Finance Minister Brian Lenihan and the Fianna Fáil led coalition have set out their stall. This was a bosses’ budget that takes €837 out of the economy for every man, woman and child in Ireland. Worse still, if you happen to be an unemployed school leaver under the age of 20 your dole is being cut in half. RTÉ’s headline states that the “most severe budget in decades is revealed”.
Lenihan will raise an extra €1.8 billion in tax and will cut €1.5 billion from the state expenditure this year with a lot more to come in 2011. Over the last few weeks it’s become clear that the economy is in utter meltdown. The tax revenues are down by 23%, the economy is due to shrink by 6% this year and Lenihan himself admitted that the government’s deficit was €3 billion greater than predicted.
What’s clear is that Irish capitalism is in a huge crisis. All of the factors that contributed towards the development of the Celtic Tiger between 1995 and 2007 have been transformed into their opposite. The average rate of growth in those years was 6% which means that the economy effectively doubled in size. As reported by RTÉ “Mr Lenihan said the Government was determined to maintain high levels of public investment but spending could not be maintained at the levels envisaged when the economy was in rapid expansion”.
This was the main reason why Bertie Ahern was able to stay in power for so long – the economy was booming. Brian Cowen and Lenihan have surely been handed the poison chalice. They are on the horns of a dilemma; they have to attack the living standards of the workers, because the alternative for the bourgeoisie is a non-runner. But every time they take money out of the economy to pour into the black hole that is the government finances they are cutting the market.
The Irish economy is massively dependent on foreign trade and it’s small by international standards, which means that we are being tossed around in the maelstrom of the world crisis. The immediate effects on the working class are bad enough, but this budget includes cuts in education, including the universities, and attacks on childcare. This assault on the working class is going to have massive implications for years to come.
What is of the most crucial importance at this point is the role of the trade union leaders. We’ve explained that the decision to call off the strike on March 30th was an error. There is a very clear reason for this. We need to stop the assault on working people in its tracks. It is quite likely that the ICTU leaders will consider that this budget is ‘not quite’ as bad as it could have been. Given the size of the budget deficit the outcome will inevitably be greater borrowing and merely a postponing of the day of reckoning. There are huge cuts to come next year already written into the government’s plans.
Meanwhile as RTÉ explains:
“Moving to the credit system, Minister Lenihan announced changes to the role and structure of the Central Bank of Ireland.
He said the role of the Central Bank of Ireland will be reformed to place it at the centre of financial supervision and financial stability.
The Central Bank of Ireland will in the future be headed by a Commission, chaired by the Governor.
A national asset management agency is to be set-up under the aegis of the National Treasury Management Agency. Assets will be transferred from the banks to the new agency to ensure the banks have ‘a clean bill of health’.
The agency will have a commercial mandate and will have the central objective of maximising over time the income and capital value of the assets entrusted to it.”
Fianna Fáil are desperate to try and impose some stability on the banks. They are trying to exercise some central control over the banking crisis. But these are extreme crisis measures, measures that will affect the economy for decades. Capitalism in Ireland has hit a brick wall and that is affecting all classes in society. The same is true throughout the entire world. The relations between the classes on a world scale are altering radically.
The government and IBEC (The bosses’ confederation) have demonstrated how easily they were prepared to ditch the national agreement on pay. It is extremely short sighted to expect anything more in the current set of negotiations between the so called ‘social partners’. Under the current conditions this is like the social partnership between the spider and the fly or the shoal of piranhas and the donkey that fell in the river.
The ICTU leaders had a huge mandate for action on March 30th. They thought they could use that to convince An Taoiseach of the error of his ways. This budget shows that the Irish bourgeoisie have no intention of sharing the pain.