Finance

Details: Category: Finance; Created: 13 October 2012

The Fiscal Responsibility Bill was discussed in the Dail on October 11th 2012. The Bill provides a statutory basis for a range of fiscal policy and expenditure management reforms in Ireland. Specifically, it makes provision that the budgetary and debt rules contained in Article 3 and 4 of the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union take effect in national law. The Bill also establishes the Irish Fiscal Advisory Council (IFAC) on a statutory basis and sets out its functions. You can watch Deputy Wallace's contribution here.

A big argument is raging in Europe as to what is actually best for the peoples of Europe. Mr. Barroso has argued that in the age of globalisation pooled sovereignty means greater power for individual members. This does not wash, however, with the peoples of Europe and many claim political virtue and economic interest demand a halt to integration and a reassertion of the powers of national legislatures. There is no doubt that enhanced co-operation on an economic level is desirable in some ways. Unfortunately, however, politically, the likely outcome is a further shift in power away from the elected representatives to unelected technocrats and a further weakening of democracy in Europe. It will lead to greater powers for the bankers at the European Central Bank and lawyers at the European Court of Justice, with the civil servants in Brussels who interpret their judgments. It is amazing how people can sit on either side of the fence, yet both are convinced that their arguments are right. Many in Europe actually believe the real villain of the crisis is the concept of financial capitalism and how it has operated. It is said the crisis did not start in Europe but in America, where the manner in which financial transactions were allowed to be deregulated completely undermined the system worldwide. That is all the more reason to have tighter financial regulation. The proposed transactions tax is one step in the right direction. Ireland is saying "No" to it because Britain is saying "No" and there is a fear jobs will be lost in the financial centre and relocated to London. It is very important, therefore, that Ireland and Britain buy into this idea because we will end up in the same place again, unless we increase regulation in the financial sector. When the crisis began in 2008, there was much talk about doing things differently. The neoliberal idea was undermined, but four years on it is gathering pace again and there is huge pressure on governments not to be too severe in the manner in which they regulate financial institutions. I find this frightening and short-sighted. The world will not solve its problems until it tackles this issue. We have talked over and over about so many ideas. I recently read an extract by Ha-Joon Chang who has written several very good works, one of which I find very definite and clear. Referring to the problems of the 1980s and 1990s, he states: "Throughout the 1980s and 90s, when many developing countries were in crisis and borrowing money from the International Monetary Fund, waves of protests in those countries became known as the "IMF riots". They were so called because they were sparked by the fund's structural adjustment programmes, which imposed austerity, privatisation and deregulation... The IMF programme, in other words, met such resistance because its designers had forgotten that behind the numbers they were crunching were real people. These criticisms, as well as the ineffectiveness of its economic programme, became so damaging that the IMF has made a lot of changes in the past decade or so. It has become more cautious in pushing for financial deregulation and austerity programmes... Given these recent changes in the IMF, it is ironic to see the European governments inflicting an old-IMF-style programme on their own populations. It is one thing to tell the citizens of some faraway country to go to hell but it is another to do the same to your own citizens, who are supposedly your ultimate sovereigns. Indeed, the European governments are out-IMF-ing the IMF in its austerity drive so much that now the fund itself frequently issues the warning that Europe is going too far... [This is scary.] What has been happening in Europe – and indeed the US in a more muted and dispersed form – is nothing short of a complete rewriting of the implicit social contracts that have existed since the end of the second world war. In these contracts, renewed legitimacy was bestowed on the capitalist system, once totally discredited following the great depression. In return it provided a welfare state that guarantees minimum provision for all those burdens that most citizens have to contend with throughout their lives – childcare, education, health, unemployment, disability and old age. ...Instead of it being explicitly cast as a rewriting of the social contract, changing people's entitlements and changing the way the society establishes its legitimacy, the dismembering of the welfare state is presented as a technocratic exercise of "balancing the books". Democracy is neutered in the process and the protests against the cuts are dismissed. The description of the externally imposed Greek and Italian governments as "technocratic" is the ultimate proof of the attempt to make the radical rewriting of the social contract more acceptable by pretending that it isn't really a political change. The danger is not only that these austerity measures are killing the European economies but also that they threaten the very legitimacy of European democracies – not just directly by threatening the livelihoods of so many people and pushing the economy into a downward spiral, but also indirectly by undermining the legitimacy of the political system through this backdoor rewriting of the social contract." We must look at the bigger picture. In the same way that business now works too much on a short-term level in order to achieve short-term gain, the political process is behaving in a similar manner.

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Details: Category: Finance; Created: 21 April 2012

On Wednesday April 18th the Social Welfare and Pensions Bill was debated in the Dáil. Mick addressed the dificulties encountered by of two single parents in county Wexford due to changes to the social welfare system. 62.7% of single parent families are at risk of poverty, showing the inequalities of the current system. He also points out that the percentage of irish people at risk of poverty is well above the European average. You can watch Mick's speech here while the full transcript is below.

I realise full well the Minister has a difficult job and if she is told to cut a certain amount to try to make it work, it will not be easy. Obviously, I do not agree with the fact she is told to cut so much in the first place. I would have rather seen the money raised through a higher increase in the tax bands for the better off. It is unfortunate the Government has decided to cut this Department’s funding so much but since it is doing so, it is a fairly impossible task not to hurt many people. There is little doubt one-parent families seem to have taken the severe brunt. I was glad to hear the Minister is thinking of rowing back a little on it. That is positive. I am not one to criticise a person for changing his or her mind. Those who cannot change their mind cannot change anything. I hope the measures will alleviate problems for many vulnerable persons. Recently, I met two women in Wexford who asked to see me - a girl called Deirdre who had been working continuously for 14 years and a girl called Ruth who had been working continuously for ten years. They had lost their jobs and become single mothers in a short space of time. They told me their stories, even about accessing social welfare benefits. It took Ruth eight months before she could get anything and she found it difficult to make progress in getting the money she thought would naturally be there for her if she ever lost her job, given she had paid tax for so long. Deirdre is still trying to get help. She admitted the father of the child was paying her a small sum of money and as a result, she has not been able to access the benefit. She was told they did not believe her figures because she could not possibly be living on the small amount of money the father of the child was giving her, and that problem is still not solved. There are so many in a difficult place today, and these are only two problems. A big problem as a result of the austerity measures implemented has been that not only have people become poorer, which is a natural result in a recession and we have come a long way down from the 2006 and 2007 levels of living standard, but also our society has grown much more unequal in that time. It is interesting to look at comparative figures for Ireland and Europe in regard to the numbers at risk of poverty or social exclusion, which is determined as having to live on less than 60% of the average income. I studied certain graphs which demonstrated that in 2007 the percentage of the population in Ireland that was considered at risk of poverty or social exclusion was 23% whereas the European average was 20%. In 2010 the European figure had risen by just 0.2% whereas Ireland’s had risen to 29.9%, which is frightening. Households with dependent children are even more at risk of poverty or social exclusion. In 2007 the European average in this regard was 19.6% and the figure for Ireland was 24%, but while the European figure has remained pretty stable since then, the figure for Ireland has increased from 24% to 34%, which is also frightening. Single adult households are taking the brunt of the recession in Ireland. The percentage of such households at risk of poverty or social exclusion in 2007 was 56.4% and it is now 62.7%. In other words, 62.7% of people who live in single parent households are at risk of poverty or social exclusion, which is an incredible figure for a developed country. Many of the less well off have been hit by the austerity measures but, sadly, it has developed in a very uneven way. We have seen the wealth of the top 10% grow in the past four years. I cannot help thinking that many of the measures introduced are something of a paper exercise. We sometimes do things that amount to false economy. We all accept the statistics that €1 spent on a child in a developed country saves the State close to €7 before the child becomes an adult. Therefore, it is not planning for the future to fail to take care of the young people who most need our help. In addition, the spending habits of those on lower incomes and on social benefits are beneficial to the domestic economy. People on lower incomes are inclined to spend all their money - they have to - so the domestic economy suffers when they do not have the money to spend. I would suggest 80% of the people in this country, perhaps 90%, have less money to spend now. However, the fact people from the lower strata have been hit the most by the measures in recent budgets has exacerbated the problem for the domestic economy. I could read out the list but Members have heard it all before. The list of areas where the less well off have been hit includes one-parent families, old people on fuel allowance, those on back-to-school and clothing allowances. It amounts to too much unfairness. I find it regressive. We need to start working towards tackling the level of inequality in our society, which has to be a primary aim if we want to make this country a better place.

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Details: Category: Finance; Created: 05 March 2012

The latest European Council meeting takes place on March 1st and 2nd in Brussels. On Wednesday, February 29th the Taoiseach addressed the Dáil on the forthcoming meeting. Following his briefing, deputies made statements encouraging the Taoiseach to raise certain issues. During Mick's submission he asked that the latest Greek bailout be questioned as well as the power held by Chancellor Merkel and President Sarkozy in decision making for the EU states. You can watch Mick's speech here.

When the Taoiseach goes to Europe for the European Council meeting, if he gets the opportunity I urge him to ask Chancellor Angela Merkel if she believes that the latest Greek bailout will work, given that it will probably deepen the recession, cause greater unemployment and social unrest. The European Union’s prediction is that the Greek economy will only contract by 4.3% this year, 0% next year and will grow by 2% in the following years up to 2020. The Greek economy is contracting at present by 7% and I do not think anyone believes those figures. I would like to hear a direct answer from Chancellor Merkel on the issue. From the Irish point of view the Council meeting will be very much dominated by the decision to hold a referendum, which I welcome. There should be greater participation of citizens in decisions made in this country. Having a vote once every five years is not enough for citizens. I welcome the decision to allow a referendum, which will be about many things for different people, such as the austerity economics and the insistence that governments should slash spending in the face of high unemployment which has been all the rage with most governments in Europe in recent times. I am not sure people in this country are fond of that. I am not sure what kind of country the Taoiseach has planned for us but people will have a say on what kind of country they want. While austerity might not do any harm to the export market or fiscal matters, it is killing the domestic market. The domestic economy, which is responsible for 90% of employment in this country, is going down the tubes. We will not have serious recovery until we deal with issues that directly concern the domestic economy. We must also ask whether we want more or fewer decisions made in Europe. Of late, Chancellor Merkel and President Sarkozy have met in advance of the European Council meetings. It is as if we do not have much say anymore. No doubt the fiscal compact will cede more power to Europe and fewer decisions will be made in this country. I am not sure that is what the people of this country want. In fairness, they will have a decision to make and it is their call. On whether we want more or less democracy, there is a serious democratic deficit in Europe at the moment and it seems to be on the increase. If Chancellor Merkel has her way we will go further away from real democracy. Sadly, a directly elected European Parliament has failed to bridge the divide between the people and the European Union. I am not sure what the answer is, but I do not consider that the EU is functioning in the manner we anticipated. Will the Government accept the vote of the people, be it “Yes” or “No” or will we be asked to vote again if we do not get the right answer the first time? It would be interesting to hear the Government make a pronouncement in that regard in advance of the referendum. The bank bailout is an issue for people. Taxpayer-funded capital injections into otherwise bankrupt banks are bailouts but the country did not get a bailout. We have loans that we are expected to pay back. It is disingenuous to call what the country received, a bailout, in contrast to what the banks are getting. Unfortunately, the main reason the banks got a bailout from the taxpayer and the country got it in turn was in order to ensure that the European banks got repaid. It is a big concern that the treaty is not the end of the European programme, it is more like a new beginning. We are told that Paris and Berlin are awash with blueprints for wha

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Details: Category: Finance; Created: 05 February 2012

Mick Wallace, TD has called on the Government to facilitate a referendum on the Fiscal Compact Treaty as soon as possible. In his address to the Dáil on Wednesday February 1st, Mick told the Government that they had received a mandate from the people at the last election and accepting this treaty was not part of that. Mick argues that this treaty suits Germany more so than any of the other EU states, with Chancellor Merkel stating earlier in the week - "we need to gradually give up more powers to the EU". You can watch the speech here.

A lot has been said about what this fiscal compact means for us and the rest of Europe. I would like to quote from Martin Wolf’s article in the Financial Times today. He puts it pretty well when he states: The ECB has saved the eurozone from a heart attack. But its members face a long convalescence, made worse by the insistence that fiscal starvation is the right remedy for feeble patients ... fiscal indiscipline is not all. Just as it was not the dominant cause of the collapse, but rather sloppy lending and improvident private borrowing, so fiscal discipline is not the cure. This attempt to vindicate the catastrophic austerity of Heinrich Brüning, German chancellor in 1930-1932, is horrifying. The perspective embodied in the fiscal compact - itself an attempt to revive the failed stability and growth pact - lacks the necessary understanding of the dependence of output in one member country on demand in others, of the role of payments imbalances and of the fact that competitiveness is always relative. There is little doubt that the level of austerity that this brings to the rest of Europe suits Germany more than the other 26 member states. In fact, it can be argued that not one of the others is very fond of what is being imposed on them by Germany. The Germans are in control and very few in Europe seem to have the stomach to contradict our masters today. Regardless of whether we like it, it appears that the politicians no longer run Europe; it is being run by the financial markets and banking institutions. The latter institutions have probably been the most culpable in the current crisis. They are the ones who have lost most money and had the poorest business models, yet they are being saved. We are going to do everything that suits them, rather than those who are suffering at their hands. This treaty definitely enshrines the German model of fiscal and monetarist rigour, as binding on the eurozone. It almost literally outlaws Keynesian economics. It was interesting to hear the German Chancellor, Dr. Merkel, saying on Saturday that “We will only be able to strengthen our common currency if we co-ordinate our policies more closely and are prepared to gradually give up more powers to the EU”. So we are going to give up more powers to the EU, but I do not believe the Government got a mandate for doing that last February. There is a general election in this country every five years, but I do not think it appropriate that it is the only say the public should have in how things are done here. Given that the Government parties went into the election with various promises and a different mandate came out of it for them, I do not think they now have a mandate to do this. Whether it is demanded constitutionally or not, the Government has an obligation to put this matter to the people. We pretend to live in some form of democracy - a more fitting definition of this democracy is: “You can say what you like, and you do what you’re told.” We pretend, however, that it is a little bit more sociable than that, so I do not see how the Government can refuse to give the people a say on this matter. It is really important to do so. Attending meetings on the household charge in recent weeks, I have noticed the amount of public interest in how the country is being run. It is fascinating and much greater than I could have anticipated. The notion that the people are not clued in to what is happening is completely dishonest. It is not true. I have been amazed at the level of interest and knowledge that people have all over the country in the current crisis. They would like a say on this issue. If this Government wants the mandate to work with this fiscal compact, it must be put to the people.

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