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Running Ireland from Germany

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German Chancellor Angela Merkel and Taoiseach Enda Kenny in Berlin last week

The revelation that key parts of the Irish budget were being discussed in the German Parliament last week -- weeks before the Dail (Irish Parliament) will get to hear about them -- has caused outrage and humiliation here.

Outrage at the way we are being treated, and humiliation at the realization that we have fallen so low.  It's humiliating that our budget, our private national business, is being analyzed in the corridors of the Bundestag before the Dail is told what's in it.  

That really puts us in our place.  It's the perfect illustration of what losing economic sovereignty actually means.

We don't take the decisions about our future anymore.  We can propose, but we have to get approval from our masters before we can do anything.  

Of course Taoiseach (Prime Minister) Enda Kenny and his senior ministers were furious and embarrassed when this happened last week. Their cover had been blown.  They might look like a government, but this exposed the fact that the real power now lies elsewhere.
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As luck would have it, the day before the leak happened Kenny had been on his first visit to Germany as taoiseach, and there was lots of red carpet posturing and air kissing between himself and German Chancellor Angela Merkel.

The pretence of a meeting of equals was carefully presented for the TV cameras.  But the next day the leak revealed the truth.

Maybe everyone here should know by now what losing our economic sovereignty means.  But they don't.

The phrase has been used casually in conversation over the past year since we got the bailout money, as though it was some kind of technicality which did not matter too much.  Apart from the quarterly visits by the inspectors from the EU-IMF to check our books, things appeared to be continuing much as before.  We appeared to be running our own affairs, like any other country.

But the truth, as last week's leak revealed, is very different, and a lot of people here only woke up to the demeaning new reality last week.

Apart from having to open our books to the EU-IMF and pass quarterly inspections, it also means that we have to get our budgets approved in advance by our European "partners.”

The most important "partner" is Germany.  Which is why the budget for 2012 which our Minister for Finance Michael Noonan will present to the Dail in two weeks was being discussed last week by a finance committee of the Bundestag.

The discussions were supposed to be confidential.  But these guys are putting up the cash, so they are more concerned about where their money is going than about secrecy and the sensitivities of Irish ministers.

The information about the upcoming Irish budget, particularly the 2% hike in sales tax, was given to the German Parliament by the European Commission, which had been given the details in confidence by the Irish government.

When the leak happened last week, the commission explained that it had a legal obligation to supply the information to the German Parliament, and it blamed Bundestag members for leaking it.  

But members of the Bundestag finance committee were perplexed at what all the fuss was about, and one of them said that the Irish people needed to understand that this is what being an EU-IMF "program country" means.

The institutions providing the money for the bailout to keep Ireland going (the EU-IMF-ECB troika) oversee and sign off on Ireland's budget, on our taxation and spending.  They make sure we're sticking to the program.  That's the reality.

Before they can approve our budget they have to discuss it.  And our budget information goes in advance not just to Germany but to all EU governments, since they all play a part in propping us up.  

The fact is that "losing our economic sovereignty" is not just an empty phrase.  It's a day to day reality with consequences.

And it means exactly what it says.  Other people are in ultimate charge of our economy, our tax, our spending and our budgets.

One area the troika want to see changes in is our system of public service pensions, which was discussed in this column last week.  Under this system, retiring politicians, civil servants and other state workers in Ireland are guaranteed generous pensions for life, even though the country can no longer afford to pay them.
At the top end, pensions of around €100,000 a year are common.  It's one area where the troika can be sure they will have the backing of most people here for change.

Private sector workers in Ireland have seen their pensions collapse and they are outraged that state workers are being completely protected. There is absolute outrage here on the issue, particularly at some of the examples that have surfaced.

The most high-profile civil servant involved is the former secretary general to the government who retired at 57 earlier this year.  His golden handshake was €570,000, with a €142,000 a year pension for life.

If you had to buy this on the open market you would be talking millions, since he's only 57.  And this guy was a key player in the management of the Irish economy over recent years!

Then there's the case of the outgoing head of the Department of Finance who is getting almost as big a pension, even though he's even younger, and he was the key official involved in the state guarantee for the banks which has bankrupted the country.

On top of that, he is getting a new job as a member of the European Court of Auditors, even though the department under his leadership recently got its sums wrong by over €3 billion. You couldn't make this stuff up!

Assuming he gets the European job it will be worth around €1.6 million over his six-year term there, with another big fat pension to follow. And this is the guy who earlier this year said that the terms of the EU/IMF bailout mean that the government cannot pay the €13 billion actuarial cost of providing a state guarantee for the pension entitlements of workers in cases of employer insolvency in the private sector.

So if you're in the private sector, tough!  But if you're in the state sector, your pension will be paid in full by our bankrupt state borrowing more. As I said, you couldn't make it up!

Another case that raised eyebrows last week was that of the secretary general of the Department of Education who is retiring in February at the age of 53.  She will be getting a pension of €114,000 a year for life, plus a handshake of over €200,000.

And of course there is the former tanaiste (deputy prime minister) in the last government, Mary Harney, who has retired from politics at 58 and is on a €130,000 a year pension for life.  She went public last week to defend this saying that although it was a "very decent" return for her 34 years in the Dail, she deserves it.

Like most of these senior politicians and civil servants, she misses the point.  The point is that the state cannot afford to pay such a huge pension, whether she deserves it or not.  The only way it can pay is by borrowing even more.
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Even top executives in the private sector cannot get pensions on this scale because their pension investments have collapsed.  Their private companies cannot borrow the millions to make up the pension deficits.  Why should the state sector be different?

And it's not just those at the top.  Middle income workers across the private sector who have been paying into retirement funds for years are now finding that these investments have collapsed and that they have very small pensions, if any.

Yet average workers in the state sector (teachers, nurses, police, etc.) are getting at least half their final salary in guaranteed pensions for life.

Figures published recently show that the average private sector pension payout over the past year was just over 3,000, and the average state sector pension was between six and seven times that amount.

Maybe the Bundestag finance committee could have a special (non-secret) debate on the scandal of state sector pensions in Ireland.  I'm going to Berlin if they do!

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