Wednesday 21 March 2018

Like the Greeks, Sinn Fein would also hit the cold, hard steel of The System

Voters in this country need to realise there will be no debt write-down so don't be fooled again at the General Election

Brian Lenihan
Brian Lenihan
Jody Corcoran

Jody Corcoran

Well, that didn't take long, did it? Just 10 days after entering office, the Syriza-led government in Greece has dropped a key campaign pledge - debt write-down.

The new Left-led authority has discovered what Labour (and Fine Gael) always knew, but sought to pretend otherwise: it really is Frankfurt's way.

For election purposes, Sinn Fein and the far Left here still like to pretend they can succeed in office where all others have failed to their cost.

As a promise, it is empty; as a negotiating ploy, hardball was shown last week to be a busted flush.

There will be no debt write-down, not now, not ever, which voters here need to realise before they allow themselves to be fooled and angered all over again.

It took the Greek Prime Minister Alexis Tsipras and Finance Minister Yanis Varoufakis a week and a few trips to the capitals of Europe to drop their pledge.

In its place, Varoufakis broadly unveiled an alternative plan, a bond swap with creditors, including Ireland, which is owed €350m by Greece.

With a weak hand, Greece was always going to blink first once the election rhetoric had died down; with a slightly stronger hand, Sinn Fein and the far Left here would have to do likewise, be in no doubt, or Ireland will follow Greece out of Europe.

The question now is whether other eurozone countries and the IMF will agree to debt-swap. It will mostly depend on how the mechanism works in practice.

Currently in deflation, Greece has linked repayment of new bonds to nominal GDP growth, but creditors like Ireland would see that as a write-down in all but name.

The truth is, we will want back our €350m; so maybe Syriza should get on with another pledge - tax the oligarchs and fattened shipping magnates for a change.

Whether the debt-swap plan turns out to be a runner, or not - it is possible that a compromise to disguise the failure of Greece will be reached - the spotlight will inevitably turn to the Government here.

And the cry will be - look at what Greece has achieved with such a poor hand.

Last week, Department of Finance officials let it be known that a debt-swap plan for Ireland would, in fact, increase repayment costs.

As the European Commission pointed out last week, Gross Domestic Product here has increased - by 4.8pc last year, well ahead of all other EU countries.

The commission has also forecast that GDP will grow by 3.5pc in 2015, the fastest growing economy in the EU, and by 3.6pc for 2016.

From evidence adduced at the bank inquiry last week, the conclusion is, and always was, that the last government made a bad decision based on disastrous advice, but more than that…

The decision made, there was no twist or turn off of the only road shown open to this or the last coalition.

Last week was all about the Syriza-led government's realisation starting to dawn.

Lest there be doubt, the European Central Bank restricted Greek banks' access to liquidity, a move designed to ramp up the pressure.

Varoufakis had a further reality check when he eventually turned up in Berlin to come face-to-face with our old friend Wolfgang Schauble.

This has been a path well-worn from Dublin - by the late Brian Lenihan, and Michael Noonan, in particular.

The realpolitik dictated a truth to Noonan that, it seems, will only drop slowly for Varoufakis.

A master of the game, our man secured a promissory note deal estimated to have saved about €20bn and a reduction in interest rates and extension of loan maturities which have also reduced the debt burden.

Ireland is also refinancing IMF loans with cheaper debt because costs to borrow are now lower. In the rhetoric of election cycles, none of this will be presented for what it is - an achievement, the best that could be achieved, in fact.

Whether it is right or fair, or even democratic, is largely immaterial in the face of The System set in reinforced steel after the event.

This new reality kicks in when a basket-case country comes up against The System.

Enda Kenny came up against that reality, too, on his first visit to Europe as leader, with a thrill in his heart and a mandate in his pocket.

Neither did it take him too long to realise that the will of the people counts for nothing when set against the demands of The System as devised by an unelected ECB.

For public consumption, Greek and EU officials say they want to reach agreement - of course they do.

But the longer the talks last, the greater will become the risk of the exit of Greece from the euro area.

That prospect will, almost inevitably, lead to another election: three-quarters of Greeks want to stay in Europe, as a majority in Ireland still do.

So what will happen next? The more deposits take flight, the less the eurozone will want to increase exposure to Greece, at which point the option nobody wants, capital controls, will be put in place.

If you are still naive enough to think there will be another outcome, then consider the words of Herr Schauble on radio shortly after Varoufakis left town: "We have been generous above and beyond to Greece".

Now substitute, say, Pearse Doherty for Yanis Varoufakis, Ireland for Greece, and you will not need Google Translate to know what he will happen next.

A little perversely, Schauble also said: "We have great respect for the Greek voters' will. But my respect for the will of the German voters and the will of voters in other European countries is just as great."

The will of the people has little or no influence over decisions that are now being made.

As Schauble has put it, "Greece lived far beyond its means for many years".

That road left open is the one marked 'reform', as all others, at home or abroad, will discover when or if they bother to threaten the way of Frankfurt.

Sunday Independent

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