Ireland: There have been a number of reports in today’s media that the
Irish economy has grown by 1.3%. Although this is no bad thing, as it
will help to rebuild the confidence of working people, the real picture
is somewhat more complicated than the headlines might indicate on the
first examination. Certainly any economic perspective that doesn’t make a
sober assessment taking into account everything that is happening in
Europe and particularly Greece just now will not stand up to much
challenge.
There have been a number of reports in today’s media that the
Irish economy has grown by 1.3%. Although this is no bad thing, as it
will help to rebuild the confidence of working people, the real picture
is somewhat more complicated than the headlines might indicate on the
first examination. Certainly any economic perspective that doesn’t make a
sober assessment taking into account everything that is happening in
Europe and particularly Greece just now will not stand up to much
challenge.
Even a closer examination of the figures reveals
some issues. Firstly the headline figure is that Gross Domestic Product
has risen by 1.3% in the first Quarter of 2011. But the figure for Gross
National Product shows a fall of 4.3% over the same period. The
difference in the figures lies in the fact that GDP includes the profits
of foreign multinationals which are based in Ireland. The lower figure
for Gross National Product reflects the effects of the
austerity measures introduced over the last couple of years which have
cut the market and the effects of government cuts also. The situation in
the Building industry is particularly bleak with seasonally adjusted
production down by 15%. There are now some 200,000 less building workers
in the state than was the case at the height of the Celtic Tiger boom
years. This is an extremely significant figure since it has been
estimated that the construction industry represented some 25% of the
economy at that time.
The instability in the state finances has big
implications for the public sector. It also has big implications
potentially for the banking sector, especially if Noonan’s proposals to
pass on losses to “senior bond holders” were implemented. The
cost of bailing out the banks has now risen to around 30+% of GDP, this
looks set to rise following recent stress tests on the banks. The knock
on effects of more instability and crisis in the Irish banks , on top
of what has already taken place, with the black hole of NAMA and AIB in
particular, will pose further risks to the capacity of the new coalition
to raise money on the international bond markets as is planned for 2012.
It’ll take more than fractional economic growth to
solve the funding crisis facing the government. Tax revenue is very
fragile and even if the economy was to take off tomorrow it’s probable
that unemployment would still tend to remain high. Unemployment tends to
be a “lagging economic indicator”. The situation in the building
industry reflects the problems in the economy. While there are Ghost
Estates on the outskirts of many towns and villages across the land and
while no one is buying the existing new houses, what incentive is there
to build more?
The problems in the rest of the euro zone will
place enormous pressures on the FG/Labour coalition to continue and
extend the austerity programmes. Already Noonan’s remarks about forcing
the “Senior Bond Holders” to take “a haircut” seems to have put the wind
up not only the speculators, but the rest of the government also, with
An Tánaiste back tracking in the Dáil the next
day. The ECB and the IMF are calling the shots and that opens up a
dangerous period for the working class. To re-enter the bond markets the
government needs to try and avoid being at the wrong end of the bond
market. Otherwise, as before, they will merely be picked off by the
parasitic speculators. Now more than ever we need a fighting and
democratic trade union movement with a clear sighted leadership.
Reliance on social partnership is not going to solve the problems, the
pressures on the Croke Park agreement illustrate this very well. There
is very little room for the trade union leaders to manoeuvre within.
Sooner or later they will come into conflict with the coalition.
