Ireland: A colony one again, this time under the heel of the European Bank and the IMF

Chapter one of a savage battle between workers and capital

John McAnulty

18 November 2010 

Some sense of the convulsion gripping Ireland today is given by the editorial in the leading bourgeois journal, the Irish Times – an editorial made even stranger by the paper’s past support of Irish historical revisionism and the advancement of a post-nationalist argument that dismissed the whole idea of self-determination for Ireland and for her people as an issue in the modern world.

(Is it this that the men of 1916)…. died for: a bailout from the German chancellor … Having obtained our political independence from Britain to be the masters of our own affairs, we have now surrendered our sovereignty to the European Commission, the European Central Bank, and the International Monetary Fund. Their representatives ride into Merrion Street today….

The current crisis was provoked by the collapse of Irish capitalist strategy on 30th September and the acceleration of the pace of collapse into chaos following remarks by Angela Merkel, the German chancellor at the Seoul G20 summit.

The initial strategy of the Dublin government was always insane. Ireland's economy is a dependent one and Irish capital has only one strategy - subservience to transitional capital. In order to reassure the bond market they gave a cast-iron guarantee to their own decayed banks and to the major European banks who provided the money. The solution was the effective nationalisation of the failed banks, the creation of a bad bank, NAMA, and massive austerity, driving down wages, jobs and services. The mixture was seasoned with the support of the trade union leadership, who demanded a 'better fairer' way of paying the banks while remaining in social partnership with the government. The final decoration for this concoction was a massive dose of lies that consistently underestimated the levels of bad debt within the Irish economy. 

The whole edifice came crashing down on 'Black Thursday' - 30th Sept when something approaching the true size of the bank bailout was revealed. A strategy aimed at assuring the bond market that every penny would be screwed out the working class began to work in reverse when the size of the debt grew past the point where it became a plausible strategy. The interest on Irish debt grew to over 9% and effectively Ireland was bankrupt.

Speaking in Seoul, where she is attending the G20 summit, German chancellor Angela Merkel said in response to the Irish difficulties:

“We cannot keep constantly explaining to our voters and our citizens why the taxpayer should bear the cost of certain risks and not those people who have earned a lot of money from taking those risks.”

The strategy of Irish capital descended to farce.  Merkel had no supporters in the Irish government. The idea that Irish capital would not squeeze workers of the last drop of blood was greeted with horror.

Minister for Finance Brian Lenihan welcomed supportive comments from Britain, France and Germany. Lenihan promised to unveil a four-year programme of austerity measures ahead of the Budget in December. This will involve doubling a savage cut of 3 billion euro to 6 billion euro and a €15bn ‘correction’ over the four years.

The minister said: 'Our EU partners have confirmed their full confidence in the budgetary strategy being pursued by the Government. It is imperative that next month's Budget be passed in the Dáil’. 

The Irish government believed that by giving an absolute guarantee to bond holders they could placate the market. Now they find that it is the sheer implausibility of that promise that is bringing them down.

They boasted that there was no need to borrow money anyway until 2011. It was the strategy of Mr Micawber - the hope that something will turn up. From that point on control of the economy began secretly to shift to the European Central bank. 

The growing Irish crisis has consequences for Europe. If Ireland might  be unable to meet the bill then other weak economies might also default and this is reflected in the rising interest rates they are charged, thus twisting the spiral of crisis further. The ability of the European powers to handle the crisis is called into question and the euro weakens. When Merkel called into question the central tenet of Irish policy the pace of events accelerated. Merkel was swiftly corrected by the major European powers who indicated that it was simply a proposal that at some point in the future gambling in property speculation might not always guarantee a 100% return for the major banks. In any case it was a statement steeped in the rankest hypocrisy. Many of the bondholders depending on their pound of flesh are in fact the German banks whom Merkel represents. But by then the damage was done and panic turned to rout.

The imperialist strategy in their new Irish colony is to provide sufficient funds from the ECB to calm the fears of the market and then to embark in a huge experiment to see how much can be sucked out of the Irish economy over and above the astronomical proposals already in place. It is likely that many of the proposals will be drawn from the Greek experience, even though it itself shows signs of failure and has not seen a return of stability.

Conditions will include the reform or outright cancellation of welfare programmes, privatisation of State assets, cuts in capital spending, an immediate increase in VAT and a widening of the VAT base, increases in excise duties, and a widening of the property tax base. Public pensions will include the linking of the retirement age with changes in life expectancy, cuts in the highest pensions, the changing of the base upon which public sector pensions are paid so that they are linked to average lifetime earnings, the lowering of the ceiling on pension payments and the restriction of access to early retirement. Perhaps the most dramatic effect will be in the speed with which standards of living are driven down and the speed with which assets are stripped out of public and semi-state bodies.

Perhaps the biggest weapon that the capitalist have in their armoury is the connivance of the Trade Union leadership in the general strategy of capital, hidden behind a layer of bombast. 

The Irish Congress of Trade Unions is to hold a major national demonstration on Saturday, November 27 in Dublin in protest at existing budget proposals:

David Begg, the ICTU secretary, said; "Congress believes there is a better, fairer way to do this …... Simply put we need to extend the period of adjustment and focus on jobs and growth”. 

In other words we should take longer and spend more on undefined investments – a crazy scenario when the effect of a longer borrowing time would be to add billions more in interest charges and when an investment strategy demands that we borrow even more at a time when the crisis amounts to an inability to borrow any money at current interest rates applied to Ireland – this in a context where the ECB will be setting the targets and the Dail will be totally irrelevant!

There has been a protracted tussle between Europe and the Irish government when they wriggled to avoid the loan.  The reason for the dispute is simple. The offer that Ireland can't refuse is meant to protect the euro, not Ireland. It will increase Ireland's debt and freeze it for years in special measures even more extreme than the unprecedented cuts proposed already. So there are enormous political risks for the Irish capitalists:

There is the enormous loss of face and political authority involved in the return of the country to the status of a colony.

There is the loss of the power of nationalism - a big element in defusing resistance is claims that 'we are all in this together' and that 'we must stand together to save the country'.

The nationalist ideology underpins the social partnership with the trade union leaderships. Will they be able put forward a programme of collaboration with the IMF?

Above all the Irish capitalists fear a call from Europe for a fairer tax regime. They are convinced that the past success of the Celtic Tiger can be explained by a policy of setting a 12.5% rate of corporation tax. If they are forced to levy at the European average they fear that the basic assumption of their strategy – that austerity now will be rewarded by a return of the good times – will unravel and they will be swept away in the ensuing explosion.

The genie will not be put back in the bottle. Angela Merkel, the leading representative of European imperialism, can (at least for a few hours) wag her finger at the bondholders. The dependent representatives of the Irish neo-colony cannot.  The trade union bureaucracy, joined at the waist to Irish capital by decades of social partnership, cannot.  Yet Irish capital is doomed if it does and doomed if it doesn’t.  The bill is too big to pay. Even if Ireland receives a European bailout the question remains. How is it to pay the bailout? Interventions by the European Central bank and the International Monetary Fund presume some failure by native capital and the ability of outside agencies to impose harsher austerity.  This is not the case here. Irish capital has done everything it can to wring salvation from the hides of the workers. The austerity can be made harsher, but that is likely to lead to complete collapse. ECB and IMF intervention merely increases the pressure on the weaker European economies, calls into question the stability of the Euro and of the European project itself. Given the absolute failure of the Seoul conference to achieve agreement and head off global currency wars, there is no government in Europe that can feel safe.

Irish workers can cut the Gordian knot.  Don’t pay! Repudiate the debt! It’s not our debt! We’re not “all in this together.”  Close the dud banks – seize the assets of the speculators – set up a workers bank to manage the real economy. What have we to lose? We will find ourselves at war with the bond market, but they have already declared war on us. The proposal of an independent capitalist Ireland put forward by the majority of the 1916 rebels ran its course on November 18th, 2010. We need a new declaration of independence – the declaration of freedom from capital. Irish workers, struggling for freedom, can link up with the vast mass of European workers and oppressed who find themselves standing a short distance behind on the road we are on and struggle for a free Ireland in a United Socialist states of Europe, a beacon of hope to the entire world.

We lack one thing – self-organisation – the organisation of the working class in its own interests. That means a hard struggle against the crooks and shysters to claim to lead us. That struggle cannot be avoided.