That Donegal byelection… November 24, 2010
Posted by WorldbyStorm in Economy, Irish Politics, The Left.trackback
Now, it’s no surprise that if Pearse Doherty of Sinn Féin wins on Thursday at least some of us round here won’t be tearing hair out or rending garments. Doherty is more left wing, and better able to articulate that position, than some give him credit (indeed a friend of mine who is a very very level headed community activist told me last week how in their view on TV Doherty has been head and shoulders above the other candidates in presenting a left of centre view). He and Sinn Féin have been enormously hard working in that constituency. Moreover his party is the only one in the Dáil that has presented any sort of serious alternative to the current orthodoxy. And there has been a palpable deepening of their economic analysis over the past three years, something others on the left could well do by emulating.
The outcome may well be otherwise, I always felt that Doherty’s day would be at the General Election. But, the weekend national RedC poll gives some pause for thought. Sinn Féin breaking above 10%, while within the margin of error might indicate sufficient churn for them to do a bit better than has been hitherto proposed. And that might well be, Red C poll included, sufficient to get them across the line.
Anyhow, I had to smile a little at the reports in the Sunday Business Post by Pat Leahy from the byelection constituency over the past two weeks. A mixed bag one might suggest. Last week there was some emphasis on Doherty with quotes (albeit it was positioned in a sceptical view of what he was saying – how, went the line, could anyone argue against the orthodoxy? Given that the orthodoxy until a week ago was that IMF intervention was very very unlikely, and all sinews were strained to avoid that outcome – successfully, so we were told, the question might be more accurately how could anyone argue for the orthodoxy with anything like a straight face). But there were also quotes from other candidates on the trail. For example, we were treated to Frank McBrearty of Labour as well. And the Fine Gael candidate Barry O’Neill. Not to mention Brian Ó Domhnaill of Fianna Fáil
What a difference a week makes. Doherty announced as the front-runner in a generally credible RedC poll, and what sort of report do we get this Sunday, more quotes from McBrearty, Ó Domhnaill and O’Neill’s campaign.
And Doherty? This:
But a poll published the following day shows Sinn Féin’s Pearse Doherty is the stand-out favourite to take a seat.
Of course the SBP could point to the fact that he occupied many more column inches the first week, and that this merely was a rebalancing, but, I couldn’t help coming away with a feeling that there was a certain ‘look over there, not here’ aspect to this. Slightly, perhaps unintentionally, but that’s the sense I was left with.
After all, for a voice that represents a divergence from the orthodoxy to be elected to the Dáil in a broadly rural constituency, and one which has had near hegemonic Fianna Fáil and independent Fianna Fáil representation (though that latter point can’t have hindered SF’s rise), is more than a slight deviation from the expected.
Good enough for them.
“Given that the orthodoxy until a week ago was that IMF intervention was very very unlikely”
In fairness, this was the FF line (for obvious reasons), but not the line communicated by pretty much every other player within the ‘orthodoxy’. It’s been flagged for quite some time that the reality was, best case, we sort this out through taking the medicine that addressed a growing deficit, or the IMF would have to impose similar/worse medicine to the same end.
And admittedly no-one seems to have understood the real scale of the bank problem – orthodoxy or not. The IMF themselves spoke of a 24 billion overhead for the Irish banks only last year – that it turns out to be maybe tens times worse would have come as a shock to everyone. Clearly a default of some kind is on the cards, and that reality is now becoming part of the, eh, ‘orthodoxy’ – whether it’s articulated or not.
Given that SF voted for the bank bail-out back at the start of this mess, and don’t have any great focus, economic policy-wise, on an alternative means to deal with the banking monkey on our backs (tell the EU/IMF to jump, nationalise BoI and AIB, and then…? Where do you fund the banks from?), I wouldn’t have any more confidence in their alternative to the orthodoxy. Six of one, half a dozen of the other.
“a shock to everyone”. Surely someone must have known? I’d say it was the porter at the front door of AIB HQ. He knew but didn’t tell. He must be punished. STOP HIS BONUS! NOW!
As recently as last month the Irish Times editorial and economic pages were arguing that EU-IMF intervention was not an inevitability, as evidenced by the quotes below. And they were assisted in this by no less a figure than Oli Rehn.
On September 17th both the Department of Finance and the IMF both dismissed the idea of an IMF bailout.
http://www.irishtimes.com/newspaper/breaking/2010/0917/breaking18.html
September 29th, a report by Arthur Beesley (IT) on Rehn’s words…
EU ECONOMICS commissioner Olli Rehn has said the Government should have no need to seek emergency financial aid from the EU and the International Monetary Fund (IMF) as it battles to regain market confidence in its economic plan.
However, he wants Minister for Finance Brian Lenihan to quickly set out specific budget and reform measures to achieve billions of euro in savings in the next four years.
As the Government faces into a difficult budget for 2011 with borrowing costs at record levels, the commissioner said the immediate adoption of measures for 2012, 2013 and 2014 would provide clarity to the markets.
http://www.irishtimes.com/newspaper/frontpage/2010/0929/1224279906789.html
Thursday September 30th. Arthur Beesley in the IT writes:
OLLI REHN’S call for a four-year package of budget and reform measures from the Government underscores mounting anxiety in Brussels over Ireland’s precarious economic position. His intervention can also be read as a wake-up call to the Irish body politic at large.
To those who fear the worst for the State, the EU’s economics commissioner has offered a modicum of comfort in his assessment that emergency aid from the EU and the International Monetary Fund (IMF) should not be required. But this is far from an all-clear.
http://www.irishtimes.com/newspaper/opinion/2010/0930/1224279988595.html
Go to October 1st and one reads Dan O’Brien’s thoughts in the IT…
http://www.irishtimes.com/newspaper/opinion/2010/1001/1224280081427.html
The involuntary loss of sovereignty necessarily accompanying a bailout [by EU/IMF mechanism] is to be avoided for many reasons. It could have serious and unpredictable political and social consequences and the reputational damage of being lumped in with Greece would be appalling, and far more serious for Ireland than for the Mediterranean country (as Greece is the most closed economy in the EU, it matters much less how it is perceived abroad than for Ireland, which is among the most open economies in the world).
Everything possible must be done to avoid the last resort of a bailout. Thankfully, it remains only a possibility at this point and the Government’s good cash position allows time and space to consider all options carefully and without panic.
Even were that simply whistling in the wind it remained the orthodoxy. Neither Beesley nor O’Brien are saying IMF intervention is an inevitability. Let’s skip forward to hear the words of the Chief Political Correspondent.
On October 19th Stephen Collins made no mention of IMF intervention, but spoke of the need now to cut even more:
In recent weeks the International Monetary Fund said that because of lower growth the scale of the adjustment would have to be significantly larger and it came up with the figure of €10.3 billion over the period. Lenihan had already given a few hints that the 2011 target would have to be closer to €4 billion rather than €3 billion.
The real shock yesterday was that the four-year figure is likely to be considerably more than the €10.3 billion projected by the IMF. That in turn means that the adjustment next year will have to be closer to €5 billion than €4 billion to keep on track with the 3 per cent target.
Just to make matters worse the cost of the promissory notes issued to cover the bank bailout will start kicking in next year at time when the State is least able to afford it.
And he continued:
What Government and Opposition have to contend with now is that the measures required to get the State back to fiscal health will be even more painful than they had thought. That will pose one of the greatest challenges to the political system that it has faced in the history of the State.
http://www.irishtimes.com/newspaper/opinion/2010/1019/1224281440949.html
In other words the orthodoxy held until mid-October, or perhaps even a little later (Lenihan himself as late as the 11th of October said he was ‘sure’ that Ireland wouldn’t require an IMF/EU bailout).
And the further point is that on October 28th, barely four weeks ago we get this explanation from Dan O’Brien again in the IT with the telling subheading that ‘after months of being told our fiscal plan was in hand, we are plunged into the worst-case scenario’.
Told by who? By the orthodoxy, the IT/Sunday Independent/FF/commentariat that the measures being taken were the necessary ones and that they were sufficient for us as a state to go it alone, indeed necessary to avoid us having to have external interventions.
As for default on the cards, well, look back to October 1st and read Dan O’Brien’s (economics editor of the Irish Times) words:
In May, a mechanism was established to rescue countries in the euro zone suffering severe economic crisis. It is co-funded and co-managed by the EU and the International Monetary Fund (IMF). It is cast-iron proof that default – in any form – is not an option for states in the euro area. Any debate on the wisdom or otherwise of default as a way out of the crisis is irrelevant in the face of the political fact that European leaders have put their resources and credibility behind a “no default” position.
Secondly, as has now been said on numerous occasions, the growing deficit is a function primarily and overwhelmingly of the banking crisis. The idea that no-one was aware of this is very hard to believe. Voice on left and right outside the FF/IT/etc orthodox line were making precisely this point from early on – at least 2008, that the banks would require greater and greater funding, Morgan Kelly and Michael Taft amongst them.. As Karl Whelan notes on Irish Economy last year he made an identical argument. http://www.irisheconomy.ie/index.php/2010/11/21/lenihan-admits-banks-couldn’t-be-saved-by-the-state/
SF’s vote for the guarantee scheme [and let's park for a second the issue as to whether at that point a guarantee scheme equalled a bailout in the sense that became clear very rapidly] at the beginning was based on the limited information then available, information that was not, as has been seen subsequently, accurate. Furthermore, at the actual vote for the guarantee scheme SF didn’t vote with the government.
Longtime commentor Wednesday outlined the situation last month as follows:
To be clear about it, there were two votes a few months apart. The first was to authorise the government to come up with a bank guarantee scheme and the second was actually on the bank guarantee scheme, after the details of it were finalised.
SF voted yes on the first vote – a decision that a lot of us were not happy with, but it was made on foot of an emergency briefing given to the opposition finance spokespersons which involved (a) dire warnings of immediate and devastating consequences for ordinary folks with Anglo mortgages, and (b) a promise that certain conditions that both Labour and SF demanded would be included in the actual scheme. Of course they ended up not being included in the actual scheme – which SF consequently voted against.
Obviously the first decision was both wrong and stupid, for a number of reasons, but that’s how it happened. They said before the bill on the final scheme was published that they would vote against it if certain conditions weren’t included, so it wasn’t really “recanting” when they did vote against it, although I can’t say I blame people for thinking that.
As for their economic policy on the banks and NAMA SF argues that even now the bondholders should be burned and AIB and BOI should be nationalised (something that is already in train it would appear, albeit by stealth). This is a position indistinguishable in its specifics from that proposed by a range of non-orthodox commentators of left and right and in terms of sustaining losses and minimising (as best as is possible) further costs to citizens. The SF position is laid out here… http://www.sinnfein.ie/contents/19297 It’s worth noting that as recently as this week Michael Noonan of FG has indicated that the IMF itself may be seeking the bondholders to take more of the ‘burden’.
Clearly the ‘orthodoxy’ is something of a movable feast then. My understanding was that Labour, Garret Fitzgerald, the IMF, etc, etc were fairly well embedded in the CLR notion of ‘orthodoxy’, and they have all been clear enough on the distinct likelihood of an IMF intervention if things (market-wise) didn’t improve following government attempts to prop up the banks. After all – the bogieman of the IMF cometh has been the stick wielded over us for quite a while now, for good reason.
The risks and consequences of the govt strategy were flagged well enough – and by ‘orthodoxy’ figures – the only real surprise was the tipping point, and the scale of exposure involved – which everyone, but everyone, seems to have underestimated.
There’s no CLR party line re the orthodoxy. Tgphere are different views expressed on here and differences of emphasis. I’m not sure I’d include GFG and the LP in it or at least not precisely. I’ve certainly quoted GFG both approvingly and not since 2007, same with the LP.
But the key point remains that the element of the orthodoxy represented by the IT as evidenced above took a certain line well into October. Now I can certainly go to the SBP if you wish and find chapter and verse there too if you like. Cliff and Pat weren’t exactly pessimistic in Sept/Oct either.
As regards the extravagance of the figures not being predicted, well given that Kelly, the Irish Economy crowd and yes Taft all argue tha the costs would be vastly greater than estimated by the government or, indeed, the orthodoxy. That they didn’t give a final (whatever that turns out to be) figure on it is hardly to their discredit. They were certainly vastly more accurate than those who boosted the govt line month after month.
When the bank guarantee was voted on SF voted against it. At the intial stages they accepted it with certain caveats. As those points were not noted by the Govt. they voted agains the guarantee
Cant see SF being wrong with telling the EU/IMF to take a hike if the 7% rumour is true. As Karl Whelan noted unless the govt, are happy with Ireland being a player in a cautionary tale then the Govt. should be quite firm with the EU/IMF.
Sure the shinners voted against after they voted for, but they still kicked off with agreement to the principle, with actual votes.
And where are SF going to get the money to prop up their newly nationalised banks after they’ve told the EU/ECB/IMF to take that hike? There’s some sense to the micro-economics of the SF grand plan, but at a macro level it assumes access to affordable rates on bond issues – which is fantasy. The EU/IMF money simply isn’t going to come without the sort of deficit reduction measures (pain/medicine/whatever) that make a nonsense of the rest of their economic plan. It’s more magic bean territory.
yeah I have some agreement there with you about the macro issue. Thats something that all left parties have a huge problem with – not being able to get the macro analysis to tie together. There micro stuff is good which is better than most.
The rights macro/micro may well be proven wrong but it does not lack in detail.
It’s all magic bean territory to begin with. As Michael Taft has pointed out on numerous occasions, not least here http://notesonthefront.typepad.com/politicaleconomy/2010/03/in-a-previous-post-we-saw-that-public-sector-labour-costs-are-below-average-by-eu-15-standards-the-argument-that-irish-publ.html
the cuts announced previously and today will result in fractional impacts on borrowing, will make no difference to debt levels and yet we wind up in a worse situation in terms of our social and economic infrastructure than if they weren’t made, and all to do what? Placate markets which, as evidenced by the latest ratings agencies pronouncements won’t and can’t be placated?
At what point does this state, and indeed the EU/ECB and IMF admit that carrying the can on this one is too great for us as an economy and a society to bear? That cutting welfare, social expenditures and so on are both socially and economically counterproductive?
But of course that’s about ideology, of which the EU/ECB and IMF have no lack of same.
Frankly if its 7% we are ruined anyway and might as well threaten to take the whole euro zone with us unless they do something to help. Our bailout is a Anglofranco-german bailout
Bring down the EU with an Armalite in one hand and Bailout Papers in the other?
A government with a little courage should say the Euro is a joint problem so lend us at 1 % over the German rate. That way you make a profit and we don’t become paupers.
Indeed, that might work, at least temporarily.
All this has the makings of a colossal political cock-up spreading to the European level.
the political cock-up seems to originate as much at the EU level. Do know if you ever read eurointelligence’s bulletin – very good economic overview and the lads writing it are not left or right but very centrist. Anyhow they have been reporting for quite a while about Frau Merkel’s tendency to damaghe the Euro rather than help it
Bock has an amusing take on the relationship between cultural Catholicism and the willingness to bend over for the IMF.
Or not. Let’s pray not.
I find it interesting that the modern day representative of the German industrial class that bankrolled the Nazis, was complicit in the holocaust, escaped retribution at Nurembourg and then grew fat on Marshall Plan transfers is now it seems in the position to lecture other European Nations on how to conduct their finances. This is especially the case regarding Greece as her predecessors looted the gold from the Central Bank in Athens during the War and it was never returned.
Pasok could at least have asked for a few bob back.