Irish Government to collapse as IMF/ECB Moves In

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So it has finally happened. It has been called the blackest day in Irish history and the fall of the Irish Republic: after a tumultuous series of denials, spin and secret discussions, the IMF and the European Union has intervened to try to stop the death spiral of the Irish economy.

This is hardly surprising; indeed, it has been expected for well over a year. What is surprising to many is that the Irish government, led by Fianna Fail in coalition with the Green Party, allowed the situation to deteriorate to such an extent – and indeed, that they did not admit failure and throw themselves at the mercy of the IMF and the European Union months earlier.

Up until November 18^th, the Irish government has insisted that it did not need a bailout, and that the State was fully funded at least until the middle of next year. Never believe anything until it has been officially denied, right?

In a deal published this week, the IMF and EU will lend the Irish state €85bn ($114bn). This astronomical figure will be used primarily to prop up confidence in the failed Irish banks.

Meanwhile, the Irish government has published its so-called four year recovery plan, which is a euphemism for the fourth austerity budget to be imposed on the Irish people. It promises to be far more draconian than previous austerity measures. The aim of this budget is to make an adjustment of €15bn in government spending over the next four years, starting with €6bn this year. The Irish can expect minimum wage pay cuts, tax hikes, VAT hikes and savage cuts in the health sector, welfare payments, child benefits and education. The Irish government will not publish the full details of the horror to come until December 7^th, further prolonging the miserable uncertainty the nation is facing.

The latest austerity budget will be the final blow to low- and middle-income families. This is not going to be a matter of spoiled spongers moaning about fewer free welfare goodies to avail of. It will be a matter of whether to pay off your mortgage or your electricity bill or feed your children. This is not an attempt at melodrama. It is happening already, and the new austerity budget has not even been implemented yet.

The first basic presumption underpinning these measures is that every citizen of Ireland, young or old, is to blame for the implosion of the Irish economy. Even the Irish media, exuberant in its celebration of the official Fianna Fáil party line during the good old days of the Celtic Tiger and gentle in its criticism now, supports this view. We must all share the burden equally, we are told.

This is not true. Reckless bankers and enabler-politicians are to blame for this mess, which was created behind closed doors and a smoke screen of spin. Astoundingly, even at this late hour the official government line can still be summed up thusly:

This would never have happened if Lehman Brothers hadn’t collapsed, this would never have happened if you people hadn’t spent all your money on new handbags, this would never have happened if the international bond markets hadn’t been so cruelly unfair to us – these are not the droids you are looking for, our full banking guarantee of September 2008 was a fantastic idea, there are no other options and now it’s time to get ready for our brilliant new measures.

The second presumption is that it is possible to slash and burn your way out of a recession. However, the fact that Ireland has already suffered through three austerity budgets while the Irish economy continues to contract should be an obvious indication that this is not so.

The third basic presumption is that the international money markets must be appeased at all costs – and that in order to do this, the Irish state must borrow and borrow anew, pouring billions into a black hole of debt. Fears are already being voiced by several economists that the €85bn bailout will not be enough to save the Irish state, and that it will have to default on this debt anyway. The doomsday scenario is thus: if the Irish state is forced to default on its gigantic debt in the near future, at a time when Spain and Portugal may approach the EU/IMF for a similar bailout, there simply will not be enough money. This in turn could threaten the entire euro zone.

It is likely that the Irish will head for the polls in a general election in January 2011. It is less likely, however, that the current Fianna Fáil/Green Party government will even last that long. The Irish nation is facing complete economic and political meltdown, and the debate about the future now takes place amid a storm of accusations and denials.

In a statement on the new for year recovery plan, Sinn Féin’s Caoimhghín Ó Cáolain told the Dáil (Irish parliament):

“This is not a plan for national recovery in our view. It is a plan for national impoverishment. It is a savage plan which will force the people to pay dearly for the economic treason committed by the Fianna Fáil/Green government. This government has no right to impose such a plan on the people. The Dáil should be dissolved now on its publication, the budget should be suspended and there should be a general election. It is a travesty that a four-year plan should be devised by the most reviled government in the history of the state – a government whose life is now measured in mere weeks.”

Joe Higgins, Socialist Party MEP for Dublin was equally scathing in his comments. In a statement to the European Parliament, Mr. Higgins said:

“I represent the capital city of the Republic of Ireland, or the former Republic perhaps at this stage, in the European Parliament. The EU Commission, the IMF and the European Central Bank are acting as agents for international speculators in financial markets in demanding that the Irish working class pay for the tens of billions that these speculators gambled in property deals in Ireland.”

Mr. Higgins went on to state that there is no moral justification for forcing the Irish people to suffer savage austerity measures and pay for the gambling losses of property speculators.

Mr. Higgins and Mr. Ó Cáolain are not lone voices of dissent, far from it. A march has been arranged for tomorrow by the Irish trade union association to protest further austerity. As many as 60,000 people are expected to march to express their feelings of betrayal, anger and humiliation. One journalist mused that the behavior of the protesters at tomorrow’s march will be a good indication of the level of anger among Irish people. After a students’ protest march turned bloody when riot police charged a few weeks ago, a more sobering view would be that the mood and behavior of the Irish police will be a good indication of how the State will choose to deal with dissent over the coming weeks.