Peter Mathews: “tear up” our obligation

The last government agreed that the State should pay €31bn to IBRC (formerly Anglo and Irish Nationwide) over a 13-year schedule ending in 2025. The first payment of €3.1bn was made in March 2011. The next payment is due on March 31.

If the European Union and the European Central Bank force us to make this payment, it would amount to increasing the totally unjustified, odious debt burden on the people of Ireland.

How is it unjustified? How is it odious?

Loan losses that occurred in the Irish banks following the financial collapse in 2008 were calculated in March 2011 at €75bn. In the 12 months since then it is becoming increasingly apparent that mortgage loan losses will get progressively worse.

Evidence is mounting that the total loan losses in Ireland could rise towards €100bn.

Throughout 2008 and 2009 there was a slow motion run and controlled implosion of the Irish banking system. In response, the ECB advanced massive loans to the Irish banks and in turn the Central Bank of Ireland responded by providing Exceptional Liquidity Assistance (ELA) to the Irish banks.

Professors Karl Whelan, Brian Lucey and Dr Stephen Kinsella recently made excellent presentations to the Oireachtas Committee on the issue of the promissory notes and ELA. They showed how the Central Bank of Ireland effectively created €45bn ELA money “out of thin air.”

The Central Bank of Ireland doesn’t owe any of this money to the ECB, they said. On a once-off basis, money was created and pumped into the Irish banks to keep them solvent. When the Irish banks repay these ELA loans, the Central Bank of Ireland simply retires them. The money literally disappears.

Therefore, the €31bn ELA money created by the Central Bank of Ireland, and advanced to IBRC to cover promissory notes, can and should be written off.

Specifically, on March 31 next, the write-off by the Central Bank of Ireland of €3.1bn ELA would mean that the Government wouldn’t have to borrow that money to pay the €3.1bn promissory note.
That promissory note could literally be torn up.

The same applies to all the remaining €25bn ELA loans to IBRC and the remaining €25bn promissory notes on IBRC’s balance sheet.

There is nothing dubious or wrong about doing this. Losses which should have been borne by bondholders have, wrongly, been dumped on the people of Ireland.

Normally, when banks collapse, their funders do not get all their money back.

In Ireland, bondholders were redeemed all their money with interest at the insistence of the ECB. Since the end of 2008, as payments to bondholders fell due, neither the banks nor the State had the resources to pay them.

That is where the ECB stepped in. It lent approximately €135bn to our banks to enable them to repay the bondholders and also to replace lost deposits.

The ECB became fully complicit in dumping this bill onto the people of Ireland.

Under normal capitalist principles, the ECB would not have shielded bondholders from the consequences of their investments. They would have to accept that Ireland is “taking one for the team.” Taking all this into account, again under normal capitalist principles, the ECB could not object to writing off up to €75bn of the loans it advanced to the Irish banks.

If the ECB is unwilling to do this, then the Central Bank of Ireland should top up its Exceptional Liquidity Assistance loans to the Irish banks to €75bn (in the case of AIB and Bank of Ireland substituting ELA for ECB loans) and then write it off.

The ECB has a limited ability to prevent the Central Bank of Ireland from doing this. It can only veto a proposal by the Irish Central Bank with a two thirds majority of its governing council. There are 23 members of the governing council, including Ireland’s representative, Governor Patrick Honohan.

So, if he and seven other members of the governing council support the proposal to write off the ELA money there is nothing Ms Merkel, Mr Sarkozy, Mr Draghi or anybody else can do about it.
But has Mr Honohan held discussions with ECB President Mario Draghi regarding writing off the ELA money?

Has he lobbied other Central Bank governors?

Has he lobbied the other eurozone countries in trouble so we can take a joint approach towards debt restructuring? Writing off that €75bn would have a massive positive impact on Ireland.

Firstly, this would allow AIB and Bank of Ireland to pass on these write-downs to mortgage holders and struggling businesses, providing a much needed stimulus to the Irish economy.

Secondly, it would allow us to “tear up” our obligation to redeem the €31bn promissory notes.
Overnight, our national debt would fall towards the Eurozone average and substantially improve our prospects of leaving the EU-IMF bailout programme.

We have been damned with faint praise from the troika. But the current EU policy of “kicking the can down the road” just prolongs the crisis. Our Government has shown willingness and fortitude in taking tough, necessary and often deeply unpopular decisions.

It’s now time for the ECB to establish fairness within the eurozone. If the European political establishment really believes we’re doing such a good job, the best way to show it is to agree to lighten the debt load on the people of Ireland by €75bn.

Peter Mathews is a chartered accountant and Fine Gael TD for Dublin South.

New budget rules up for agreement

EU Observer reports that EU finance ministers are to sign a first agreement on laws that would strongly increase the power of the EU to instruct euro-zone countries on how to spend their national budgets.

Applying to the seventeen members of the single currency only, the two laws require that all national budgets be presented to the Commission for “assessment” at the same time—by 15 October at the latest, according to a draft of the agreement.

The Commission would have the power to ask for a revision of the budget if it considered it likely to lead to a breach of the rules underpinning the euro, which bind member-states to keeping minimal budget deficits.

The seventeen would be required to establish independent bodies and to base their national budgets on independent forecasts—a move designed to depoliticise the process of drawing up the budget in member-states by subjecting it to technocratic eyes. Countries already breaching the budget deficit rules will have to issue regular reports to Brussels and agree a “partnership programme” on how to get back on the right fiscal track.

Those either experiencing or at risk of “severe” difficulties with their finances, or those already in a bail-out scheme, will be subject to far more invasive monitoring. Essentially they would lose the authority for any kind of discretionary spending.

The draft rules would entitle the Commission to grill them on the “content and direction” of fiscal policy, while Brussels would be entitled to see sensitive information, such as information on the financial health of individual banks. Bailed-out euro members would remain under this hyper-surveillance regime until they have paid back at least three-quarters of the money lent to them.

Much of the draft, proposed by the Commission last November, is to be approved by finance ministers, but a clause that would have essentially forced a country to undergo a bail-out has been removed, said a contact close to the negotiations.

The laws come on top of six other budgetary surveillance laws applying to all twenty-seven member-states that came into force in December.

They form part of the EU’s attempt to make sure the present sovereign debt crisis will never happen again, although critics say the laws infringe on national democracy.

Following the ministers’ green light the draft will go to the EU Parliament, with real negotiations between the two sides expected to come in April, after the proposal has made its way through committee.

One of the sticky issues will be how much these laws should encompass what is in the fiscal discipline treaty, an intergovernmental document covering much of the same area, due to be signed by EU leaders in March. If the scope of these laws is too wide it would raise the awkward question—already to be heard sotto voce in Brussels—about the point of having the fiscal treaty at all.

SIPTU stops short of calling for rejection

SIPTU has described the EU Permanent Austerity Treaty as the worst possible response to the economic crisis. In a grim warning the general president, Jack O’Connor, claimed it amounted to a contraction in the face of the “most serious recession since the 1930s.”

The treaty’s twin-pronged approach of cutting public spending and raising taxes, he predicted, would have a far-reaching effect on people’s lives. “It is hard to imagine a worse response to the challenge of recession and stagnation. It’s not about stimulating job creation through investment: it’s actually the reverse.”

O’Connor claimed that EU leaders’ talk of “restructuring” was code for the most savage assault on gains made by working people since the Second World War. “It’s about reducing pension provision, cutting public services, eroding people’s rights at work, and driving down the cost of labour.”

Trade unions have organised a wave of protests throughout Europe about the new Permanent Austerity Treaty over the past month. The day of action on 28 February publicised the “anti-social and anti-democratic” aspects of the treaty—part of a series of centrally driven austerity agreements endorsed by EU leaders.

The pressure increases for co-ordinated corporate tax

France and Germany have moved a step closer to a full fiscal union by announcing a harmonisation of their corporate tax rates by 2013. The proposals are “a first step towards more European coherence” and support the “Euro-Plus Pact,” setting out rules for economic and fiscal co-ordination, which not all member-states signed.

The move will join France and Germany in a single “aligned” rate of business tax, known as a common consolidated corporate tax base, as a prelude to its introduction throughout the EU—a development that Enda Kenny has described as hugely damaging for Ireland’s low-tax regime.

But it won’t be long now until his mettle is tested, as the “own resources” provisions of the Lisbon Treaty come home to roost. Just to remind readers, he promised “constructive engagement".

Austerity Bites: The poor get poorer - 115 million Europeans; 23 per cent of EU population

Recently released figures for 2010 show that 115 million Europeans, or 23 per cent of the EU population, live in households with less than the poverty threshold disposable income, in households where there is severe material deprivation (such as a lack of heating), or where the adults worked less than 20 per cent of their total work potential.

While 13 of the 25 member-states that provided information recorded an increase in the numbers affected when compared with 2009, Spain (23.4 per cent to 25.5 per cent) and Lithuania (29.5 per cent to 33.4 per cent) recorded the greatest leap from one year to the next.

The figures for deprivation were even higher among those under the age of seventeen, with 27 per cent of young people throughout the EU falling below the threshold.

In all, twenty countries recorded a higher rate of poverty and risk of social exclusion among young people than among the general population.

The poverty statistics come on top of unemployment statistics showing a record unemployment rate in the EU, with some 23 million people out of work.

Greek president rejects German interference

Relations between Germany and Greece, strained since the beginning of the economic crisis in 2009, appeared to reach a new low point amid the exchange of barbed comments between the two countries.

President Károlos Papoúlias was uncharacteristically blunt in his response to repeated criticism about the Greek economy and politics. He accused the German minister of finance, Wolfgang Schäuble, of making insulting comments, including the suggestion that Greece should not hold elections now, because its politicians are incapable of keeping to the terms of a new bail-out. “We all have a duty to work hard to get through this crisis,” he said during a visit to the Ministry of Defence. “I will not accept Mr Schäuble insulting my country. I don’t accept this as a Greek.

“Who is Mr Schäuble to insult Greece? Who are the Dutch? Who are the Finns? We always had the pride to defend not only our own freedom, not only our own country, but the freedom of Europe.”

The comment that appears to have sparked Papoúlias’s response was a suggestion by Schäuble that Greece should follow Italy’s example by forming a “technocratic” government. He also cast aspersions on the record of Greek politicians in the past.

“After [the technocrats have completed their work] the democratic process can resume with the effects that we have all seen over the last few decades.”

Fianna Fáil returns from Damascus

Fidelma strikes back...

Senator Mark Daly (Fianna Fáil):

Ireland and the EU have a democratic deficit. The direction the EU is taking is not democratic in nature. Since the failure of the euro started, we have seen that it was designed to fail. According to many commentators, it was not structured correctly. The new EU structures being put in place are also designed to fail. They lack consultation with—

Senator Fidelma Healy Eames (Fine Gael):

The senator is living in his own world.

Senator Daly:

If Senator Healy Eames believes that Europe is democratic in nature while the Germans and French dictate to everyone how it should be run, she is the one who is not living in the real world.

A very late conversion for Fianna Fáil!

Septic tanks?

The European Commission is proposing for the first time to regulate pharmaceutical pollutants in surface water, citing their potential hazard to humans and aquatic life.

Three pharmaceutical substances—including those found in oral contraceptives and hormone medicines—are among the fifteen chemicals the Commission proposes to add to those regulated in EU member-states.

Israel to demolish EU-funded renewable

8Six EU-funded wind and solar energy projects that provide electricity for six hundred West Bank Palestinians have been put on a “demolition list” by Israel, allegedly in response to a report by an EU mission that called for laws to prevent the financing of illegal settlements.

West Bank project managers say the “stop work” orders served against the projects are “a first step to almost automatic demolition.”

Elad Orian, a joint founder of Comet-ME, which oversaw the renewables project, said that four hundred people would be left completely without electricity if the demolition went ahead.

“The people will be left without light or the ability to charge cellphones [mobile phones], which is the only means of communication there.”

The project, supported by Comet-ME and the German group Medico International, built a total of fifteen solar plants and hybrid systems for electrifying villages with a combined population of some 1,500 people.

Area C is a canton under full Israeli control, comprising some 60 per cent of the West Bank and—beyond the West Bank Wall—all of Israel’s settlements, which are considered illegal under international law. Palestinians need permits to build in this region, but a study by the Israeli group Peace Now found that, between 2000 and 2007, 94 per cent of their applications were turned down.

The region, spanning the Dead Sea, Judaean Desert and Jordan Valley, is underdeveloped and the German Foreign Office provided approximately €300,000 for the six hybrid wind and solar energy projects, which serve poor villages in the South Hebron Hills.



Real pay per employee (2000 = 100)
Source: Ameco database.


Some EU diplomats, and many nongovernmental groups, see a link in the timing with a confidential report by the EU’s regional diplomats into the building of settlements and the demolition of houses in Area C. It called on the Commission to draft legislation “to prevent/discourage financial transactions in support of settlement activity.”

Less than two weeks after the report was leaked, notices were served on clean-energy projects in Haribat al-Nabi, Shaab al-Butum, Qawawis, and Wadi al-Shesh.

The German role in the euro-zone crisis

The Economic and Monetary Union that Ireland signed up to under the Maastricht Treaty (1992) and Lisbon Treaty (2009) assumed that the deficit rules of 3 per cent and 60 per cent of GDP for every euro-zone state would be complied with and enforced by means of sanctions that are set out in those treaties.

When Germany and France broke these rules in 2003, the EU treaty sanctions were not applied against them, and they were effectually dropped for everyone else.

Now Germany and France are using the present euro-zone crisis to set about increasing their political sway over the euro zone by changing the whole basis of the Economic and Monetary Union that Ireland signed up to by establishing a permanent €500 billion so-called European Stability Mechanism bail-out fund, surrounded by a framework of controls over national budgetary policy, including a permanent balanced-budget rule (0.5 per cent deficit rule) proposed in the Fiscal Compact Treaty.

Remember that, under the Lisbon Treaty, in two years’ time Germany’s vote in making EU laws, as well as voting in euro-zone matters will double, from its present 8 per cent to 16 per cent, while that of France and Italy will go up from 8 to 12 per cent.

And Ireland’s vote? Cut by half, to 1 per cent.

But what about the German economic model?

Here is a typical portrayal, by Martin Hart-Landsberg at www.spectrezine.org:

As growing numbers of countries face renewed austerity pressures, there is a tendency to explain the trend by searching for specific policy failures in each country rather than considering broader structural dynamics.

Key to the credibility of those who argue for a focus on national decisions is the existence of countries that people believe are performing well. Thus, the argument goes, if only policy makers followed best practices their people wouldn’t find themselves in such a bad place. Recently, German has become one of these model countries.

Here is a typical framing of the German experience:

At a time when unemployment rates in France, Italy, the UK, and the US are stuck around 8%–9%, many are turning to the apparent miracle in the German labor market in search of lessons. In 2008–09, German GDP plummeted 6.6% from peak to trough, yet joblessness rose only 0.5 percentage points before resuming a downward trend, and employment fell only 0.5%. In August 2011, the standardized unemployment rate was about 6.5%, the lowest since the post-reunification boom of 20 years ago.

In other words, Germany seems to be doing things right. Despite suffering a deep decline it actually enjoyed a lower unemployment rate. So, how did it do it? Often cited are recent German policies which have increased labour market flexibility.

But are these the best practices that should be adopted elsewhere? One way to answer that question is to look at what these changes have meant to German workers.

A Reuters report concluded: “Job growth in Germany has been especially strong for low wage and temporary agency employment because of deregulation and the promotion of flexible, low-income, state-subsidised so-called ‘mini-jobs’.”

The number of full-time workers on low wages—sometimes defined as less than two thirds of middle income—rose by 13.5% to 4.3 million between 2005 and 2010, three times faster than other employment, according to the Labour Office.

Jobs at temporary work agencies reached a record high in 2011 of 910,000—triple the number from 2002 when Berlin started deregulating the temp sector . . .

Data from the Organization for Economic Cooperation and Development shows low-wage employment accounts for 20% of full-time jobs in Germany compared to 8.0% in Italy and 13.5% in Greece . . .

One out of five jobs is a now a “mini-job,” earning workers a maximum 400 euros a month tax-free. For nearly 5 million, this is their main job, requiring steep publicly-funded top-ups.

“Regular full-time jobs are being split up into mini-jobs,” said Holger Bonin of the Mannheim-based ZEW think tank.

And there is little to stop employers paying “mini-jobbers” low hourly wages given they know the government will top them up and there is no legal minimum wage.

As the New York Times astutely reported,

But hidden behind the so-called German economic miracle is an underclass of low-paid employees whose incomes have benefited little from the country’s stability and in fact have shrunk in real terms over the last decade, according to recent data.

And because of government policies intended to keep wages low to discourage outsourcing and encourage skills training, the incomes of these workers are not likely to rise anytime soon.

That, in turn, means they are likely to continue to depend on government aid programs to make ends meet, costing taxpayers billions of euros a year.

The paradox of a rising tide that does not lift all boats stems in part from the fact that Germany has no federally set minimum wage. But it also has its roots in recent German politics, which have favoured measures to keep unemployment low and win support from employers . . .

The Confederation of German Employers’ Associations says the introduction of a minimum wage would push up labour costs and lead to more unemployment. Jobs would simply move out of Germany and to Eastern Europe or Asia.

An ILO report, Global Employment Trends, 2012, shows the connection between these policies and the euro-zone crisis.

For they have not only taken a toll on German workers, they have also greatly contributed to the crisis in Europe. The low wages and insecure employment conditions have enabled German employers to boost exports and limited imports.

The ILO report concludes:

The rising competitiveness of German exporters has increasingly been identified as the structural cause underlying the recent difficulties in the Euro area. Crisis countries had not been able to export enough of their goods to Germany as domestic demand there was not strong enough because of low wages. 

German policies to keep down wages had created conditions for a prolonged slump in Europe as other nations on the continent increasingly saw only even harsher wage deflation as a solution to their lack of competitiveness.

The report called on Germany to enact swift changes.

“An end to a low-wage policy would create positive spill-over effects to the rest of Europe and restore a more equitable income distribution . . . An end to a low-wage policy would create positive spillover effects to the rest of Europe and restore a more equitable income distribution.”

As the chart shows, German wages have been stagnating for more than a decade. No wonder Germany has been exporting so successfully and other countries in Europe have found it difficult to compete.

While German politicians blame these other countries for their problems, the fact is that German growth has depended on the high consumption and borrowing in those other countries.

Kenny, Gilmore, and a referendum

Enda Kenny and his cronies would do well to tell the truth about the EU Permanent Austerity Treaty. The Taoiseach and his mates deny that the pact was crafted to minimise the prospect of a referendum in Ireland. That is exactly what happened, however, and it is no secret at all in Brussels, where the treaty was written.

Parts of the pact were explicitly drafted to give Kenny a chance of avoiding a vote on it. An EU official quoted in the Irish Independent accepted that the matter was likely to go to the Supreme Court but said the EU authorities hoped there would be no referendum, as many voters would relish an opportunity to inflict a bloody nose on the Government and the EU over their austerity and pro-bondholder bail-out policies.

Kenny insisted that Irish negotiators were not told to circumvent the risk of a vote and were given a mandate to maximise Ireland’s interests in the talks. But think about the damage that would be done to Kenny if there was a referendum and it was rejected. He would be hugely diminished—domestically and internationally—and questions would be asked about his ability to plough on with the EU-IMF programme, which Eurocrats hope will deliver a badly needed success for their cruel austerity policy.

So there is every reason to believe that the authorities would tinker with the text of the treaty to make an Irish vote less likely.

And what about the comment made by Éamon Gilmore that the provisions of the treaty had no “appropriate” place in the Constitution of Ireland? If that is a legitimate argument to make before an Oireachtas committee, is it not equally legitimate to make it in an EU negotiating forum?

And was it made? Somehow it echoes Gilmore’s claim that there would not be another referendum following the first rejection of the Lisbon Treaty!

Well, there’s a pair of them in it; but remember what happened to Fianna Fáil! There are big changes ahead, and those who are honest with the electorate, uphold their interests and enhance the sovereignty of the people will be the ones to benefit.

Irish spooks up to their necks in it

"Deep in the EU undergrowth..."

...since it has quietly signed up to the Justice and Home Affairs section of the Lisbon Treaty, where it enjoyed a temporary opt-out, Ireland is engaged in discussions on a wide range of “security” issues with a potentially huge effect on civil rights and individual liberties.

The opt-out meant that this hugely important part of the treaty remained below the radar during the referendum debates, but...

....measures designed to combat terrorism and crime and to protect the EU from “natural and man-made disasters,” even “traffic accidents,” are featured on the agenda of a myriad of committees of unaccountable officials.

Their work is revealed in a series of classified EU documents, littered with acronyms, reflecting the large number of proposals designed to strengthen links between the security and intelligence agencies of EU member-states...

One document, “Draft working method for closer cooperation and coordination in the field of EU security,” was sent by the presidency of the EU Council, a post then held by Hungary, to the Standing Committee on Operational Cooperation on Internal Security. It refers to “calls for closer cooperation between the fields of the common foreign and security policy and the area of freedom, security, and justice.”

After mentioning moves to “enhance links between the internal and external aspects of counter-terrorism,” the document states: “It is important to note that effective and timely coordination between the competent authorities at national level and cooperation with the relevant actors at EU level are of critical importance to building close relations between the external and internal aspects of EU security.”

Included among “possible areas of cooperation in the field of EU security” are “the proliferation of weapons of mass destruction,” “terrorism,” “organised crime, including cross-border crime and illicit trafficking,” “cyber-security,” “energy security,” and “climate change.”

Another classified document from the Crisis Management and Planning Department for the Political and Security Committee discusses strengthening ties between the common security and defence policy and the area of “freedom, security, and justice.” Entitled “Elements of a draft road map,” it refers to the EU’s little-known Political and Security Committee drawing up plans for “comprehensive situational awareness and intelligence support” and “improving cooperation in planned EU external action.”

Other documents refer to “informal networks,” a “joint situation centre” designed to promote cooperation between EU spooks, “road maps,” and “inter-institutional information meetings.”

A list of initials and acronyms copied into one document illustrates the plethora of committees relating to “security” and intelligence spawned by the EU. They include JAI, COSI, COPS, CIVCOM, PESC, RELEX, JAIEX, ENFOPOL, COTER, and PROCIV.

The documents were leaked to Statewatch, a British charity that monitors threats to civil liberties throughout the European Union. They reveal a patchwork of committees that may appear on the surface to be little more than an attempt at European bureaucratic empire-building. Their significance, however, is much greater than that, as this secretive network is concerned with security, intelligence, and law enforcement—issues of vital concern to EU citizens.

Tony Bunyan, editor of Statewatch, pointed out that “a whole new panoply of working parties and informal groups is mushrooming in the field of EU external security.” He added that the European External Action Service, headed by Catherine Ashton, was pushing for EU agencies to operate outside Europe on such issues as gathering intelligence and personal data as well as distributing personal information throughout the EU...

"These practices would go far beyond the remits laid down in EU law. Crucial documents are not publicly available," and there is no mechanism for parliamentary accountability at the national or the EU level; and it would more than optimistic to expect that Alan Shatter might break the veil of secrecy!

http://www.guardian.co.uk/news/defence-and-security-blog/2012/jan/24/eu-intelligence-security