The real Phil Hogan

Criticism of the Government’s nomination of Phil Hogan as Ireland’s member of the EU Commission has tended to focus on his lobbying in 2012 to prevent a Traveller family being given access to social housing. On those grounds Nessa Childers, an independent member of the EU Parliament, reasonably described the nomination as a “step backwards for equality.”

The other main strand of criticism concerns his agreement on bloated consultancy payments for the establishment of Irish Water, an issue that Sinn Féin in particular is emphasising. Again, the criticism is legitimate and important, as is the fact that he spent the summer appointing former Fine Gael and Labour Party councillors to state boards, and that he quashed inquiries into planning irregularities, including in his own fiefdom of Co. Carlow, when he took office as minister for the environment.

An article in Irish Left Review by Andy Storey points out that the problem with Hogan goes well beyond anti-Traveller racism, the wasting of public money, the dishing out of sinecures to political cronies, and taking a relaxed approach to dodgy planning. Most politicians engage in all the above. Hogan’s real importance lies in his being a prime example of the noxious nexus between political and corporate power in Ireland.

The Moriarty Tribunal in 2011 concluded that the former minister Michael Lowry had “an insidious and pervasive influence” over the awarding of a mobile phone licence to Denis O’Brien’s Esat Digifone consortium; in fact the tribunal described Lowry’s conduct as “profoundly corrupt to a degree that was nothing short of breath-taking.” In July 2010 Lowry was an honoured guest at Phil Hogan’s fiftieth birthday party, and only days after the publication of the Moriarty report Hogan had an official meeting with Lowry—allegedly to discuss unrelated matters.

But then, this should not be so surprising. Hogan has form here. As Jody Corcoran has reported, “Hogan was personally engaged in the extraction of at least two significant sums of money from O’Brien, or his companies or associates, for Fine Gael at or around the time of the granting of the licence.” Coincidentally, Siteserv—a company owned by O’Brien that had substantial debts owed to Anglo-Irish Bank, now owned by the state (i.e. you and me) and now written off—has won some of the contracts for installing water meters—water charges, of course, being another of Hogan’s legacies.

O’Brien, who Hogan “ran into” at the Mount Juliet Golf and Country Club in March, is not the only controversial businessman Hogan has been associated with. In the 2000s Michael Fingleton, then managing director of Irish Nationwide Building Society, personally approved a loan of €450,000 to Hogan to allow him buy a house in Dublin 4, with Hogan having to repay only the interest on the loan for a decade. Fingleton then lent him €430,000 to buy a Portuguese holiday home, on the same generous repayment terms. A report in the Irish Independent on the matter charmingly described the second loan as having been processed with “what appears to have been ... minimal paperwork.” How probable was it that we would ever have had a serious banking inquiry when a senior Government minister had personally profited from the shady practices that created the property and banking crisis in the first place?

In February 2009 Hogan declined to follow his party leader’s example and take a 5 per cent cut in his salary of €110,000, stating that “my personal circumstances don’t allow that at the moment.” (God knows how dire his personal circumstances would have been if he had been obliged to meet normal repayments on his property loans.)

In April 2012 a Kilkenny woman texted Hogan to complain of the hardship the household charge was causing her, to which Hogan responded: “Would you ever relax and feed the children.”

The man is demonstrably a hypocrite and a boor (appropriate enough qualifications for an EU Commissioner these days). Even more importantly, he is the embodiment of the crony-capitalist links between business and politics in Ireland, links that are forged and greased through political donations, personal favours and friendships, opaque meetings, and secret business dealings.

In that sense Hogan is the perfect representative of the Irish elite and an eminently apt person to fulfil that representative role in Brussels. 

http://www.people.ie

Euro-zone peripheral countries lick their wounds

The peripheral countries of the euro zone will have to pay more than €130 billion this year just to meet the interest payments on mounting debts, a burden almost three times as high as the rest of the euro area.

The figures—calculated by the Financial Times from data published by the International Monetary Fund—underline the deep wounds left by the euro-zone crisis, in spite of the high demand for peripheral euro-zone debt in recent months.

Although falling bond yields have eased borrowing costs markedly during the past two years, weak economic recoveries and still- extensive budget deficits mean that the interest bill is still climbing. But, even if their debt ratios stabilise, and even start to tick down, they will remain extremely high for a long time, which means they’re very vulnerable to any further shocks.

The figures show that the debt-servicing burden of the euro-zone periphery accounts for almost a tenth of the revenue received by governments. In the other thirteen euro-zone countries the same burden averages only 31⁄2 per cent, with the difference in the debt- servicing burden between the indebted periphery and the rest of the zone forecast to rise over the next five years.

 In the 2013 budget the Government estimated that expenditure on interest reached €6.3 billion in 2012 and is expected to rise to just over €10 billion by 2015. These numbers are put into perspective when we consider that the total tax take in 2012 was €36.6 billion, with income tax accounting for €15.2 billion.

In other words, interest on the national debt in 2015 is expected to be equivalent to two-thirds of the total income tax take in 2012. This is an unacceptable and unsustainable burden, to which there can only be one answer.

Incidentally, the Irish health budget for 2013 is €13.6 billion.

 

Abandoning the euro

The recent call by Ming Flanagan TD, who is an independent candidate in the forthcoming EU Parliament elections, prompted us to look for a succinct commentary on the mechanics of abandoning the euro.

Two years ago, a team headed by Roger Bootle won the prestigious Wolfson Prize for Economics with a paper that outlines the smoothest process by which a member-state could give up the euro. We publish a summary below.

■ The most realistic scenario for the break-up of the euro is that one or more of the weaker peripheral countries will leave the euro zone, introduce a new currency, which then falls sharply, and default on a large part of their government debt. Other forms of break-up are possible, but the analysis of these will involve the same issues, although, in the case of strong countries leaving, often with the signs reversed. Accordingly, our analysis centres on the departure of a single weak member, and we then note any instance where the issues and conclusions need to be modified for other forms of break-up.

■ It will not be possible to be open about preparations to leave for more than a very short period without precipitating a damaging outflow of money, which could cause a banking collapse. Accordingly, preparations must be made in secret by a small group of officials and then acted on more or less straight away.

 recommend that the country should immediately announce a regime of inflation- targeting, monitored by a body of independent experts, adopt a set of tough fiscal rules and outlaw the indexing of wages but announce the issue of index-linked government bonds. The government should also continue with structural reforms designed to increase the flexibility of product and labour markets.

■ To facilitate the convenient use of euro notes and coins, to help to maintain price transparency, and to boost confidence in the new system, we recommend that the new currency be introduced at parity with the euro. Accordingly, where a price used to be 1.35 euros it would now be (for example) 1.35 drachmas. The drachma would be free to fall on the foreign-exchange markets, and indeed it is vital that it should do so.

■ We reckon that when any or all of the weaker members of the euro zone left, their currencies would depreciate by something like 30 to 50 per cent. This would add another 10 per cent to consumer prices, or even more, which, spread over two years, would cause the annual rate of inflation to rise by roughly half this figure. But international experience suggests that such a spike can be short-lived, and inflation can then return to something like its previous level.

■ Given the short time from announcement to implementation, it will not be possible to have new notes and coins available immediately. This is unfortunate, but it is not as serious as is often imagined. The authorities should allow euro notes and coins to continue to be used for small transactions; but immediately after the decision to abandon the euro has been announced they should commission new notes and coins to be produced as soon as possible.

■ To facilitate the convenient use of euro notes and coins, to help to maintain price transparency, and to boost confidence in the new system, we recommend that the new currency be introduced at parity with the euro. Accordingly, where a price used to be 1.35 euros it would now be (for example) 1.35 drachmas. The drachma would be free to fall on the foreign-exchange markets, and indeed it is vital that it should do so.

■ We reckon that when any or all of the weaker members of the euro zone left, their currencies would depreciate by something like 30 to 50 per cent. This would add another 10 per cent to consumer prices, or even more, which, spread over two years, would cause the annual rate of inflation to rise by roughly half this figure. But international experience suggests that such a spike can be short-lived, and inflation can then return to something like its previous level. 

■ Just before the changeover, some form of capital controls will be essential, including at least the closure of the banks. But after the changeover, capital controls should be avoided and, if used, should be withdrawn as soon as possible.

■ The government should redenominate its debt in the new national currency, and make clear its intention to renegotiate the terms of this debt. This is likely to involve a substantial default—perhaps enough to reduce the ratio of debt to GDP to 60 per cent. But the government should also make clear its intention to resume servicing its remaining debt as soon as practically possible.

■ The central bank of the country should stand ready to inject liquidity into its own banking system, if necessary by quantitative easing. The monetary authorities should also announce their willingness to recapitalise the banks if necessary.

■ The authorities should provide as much clarity as possible on the legal issues, including the status of the country’s membership of the European Union and the effect on international contracts at present denominated in euros. Approval by the EU would also be needed for any capital controls, but this would have to be sought retrospectively. All this would require close co-operation with other EU member- states and institutions, including countries in the northern core.

■ Domestic economic policy may also have to adapt. Indeed policy-makers in the northern core should have more freedom once they are no longer constrained by the need to set an example for weaker countries that have left. As the value of the euro would rise, the northern core would at first suffer from a loss of domestic demand, though it would enjoy a lower rate of inflation. This combination would give it the incentive to undertake measures to boost domestic demand, especially through monetary policy and structural reforms.

■ A rebalancing of the economy away from reliance on net exports would be in the interests of the whole of the present membership of the euro zone, as well as countries outside it.

Of course, giving up the euro without breaking from the dominance of neo-liberalism would result in further significant hardship for ordinary people, as the price of imported goods, especially food, would increase. Austerity would not just go away either; so repudiating the debt would be necessary in order to force the highest possible write-down. This would allow social measures and strategic economic investment to be given priority, rather than paying the bondholders, and for the people of this country to be put first. 

European Movement officially promotes EU in schools

The “Blue Star” programme is part of the Government’s “Communicating Europe” initiative, whose aim is “to foster better understanding and knowledge among primary school children of the European Union and how the EU affects our lives.”

The invitation to tender for the post of national co-ordinator was published on the Public Procurement web site in October 2011. The European Movement (Ireland) was awarded the contract, and the scheme was subsequently renewed for a further two years. The total cost was €140,000, paid by the Department of the Taoiseach.

The scheme has grown significantly over the period of the contract, from 30 schools in twelve counties in the pilot year to 106 schools in twenty-four counties registered for this year’s programme.

Reports on the first two years are available on the web site of the Department of the Taoiseach.

 

Could TTIP contain an internet censorship plan?

An internet censorship plan is at present being finalised, with Barack Obama holding secret meetings with political figures and lobbyists in Asia to lock the Trans-Pacific Partnership’s internet censorship plan in place.

Leaked documents reveal that this secret plan would censor the use of the internet and strip away people’s rights.1 If completed, the plan would force internet service providers to act as “internet police,” monitoring our use of the internet, censoring content, and removing whole web sites.2 It would give media conglomerates centralised control over what we can watch and share on line, and give governments the ability to neutralise the internet for political rivals.

The Trans-Pacific Partnership is being called a legal “blueprint” for the rest of the world.3 Once the TPP’s internet censorship plans are complete, they will be used to globalise censorship—which brings us back to the Transatlantic Trade and Investment Partnership (TTIP) between the European Union and the United States, which is also being negotiated in secret and whose known components bear a striking similarity to the TPP. It would be a good bet that a similar provision is included in the TTIP, providing another reason why we should be determined in our opposition to it.

1. Wikileaks: “Secret trans-Pacific partnership agreement.”

2. Electronic Frontier Foundation: “TPP creates legal incentives for ISPs to police the internet.”

3. Inter Press Service News Agency: “US ‘bullying’ TPP negotiators amid failure to agree.” 

"Ireland is not Greece"

Speaking in Luxembourg on 4 October 2011, Michael Noonan insisted that “Ireland is not Greece.” Now, in April 2014, the graph below by David McWilliams proves that Noonan was correct—to the detriment of us all.

The fact that the Greeks can raise money shows that the markets have absolutely no memory. Two years after the biggest sovereign default in history they are back at it—though it should be noted that their balance sheet is immeasurably better after the default than before.

Greece’s debt is still almost 180 per cent of GDP. But the bulk of the debt is owed to other

euro-zone governments, as a result of its two “bail-outs.” Not only do these loans pay a low interest rate of a little over 2 per cent, but Greece doesn’t need to begin repaying them until 2022, and then it has another twenty years to complete the job.

Greece shows just how quickly things can turn about. Note also that its ten-year bond yield, which hit 30 per cent after the debt default two years ago, is now 6.2 per cent.

Two of the country’s big four banks— Piraeus and Alpha—have raised €3 billion of equity between them in recent weeks, and Eurobank, another big lender, is planning to follow with a €3 billion issue later this month.

So it was just more bragging from Noonan when we should have been planning to emulate the Greeks, if not surpass them, by repudiating the debt. Instead we have water charges, another austerity budget ... and so on.

Doesn’t it make your blood boil?