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Finally, Ireland exit the bailout and they might even stop eating pigeons

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Anti-austerity protesters on O'Connell Street last week.
Anti-austerity protesters on O'Connell Street last week.


First, I want to assure you that, tough though it is for journalists here now, no pigeons were hurt during the writing of this column. 

You will have seen The New York Times story about how things are so bad in Ireland that an out of work company director has to hunt and shoot pigeons to survive. 

He has since admitted that this was a slight exaggeration.  Yes, he likes shooting as a sport and he may have shot the odd pigeon.

But the welfare payment here for someone like him who is out of work is €188 (or $258) a week. In the discount stores like Lidl and Aldi you can buy a week's food for less than a quarter of that.

So unless you're a really gullible New York Times reporter you're not going to believe that someone like that is depending on pigeons he shoots and barbecues in the back yard. 

The former company director does not deny that he said it.  The really shocking thing is that the reporter, Liz Alderman, who is chief European business correspondent for the Times, believed that this was how he fed himself.

She needs to get out more.  Or at least become more familiar with the Irish tendency to spin yarns.

Alderman was in Dublin recently to set the scene for Ireland's exit from the bailout last weekend. 
She told a cautionary tale.  And despite the dead pigeons story that she swallowed and regurgitated, she was right to do so.

So, leaving the pigeons to rest in peace, what does Ireland's exit from the bailout actually mean? 

Taoiseach (Prime Minister) Enda Kenny went on television to address the nation on Sunday night to mark the bailout exit and to explain exactly what is involved.

On Sunday we reached the end of the three-year bailout program which began at the end of 2010.  Over the three years we have been given €67.5 billion by the Troika -- the IMF, the EU and the ECB -- to keep the country going when we could not borrow money from anywhere else.

We have made considerable progress in getting our finances back on track, and at this stage the financial markets are now cautiously willing to lend to us again. So from now on we can manage without any more bailout money.

That means that we have our economic sovereignty back, or as much sovereignty as any other European country has these days.  Taking the Troika money meant that the Troika laid down the budgetary targets Ireland had to follow for the last three years.  Now that we are out of the program, instead of the Troika being in control of our finances, we are in charge again. 

But as Kenny made clear in his TV speech to the nation on Sunday night, it does not mean that our financial troubles are over.  Kenny put on his sternest face to emphasize that.

The fact is that we still have a long way to go to reach a position that is financially sustainable.  But it is only fair that we briefly pat ourselves on the back, as Kenny did. 

We are the only one of the European countries who got in a mess which has managed to get out cleanly and on time.  We're not Greece, which is still a mess, and we're not even Portugal, which is likely to need another bailout.

We managed to implement the tax hikes and spending cuts that were part of the bailout program without mass demonstrations on the streets.  All of this can be seen as a success. 

But it is success that has come at a heavy price.  It's much too soon for anyone here to go around singing “A Nation Once Again.”  Hence Kenny's serious face.

The Irish economy is still limping along. Unemployment is still 12.5 percent.  And it would be much higher except that tens of thousands of people, especially young people, are emigrating every year.

Since we started the so-called austerity program our budget deficit has come down bit by bit.  Under the Troika program we are supposed to reach the bailout target of a deficit of three percent of GDP by 2015, the level that all EU countries have agreed not to exceed.

The forecast deficit for 2013 is 7.3 percent of GDP, for 2014 it is 4.8 percent and for 2015 it is 2.9 percent.  But it is still a struggle and the last steps are the hardest to achieve.   Even though we have slashed state spending and hiked taxes in the last few years, our budget deficit next year, for example, will still be around €10 billion. 

In the years between 2015 and 2020 we are supposed to start running budget surpluses, enabling us to begin paying back the mountain of money that we owe.

The size of our national debt is enormous, now over €200 billion, including the 67.5 billion euro bailout money.  Our debt to GDP ratio is around 125 percent which is on the borderline of what the financial markets regard as unsustainable.  Any slippage in our austerity drive and the markets will pull the plug on us again. 

Interest payments on our national debt are now running at around €10 billion a year and that is a crippling drag on our economy as money is sucked out of the country, money that otherwise could be spent on state services and job creation.

In a few weeks around €7 billion euro in bonds are maturing and the investors will have to be paid. 
Since we are back in the financial markets we can roll over debts like this into new bonds. 

But that €7 billion is just one of a succession of bond lots that will be maturing in the future; it shows what we are facing in the years to come.  Between interest payments on the debt and repayments on maturing bonds we are trussed up like a Christmas turkey, even if we are out of the Troika bailout.

We got into this mess, you will remember, because we were spending far too much during the boom years and when revenue collapsed as the bubble burst we were caught.  As Kenny said in his speech, "Everyone knows that you can’t keep spending more than you are earning."

Complimenting the Irish people on staying the course, he said that we have already completed over 90 percent of the necessary cuts and tax increases.  That is true, but the last 10 percent will be the most difficult. 

Kenny is optimistic.  As a result of the progress we have made, he said, we can now begin to reduce the national debt burden.

By 2020, he said, with continued effective management of the public finances, "we can eliminate government borrowing and cut public debt by a quarter, relative to the size of the economy."

That sounds great.  But the key phrase here is "relative to the size of the economy." 

Built into the government forecast are projections for growth of at least two percent a year, and you have to be as optimistic as Kenny to believe we will achieve that consistently. 

The forecasts right now are good, but it's really out of our control since it depends so much on a significant recovery in our export markets. 

There is also our ability to control spending.  Next year we are supposed to be taking a further €2.5 billion out of the budget, close to €1 billion of which is supposed to be cut from health spending. 

Given that the Department of Health seems incapable of enforcing cuts (instead of the planned cuts this year there was a spending over-run of over €200 million) that seems like pie in the sky. 

Where that will leave the deficit next year is anyone's guess.  And if you add in a failure to grow the economy we could be in trouble again.

The bottom line on our bailout exit is that it is a precarious business which, even if we stay afloat, will leave very little over to revive the economy here, thanks to the huge burden of debt we now carry.  We could be looking at a lost decade, or longer.

We have got this far thanks to the squeezed middle class in the private sector here who have been bled dry by tax hikes and hit by cuts in or charges for 'free' state services.  They have also seen their incomes stand still or go down at a time when everything seems to be as expensive as ever.

And as you know, tens of thousands of them are struggling and failing to pay mortgages on properties they bought during the boom and which are now worth half what the homes cost. 

You are familiar with the stories from here about all the ordinary couples who work hard and find that at the end of each month they have nothing left over when all the bills are paid.  And on top of this most people in the private sector here have seen their pensions vanish with the market collapse.

In contrast with this there is a large section of the Irish economy -- professional people and people on the state payroll -- who have escaped much of the squeeze that has hit people in the private sector. Their pay is largely intact and their pensions are protected. 

Our politicians, judges, civil servants and so on are all part of this elite.  Our saintly president, for example, who never misses a chance to deliver a sanctimonious lecture, is in line for four pensions.

That's another legacy of the bailout, a deep feeling here that the pain has not been applied equally. 
And that is why the radio stations here that did street interviews with people in the past few weeks found very mixed feelings about the Troika departure. 

A lot of people feel that it was the Troika which was pushing for cuts in wasteful state spending, often on pay and pensions, and demanding that professional fees from lawyers, doctors and others be cut so that they are more in line with European norms. 

Without the Troika there to tell our politicians what to do, will these reforms ever get done?  Or will the elite escape while ordinary workers are squeezed even more?

The government announced a new six year plan on Tuesday which sets out the steps the government will take to continue our economic recovery between now and 2020.  In the last few days some ministers have also begun to talk about a slight easing of the tax burden for the middle class (just in time for the next election). 

But the reality is that things will be tough here for the foreseeable future, even though we have exited the bailout.   

It may be a historic moment, but Kenny was right to down play it.

Now where did I leave that shotgun?  It's time to bag a few pigeon for the Christmas dinner. 

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