Guest post: Irish ire

February 24, 2011 § 4 Comments

I’m delighted to introduce a new guest poster. Felim McMahon is a sub-editor and student of international relations based in Dublin. He is on twitter @felimmcmahon. Here are his views on tomorrow’s election, and they are his personal views:

IRELAND goes to the polls on Friday, February 25 in what is already being touted as a ‘historic’ parliamentary election. Journalistic cliches aside, the vote is set to break many records and radically alter the political makeup of the next Dáil*. The truly big decisions affecting the Irish electorate’s prospects, however, will decided by the leaders of the European Union. A broad consensus is emerging, at least among economic commentators, that Ireland is not just heavily indebted, but could be heading towards default if it does not get an adjustment to its EU/IMF financing arrangement and on the debts that originated in its runaway banking system. In this regard, the country finds itself caught in a political standoff between the eurozone’s creditor and debtor nations. To be clear, addressing its overspend counts for at least two-thirds of Ireland’s problems by most estimates, but the crisis is so acute that debt relief on the non-sovereign part of the country’s debts has become a pressing issue. This background and its impact on the vote, which is the focus of this piece, is critical to understanding the election.

In October 2008, the state guaranteed the debts and deposits of five financial institutions to the tune of €440bn or almost three times Ireland’s gross national product (GNP). With bank losses mounting and exchequer returns collapsing, government debt rose from 25pc of GDP in 2007 to 95pc in 2010.

Ireland has been effectively locked out of the bond markets since last November, when default fears pushed the rate at which it could borrow to almost 9pc. In response to the crisis, the outgoing government agreed a three-year deal with the IMF and the EU to provide a €85bn lending facility in return for a programme of austerity measures and other ‘reforms’, and the safeguarding of senior debt in the guaranteed banks.

There is little chance of those markets opening up to Ireland anytime soon. Last month, just over half investors, traders and analysts surveyed by Bloomberg ranked an Irish default as ‘likely’. The data also suggest that the markets believe the outlook for bank debt is also bleak. A leader in the Guardian asserts that the guarantee has “bankrupted the Irish state and dumped the consequences on the taxpayer”. Not many people on this side of the Irish Sea would disagree.

Economist and author David McWilliams estimates that 1.5 million Irish households are now on the hook for €250bn in sovereign debt, which will require over €12bn in annual interest payments by the end of 2012 — or 85pc of the country’s income tax take. He is not alone in suggesting that Ireland needs to restructure its debts if it is to deal with what the FT’s Martin Wolf rightly calls  “economic collapse, financial implosion and fiscal disaster”.

The EU, however, has so far resisted calls to either renegotiate the interest rate or write down any Irish bank debt, fearful of ‘contagion’. To say that Ireland’s prospects are heavily hinged on upcoming negotiations over Europe’s debt-resolution mechanism is putting it mildly. And the suspicion in this jurisdiction is that some of our EU ‘partners’ would be happy to leave Ireland swing. The truth is that a serious political struggle between Europe’s debtor nations and creditor nations is pitting Irish, Spanish, Italian, Belgian, Portuguese and Greek citizens against their fellow europeans in Germany, France, Finland, Denmark and elsewhere in the eurozone.

Our European cousins understand that we didn’t cheat as much as Greece did, but they will greet with horror any suggestion that the only course of action to head off an Irish default is for them to agree to, as McWilliams puts it, “knock a few zeros off the bank-debt figure”. A front page headline from Ireland’s colourful ‘Sunday Independent’ at the time of the Greek rescue, last April, may serve as a humble reminder that nations have no friends, just interests in the international community.

‘Help Greece?,’ it teased, ‘Pass the hemlock.’

The author of the piece, also a well-known TV presenter, asked: “So what did the Greeks do for us? Tragedy? Yes, but arguably we had enough of that ourselves already.” He is not wrong about the tragedy. Ireland has been devastated over the last two years, with the financial crisis rapidly becoming a jobs crisis, a social crisis, a mental health crisis, an identity crisis and an ongoing crisis of political legitimacy.

The current ‘solution’ sees its people going guarantor on an obscene amount of formerly non-sovereign debt as the EU collectively kicks the can of a far wider and deeper crisis a little further down the road. This buys everyone time to order their affairs, but that time is being bought by Irish citizens at a premium when they can least afford it.

The three main parties (Fianna Fáil, Fine Gael and Labour) have all, in their own way, signalled their intention to negotiate a better deal for Ireland – on the interest rate it receives, and perhaps even the principal with varying degrees of rhetoric. In this regard, they are helped by the fact that the ECB has pumped €100bn in liquidity into the Irish banks which could, in a worst-case scenario, be converted into (almost worthless) bank shares. On the whole, the big three have been keen to fight the election on other issues including their radical and varied plans to reform politics, the public service and health system; to create jobs and, to a lesser extent, to reduce the deficit.

This consensus has successfully limited public debate on the issue, but the  elephant in the room has not gone away. Ranged against the main parties’ debt consensus, and making the serious political hay from opposition to austerity measures, are two leftwing groupings and a historically high number of independent candidates. On the whole, they are more focused on the principle of the debt than the principal. As Irish economist Ronan Lyons put it, the bank bailouts have given people the perfect excuse to ignore the fiscal crisis. He estimates that tax burden on Irish households arises as follows: €120pm to service banking debts at 6pc; €320pm to pay for government debt (including €220pm for the debts expected to be run up between 2008 and 2015); €800pm on social welfare; €300pm on education; €400pm on health and €200pm on capital projects. But if there is magical thinking outside the main political parties on matters economic, then it has also been apparent at the very centre of the political establishment.

Finance Minister Brian Lenihan famously declared in 2009 that the country had “turned the corner”, a year before the tricolour over his department of finance was  run down the flagpole and handed to the IMF. Instead of planning for the worst and praying for the best, the outgoing administration was engaged in a game of ‘pretend and extend’. It claims it had no choice. With private debt and increased – taxes being loaded onto their backs, and with social welfare, services and jobs disappearing, the electorate are more angry, engaged, and uncertain than at any time since independence. It has created an appetite for what many commentators have decried as too-simple solutions.

The most significant challenger to the big three in party political terms is the left-wing republican party Sinn Féin, which rejects partition, is closely associated with the Irish Republican Army (IRA) and organises itself on an island-wide basis. While it may be in government in Northern Ireland, Sinn Fein is still a political ‘outsider’ in the south, despite the fact that a single-party government hasn’t been in power there since 1989. All other parties (Labour, Fianna Fail, Fine Gael, the defunct Progressive Democrats and the Green Party) have — in one alignment or another — taken their place at the cabinet table.

Sinn Fein proposes a go-it-alone approach that would see Ireland not drawing down any further funding from the IMF/EU, and imposing haircuts on bank bondholders while protecting depositors. Its economic policies have been fiercely contested in the media and scored lowly by economist Ronan Lyons in a comparative exercise matching party manifestos with a survey of voter preferences. But ‘tough on Europe’, and ‘fighting cutbacks’  has never sounded so good to the electorate. The platform of a looser grouping – the United Left Alliance – is similarly constructed. The heavy hitter in that group is Socialist Party MEP Joe Higgins, who recently challenged European Commission President Jose Barosso in a fiery exchange that drew plaudits from across the spectrum at home as it highlighted the chasm that now exists between Ireland and its ‘partners’ abroad.

The third grouping putting pressure on the big three over the debt transfer and/or cutbacks is a large field of independents. The first thing to note about the independents is their sheer number. On election day, they will comprise 233 out of the 566 candidates (41pc) compared to 108 out of 470 candidates (23pc) in the 2007 General Election. This compares to 105 for Fine Gael, 75 for Fianna Fail, 68 for Labour, 43 for the Green Party, and 41 for Sinn Fein.

Nineteen independent candidates aligned with a grouping called New Vision, which is advocating the separation of banking and sovereign debt as part of a four-point voting ‘commitment’ its candidates are signed up to, which leaves them unwhipped on all other issues. New Vision are not to be confused with a new political party of the same name, but in Irish, called Fis Nua — a kind of Green offshoot also standing on a red/green platform.

A number of high-profile independents running in and around the capital also oppose the debt transfer, but come from a more fiscally conservative background, often in economics or finance. Dubbed the ‘Irish tea party’ by one political commentator, they come minus the social conservatism. These prominent economic liberals include outgoing senator, journalist and author Shane Ross, who exposed an expenses scandal at the state training agency FÁS and other Irish quangos; financial analyst Paul Sommerville; management consultant Stephen Donnelly; and mother-of-five, law student and charity co-founder Kate Bopp (running in North Tipperary). Sommerville and Donnelly, interestingly, have raised their profile using social media, and through regular appearances on a late-night politics show. They also have the backing and advice of high-profile economics commentators like McWilliams and Constantin Gurdgiev. Expect to see one or two in the Dail, and perhaps in government. Although they are often lumped with the Sinn Fein and left-leaning groups by the establishment, their economic common ground really doesn’t go beyond the debt issue. At a town hall meeting in support of Sommerville’s candidacy last week, it was put to McWilliams that Sinn Fein were the only party in the field advocating the separation of private and sovereign debt. “Are we going to have to vote Sinn Fein or wait for a referendum that may never happen?” he was asked. McWilliams summed it up thus: “I think that Sinn Fein know how to avoid insolvency, but don’t know what to do after that; and the other parties don’t know how to avoid insolvency, but know what to do after that.”

A fourth candidate in the same vein, who opted to run for Fine Gael is banking expert Peter Matthews, who has been a strong critic of the National Management Asset Agency (NAMA) — a state body that is buying bad loans from Ireland’s banks at a discount in the hope of realising a profit on the eventual sale of the associated assets (mainly land and property), while cleansing the balance sheets of the toxic institutions. He is running in a constituency that saw the economics editor of the state broadcaster, George Lee, elected for the party in a by-election only to part company with Fine Gael and resign his seat just months later on the basis that he wasn’t being listened to. As they push for an overall majority, which would see them ruling without the backing of putative coalition partners, Labour, Fine Gael has also asked its supporters to transfer to Sommerville. Fianna Fail, for its part, has signalled its willingness to engage in constructive opposition, and to support an FG minority government from the opposition benches.

State of the parties in final poll. 1500 respondents by telephone Feb 19 — 22.

Irish opinion polls

opinion polls in irealnd

Adrian Kavanagh predicted:

Seat estimates based on Red C-Paddy Power poll: FF 21, FG 80, LB 34, SF 13, GP 0, OTH 18 (7, Right, 11 Left – 6 ULA)

 

Fine Gael

The last poll before the election puts Fine Gael on 40pc, which brings the possibility of the party achieving an overall majority of 84 tantalizingly close. Having seen their share of the vote rise in a series of polls, meanwhile, the party has momentum. Most commentators have settled around the 80 mark in their predictions, but some went the full stretch. State broadcaster RTE’s political editor Brian Dowling predicted that vote management, and the relative weakness of the opposition would deliver a majority for Enda Kenny’s party. Fine Gael might also have the option of teaming up with a small group of like-minded independents — leaving their putative coalition partners in the Labour party out in the cold. The most likely scenario, however, remains a Fine Gael-Labour coalition, perhaps with some right-leaning independents to shore up FG’s position against a Labour walkout. The draconian budgets that lie ahead for the country in any imaginable scenario will put a premium on stability — even if this means accommodating a centre-left partner with close ties to the country’s unions. Coalition with Fianna Fail, although it makes sense ideologically, would seem to be entirely implausible … for now.

Labour

After polling at up to 35pc in the months before the IMF arrived, Labour is on course to reap a disappointing 18pc of the vote — but will still double its tally in the 2007 general election. That should see its representation rise from around 20 seats to the mid-thirties. It should be borne in mind that Labour peaked in the polls at a time when FG was fighting a bitter internal leadership battle, and as the consequences of the blanket bank guarantee (which Labour was alone in opposing) were becoming evident to the public. Such a result would bring it to a level it has not seen since 1992, when Labour-backed independent Mary Robinson was president. But the slow pace of public sector reform, links to the trade unions and the party’s adherence to the IMF/EU consensus have put it in a difficult position. It faces a straightforward austerity/debt challenge from the left, on the one hand, while some voters on the right of its ‘market’ may be put off by worries about higher taxes, and the party’s vote-compatibility with a desire for public sector reform. Labour’s union links (and donations) have it anchored to a social partnership model that served Ireland well in the 1990s, but which is now associated with stagnation, loss of competitiveness and sectional interests. The last government has been criticised for securing industrial peace at the price of reform. It is possible that some Labour-inclined voters now share a conviction that party’s public-service union links and its support for the IMF/EU deal may be too closely linked — at their expense. Whether the party can balance the social democratic and reform agendas remains to be seen.

Fianna Fail

The big loser of this election is Fianna Fail, Ireland’s erstwhile party of power, which is on course to win just 15pc of the vote and return around 20 TDs. Their lowest return before this was in the high-60s. The party is now perhaps inextricably associated in the public mind with a clientelist, even corporatist mode of politics that is being blamed for Ireland’s downfall. Under three-times Taoiseach Bertie Ahern, FF seemed unstoppable. Dubbed the ‘teflon Taoiseach’, he even survived leaks from a planning corruption tribunal on the eve of the 2007 vote that shone a light on his highly unorthodox financial affairs and cash ‘dig-outs’ he received from a series of developer ‘friends’. He was forced out of office in May 2008 with nothing proven but, as FG leader Enda Kenny put it in on the steps of the Dáil, in Irish, there was ‘a cloud over his head’. Ahern was replaced by giveaway finance minister Brian Cowen, who chose barrister and former children’s minister Brian Lenihan as his treasury guardian — the best qualification of the latter, perhaps, that his polished image acted a foil to the gruff persona of the man dubbed BIFFO (Big Ignorant Fecker from Offaly).

The cracks were also apparent in the Irish economy in May 2007, but the public answered an election pitch that implored them: ‘You don’t change horses when you’re crossing the stream.’ Besides, there was still plenty of money in kitty, even as Ireland’s property bubble burst, and the main parties had converged on a soft-landing consensus — leaving the writing on the wall unread. Since then, FF has become as toxic a brand as Ireland’s zombie banks were tainted by dismal failure and financial scandal. They have suffered a reversal that has brought to the satirical Irish mind images of the Ba’ath Party in Iraq, and the deposed leaders of Tunisia and Egypt.

New party leader Micheal Martin in many ways represents the very best face of Fianna Fail. Sometimes satirically portrayed as a altarboy, he has committed to rebuilding the party and returning it to power within 10 years. But while his radical reform platform for national government has scored highly with the experts, and his personal ratings are high, Martin has not done much beyond shoring up FF’s die-hard vote. Tony Barber and John Murray Brown are worth quoting on the future of Fianna Fail in the FT: “If Labour remained in opposition, occupying the social democratic space, questions would arise over the future direction of Fianna Fáil, which lacks a clear ideological profile. Though the party could soon be reduced to a rump in parliament, it would be foolish to write it off. It was once said of Charles Haughey, a former prime minister who served as Fianna Fáil leader from 1979 to 1992, that if he was buried at midnight at a crossroads with a stake through his heart, people should still wear a clove of garlic round their neck just in case. Fianna Fáil’s opponents feel certain the party will be back.”

Green Party

If Charles Haughey was often portrayed as a bogeyman, then the fate of Fianna Fail’s coalition partners suggests there is something of the night also about the monumentally corrupt ex-Taoiseach’s party. The rightwing Progressive Democrats met their downfall in the 2007 election, by which time many of their policies had become mainstreamed. Now it might be the turn of the Greens. Unfortunately, a party that did much to fight corruption in local government faces a real prospect of losing all its seats in parliament too — having already seen its councillors all but wiped out in the 2009 local elections. If there is a ray of hope for the Green party it is that their main concern — environmental sustainability — is likely to remain high on the agenda.

Sinn Fein

Set to win its highest number of seats since the days of the pre-independence Dáil, Sinn Fein could more than double its representation to 13, making it a considerable presence it the Dáil. With Labour most likely in government, and Fianna Fáil perhaps supporting the broad thrust of government policy, Sinn Fein is set to benefit from its position as a significant leftwing player at a time of austerity and financial crisis.

Recommended reading:

Elaine Byrne

Michael Lewis

Reform Card

Olivia O’Leary link

PRSTV 1 PRSTV 2

 

*The Dáil is the lower house of Ireland’s bicameral Westminster-style Oireachtas or parliament.

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