The European Financial Crisis: An Irishman’s Perspective

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The European Financial Crisis: An Irishman’s Perspective

Im Jubiläumsheft des Rotkielchens (41/2, S. 12/13) konnten wir ein Gastbeitrag des irischen Genossen Dara Turnball veröffentlichen, in dem er seine Sicht auf die europäische Finanzkrise schildert. Aus Gründen der besseren Lesbarkeit und Verständlichkeit hat sich die Rotkielchenredaktion dazu entschlossen, im Heft selbst eine deutsche Übersetzung zu veröffentlichen. Da jede Übersetzung den Inhalt eines Artikels dabei aber natürlich verändert, stellen wir euch die Originalversion hier gerne zur Verfügung:

The European Financial Crisis: An Irishman’s Perspective

The best parable for the European financial crisis is that of a weed. The way to kill a weed is to cut it out before it has a chance to grow strong and before its roots have a chance to grow deep and penetrate all the ground that surrounds it. Failure to act quickly and decisively in tackling the unwanted contagion means that the problem becomes ever more difficult to overcome. Just like an incompetent and inattentive gardener those with the power to stop Europe’s contagion waited too long and now the roots have grown deep.”

I made the above statement in early July 2012. I also bemoaned the attitude of Chancellor Angela Merkel; her irrational commitment to clearly failing and socially damaging austerity policies has been the biggest hurdle to emerging from the financial crisis. Since July the Eurozone has become like an entrenched warzone with France, Spain and a slightly shy Italy and European Central Bank (ECB) leading the more progressive growth agenda countries against austerity loving Merkel and her allies in the Netherlands and Finland.

The neoliberal ideology that landed us in the mess we are in has been seen as the best prescription to get us out of the crisis. Austerity is carried out in the name of what Nobel Prize winning economist Paul Krugman calls “the confidence fairy”. Angela Merkel and her fiscally conservative minions believe that death by a thousand cuts will somehow lift the confidence of consumers and markets alike. Clearly Dr Merkel does not remember any of the training that earned her a doctorate in physics; if you try a formula that does not succeed you do not reproduce it time and time again and expect your experiment to arrive at a different result than it did the last time. Austerity has failed!

So what can we do to end this financial crisis? There are three simple steps out of this crisis; reduction in borrowing costs, reduction in debt and increased growth. To reduce borrowing costs, that are likely to see Spain and Italy unable to service their massive national debts for much longer would be a massive step on the road to recovery. The United Kingdom and Italy enjoy very different government bond yields despite similar debt levels. The reason is that the Bank of England is willing to ‘bail-out’ the UK if things go wrong, while the Eurozone has no present lender of last resort.

Since the ECB refuse to take decisive action it is up to the member states to find a vehicle to drive down borrowing costs. Such a vehicle may just exist in the form of the new European Stability Mechanism (ESM). If the ESM were issued with a banking licence it could begin to buy up debt in the form of government bonds at much lower prices than the market currently demands, this would drive down borrowing costs across the Eurozone.

The second step is to tackle debt. Much of the so-called ‘debt’ of the Eurozone exists only as numbers on a page and represents no real monetary value and yet it must be serviced. The Irish Government is scheduled to make €47.9 billion of payments (with €16.8 billion in interest alone) to a bank which no longer exists. This bank will then literally burn the money in a big fire. If you think I’m making this up, I’m not. There are no sound economic reasons for Ireland to do this, only political ones.

We must realise now that the unreasonable debt of countries like Ireland is having real impact on people’s lives. Already in Ireland social welfare has been cut, funding for essential services like hospitals and schools is way down and capital spending on much needed infrastructure has ground to a halt. The net result for Ireland of servicing its debts has been an increase in total unemployment from 4.7% at the start of the crisis to 14.9% today and youth unemployment stands at a sickening 38.7%.

Reducing the level of payments required where possible and sensible while elongating the repayment period are two common sense solutions to helping Europe get over its debt crisis. If the German Chancellor doesn’t like this then perhaps someone could quietly remind her that Germany only finished paying off its debts from the WWI less than two years ago, that’s 92 years it took for Germany to service its own debt.

Finally, we come to step three, growth. Growth in the EU27 was 3.2% before the crisis the projected growth for 2012 is 0%! Think about that for a second, there is to be no growth in the EU this year despite all of the extra university graduates looking for work. Austerity has brought Europe to a complete standstill. New French president François Hollande has managed to turn the agenda more towards promoting a growth agenda but even the most naïve observer knows that his victories to date have been modest. Promoting growth and investment in long term employment is obligatory if we aim to restore confidence.

No one believes that the way out of this crisis will be easy. Going forward we need to close the book on the failed ideology that has dug us even deeper into an already deep hole. The policies that put growth, prosperity and people first are the way forward. Let the last four years stand as a reminder that market confidence is no substitute for the confidence of the people that their government will protect them from unjust hardship and misery.

Dara Turnbull (Labour Youth, Ireland)

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