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Getting the digs into Greece… June 30, 2015

Posted by WorldbyStorm in European Politics, Irish Politics.
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Pat Leahy has another excellent piece in the SBP at the weekend which asks why is the Irish government so keen to criticise Athens? In some ways it is not a huge puzzle. Despite a nominally social democratic component the instincts of this government are reliably right of centre on economic thinking (it has been breath-taking, albeit not exactly a revelation, just how willing the LP has been to accede to the orthodoxy economically. And one has to wonder just what mechanisms or resources inside that party there are to generate thinking on economics?). And given that that reflects European thinking small wonder that they are happy to attach themselves to the overall approach.

This has led to complete absurdities. Leahy notes that the Taoiseach in a bid to be the best European around (I paraphrase) came out with some bizarre stuff:

Last week he said at least two things that required further explanation, to put it kindly.
When asked by reporters if Ireland would support debt relief for Greece, he responded bluntly: “No.”
Officials later clarified that Ireland would indeed support debt reprofiling – or stretching the repayment periods and lowering the interest rate on debt, generally thought to be a form of debt relief. It was debt forgiveness, officials explained, that Ireland would not contemplate.

And:

Kenny also said that Greece should follow Ireland’s example in correcting its public finances with growth-friendly measures. Here, he asserted that Ireland did not raise income tax.
“In Ireland’s case, we did not increase income tax, we did not increase Vat, we did not increase PRSI, but we put up alternatives to those measures proposed in order to keep a pro-growth policy and make our country competitive, grow our economy and provide jobs for our people,” he said.

To which Leahy responds:

Well, perhaps. The rates of income tax might not have been increased. But Ireland certainly increased taxes on income.
Ask everyone who pays the Universal Social Charge.

But as was noted by 6to5against, VAT increased too – in December 2011 from 21 to 23%. But I suppose such details are irrelevant.

Leahy makes the point that Dublin is merely articulating openly an attitude that is held widely in the EU, and he sums it up like so:

The political atmosphere and personal relationships around the Brussels negotiating table are toxic. But that is not the biggest problem. The biggest problem is that the two sides remain divided by issues of substance.
Let Schäuble and Yanis Varoufakis, the Greek finance minister, sum it up.
“We cannot allow any member state to spend money without limit and other member states to be liable for it,” Schäuble said on Friday at a conference in Frankfurt.

While:

The same day, Varoufakis told RTE’s Morning Ireland: “When they say that they want more pro-growth measures, what they effectively are saying is we should reduce the minimum wages, we should reduce the minimum pension further . . .
“To do this in a country where one million families rely on a single pension because everyone else is unemployed, instead of intervening in employer pension contributions, is quite absurd, and it is a proposition that I am simply not prepared to put to my parliament.”

What’s most curious about all this is that we know – indeed the SBP editorial itself argues this – that the EU/IMF approaches are futile in relation to Greece, that they cannot work economically and that what is asked of that state and its citizens is both impossible and counterproductive.

The editorial says:

The Greek people have endured massive austerity, and it has not worked, because their economy is nowhere near as open as Ireland’s is, and is without the basic tax-gathering structures to be able to balance the books as we have.
Their negotiating positions have, at times, been unfortunate and haven’t worked out. But precisely the same thing can be said of Ireland.

And yet, on it goes. Testing the EU and the eurozone to breaking point, and perhaps beyond. And to what purpose? It is impossible not, now, to regard this as ideological and political masked as the inevitable. As and when that latter is demonstrated to be manifestly incorrect one can only assume the ramifications will be considerable.

Comments»

1. CL - June 30, 2015

Yes, but Ireland is the ‘pride of Europe’-

“And yet the story must be maintained: Greece must keep punishing its people to pay back the money being borrowed to make the payments on the unpayable loans. In the upside-down world we inhabit, Syriza, which has called a halt to this fiction, is a bunch of mad fantasists, while the troika that goes on acting as if the fictions were real is the voice of hard-headed realism.”
http://www.irishtimes.com/opinion/who-will-dare-say-out-loud-emperor-has-no-clothes-1.2267032

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2. Gewerkschaftler - June 30, 2015

For the Troika and it’s big fans in the Irish government it isn’t about loan repayment.

It’s about permanent debt-slavery. Debt-slaves can be forced to do anything – worship the master’s absurd gods (“reflationary austerity”), sacrifice their own children (compulsory emigration or a life of hunger and despair) etc. etc.

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Ciaran - June 30, 2015

Agreed – which explains the breathless exhortations of European (including the UK) governments to run surpluses forever and ever. Public surplus = private debt.

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Ciaran - June 30, 2015

Private deficit, I meant. ..

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3. gendjinn - June 30, 2015

At this point I really don’t understand why Syriza doesn’t threaten to pivot to Russia. Being a NATO member the US would be hopping mad if Merkel let that happen.

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dilettante - July 1, 2015

Maybe the colonels are still somewhere in the background?

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4. fergal - July 1, 2015

Can somebody explain how the best little country to do business in can lend 350 million to Athens while it owes over 200 billion in national debt? I think it’s part of the eu stability mechanism but still, isn’t this just plain daft?
It also puts to bed that old Thatcherite view of a country just like a household reprised recently by ff/fg/lab- a household has to balance its books, it can’t spend more money than it has.
Not only can we owe about 200 billion euros but we can lend money as well…

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An Cathaoirleach - July 1, 2015

It is our obligation under EU structures. If you remember the UK Government lent Ireland money, though running a large debt. Indeed the UK has a large current deficit than Greece in the current.

The Irish Government has large cash holdings at present, borrowing ahead.

To take your household analogy, one may have a mortgage and outstanding balance on your credit card as well as money in your deposit account. As long as you keep up your monthly mortgage repayments and clear your credit card at the end of the month, no one cares.

The Irish State will also run a large current Budget surplus in 2015, indeed if the tax payments continue at the rate of the first five months, the net borrowing requirement will be very small.

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Ed - July 1, 2015

They borrowed it to lend it. At a higher rate of interest. And both Lenihan and Ruairi Quinn boasted that it would be a profitable deal for the Irish state. Solidarity how are ya?

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