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Seeing as we’re talking about that debt ‘deal’… October 30, 2012

Posted by WorldbyStorm in Economy, Irish Politics.

It’s funny. I’ve noted before how the rhetoric about Croke Park is almost entirely hollow, given that the outcomes positive (and negative) from jettisoning it are never outlined. So it is that in piece after piece in the Business Post or the Irish Times it is simply assumed that to do away with it is self-evidently “a good thing”. Yet there’s an odd echo of this in relation to the restructuring of debts from the bank bailout. There the narrative up until recently is one of such a deal being almost an inevitability and that it will without question do us good.
Except, except, dig a little deeper into the surrounding rhetoric and suddenly it seems a lot less clear cut that there will be any benefit at all from such a restructuring for citizens.

Take by way of example Cliff Taylor’s thoughts in the most recent SBP where…

…it now looks likely that there will be some deal…

But he also notes…

However, what is not clear is just how significant this deal would be.

Because when it comes to fiscal measures that impact directly upon citizens he asks the key question:

What does it all mean for the annual budgets?
If the €3.1 billion payment on the promissory note is postponed next March, some commentary has suggested it would mean €3.1 billion less in savings would need to be found in the budget. Unfortunately, this is not the case.
The capital amount of the promissory note – the €31 billion originally promised – has already been counted in as part of our national debt and accounted for in a previous year’s deficit.
This means that next year’s budget targets – and the need for cuts of €3.5 billion – have already been set, excluding any consideration of repayments of capital on the promissory note.

And he goes further suggesting that

The troika would be unlikely to agree to the government easing up on planned cutbacks or tax hikes. However, there would be a bit more leeway in the annual figures for a few years and some margin for error in case economic growth does not recover, which is now a serious risk.

Does that sound like an improvement on our current position in any substantive way? Indeed does that sound like it would be something that would be measurable as an improvement?

I think this is important because it essentially proves the lie about the similar rhetoric about the Croke Park Agreement where the suggestion is that monies clawed ‘back’ from that would somehow ameliorate expenditure cuts elsewhere. But the same logic operates. If the troika isn’t willing to allow cutbacks or tax hikes eased up on foot of monies from a ‘deal’ why would it do likewise with monies from the end of the CPA?

And what’s crucial about this is that it demonstrates that the policies being forged are ones that go far beyond an economic tourniquet to ‘save’ the Irish economy, but are instead part and parcel of a very political worldview implemented to arrive at certain outcomes in terms of restructuring this state and this economy and beyond that this society.

Taylor asks the question ‘what if we get no deal?’

And his answer points to the near lack of distinction in real terms whether one is forthcoming or not:

I think we are likely to get some kind of deal. However, there is a risk that the deal may not significantly alter our debt and deficit arithmetic. The problem is that, if the economy does not start to grow again, our debt ratio could rise further.

Now most of us on the left have perhaps been dubious from the start about how a ‘deal’ would function, even were it possible given the visceral aversion towards it from Merkel et al. And while the rhetoric about the achievability of such a deal has improved markedly in the last week it has been fairly obvious that it is thoroughly hedged.

That’s not to say that something won’t happen, something that will be presented as a ‘deal’. But if there is no measurable difference between having a ‘deal’ and not having one the political ramifications of that (quite apart from the destructive nature of the economic implications) may be very very important.

Consider the political capital already expended by FG and the LP on the matter. This has been, to some degree, their get out of jail free card – the “game-changer” as Eamon Gilmore put it. But if the game remains almost precisely the same, at least as most of us citizens see it…


1. Paul - October 30, 2012

Great post.
Sadly, it seems that the main purpose of a ‘deal’ will be to allow fg/lab to claim a moral victory. It will be structured in such a way that it creates almost no change to policy.
At the same time, the media will express grave concerns about any cuts in the US budget.


WorldbyStorm - October 31, 2012

Thanks Paul. I think that what you say about it being presented as a moral victory is spot on and as to the possible media response. And in a way it suggests that there’s quite some constituency in this society for whom a genuine deal might well not be welcome at all.


2. CMK - October 31, 2012

Read all of the SBP comment on ‘The Deal’ at the weekend and am none the wiser, which I think is what actually happened: i.e nothing. Crazy Cliff’s piece was pure waffle and had the feel something lashed out to fill up space before the edition went to the printer’s. Pat Leahy’s was little more grounded, but maybe Pat wrote early in the morning. My perspective, for what it’s worth, is that we’re still on the hook for every cent of the bailout, with all that implies. For every debtor there is a credit. The institutions who ‘lent’ us the bailout cash won’t want to absorb even a euro’s loss on their loans. The ECB and the IMF, particularly the latter, are institutional sociopaths, supremely indifferent to the human costs of their practices. The IMF is an old hand; the ECB as the new kid on the block, is being ‘blooded’ in Greece and will take the lessons learned there an apply them elsewhere. What the whole ‘deal’ and ‘special case’ nonsense is about it presentation and PR. The substance remaims the same but the packaging has changed. There’ll be more ‘deals’ over the coming years as the cost of bailout is remorselessly wrung from this society.


RosencrantzisDead - October 31, 2012

I am inclined to think that all this ‘special case’ talk is being deployed to give false hope to a populace who are about to hit with a very nasty budget. If we do receive ay restructuring in the near future, my feeling is it will be mostly cosmetic but it may be enough to keep the government together.


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