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Wednesday 3 September 2014

Fionnan Sheahan: Origin of economic crisis lies with Dunces in Dublin

Fionnan Sheahan

Published 30/11/2010 | 05:00

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THE Bogeymen of Brussels are being blamed for a punitive rescue package -- refusing to burn the bondholders, lowering the minimum wage and threatening our corporation tax rate.

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This is not the assessment of the British press on Fleet Street who can be so hostile to the EU project, rather the views being expressed from the pro-European parties in this country.

Forget about even thinking of holding an EU referendum in this country over the next decade -- and beyond, for that matter.

After the events of the past week, Ireland is edging closer to being regarded as a Eurosceptic nation.

An opinion poll taken this week on Irish views on EU membership would likely throw up some highly negative results.

The head of the junior coalition partners last week pointed the finger at Europe for his Government's decision to reduce the minimum wage.

Green Party leader John Gormley said the reduction in the minimum wage was the "first demand" by European Commissioner Olli Rehn.

Never noted for missing an opportunity to pass the buck for an unpopular decision, Fianna Fail ministers didn't go out of their way to contradict it.

The apparent threat to the country's corporation tax rate was set up by the Government as what is known in European terms as a 'red-line issue' -- a non-negotiable.

While a number of EU member states have made their views known, there is no evidence it was ever considered as part of the EU- IMF bailout talks.

Trumpeting the Government's defence of the 12.5pc rate, Taoiseach Brian Cowen said there had been "a lot of statements from many quarters" -- presumably a reference to the French and German positions.

For a man who a fortnight ago was playing word games over the definition of "talks" and "formal negotiations", he was suddenly more than willing to elevate the status of these soundings to official arm-twisting.

The idea of the bondholders taking a hit was an option that was explored and put forward by the valiant Irish negotiating team -- only to be shot down by the manipulative European Central Bank.

"We are not an irresponsible country. We are a country that recognises its international obligations as a member of the euro area," Mr Cowen said, again setting up Europe as a scapegoat.

Central Bank Governor Professor Patrick Honohan at least tried to be measured in explaining why the notion of burning bondholders was not embraced.

"There was no enthusiasm -- I would put it no more strongly than that -- in European capitals for something to be done about those," he said.

The opposition parties' reaction to the ECB-IMF bailout has also painted Europe as the bad guys -- riding roughshod over an incompetent Government. Labour's Joan Burton contrasted the IMF rate to the EU partners' "usurious interest rates of 6pc, 7pc or more".

"Making one country the poster child of austerity pour encourager les autres will only be to the detriment of the European project," she said.

Fine Gael's Richard Bruton lambasted the EU and ECB attitude in charging a 5.8pc interest rate.

"The EU in particular is looking at Ireland like a prodigal son who must be got into line. It is displaying very narrow thinking in shielding bondholders from exposure to costs and taking a penal approach to the cost of money. If Europe sets a cliff too steep for Ireland to scale it won't solve its own problems no more than Ireland's," he said.

This from the brother of John Bruton, former Taoiseach and former EU ambassador to the United States, and a figure who has contributed immensely to deepening Ireland's role in European Affairs.

Slightly over a decade after our currency changed overnight from punts to euro, the country has begun to question the move.

The advantages of the certainty on the value of currency, access to a market using the same currency, the convenience of travel and the security of having the backing of a larger currency unit are now being contrasted with the disadvantages of not being able to control interest rates, being able to devalue, and other countries having a vested interest in your financial affairs, which can conflict with that of the country itself.

Mr Cowen categorically ruled out ever even looking at the suggestion for leaving the eurozone. "That was not an option for this country," he said.

Ireland's relationship with Europe is at a low ebb -- and yet the fault lies closer to home.

Europe may gradually be wondering what it gets out of the relationship. Despite benefiting enormously from EU funding over the past 37 years, to the tune of €60bn, Ireland has initially rejected the last two EU referenda and one Irish bank threatened the very future of the currency and, therefore, the union itself.

The European Central Bank prevented the entire collapse of the Irish banking system by replacing the deposits flowing out of the troubled banks. Its patience ran out three weeks ago when there was no end in sight.

When the European Commission ticked off Ireland for its profligacy, the advice was ignored.

Charlie McCreevy was portrayed as a hero for standing up to the EC's bean counters in 2002, when deficit rules were stretched to the limit following a pre-general election splurge by Fianna Fail.

EU interventions are depicted as dictates and yet, when officials don't step in, they are accused of being hands-off.

Rules for membership of the euro were in place.

It was left to the Irish Government to regulate the banking sector, which it failed to do.

It was up to the Irish Government to control its own income and expenditure, which it failed to do.

The origin of this crisis and the responsibility for the need for an international rescue lies not with the Bogeymen of Brussels, but the Dunces in Dublin.

Irish Independent

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