For those who listened to the siren voices telling us that the Euro bail-out worked and the global recovery was underway – think again.
One of the reasons I have written much less recently is the feeling of repeating myself. We are in a holding pattern. Waiting for the autumn Spending Review in the UK, schools going back everywhere and the US mid terms. Each of which will force realities and decisions that are being assiduously avoided at the moment.
But even as we wait under the welter of soothing propaganda – which I have to say I find wearing – events and debts are still seeping along.
It seems to me, we are about to see the return of Euro debt. It never really went away. Debt is like flu. It goes quiet, mutates and then scares us while we find out if it is a virulent or a relatively benign outbreak. Which this one is I don’t know. But it does seem to be back.
There are confirmed cases in Ireland and Spain and it has probably spread to Portugal and Italy. It never left Greece.
First Ireland. Ireland has been held up as the poster child for the austerity solution. A stoic people who don’t whine and fuss but put their heads down and suffer what has to be suffered. For the greater good. That’s the official story. The reality is a lot more sordid.
Those in work have seen their wages cut by around 13%. What would 13% of your wage be? And they are the lucky ones. The ranks of the unemployed swelled again, up now to 13.5%. But it’s what is required to sort out the deficit isn’t it? So, what have ordinary people got for their sacrifices?
Well falling wages and rising unemployment mean that Ireland’s revenue from income tax fell 9%. This is the revenue which is supposed to be pay Ireland’s way out of debt. Not surprisingly with public finances contracting, Ireland’s actual ability to pay off its debt is also disappearing. And the deficit actually rose to stand now at 18.7%.
The same is true in Greece. The economy is shrinking much faster than the debts. The economy in July was 7% smaller than it was a year ago. Tax receipts are €770 million short of where they need to be for the IMF plan to be credible. What do you think? Put a tenner on it working?
But here is the fact that curdles my stomach. Back to Ireland as the poster child. As I wrote last week the EU ‘allowed’ Ireland to bail out Anglo Irish bank by another €10 billion or so. Immediately Ireland’s cost of borrowing and insuring that borrowing jumped up. Making their debts just that little bit bigger and that little bit harder to pay off.
WHY are they bailing out Anglo? Let me add this fact. Without bailing out Anglo’s private incurred debt, Irish Sovereign debt would be about 12% . But it isn’t 12 it’s 18% Now tell me what the austerity is really for. Tell me exactly who the Irish people are suffering for and whose future they are sacrificing their own for?
The same is true in Greece.