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Shane Ross: Warhorse Joe flattens Jose

JOE Higgins was in cracking form when he rose to speak in the European Parliament last Wednesday.

The forum is hostile terrain for Joe but he is a master of guerrilla warfare. Nobody lobs more lethal grenades. And even if Joe expresses his views in the medieval language of "vassals" and "serfs", he sometimes hits the target bang on.

It was wonderful to see him get right under the skin of European Commission President Jose Manuel Barroso. Indeed, it is a rare accolade for a little-known MEP to provoke the portly Portuguese plutocrat to anger.

Joe was railing on about the banks, a subject on which he speaks plenty of good sense in language that is a trifle too ideological.

His claim that Ireland's deal with the EU/IMF was merely a cute transfer of bad debts from banks to taxpayers is correct.

And the old agitator rightly went on to denounce the national bailout as a tool to cushion the banks from the consequences of reckless speculation.

Which it was. Europe's power houses are protecting their banks from the consequences of their reckless loans to Anglo Irish, Bank of Ireland and AIB.

Joe dubs the victims as "vassals". He spits out the word "capitalism". Although Joe's language has eerie echoes of the old days of Soviet socialism, that does not mean that he is wrong. His analysis is right: the European big powers closed ranks to protect themselves. They imposed a solution on the Irish citizen that simply crucified us all.

At one point, Joe went a bit overboard with the old Soviet stuff. He described the deal as "a mechanism to make working-class people throughout Europe pay for the crisis of a broken financial system and a crisis-ridden European capitalism".

Not bad as far as it goes; but not far enough.

The suffering in Ireland goes far beyond Joe's "working-class" people. They have endured pain by the barrowful as a result of the bankers; but so have others.

Joe should not forget the middle-class suffering too.

The middle classes are bleeding badly. Their sons and daughters too are emigrating. They too are unemployed. They too are suddenly slashing their living standards. Hundreds of thousands of their flock are in negative equity. The fallout from the banks is not a matter of class warfare. The entire Irish nation -- bar a few of the super rich -- is suffering.

Joe is right . But none of the Irish victims deserves to be taking the flak to protect President Barroso, Angela Merkel or Nicolas Sarkozy and their friends in the European banks.

Jose Manuel Barroso was ebullient in his response. He bellowed back at Higgins that "the problems of Ireland were created by the irresponsible financial behaviour of some Irish institutions and by the lack of supervision in the Irish market".

Rock on, Jose. Dead right. The FitzPatricks and the Drumms were insane in their lending and reprehensible in their greed. The Regulator was asleep. Funnily enough, Jose omitted to mention our equally guilty politicians or permanent mandarins in the Department of Finance. He only fingered the fallen villains, not the incumbents who share the responsibility. Ah well, he may have to meet these guys again.

Barroso gave a few hostages to fortune when he claimed that "it was not Europe that created this fiscally irresponsible situation".

Not Europe alone certainly, but it takes two to tango. Who does he think lent the millions to Sean FitzPatrick and David Drumm's rogue bank? None other than the same European banks that Angela Merkel, Nicolas Sarkozy and Jose Manuel are so keen to leave untouched. Among them are the bondholders that the trio's good friend Jean ClaudeTrichet , boss of the European Central Bank, seems so anxious to protect.

Anglo lent recklessly to developers , but those bankers who lent to Anglo and the other Irish banks did so in the full knowledge that the jig could be up for the Irish banks.

Their canny friends in the stock market were trashing Irish bank shares at the very time that the foreign bankers were lending them money. While the stock market was flagging big trouble ahead for the Irish banks, bankers simultaneously kept lending to Anglo.

Joe's working class and Ireland's middle class -- the guys at the bottom of the pile -- are paying the price while none of the lenders is being penalised.

Joe, the old warhorse, has a point. We should not be forced to subsidise speculators.

But I have a little uncomfortable news for Joe. He has strange bedfellows. In recent weeks, I spent a day in Geneva and another in London, seeking to find out what the ruthless investors in the markets felt about Ireland's deal with Europe and the IMF. Did our negotiators do well?

The results were revealing.

Far from congratulating Ireland on lifting itself out of the mire, far from castigating us for our economic insanity, they were stunned in disbelief.

A vast majority of the traders to whom I spoke were in shock. They wanted to know why we had not defaulted. They understood the law of the jungle: if bankers lend to a high-risk client -- like Ireland -- they expect to pay the price; Ireland's Government have behaved like mugs. In short, they should have burned the bondholders. Instead, they capitulated to the demands of the big guns in Europe and threw the citizens to the wolves.

Joe Higgins, the principled socialist, is in agreement with the free marketeers.

Default was an option, but we bottled it.

The traders were adamant: default would have been far better for the credit rating of the nation than the current endless doubts about the prospects for our solvency.

Our failure to default means that, instead, we are constantly being downgraded, ensuring that we cannot borrow in the global markets.

We are bankrupt. Let us default. Once we have settled with our creditors, we will rapidly rebuild confidence. Our credit rating will recover.

Foreign investors are already circling the bombed-out investments of Ireland, bottom-fishing for bargains. Some are even wondering whether to buy Irish debt. If we default, there is only one way for confidence -- up.

Optimists point at our US multinationals, still brimming with confidence as evidenced by Intel's $500m investment last week. US multinationals are ignoring the crisis in the public finances, confident that they can flourish inside a bankrupt state.

US multinational leaders sometimes cast a fearful eye in the direction of Joe Higgins' bêtes noires -- Jose Manuel Barroso, Angela Merkel and Nicolas Sarkozy. The renewed pressure from European leaders to increase our 12.5 per cent corporate tax rate does not impress them.

We should defy Merkel and Sarkozy's recent sabre-rattling, while teaching Barroso and his bully boys a lesson by cutting our corporate tax rate to below 10 per cent. We could boost employment and increase exports at a stroke.

Barroso is correct to say that our banks are sinners -- bad sinners -- but he should remove the mote from his own eye before he takes umbrage at the wise words of socialist Joe.

Sunday Indo Business