Thursday 14 November 2019

Solution to our problems found inside these borders

What is the point in being part of the EU if we are treated as a pariah, in spite of all our cuts? asks James Fitzsimons

Sometimes, if you wait long enough, the problem will just fade away. That's what is happening to the interest being charged on our bailout funds. It didn't happen in 100 days but it did in 200. Better late than never. Was this the plan all along or did they have no choice in the end? At six per cent we were being grossly overcharged. At three per cent we are still paying too much. And we cannot give the bondholders the haircut they deserve. So how can the Government claim to have won a victory? We are back where we started. We would be fools to believe that we got anything we didn't deserve.

Guenther Oettinger was out of line when he suggested last week that we should fly our flag at half-mast. He described us as deficit sinners who need to be humiliated. This is the kind of constipated thinking that keeps the EU in the dark ages and as far from European integration as it was in 1956. Mr Oettinger should be tarred and feathered and have his pension rights taken away as a warning to other upstarts abroad.

Maybe we should be thankful for the reduction in interest rates and the extended term over which to repay. They were a long time coming. But it's still not enough and the Government should get on with doing what it said it would do. Then we can get back to being good Europeans.

Meanwhile, we should fly the EU flag at half-mast to reflect the benefit of the interest rate cut. When we get what we deserve we can raise it up again. We have saved nothing. Even the three per cent being charged is a profit for the financial institutions that we bailed out.

As the first French banks were sucked into the financial black hole last week, the EU is desperately trying to calm international money markets with measures that are at least two years too late. Hopefully they will still work. But they can be easily destroyed by reckless comments such as those by Mr Oettinger. Even if other countries provoked him, we certainly did not.

In spite of our radical austerity measures, over the last few months we have left ourselves open to criticism on a number of fronts. Reckless lending at the banks and the lack of financial supervision should be in the past and even if we have not sorted out the problem, we have learned our lesson. But we have been repeatedly criticised in recent months for overpaying public servants and not charging enough tax. This could leave us open to attack again and it might even result in our being penalised with higher interest charges if we don't do enough.

Taxes are reaching breaking point. The tax base is too small and it affects the only people in the economy who are spending money. We are reaching the point where every euro taken in tax is lost in domestic spending.

This is a real problem, because the money taken out of the system is not going back into circulation here. It is filling a black hole in the contaminated Irish banks that are not lending, or it is going abroad to pay back banks that refuse to accept their losses. Eventually, these banks will have no choice but to shoulder their own losses, whether from Ireland or some other sovereign state. We are being very reasonable. But we are not being treated fairly.

The message keeps coming back that we are looking for cheap EU money to overpay our public servants relative to what their counterparts in other EU countries are paid. In fact that is what is creating most of our deficit. Even the most sought after public servants in the world may need to take more radical pay cuts if we are to avoid flying the Tricolour at half-mast.

It is mind-boggling that the Government is proceeding with the outrageous voluntary redundancy scheme in the public service when we are broke. It makes even less sense that the EU should go along with it, given its clear opposition to our public sector pay rates.

On top of huge retirement lump sums the Government has guaranteed pensions based on earnings that were outrageously high.

Those who sign off on this should be cut off without a cent when we finally come to our senses. It will be left to workers in the private sector to carry this burden for the rest of their lives as an inept Government ravages what's left of their pension funds to pay for this folly.

Nearly as many have lost their jobs in the private sector as are employed in public service. We might get help from abroad, but the solution to our problems can only be found within our borders. We need to be selfish if we are to survive. We account for only one per cent of the population in the EU, but the general public is being asked to shoulder a burden that is political.

What is the point in being part of the EU if we are treated as a pariah, in spite of all that we have done?

While the EU expects us to honour our debts to foreign bondholders and banks, it holds back the benefit of being recognised as full EU citizens. Just as we shouldn't default on our financial obligations, they shouldn't cast us adrift. If they cannot include us then they cannot expect us to abide by their rules. The EU has started to cut what it is charging us for funds. It needs to go much further. While Greece may be excluded because it was more reckless in creating its own problems, if the punishment is too severe it may never recover. If it doesn't get a better deal it will drag the rest down with it.

As we head for the next round of austerity measures we need to be careful. For more than 500 years we fought the British to keep what little we had. Now we are willing to throw it all away for free. What's the point in having a State if we have no State assets? It took a hundred years to gather our crown jewels. We need to fight to hold onto them.

There is no justification in selling off the State assets just to save French and German banks that made mistakes. If we must sell, it should only happen as a last resort and where all other measures have failed. But first the bondholders should take a haircut themselves and our bailout interest rates could fall even further.

We need to be careful in selling minority stakes in the ESB or other utilities. We are starting to burn the furniture to keep the fires going. This is reckless behaviour and must stop.

James Fitzsimons is an independent tax adviser specialising in tax and financial planning.

Sunday Independent

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