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PEOPLE’S NEWS
News Digest of the People’s Movement
No. 38
24 November 2010 decide what constitutes a transfer of powers in certain cases. The bill defines in detail what constitutes a transfer of power. These are: • permitting qualified majority voting, ending the national veto, in certain areas in the Euro pean Council • any attempt to move to qualified majority voting through “passerelles” or “ratchet clauses” —in effect introducing changes without a new treaty • conferring power on any EU body that would impose an obligation or a sanction on Britain • any attempt to join the euro or to join the EU’s Schengen common travel area.
Loss of sovereignty ALL the crocodile tears being shed for the current episode of “sovereignty loss” would be a bit less nauseating if they were accompanied by even a modicum of recognition that when this country’s authorities adopted the euro they thereby abolished national control of interest rates and exchange rates. In doing so they aban doned the essential economic instruments of sovereignty. Remember the key question asked in last June’s ReglingWatson Report on the banking crisis: “Was it a coincidence that Ireland’s econ omic fundamentals began to deteriorate when Ireland joined the euro area?” And their answer: “In a monetary union, the challenges for policies becomes even greater, as monetary conditions cannot be influenced directly and the (nominal) exchange rate is no longer a policy instrument.” So rhetoric about “the state of the nation,” delinquent bankers and developers, the credit crunch crucifying “Ireland Inc.” and trade union leaders calling for jobs and investment is so much hot air on cold winter days if it ignores this reality.
Germans plan to make the bankers pay for future bail-out losses —but it’s too late for Ireland PROPOSALS by the German Finance Minis try on the new crisis mechanism emphasise that the private sector has to be involved in the new bailout system. “The crisis mechanism is to facilitate a fair balance of interests between the debtor state and creditors in the event of threatening in solvency,” it says, proposing a “twopillar system” imposing losses on the bond markets when a country is forced to turn to the “crisis mechanism.” In the first scenario, when a country has cash flow problems but is fundamentally solvent the creditors would agree to longer maturity periods on bonds and cuts on their yields. In the second, graver “pillar,” where a country is on the brink of insolvency it would be bailed out in return for debt restructuring, while bondholders would face large losses—economists say from a third to a half of their investment. “As a rule such [bail
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British Government tables EU “referendum lock” bill THE British Government has published its bill containing the “referendum lock,” designed to prevent the transfer of powers from London to Brussels without voters’ consent and a “sovereignty clause,” which it says will assert the primacy of Parliament. The referendum lock will cover the Lisbon Treaty’s ratchet clauses—which allow EU leaders to permanently scrap national vetoes by one unanimous vote—and any decision to join the euro. The bill also includes a “significance clause,” which allows ministers to 1
out] help also requires a substantial ‘haircut’,” it says. The Europeans hoisted a €750 billion umbrella over the currency in May this year in the wake of the Greek emergency, which spiralled into a eurozone crisis. Merkel was accused of dithering and making a bad situation worse. The lesson has been learnt. The €750 billion fund is temporary, expiring in mid2013. The Finance Ministry paper is for the new, permanent “crisis mechanism.” It is to be in place by the summer of 2013, otherwise Merkel might be waving her reelection hopes goodbye. The complications and legislative timetables mean that the outlines of the new system need to be agreed next month and essential moves, including amending the Lisbon treaty, accom plished by next summer. Merkel’s central demand, the novel aspect of the new regime, is that investors are to bear a large part of the losses. She has come under heavy criticism for this from the Irish and the European Central Bank but is convinced she is right. The criticism is that by insisting on losses for lenders she alarmed the markets, which pushed up the cost of Irish borrowing and caused the chaos. But the Germans are unapologetic. “This process of clarification is needed,” said another senior diplomat. “The only unfortunate victim is Ireland.” Behind the scenes Merkel is also moving deftly to secure crucial areas of European policy making. Her current European adviser, Uwe Corsepius, a close associate, is to be installed in Brussels running the European Council. The aim appears to be to form a tight alliance with Herman van Rompuy, president of the Council, sidelining his rival, José Manuel Barroso, presi dent of the European Commission, the EU execu tive. Merkel also hopes to install a monetary hardliner as head of the European Central Bank in Frankfurt, replacing JeanClaude Trichet. Throughout the EU there are complaints about a new German Europe. But the Scandinavians, the Dutch and the Austrians are quietly applauding Merkel’s determination. Perhaps more importantly, the French have capitulated, while the British are mere specta tors, increasingly unengaged and ignored. “The euro is the biggest crisis facing Europe, and it could carry on for another five years,” said Charles Grant, director of the Centre for Euro
pean reform. “The French are fearful of German euroscepticism, of German economic success, of the Germans going it alone on Russia and China, so they will go with Berlin. The Germans are back in the driving seat.”
The wisdom of van Rompuy Van Rompuy on sovereignty: “We have together to fight the danger of a new euroscepti cism . . . This is no longer the monopoly of a few countries. In every member state there are people who believe their country can survive alone in the globalised world . . . It is more than an illusion: it is a lie!” Van Rompuy on democracy: “I, for one, have really been impressed over the last year by the political courage of our governments. All are taking deeply unpopular measures to reform the economy and their budgets, moreover at a time of rising populism. Some heads of government do this while being confronted with opposition in parliament, with protest in the streets, with strikes in the workplace—or all of this together —and fully knowing they run a big risk of elec toral defeat. And yet they push ahead. If this is not political courage, what is?” Van Rompuy on the democratic process: Com menting on his presidency at the launch new book, Inside the World of Herman van Rompuy: “I don’t speak here as a politician but as a free man. I don’t have any voters. And I also prefer readers to voters.” Van Rompuy on the crisis: Speaking at the start of a series of meetings involving finance ministers from the euro zone: “We all have to work together in order to survive with the euro zone, because if we don’t survive with the euro zone we will not survive with the European Union.”
What will the Irish bail-out actually solve? Open Europe research OPEN Europe has published a new briefing that looks at the different bailout options for Ireland. It argues that a oneoff bailout or stricter budget rules will do very little to solve the euro 2
zone’s problems—although it can serve to buy valuable time for Ireland, which is in better shape than Greece and Portugal. The briefing notes that the real problem Ireland and other weaker eurozone economies face is how to regain competitiveness inside a monetary union, without the option of currency devaluation at their disposal.
all memberstates’ judicial systems are equiva lent, when clearly they are not. Ireland obtained an optout from justice and home affairs in the Lisbon Treaty, and conse quently the issue never surfaced in the referen dum debate. Now enquiries to the Department of Foreign Affairs have confirmed that we have opted in—again with no public debate. But then we are used to that.
Iceland refuses €30 million over fears of EU propaganda
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ICELAND, a candidate for membership of the European Union, has spurned up to €30 million in Brussels cash out of fear that any projects the money is spent on would amount to interference in a domestic debate over whether or not to join. The European Commission had announced that Iceland is eligible to receive up to €30 million for “preaccession” projects. The money was to go to, among other things, an information campaign by the EU to inform the Icelandic people about what it does. Three Icelandic ministers fear that the funds would be used to change Icelandic legislation in a proEU direction at this stage of negotiations. Both the Agriculture and Fisheries Ministry and the Finance Ministry have announced that they do not intend to apply for any grants. Two other ministries, the Justice Ministry and the Transport, Communications and Local Govern ment Ministry, have also put project proposals on hold.
THE evocative fine art print Mise Éire, signed, numbered and blind stamped by the artist, Robert Ballagh, in a limited edition of two hundred and fifty, is still available, but there are fewer than fifty left. The price is €250 unframed, €300 framed.
Gardaí in Afghanistan OH, what good Europeans our political leaders are! Without any debate in the Dáil or in the country, they have sent six members of the Garda Síochána off to join the EU police mission in Afghanistan. The “mission” is to train the Afghan police force—as if policing in Ireland has anything vaguely in common with policing in Afghanistan. The absurdity of this venture was illustrated by the fact that the six gardaí had first to go through a period of training with the army. Why didn’t the Government just send six military police instead? Well, one stumbling block would have been the Defence Act. Under this the Government is not allowed to despatch a contingent of more than twelve members of the Permanent Defence Force without seeking a resolution from the Dáil. And, as seven Irish soldiers are already based in Kabul, that would have meant the coalition Government (including the hypocritical Greens)
EU’s growing police and justice role goes unnoticed by voters THE past few months have seen an alarming array of new EU controls over justice and home affairs quietly introduced under the radar. Euro pol, the EU’s intelligence agency, now employs more than 650 people and offers diplomatic immunity to its officers. Europol’s staff are about to move into a new £8½ million building, and its annual costs are £60 million. Seventeen law enforcement systems and databases are at present operating or are being developed, while the European arrest warrant has turned out to be completely dis proportionate. The premise underlying it is that 3
having to defend our involvement in that illegal occupation. Another reason is that the police mission is just part of a façade to support the illusion that “normality” now prevails in Afghanistan, which of course is patent nonsense. There’s a war raging in that country, and the six gardaí will be of little practical use. It is difficult not to be cynical about this ploy. The gardaí and their EU counterparts are apparently there to instruct the Afghan police about human rights. At the same time the US forces have their own “dark prison” in Kabul, where torture is systematically used. Will the gardaí be involved in overseeing this prized insti tution? Hardly! While our gardaí are angels in comparison with US and NATO forces and their warlord allies, they have nevertheless not excelled them selves when it has come to transparency. The experience of Galway Alliance Against War at the hands of the boys in blue has certainly raised the question of their objectivity. Just for the record, the six gardaí are an inspector, a sergeant, and four gardaí. Three of them hail from the Emergency Response Unit. (Hopefully none of these come from the unit that unnecessarily shot John Carty to death in Abbeylara.) And let’s hope the practices used by the Gardaí in Co. Donegal—and in many other counties, if the truth were told—will not be taught to the Afghan police force. So, there was no debate in the Dáil: it was rubberstamped by the Government. But a lack of a Dáil debate should be of no surprise, as 70 per cent of Irish political business is now decided by the unelected EU Commission in Brussels. • Thanks to Galway Alliance Against War.
Amid concerns about the IMF, the European Commission also gave the green light for the revised €153 billion bank guarantee scheme. It will protect mainly corporate and retail deposits but also some individuals’ savings. It is the second time that EU officials have approved economic protection plans for Ireland in as many days, after the Commissioner for Economic and Monetary Affairs, Olli Rehn, gave his backing to a plan to reduce spending by €15 billion. He also said the EU would be flexible with the Irish savings bid. Writing in the Irish Times, Morgan Kelly, professor of economics at UCD, who obviously didn’t know, argued that “by next year Ireland will have run out of cash, and the terms of a formal bailout will have to be agreed. Our bill will be totted up and presented to us, along with terms for repayment” (getting the prediction wrong for the first time—but only on the timing!). He concluded: “Sovereign nations get to make policy choices, and we are no longer a sovereign nation in any meaningful sense of that term.”
ECJ returns farm subsidy information to realm of secrecy THE European Court of Justice has ruled that the publication of the names and details of indi vidual farmers receiving agricultural aid infringes their right to privacy. “The obligation to publish the names of natural persons who are beneficiaries of such aid and the exact amounts which they have received constitutes, with regard to the objective of transparency, a dis proportionate measure,” the court said in a statement. The disclosure of all beneficiaries of EU farm subsidies became obligatory in 2007, after intense campaigning from transparency groups and the uncovering by journalists of big food companies and royals among the top recipients, instead of small farmers struggling to get their products into a market dominated by chain retailers. Germany and Ireland promptly took down the web sites listing the beneficiaries—despite the fact that the applied only to individuals, not companies or associations. Irish farm groups were enthusiastic about the decision, as they have always claimed that the publication of
Honohan: “Savage” cuts resemble IMF package! IRELAND is lining up the same savage cuts as a feared IMF rescue, the country’s top banker warned last week. In his sobering assessment, Professor Honohan said: “An IMF package wouldn’t look that much different.” So, what did he know that Cowen and the rest of us didn’t know? 4
these details was a “snooper’s charter.” While the two countries have taken down their web sites, Farmsubsidy.org, a portal run by journalists uncovering the stories behind the figures, still has the data available on its own pages, along with a ranking of the top beneficiaries. Meanwhile the EU’s auditors have once again refused to sign off EU spending, making it the sixteenth year in a row they have refused to do so. The two biggest areas of the EU budget, agriculture and regional spending, remain “materially affected by error.” The error rate for agricultural spend ing has increased since last year, though there has been a significant improvement in the amount of errors for regional spending. The auditors found that five out of seven of the EU’s spending areas were affected by an error rate above 2 per cent, which the Commis sion defines as the threshold for a “clean bill of health.” Ireland was singled out for “significant controlled weaknesses” over how it calculates VAT, revealing a “difference of opinion over how tax rules should be applied.” The Court of Auditors also found that in four out of ten cases EU officials received double the amount of social benefits they were eligible for by accepting national benefits alongside full EU benefits.
214 officials earn as much as the German Chancellor OF the 23,000 employees of the European Com mission, almost a quarter earn more than €10,000 per month, with 214 officials earning between €15,000 and €18,000—as much as the German Chancellor. An Austrian MEP, Martin Ehrenhauser, says: “These privileges cost more than €1 billion each year,” adding that “the bureaucrats are so powerful that none of the politicians dares to attack their privileges.” There are also transitional payments for EU officials leaving office. The system whereby members of the Commission profit from a mini mum wage of €180,000 during the three years after they have left office is out of touch with reality.
Meanwhile . . . Members of the European Commission leaving office later this year will receive more than £1 million (€1.1 million) each in pension payments and socalled “transitional” and “resettlement” allowances.
Ireland being sacrificed for the euro Tom O’Connor, CIT SEVEN industrialised countries will need to borrow a larger proportion of GDP than Ireland in 2011, according to an IMF report. So, despite high interest rates on bonds now, our borrowing needs are well behind the United States, France, Italy, Greece, Japan, Belgium, and Portugal. There isn’t any talk to these higher borrowers, so clearly this is not the reality for Ireland either. The rightwing economic estab lishment is falsely frightening us with the IMF to take more cuts. So why are bond rates so high? The reason is that they do not believe that the Govern ment’s fouryear plan can be delivered. Neither does the ESRI. The EU is desperately trying to
German plan for an “Insolvency Act” for debtor countries THE German Finance Minister, Wolfgang Schäuble, has discussed the German govern ment’s plans for an “Insolvency Act,” envisaging a twostep crisis resolution mechanism for high debt eurozone countries. “In the first step, the deadlines for upcoming loans could be extended in a critical phase. If this does not help, in the second step private creditors will have to accept a deduction in their outstanding accounts. For that, they will be guaranteed that they receive the rest.” The plans have been endorsed by Angela Merkel’s coalition government.
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save the euro, and that is why it is trying to get Ireland to do the impossible. But the markets still know it is impossible. The Government should do two things: demand an extension of two years, and tell the EU that this is nonnegotiable; and stimulate the economy, which will drive up economic growth and improve the public finances over two years. The problem is that the Government’s austerity plan is dashing prospects of growth; and that is why the Government has to cut so much. Its cuts are based on low figures for economic growth. The Government is shooting itself in the foot. The markets know that too. This pretence between the EU and Ireland, and Ireland’s belligerence on stimulating the economy, is so farcical that it is creating total pessimism and un certainty on the bond markets. It is now amount ing to economic suicide. This is the same mistake the Government made in trying to beat the markets in 1992 by defending the Irish pound within the ERM. Eventually it had to capitulate. The European Union is so desperate to defend the euro that the German prime minister, Angela Merkel, is threatening to issue a warning about Irish bonds. This is naked coercion of Ireland by Merkel to keep the euro from disintegrating. Ireland is not responsible for the failure of the Stability and Growth Pact: it has only breached it in the past two years. Yet Ireland is being coerced into defending the euro at the expense of its own economy. Ollie Rehn has come here to impress the EU hard line on Ireland. Neither Rehn nor Merkel will prevent the euro from falling apart. The markets know this. The markets know that Ireland’s deadline of 2014 is impossible. They also know that a huge €14 billion austerity plan will prevent a strong recovery in Ireland and make matters worse. It’s time for Ire land to demand an extension until 2018 and not be sacrificed on the funeral pyre of the euro at the expense of 450,000 unemployed, economic deflation, and emigration running at 90,000 per year. The defence of the ERM in 1992 failed, and this attempt of impose the 3 per cent deficit as a percentage of GDP by 2014 will also fail. It is also likely that the euro will fail in the
near future. This country cannot become the col lateral damage of that process. An overview of the borrowing needs of the governments of fifteen major developed countries in 2011 shows that Ireland is in the middle in borrowing needs when measured as a percentage of GDP. According to the IMF, Japan, the United States, Greece, Belgium, Italy, France and Portugal all require a higher percentage of gross domestic product to finance their budgets in 2011. All require more than 20 per cent of GDP. Ireland is next, and it will require less than 20 per cent of GDP, according to the IMF. Ireland is followed by Spain, Canada, Britain, Germany, Finland, Sweden, and Australia. In 2011 these governments will have to raise $10.2 trillion to repay maturing bonds and finance their budget deficits, according to the IMF. That’s an increase of 7 per cent from 2010 and equals 27 per cent of their combined annual economic output. Aside from Japan, which has a huge debt hangover from decades of anaemic growth, the United States is the most extreme case. In 2011 the US government will have to find $4.2 trillion. That’s 27.8 per cent of its annual economic output—up from 26.5 per cent this year. By comparison, crisisaddled Greece needs $69 billion, or 23.8 per cent of its annual GDP.
No2EU offers solidarity with Irish workers THE British cam paigning group No2EU—Yes to Democracy has pledged its full support for the People’s Move ment as it mobilises a fight back against the declaration of war on the Irish people by the EU and the Brusselsled attempt to seize complete control of the Irish economy. Bob Crow, general secretary of the RMT Union and spokesperson of No2EU, said: “The allout drive by the EU superstate to batter the Irish people into submission and to force them to accept a complete takeover of their economy by 6
Brussels is an act of aggression that anyone who believes in democracy should actively oppose. The Irish people aren’t responsible for the odious debts racked up by the bankers and the political class and they shouldn’t have their freedom, their democracy, their standards of living, their jobs and their public services ripped away as part of some centrally imposed bailout. “The EU have moved on from demanding money with menaces to offering loans with menaces. They are no different from loan sharks in the runup to Christmas; but the price to pay to these gangsters is national freedom and un diluted fiscal fascism. “The chattering classes, the bankers and the Euro elite have dragged the whole of the conti nent into a political and economic experiment which is now teetering on the brink of collapse, and, as we warned repeatedly, it will be ordinary working people, from Greece to Italy and from Ireland to Iberia, in their tens of millions, who pay the price as their lives are ripped apart. The time to stand and fight is now. and we pledge our full support to the People’s Movement.”
would force pension funds to hold similar levels of capital to those of insurance companies under what is called the Solvency II regime. • A German Finance Ministry paper on the proposed crisis resolution mechanism states that aid should come with strict conditions, such as a “voluntary suspension of voting rights” in the Council of Ministers. The paper also argues that new bonds issued by eurozone governments should include “collective action clauses,” which would prevent individual creditors vetoing decisions to restructure debts. • According to the Sunday Times, at least £30 million of EU subsidies has been used since 2000 to build fishing vessels that routinely breach bluefin tuna fishing quotas, pushing the species to the brink of extinction. • Peter Jungen of the European People’s Party has revealed that the ECB is more leveraged than the average hedge fund. He said the ECB is leveraged twentyone times, while the average hedge fund is only leveraged three to four times. “A fall in assets of 4.2 per cent would wipe out the reserves of the ECB balance sheet, which begs the question: who will then bail out the ECB?” He further said that if the ECB applied marktomarket accounting it would already be insolvent.
And finally . . . • New EU pension rules could spell the end for definedbenefit pension schemes. The new rules
© Steve Bell, 2010
People’s Movement · 25 Shanowen Crescent · Dublin 9 www.people.ie 087 2308330 · post@people.ie
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