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Short term politics… or, waiting for something, anything, to turn up… October 31, 2012

Posted by WorldbyStorm in Economy, Irish Politics.
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Backroom in the SBP puzzles over the way in which this government has in its first eighteen months and more tended to overstate and exaggerate supposed ‘victories’ and ‘achievements’ in Europe in relation to restructuring debt. Consequently:

…the Irish government grotesquely [oversold] the results of that EU summit in late June which agreed that “it is imperative to break the vicious circle between banks and sovereigns”.

And…

This prompted Taoiseach Enda Kenny to talk of a “seismic shift” and Tánaiste Eamon Gilmore to speak of a “game-changer”. To date, it has been neither.
For starters, the EU had only agreed to that position at a conceptual level, with the details to be worked out later. The problem is that the devil is in the detail. Without detailed agreement, there might as well be no agreement. Thus, while EU economics commissioner Olli Rehn might have declared in June that there would be a detailed agreement come October, we are still waiting.

All true, all true.

But Backroom interprets this as being an example of a basic dynamic.

If the EU’s June resolution promises so little, it has to be asked why Kenny and Gilmore boost it so much. The answer lies in politicians’ tendency to take short-term political gains.
For most politicians, the long run is merely a series of short runs. Politicians can see their fragile careers come unstuck at very short notice. Think of how quickly Willie O’Dea disappeared from view after he was forced to resign his ministry in February 2010 , when the ramifications of a legal case blew up in his face.

I wonder though. I wouldn’t doubt that there was an element in that. But this government for all its faults isn’t entirely stupid. They are well aware of the fate of their predecessors (although the essential sidelining of FF as a political force has given FG in particular more space than it might otherwise have expected and the hope that it will remain the destination of centre and right of centre voters for the next Dáil. Perhaps it will but look at that FF level of support and consider how much of the electorate remains immune to its blandishments…).

But I suspect that as much a part of this was the sense that all the government had to do was hang on until the EU and others pulled the chestnuts out of the fire. They can, after all, read the data as well as anyone else and they presumably are aware that the current trajectory of economic policy for this state is unsustainable.

Thing is one also wonders whether this has been something of an historic error of perception because it would appear – and the Greek case would bear this out to some extent – that the level of tolerance of extreme socio-economic dislocation is actually much much higher than might have been expected from the EU/ECB (though to a notably lesser extent from the IMF). Frighteningly high to be honest.

That leaves the government positioned on the unforgiving territory of a possibly cosmetic ‘deal’ on debt which on closer examination will be largely meaningless in terms of its impacts on the state and citizenry.

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1. CMK - October 31, 2012

Spent a bit of this morning reading through the Comptroller and Auditor General’s report for 2011; specifically Chapter 2 on the government debt. Going by the data in that section I worked out that the debt to GDP ratio went from 106% to 114% in the first part of 2012, and it can presumed that if the same patter is replicated for the second half of 2012 it will be close to 120% by year’s end. It will increase next year, though probably at a slower pace, and so we’ll go forth into the bond markets in early 2014 with a debt to GDP ratio in excess of 125%. And, deal or no deal, we’ll be rudely reminded that no private financial institution is going to give a state in that much financial trouble money without a very steep interest rate and so, in late 2013, we’re likely to experience Groundhog Day all over again and the dreaded second bailout will become an ‘unavoidable necessity’. I’d say a second bailout is a certainty and Greek style conditionalities will be forced upon us. Election 2016 might well take place under circumstances currently unimaginable.

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PaddyM - October 31, 2012

Election 2016 might well take place under circumstances currently unimaginable.

It doesn’t have to be Election 2016 if the government or its “partners” decide otherwise. Article 16.5 of the Constitution:

The same Dáil Éireann shall not continue for a longer period than seven years from the date of its first meeting: a shorter period may be fixed by law.

I know I’ve raised the point before (and that I run the risk of seeming like a paranoid escapee from Crank Central) but this coalition has a big enough majority (and, by 2016, possibly a big enough incentive) to rewrite the legislation currently fixing the maximum period as being five years if it feels the need to do so. Certainly our “partners” would be unlikely to object.

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Joe - October 31, 2012

A few years ago, I would have said you were an escapee from Crank Central, PaddyM. But things have changed big time. Two European democratically-elected governments – Greece and Italy – have been replaced by diktat of EU/ECB/Troika etc over the past couple of years. So changing the law to extend the term of our government would be a fairly minor measure.
The only counter to the the argument that a second bailout is inevitable, that I can see, is this: Our government appears to be banking on the hope that EU/EC/Troika etc needs a “success story”. And our government’s masterplan is to doff the cap, show them that we are the best little boys and girls in the class, and put the hand out bigtime for a handout/writeoff that will enable lil’ oul’ Ireland to function without a second bailout.
It’s absolutely sickening so it is. Puke central.

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PaddyM - October 31, 2012

I am slightly puzzled by the Constitutional Convention being asked to reduce the Presidential term from seven years to five, while leaving the clause above in place.

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CMK - October 31, 2012

Well spotted. I think you could be right and the ‘technocratic’ clause could be invoked in the case of a serious, unexpected, fightback against austerity, i.e. one well beyond the parameters for current campaigns against different aspects of austerity. Any technocratic government will, of course, enjoy immediate media support and will no doubt be hailed as essential to ‘protect democracy’.

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2. greengoddess2 - October 31, 2012

“Thing is one also wonders whether this has been something of an historic error of perception because it would appear – and the Greek case would bear this out to some extent – that the level of tolerance of extreme socio-economic dislocation is actually much much higher than might have been expected from the EU/ECB (though to a notably lesser extent from the IMF). Frighteningly high to be honest.”

The level of tolerance is high for only one Party……

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