Fine Gael Minister for Finance Michael Noonan
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|Ireland's Minister for Finance Michael Noonan|
For Ireland -- or any democratic country -- to function, the vast majority of people have to support the state by paying their taxes, obeying the law and generally being compliant citizens.
No one likes paying tax, and no one will agree with all the laws or all the policies of the government in power at any particular time. But in normal times enough of us do, and the rest of us accept the will of the majority, and from that the moral authority of the state.
There's an element of consent involved which is the bedrock on which all democracies are founded.
Politicians and state authorities undermine that consent at their peril. If people feel cheated by the state they start to withdraw their consent to be governed. They become resentful and distrustful of the state.
They feel alienated from the state authorities and power structures. They no longer feel a compulsion to pay their taxes and obey the laws. They feel the state no longer deserves their loyalty and support.
It is at that stage that angry street protests break out and become violent, democracy begins to flounder and a country starts to become ungovernable, with a huge number of its citizens appearing to reject the policies of the state. We have already seen this happening to some extent in Greece and starting to happen in one or two other places in Europe.
These are not normal times in Ireland. We are now in danger of seeing the same thing happening here. The Irish people are at a tipping point, and the future could go either way.Read more new on Ireland's economy here
The level of anger at and cynicism about what is happening in the Irish economy and Irish society is now palpable here. This boiled over last weekend when there were further revelations about the pensions of bank chiefs and retired politicians, many of whom played a part in the collapse of our economy.
This is an issue we have been exploring in this column for weeks now, including last week on Irish Central when we looked at the huge pensions given to the two men who headed up the two biggest banks in Ireland during the property bubble.
It was the reckless lending by the banks that was the main driver of the boom and bust here, with the catastrophic consequences that followed including the loss of our economic sovereignty. But instead of being penalized or even prosecuted for their failures, the guys at the top of the banks have been handsomely rewarded.
Minister for Finance Michael Noonan attempted to deflect questions last weekend about the outrageous pensions given to the power elite in the banks, in politics and in state regulatory bodies, the people who went asleep on their watch and got us into this crisis. In a feeble response, Noonan told reporters that he was not "legally empowered" to do anything about the pensions given to the bank chiefs because they were subject to legal contract.
This response, which topped the TV news on Sunday night, was greeted with the derision it deserved by ordinary people in the private sector around the country who have seen their own pensions collapse in the past few years.
As we reported here recently, around 80 percent of defined benefit pension schemes (the kind that guarantee you at least half your final pay when you retire after 40 years service) in private companies here are bust.
But that did not stop the government last year adding to the problem by imposing a 0.6 percent levy (or half a billion euro a year nationally) on private pension funds, whether they were company schemes or individual pension plans. And the levy (a nice word for tax) is set to continue for another three years at least.
The government's excuse was that it needed the money for "job creation" schemes. We have seen no jobs as a result. What we have seen are company pension plans collapsing and the employees being left with little or no pensions.
So although Noonan does not feel "legally empowered" to retrospectively stop the huge pensions the failed bankers got, he does feel "legally empowered" to retrospectively raid the pension funds saved up with great difficulty by ordinary people in the private sector over their working lives.
It gets even better. It also emerged last weekend that the state's biggest bank, AIB, used some of the bailout money it got to fund its former chief executive's annual pension of over €
520,000. And who will end up paying back the bailout money? The ordinary taxpayer of course.
The situation with the half million euro a year pensions for life given to the top bankers is, of course, only a small part of the overall problem that is tipping the Irish people into revolt. The same situation reaches right across the state power structure here, including senior politicians and civil servants and top executives of all kinds in state and semi-state companies and organizations.
They are all guaranteed pensions of anywhere from €
80,000 to €
180,000 a year for life when they retire. Typically a pension on this scale would cost an individual in the private sector who has to buy an annuity several million euro. At a time when most people in the private sector have seen their pensions vanish, the injustice of this is sickening.
As we said here before, we are now seeing the emergence of two Irelands, the haves in the state sector and the have-nots in the private sector. The disparity is particularly evident when you look at all those people on the state payroll who are middle management rank or above and who are over 50. They are the ones with the high salaries and the huge guaranteed pensions, at the expense not only of the private sector workers but of the lower paid state sector workers.
Why should this power elite want to reform the system, since it would mean reducing their own Rolls Royce pensions down the line? So they all play the game and talk the talk (about sharing the burden and turning the corner and positioning for recovery and so on) but they won't change the system.
The single most striking characteristic of the way the present and the last governments have attempted to work their way through the bailout program and towards balancing our annual budgets has been the success of the power elite across Irish society in avoiding most of the pain.
They have managed to insulate themselves from most of the adjustments, making only token changes to their lifestyles. The group includes all the senior ranks in the state services and in their trade unions, as well as a lot of professionals in the private sector.
Typically, these people are in the over-50 age group, with their houses paid for, so they also have no negative equity or mortgage problems.
The other side of this is the tens of thousands of young couples here who are not only struggling with pay cuts and job losses, with higher taxes and cuts in state services, with repayments on boom time mortgages on houses that are now deep in negative equity and higher prices for essentials like petrol and electricity. All these people, the great middle section of Irish society, are being crucified by the cuts being imposed by the government. And they are getting no help from the government, least of all in getting the banks to carry their share of the burden. Read more new on Ireland's economy here
One revelation here last week underlined this. The current head of one of the banks that gave its retiring boss a half million pension a few years back was before a Dail (Parliament) committee last week, and one of the questions he was asked was how many mortgages had been written off by the bank since it had been bailed out by the state.
This bank got around €
5 billion in bailout money, a chunk of which was supposed to be used for debt forgiveness for customers who had taken out mortgages during the boom and now were deep in negative equity and unable to make repayments because of pay cuts or job loss.
How many mortgages like that have you written off? the bank boss was asked. None, was the answer.
The banks are holding on to all the bailout money and the government seems powerless to do anything about it.
The only one of the elite to pay the price for failure here is Sean Quinn, once Ireland's richest man, who began a nine-week jail term last week for contempt of court. Mind you, he was always a bit country and rough around the edges to be an accepted part of the sophisticated elite here, which may explain why he has ended up where he is.
The short jail sentence arises from Quinn's alleged attempts to hide his remaining foreign property assets from the authorities. He owes a couple of billion to the former Anglo Irish Bank, now being wound up, which has left the Irish taxpayer with all its debts, so any money Quinn has left should be going to lessen that burden.
But Quinn's enormous bet on Anglo shares was not something he did all by himself. Others were either involved or knew, including bankers, financial advisers and possibly the financial regulator.
Yet he's the only one who has ended up in the slammer. There's something not quite right about this, as Quinn's many supporters in the border counties he comes from keep saying.
But there is not much sympathy for him across the rest of the country. He made such a mess of his insurance business that anyone with motor or home insurance here (which is most people) will be paying a levy on their annual policies to make up for his losses for a decade to come.
Again, note that instead of using bailout money to sort out the financial mess of the Quinn collapse, it is the ordinary people who are being hit with a new extra tax to pay for it.
We are now just a few weeks away from the budget here, which has to reduce our budget deficit by €
3.5 billion euro over the coming year. This is a huge test for the government.
Will it at last tackle the state sector pay and pensions imbalance to help pay for this? Will it tell German Chancellor Angela Merkel that we want our money back, the tens of billions we were forced by the ECB to repay to unguaranteed German and French bankers and bondholders who gambled on our property boom and lost?
Or will the government continue the policy of changing nothing and loading all the pain on to the majority of ordinary Irish people who have no way of escape?
We will know next month, and there are no prizes for getting the right answer.
The tipping point will come either then, or early next year when we have to make another €
3 billion payment on bank debt back to Europe.