Opinion

THE STATE OF PLAY: Talking up the economy is unreal, distorts international perceptions; and risks false budgetary expectations and Germany thinking we don’t need bailout relief – John Gormley 

It’s time to legislate for abortion in Ireland to save women’s lives, for rape victims and where the foetus is already dead – Ivana Bacik 

Niall Crowley Minister Jimmy Deenihan, speaking recently in the Seanad, identified the opportunities in the coming decade of multiple commemorations. These included the possibly contradictory potentials “to dedicate ourselves to an enhanced understanding of modern history” and to “play a major role in bringing all on this island closer together”. Inevitably though somewhat jadingly, he suggested that “the commemorative programme will also have a special appeal to the Irish diaspora”. Why miss a good business opportunity? 2013 is the year of the The Gathering, whose website states that it offers an opportunity for “communities throughout Ireland [to] showcase and share the very best of Irish culture, tradition, business, sport, fighting spirit and the uniquely Irish sense of fun”. We like to celebrate the stereotype fighting Irish, ideally in failure. Any prospect of success would make this stereotype much more threatening. We have statues to Jim Larkin and James Connolly but none to William Martin Murphy, the businessman who embraced the task of dismantling the ITGWU and so unleashed the Dublin lockout in 1913. Our politics of national identity prizes the heroic underdog – more particularly, the unsuccessful heroic underdog. Dublin in 1913 was a place of extreme poverty, chronic unemployment, overcrowded housing and rampant malnutrition. Local authorities did not even provide minimal social services to relieve the hardship. Trade unionism had emerged as a new form of struggle for social change. Jim Larkin and the ITGWU had been successful in securing significant wage increases for the dockers in Belfast and Dublin. William Martin Murphy and the Dublin Employers Federation decided to stop the growth of this new movement. Murphy was chairman of the Dublin United Tramway Company and owner of both Clery’s department store and the Imperial Hotel. He also controlled the Irish Independent, Evening Herald and Irish Catholic newspapers. Murphy was also a prominent nationalist and a former Home Rule MP in Westminster. He was known as a kind and charitable man in his private life. He was regarded as a good employer and his workers received fair wages but he was against trade unionism in general and Jim Larkin in particular. Larkin promoted an aggressive trade unionism that sought to combine unskilled and general workers in one large union and to make use of sympathetic strikes. This approach offered hope to working class people that a fairer and more equal distribution of wealth was possible. So 1913 was more than a dispute over wages and union recognition; it was also a dispute about living conditions, inequality and the ownership of wealth. Over 20,000 people were off work from mid October 1913 until January 1914. The industrial dispute was the most significant and most severe in Irish history. Families across Dublin endured the most severe hardship. Gradually the workers were forced back to work over December and January.  Many found themselves blacklisted and without hope of work. Union leaders called the battle a draw. It left, however, a legacy of bitterness and a sense of betrayal among union leaders. Employers were clear that they had secured the avoidance of a social revolution. The battle about the ownership of wealth then ceded place to the battle for Irish independence. 1913 commemorations must rise above celebrating stereotypes of the fighting Irish. We need to commemorate 1913 in these current times of crisis but in ways that enable the past to be a challenge to do better in our pursuit of social change in today’s Ireland. The 1913 committee established by SIPTU – the descendant of the ITGWU – is a valuable initiative. The Committee aims to recall and reaffirm the values that inspired Larkin and Connolly. It identifies a broad spectrum of civil society organisations that must work together to affirm these values. 1913 challenges civil society to find the strategies and tactics to make its legacy relevant in today’s Ireland. 1913 was the high point in what was an evolving new form of struggle for social change and equality. Today civil society is fragmented into a diversity of specific interests. It has been transformed by a partnership with the state that has become debilitating. It has lost its capacity to mobilise. Commemorations must stimulate the emergence of a focused and effective civil society that demands an equal, environmentally sustainable and participative Ireland.

However one interprets the core constraints of the Fiscal Compact Treaty  (officially cosily known as the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union), several facts are indisputable.   Firstly, the new treaty will restrict the scope for future exchequer deficits. This has prompted the ‘No’ side of the referendum campaigns to claim that the Treaty will outlaw Keynesian economics. This claim is exaggerated. Combined structural and general deficit targets to be imposed by the Treaty would have implied a maximum deficit of 2.9-3.0 percent in 2012 as opposed to the (equivalent) IMF-projected general government net borrowing of 8.5 percent of GDP. With the value of the Treaty-implied deficit running at less than one half of our current structural deficit, the restriction to be imposed by the new rules would have been severe. However, in the longer term, Treaty conditions allow for accumulation of fiscal savings to finance potential liabilities arising from future recessions. This is entirely compatible with the spirit of Keynes, even though it is at odds with the extreme and fetishised worldview of the modern Left, that sees no rational limit to debt accumulation so long as it stimulates economies out of recessions and broader crises.   Secondly, the Treaty will impose a severe long-term debt ceiling, but that condition is not expected to be met by Ireland any time before 2030 or even later.   One interesting caveat regarding the 60 percent of GDP limit is the exact language employed by the Treaty when discussing the adjustment from excess-debt levels. The Yes camp made some headway in convincing voters to support the Treaty on the grounds that debt paydowns required by the debt bond will involve annually reducing the overall debt by one twentieth of the debt level in excess of the 60% limit. However, the Treaty itself defines “the obligation for those Contracting Parties whose general government debt exceeds the 60% reference value to reduce it at an average rate of one twentieth per year as a benchmark” (page T/SCG/en5). Thus, there is a significant gap between the Treaty and reality.   Another debt-related aspect of the treaty that is little understood by some analysts is the relationship between the deficit break, structural deficit limits and the long-term debt levels consistent with the economy’s growth potential. Based on IMF projections, our structural deficit for 2014-2017 will average over 2.7% of GDP, which implies Treaty-consistent government deficits of around 1.6-1.7% of GDP. Assuming long-term nominal growth of 4-4.5% per annum, our ‘sustainable’ level of debt should be around 38-40% of GDP. Tough, but we were at public-debt-to-GDP ratios of below 40 percent in every year from 2000 to  2007. It is also worth noting that we have satisfied the Treaty’s  60% debt limit every year between 1998 and 2008.   Similarly, the Troika programme for fiscal adjustment implies a de facto satisfaction of the Treaty’s deficit limit after 2015, and consistent non-fulfilment of the structural deficit rule and the debt rule at all times between now and 2017. In other words, no matter how we spin it, in the foreseeable future, we will remain a fiscally rouge state, client of the Troika and its successor, the ESM.   On the negative side, however, the one-twentieth rule will be a significant additional drag on Ireland’s economic performance, compared to the current Troika programme. If taken literally, the average rate of reduction of the Government debt from 2013 through 2017, required by the Treaty would see our state debt falling to 87.6% of GDP in 2017, instead of the currently-projected 109.2%. In other words, based on IMF projections, we will require some €42 billion more in debt repayments under the Treaty over the period of 2013-2012 than under the Troika deal.   On balance, therefore, the Treaty is a mixture of a few positive, historically-feasible, benchmarks that are dubious for the future, and a rather strict short-term growth-negative set of targets that may, if satisfied over time, be beneficial. Confused? That’s the point of the entire undertaking: instead of providing clarity on a reform path, the Treaty provides nothing more than a set of ‘if, then’ scenarios.   Let me run though some hard numbers – all based on IMF latest forecasts. Even under optimistic scenarios, Ireland’s real GDP is expected to grow by an average of 2.27% in the period from 2012 to 2017. This is the highest forecast average rate of growth for the entire euro area, excluding the Accession states (the EA12 states). And yet, this growth will not be enough to lift us out of the Sovereign debt trap. Averaging just 10.3% of GDP, our total investment in the economy will be the lowest of all EA12 states, while our gross national savings are expected to average just 13.2% of GDP, the second lowest in the EA12.   In short, even absent the Treaty, our real economy will be bled dry by the debt overhang – a combination of the protracted deleveraging and debt-servicing costs. It is the combination of government debt and unsustainable levels of households and corporate indebtedness that is cutting deep into our growth potential, NOT the austerity-driven reduction in public spending. In this sense, Treaty-induced acceleration of debt repayments will exacerbate the negative effect of fiscal deleveraging, while delaying private debt deleveraging.   However, on the opposite side of the argument, the alternative to the current austerity and the argument taken up by the No camp in the Treaty campaigns, is that Ireland needs a fiscal stimulus to kick-start growth, which in turn will magically help the economy to reduce unsustainable debt levels accumulated by the Government.   There is absolutely no evidence to support the suggestion that increasing the national debt beyond the current levels or that  dramatically increasing the tax burden on the general population – the two measures that would allow us to slow down the rate of reductions in public expenditure planned under the Troika deal – can support any appreciable

While the Green Party was in government it had a number of redline issues: key among them were the refusal to contemplate a flat rate property tax for the primary residence and a resistance to any movement towards the privatisation of water. We now know that the government has made a dog’s dinner of the property tax but there has been less scrutiny of the creation of Irish Water, the Fine Gael brainchild. Most of the political comment from the opposition is focused on the apparent unfairness of water charges and in particular the costs of installing the water meters themselves. But they’ve managed to ignore the beast in the room that consumes over 200 litres of water a day in the wild. Let me state it bluntly: the creation of Irish Water is the first step in the privatisation of water. No doubt about it. And we haven’t heard a squeak from the Labour mice, except yet another flat denial from Eamon Gilmore. Let’s ask a number of pertinent questions, the questions that Labour haven’t asked or simply don’t want to think about. Why are we setting up this new entity when local authorities have managed successfully to provide water to the citizens, albeit with a leaking pipe network due to lack of investment? It was because of leaks that the local authorities themselves were the greatest advocates of charges, knowing that extra investment was badly needed for the creaking system. Fine Gael have made no secret that they intend to follow the British model, a model which led inevitably to privatisation but was found wanting, as we know, in Northern Ireland when many were left with no water during the cold snap. And what about the loans from the National Pension Reserve Fund (NPRF)? How is the loan from the NPRF to Irish Water secured. The Greens had proposed that the loan should just be secured on future water charges, i.e. the NPRF would be able to call on future water-charge revenues to ensure their loan was paid back. However, government departments were suggesting that the loan would be secured on the assets of the water service itself, raising the prospect that the entire water system could be used as collateral for the loan. As the NPRF is part of the state, this obviously wouldn’t amount to privatisation, but the move of transferring ownership of the water assets to Irish Water suggests that Irish Water could in the future raise commercial capital using these assets as collateral, which would mean that the water service could end up in private hands by default. But it won’t be by default. Privatisation is fully in keeping with the ideology of the Sate’s most right wing party, Fine Gael, bolstered by their Blairite lackies in Labour. Even a cursory reading of their own document provides a enough signposts towards privatization. This model proposed is recognised in capital markets as the most attractive proposition to lenders and is understood by investors who lend to the water sector in other countries. A key factor in evaluating the merits of the new operating model is the possibility that the borrowings of Irish Water could be outside the General Government Balance (GGB). Its capacity to borrow on the international markets would be a key factor in enabling the company to become financially sustainable and separate from the Government. It is proposed to transfer all infrastructure to this new body and allow it to go to the market to borrow money using Ireland’s water infrastructure as security. It is this drive to remove funding of the water sector from the Government that is pushing water infrastructure into the hands of private investors. The funding of water services is proposed ultimately to come from two sources, the consumer and private investors. The current system requires €600million annually in capital investment, with a backlog of €500million for essential projects being experienced already. The significant level of investment required indicates that majority control over water infrastructure would be wielded by private investors should the Government pursue its plans. The report repeatedly states that the new model will drive efficiency. Any reorganisation of the current system would improve efficiency – once there’s a commitment to reinvest the money from charges back into the system. However, once profit becomes the main motive, efficiency for the public good becomes secondary. There are people in the Labour party who get this, but they remain silent as their leaders take them into hostile territory for any self-respecting socialist. Recognising these potential difficulties, the Green Party raised the prospect of protecting our water resources from privatisation in the Constitution. Is it too much to ask that Labour would include this idea in their deliberations in the Constitutional Convention?