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How Europe let Ireland down

Posted Friday, February 4, 2011

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History

Ireland's two main export customers are the US and UK.

In the early part of this century they were at a different stage of the economic cycle than the big Euro countries like Germany and France.

Inflation was rising and there was a bit of a boom caused by the internet boom which needed to be choked off so the US and UK let interest rates rise, causing a minor downturn, till the problem was fixed and non-inflationary growth could continue.

ECB

Ireland was at the same stage of the cycle as the US and UK and could have done with interest rates rising.

However, they couldn't raise rates as they were in the Euro and had 'pooled' their financial sovereignty.

That had to be done by the European Central Bank - and as Germany and France didn't need rates raised they stayed low.

Direct Result

Low interest rates and the cheap money available was what caused the connstruction and housing boom from 2002 onwards.

That was why Ireland got into trouble (aided by the greedy casino banks).

It was a direct result of being in the Euro and of European Central Bank policy.

Bottomless Pool

When Ireland went into the Euro we were told that we hadn't lost our sovereignty but had merely 'pooled' it.

That means that if we or our banks got into trouble it should have been a shared 'pooled' problem.

Let's see what should have happened if the EU and ECB was dealing honestly and properly with us.

System

Every country has a Central Bank.

It steps in if the banks are in trouble.

Ireland has a Central Bank.

It used to set interest rate policy.

However, it 'pooled' some of its sovereignty into the European Central Bank when we went into the Euro.

The Process

In the past what would have happened if the banks got into trouble was that the Irish Central Bank would step in to help and in the rare occasions when it couldn't help enough then the burden would fall on the Irish people.

However, this time round some of the sovereignty was 'pooled'.

So what should have happened is that when our banks got into trouble and the problem was too big for the Irish Central Bank then the next step shouldn't have been the Irish taxpayer but the European Central Bank.

Our Shared Problem

It should have bailed out the banks using EU funds.

And if it didn't have enough money then our 'pooled' Euro sovereignty should have meant that the debt burden should have been borne by the whole of Europe.

However, the ECB and the Euro area decided that despite the fact that we got into trouble due to their decisions and our 'pooled' sovereignty that the burden was going to be borne by Ireland and Ireland alone.

Did the Dirty

All they were looking to protect was the big German and French banks who had made bad investments in loaning money to Irish banks who were now insolvent.

There was none of this 'we are all in this together in the Euro area and one country's problems are everyone's problems'.

The Government in Ireland agreed to this and promised that the Irish taxpayer would pay.

Indeed the two main parties in Opposition agreed to this too (they didn't want to cause any trouble with our fancy German and French partners).

Con

This was a complete con.

Both we and the Irish Central Bank pooled our financial sovereignty when we joined the Euor area.

The European Central Bank caused our problem by keeping interest rates low while they rose in the US and UK which caused our Construction boom and bust.

It should have been part of the solution.

That was what we were entitled to when we pooled our soverignty.

Perfidy

Instead they looked after the interests of the German and French banks and let the Irish taxpayer dangle in the wind.

There was no pooled sovereignty when things went badly.

And instead of pointing this out to our 'fancy' Euro friends our Government and the main opposition parties didn't want to rock the boat and meekly handed the debt burden of the banks to the Irish people and the rest of our financial sovereignty to the EU and IMF.

Protested

They should have raised the roof and demanded that the burden should be 'pooled'.

They should have raised the roof at the Irish nation being abandoned and left to bear the whole burden itself.

Election Winner

Someone asked who would win the election.

Someone else replied that it would be a Coalition in charge again - the EU and the IMF.

If only someone in power or opposition had demanded that we should stand up for ourselves and demand our rights which we had pooled when we joined the Euro.

Maybe its not too late.

Maybe this election is our chance to state our point of view.