millions of jobs for people in IT, engineering and software development. But it has also shifted the power and profits to the top 1% in our society. It has taken jobs from lower-class households, and has squeezed the middle-class. During recessions, governments will not have the capacity, or simply allow to counter declining output and rising unemployment, which is the reason why we are where we.
So, not only is it imperative that the Irish people have a say on this compact, but a debate about Ireland’s future within the single currency, which does not mean a debate about EU membership. The EU lasted over five decades before the single currency was formed; it was not introduced as a response to a structural deficit or crisis. But it was and still is a political project pursued by you guessed it, a German politician, Chancellor Helmut Kohl, and now by his student, Chancellor Angela Merkel.
We can move on from this crisis, but this fiscal compact is not the answer, so do not be fooled by the government and their scare tactics about a ‘financial bomb’, because if this compact is implemented, well, then more and more of us will take that ‘lifestyle choice’ and emigrate to Australia for sun, sea and……..JOBS!
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