Link to this page: http://www.socialistparty.org.uk/issue/640/10333
Is Ireland's economy going bust?
THE IRISH government has imposed a series of savage austerity measures to reduce the country's large budget deficit. But far from curing its economic problems Ireland's economy shrank by a further 1.2% in the second quarter of 2010, hinting at a double-dip recession.
Unemployment in Ireland now stands at 13%, with the economy having contracted 14% during the current crisis. Dublin Socialist Party councillor Mick Barry asks if Ireland is heading for bankruptcy.
UCD economist, Morgan Kelly, was pilloried by the establishment back in May when he said it was no longer a case of whether Ireland would go bankrupt but when.
Four months on, more and more establishment voices are beginning to entertain the notion that he may have been correct.
Despite the massive cuts programme being implemented by the government, the price of borrowing by the Irish state continues to rise. The 'markets' demand a heavier price despite the government's 'market-friendly' policies.
The Irish state now pays 5.58% on ten-year government bonds, more than Greece pays for its debt in the wake of the European Union/International Monetary Fund bailout.
The Standard and Poor's debt rating downgrade simply reflects the view that there is an increased risk that Ireland will not be able to meet its liabilities.
Matt Cooper wrote in the Sunday Times: "We seem to have got something of a raw deal: public spending has been slashed, the cost of borrowing is going up, and so too is unemployment. The cost will be met by this and future generations. The width of the chasm in the public finances remains so enormous it is difficult to see how cutting current spending and increasing taxes further will do anything other than send the economy into another tail spin."
Kelly's analysis back in May predicted a sovereign debt of 140% of GNP (national wealth) by late 2012. This was based on the state guarantee to the banks costing the taxpayer €33 billion for written off property development loans (out of a total €100 billion), €7 billion for written off business loans (out of a total of €35 billion) and €7 billion for written off mortgage arrears (out of a total of €140 billion).
This would result in bank bailouts ten times greater than the bank bailouts in the USA per head of population.
It is probably too soon to say that bankruptcy for the Irish state is inevitable but equally a Greek-style debt crisis in Ireland even before Christmas cannot be ruled out.
The lessons for the working class movement from recent developments are clear. The massive cuts and tax increases are not being ploughed into an economic recovery. They are being ploughed into a black hole to feed the banks and the insatiable greed of the markets.
The movement must reject all cuts and tax increases and deals such as the Croke Park agreement which facilitate them. A struggle must be launched against the economic policy of the ruling class and a campaign to replace the market economy with a democratic, socialist system must be launched and vigorously pursued.
In The Socialist 29 September 2010:
Socialist Party editorial
Socialist Party news and analysis
Socialist Party feature
Socialist Party workplace news
International socialist news and analysis
Socialist Party feature