Month: May 2012

A LONG TIME IN POLITICS

British Prime Minister Harold Wilson once remarked that a week is a long time in politics. Indeed. And three months can be an eternity. On December 1st last Brian Cowen’s government seemed on the ropes. The recession was biting savagely, negotiations on cost cutting with the public sector unions had ended in fiasco and a savage, benefit and wage slashing budget had become inevitable. Fianna Fail was in the doldrums in the opinion polls, trailing its chief rival, Fine Gael, by a wide margin.
Three months later, the scene looks different. The budget was successfully navigated. There may be disruption ahead in the public sector, still smarting over the pay cuts, but the issue does not appear to have caught fire. There has been only muted reaction from those affected by the welfare cuts. Overall the public mood has been one of relief that the draconian budget proved less so than feared.  There are some signs of economic recovery, though the signals are mixed. International opinion, deeply sceptical beforehand that the government would take the necessary measures, has been fulsome in its praise. The cost of borrowing (for it has not stopped – but continues at $400 million per week) to keep the country afloat has even reduced slightly.
Ireland is now something of a darling of the international economic press. There are no more analogies with Iceland. The new EU bad boy is Greece, where a new government discovered its predecessor had been economical with the truth where the public finances were concerned. Suddenly there are fears for the stability of the Euro, with the participating countries (which do not include Britain) now divided into two – those who practice economic and financial prudence and those who do not, but run huge fiscal deficits. Ireland currently occupies a grey area in the middle; having fallen from grace we appear to be bouncing back up, thanks to the government’s firm actions. Some commentators have even begun to replace Ireland with Italy in the “PIGS” group alongside Portugal, Greece and Spain (“PIGS” was the unflattering acronym used in Brussels to identify the four “poorer” countries receiving special subsidies from the EU before the – much poorer – Central Europeans were admitted. It stuck in the Euro era to identify the fiscally weaker members).
These are still early days. The immediate concern when the Greek crisis broke was to cobble together a short term solution to head off any possible domino effect were Greece to default on an early maturing $30 billion debt, threatening next up Portugal and Spain. Any lasting solution to the Eurozone’s problems will probably feature the major paymaster, Germany – which will have to do most of any necessary bailing out – exerting some control over other Eurozone members’ budgets. Watch this space.
Domestically, also, things may be looking up politically for the government. Last year’s by-election and local election losses and the depths to which Fianna Fail slumped in the polls (trailing Labour at one point) represented the nadir. Since then there has been some recovery but the party has continued to languish far behind Fine Gael in popular support. However, even allowing for an expected upturn in support after mid-term disaffection, and even possible brownie points for acting tough, the odds have been squarely on a change of government at the next election (which must take place by June 2012 ). The electorate continues to place the political blame for the economic collapse firmly on the government and on Fianna Fail in particular. The coalition partner, the Greens, which was decimated in the local elections, has stuck with Fianna Fail on the Benjamin Franklin maxim that if they don’t hang together, they’ll hang separately.
The scenery changed in the second week in February with the departure from active politics of the high profile Fine Gael TD, George Lee.  Lee, the former economic correspondent for the national broadcaster RTE, was elected to the Dail in a by-election only last June, gaining a whopping 53% of the vote. His declared aim was to do something about Ireland’s dreadful economic situation. His resignation, from both his seat and his membership of Fine Gael, after just 8 months has been accompanied by ill feeling and recrimination. Lee declared he was quitting through frustration at his inability to achieve anything and at his treatment at the hands of Fine Gael, which had ignored or sidelined his talents and expertise. Fine Gael’s reaction has been a circling of the wagons and closing of the ranks behind leader Enda Kenny. They, and many neutral observers from the media, have focussed on the shortness of the period allowed by Lee to make an impact, and the opportunities on offer to him, which were his to develop. Some have asked what, in any event, he could have hoped to achieve in the short term by joining the opposition.
It’s a debate in which there can be no winners but at least one loser. Enda Kenny was already under fire for two recent less than impressive media appearances (in one of which he stumbled over his attitude to forming, hypothetically, a government involving Sinn Fein). Having brought Fine Gael back from near electoral oblivion in 2002 to a credible alternative party of government in 2007 (how many remember how close he came to government then?), and having since built up an impressive lead in the polls, there was a high level of agreement among pundits that, barring something major, Enda Kenny was set fair to become Ireland’s next Taoiseach. The Lee affair, and the fallout from it, together with the media performances, have now raised doubts. Could he not have handled, and harnessed, Lee better? For the moment criticism is muted but if the next few months see Fianna Fail gain an electoral “bounce”, for whatever reason, then the mutterings against Enda are likely to increase and the Lee affair is likely to surface again. Whatever happens, Fine Gael have been damaged; it remains to be seen by how much.
In retrospect the Lee episode was a distraction. His election came at the high watermark of public disillusionment and dissatisfaction with the political and economic situation. Much of the population were in denial and were seeking scapegoats or an instant solution.  Lee was seen as someone untainted and determined to do something to put it right. His throwing in of the towel so soon has come as a shock. Yet the period since June last has seen some progress towards finding a way out of the economic morass, not least in the growing public recognition of the seriousness of the situation and what needs to be done. It would be unfortunate were Lee’s departure to affect this. Our troubles are the outcome of a reckless property bubble in tandem with an international economic recession. Like other economic bubbles ours will have to work itself out, with considerable temporary pain. There’s no way to avoid this. And, as we now know, Ireland is not the worst.

Greece, equally recklessly, hid the truth until it was almost too late. Let us hope it can be rescued. Timeo Danaos….?
END

CHECKING IN WITH REALITY
Ireland 2009. How to describe it? The Year of Reality?  The Year the Party ended? It wasn’t the best of times; but was it the worst of times? Two surveys, before and after the New Year, found that most people were enjoying their lives as much as ever, despite the recession. Moreover, as proof that there is life apart from economics, media interest in December and after also switched focus away from its obsession with the country’s economic difficulties, though the alternate headlines hardly made for light reading.
The most persistent non economic story of the year, that of clerical abuse of children, surfaced again in December with the publication of a second highly damaging report, this time on clerical sexual abuse in the Archdiocese of Dublin. The first, in May, had focussed chiefly on the so-called “industrial schools” of the previous half century, including Artane and Letterfrack, administered by a number of religious orders. It described a regime of systemic abuse, physical and sexual, inflicted on the inmates, mainly children from poor and underprivileged backgrounds. The report’s conclusions were clear and damning with regard to both the religious orders involved (the Christian Brothers in particular) and to the Irish Department of Education and pointed firmly to a cover-up by the religious concerned.

The December (Murphy) report addressed allegations (a “representative sample”) of sexual abuse of over 300 children by 46 priests in the Dublin archdiocese over 30 years to 2004 i.e. at clergy in the front line attached to parishes. It found most of the allegations to be well founded, noted that some of the priests concerned were dead, and that 11 had been convicted by the Courts. Disturbingly, it found that, at least until the mid-1990s, the Archdiocese’s preoccupation had been to maintain secrecy and to have a “don’t ask, don’t tell” approach. Four former archbishops were criticised as well as auxiliary bishops during the period (four of five of whom have resigned, prompted by public opinion and pressure from the current Archbishop, Diarmuid Martin).  In its wake, conscious of the damage, real and potential, Cardinal Brady and Archbishop Martin met with the Pope. There is little doubt that, despite the fact that only a small percentage of priests were involved, the report has dealt another body blow to the flagging authority of the Irish Church.

Some relief was afforded to the beleaguered Hierarchy as a severe spell of weather more in keeping with the American Mid-West than an Irish winter hit the country over Christmas and the New Year, driving everything else off the front pages. The worst weather in almost fifty years, following on heavy flooding in November, may or may not be down to climate change, but it served as a timely reminder of the type of winter we would face if anything were to deflect the Gulf Stream. Unsurprisingly the authorities were unprepared for an extended freeze and public opinion, charged with a sense of entitlement, was highly critical as supplies for road clearing became exhausted. Yet, overall, the public mood remained upbeat, reflecting what many commentators are pointing to as indications that the worst economically may be over.

Whether we are actually at the end of the beginning, there are some positive signs.  2009 was certainly a year in which for many a different reality dawned. The huge rise in unemployment over the last two years saw tens of thousands of families lose one income, a smaller number lose two. For a generation which had become accustomed to prosperity and  rising living standards,  on an unprecedented scale, and had planned ahead on that basis, the shock was psychological as much as economic.  The job market simply dried up. Recovery or not, nobody doubts that difficult years lie ahead. The jobs lost over the past 18 months will take much longer to replace, and will not be in construction!

However, as the dust has begun to clear, some perspective becomes possible. Yes the number of unemployed increased dramatically – by 8% of the workforce in two years. But for most people 2009 was a year for treading water. Life continued pretty much as before; taxes were increased, reversing a trend. There was less money around and prudence and caution emerged where spending it was concerned. There was apprehension, certainly, as jobs disappeared and as the country’s finances went into freefall. There was particular concern regarding job prospects for the young, who as a group were hardest hit.  There was hysteria in the media and among politicians. But it is now becoming apparent that the recession was concentrated, hitting some sectors very hard, some hardly or not at all. Building and related activities suffered severely. There was a shakeout as some multinationals restructured in the context of the international downturn, and another as some featherbedded companies went to the wall. The retail sector took a hit, particularly in sales of luxury consumer items, such as automobiles. But other sectors (pharmaceuticals, high-tech) continued as before. Overall our exports in 2009 appeared to buck the worldwide trend (decline) by holding up.

There are tentative signs (flattening of unemployment, stabilisation of tax revenue) that economically the worst may be over.  If this proves the case, a contributing factor will be the infusion of confidence brought about by the December budget. For once an act of policy ticked most of the right boxes. Most of the sacred cows went down like ninepins (sorry about that!) as the government followed through on its promises to cut government spending. Wages in the public sector were slashed, benefits were cut and inroads were made in the huge budget deficit. There were no new taxes apart from a hike in fuel taxes dubbed a “carbon tax”. There were some perceived injustices among the welfare cuts, where there was insufficient tweaking, but these can probably be rectified at a later stage. Overall however the budget was greeted with relief (just as it had been awaited with trepidation) and as a sign that the government was serious about setting the country to right. It’s only a first step; to adapt a recent Flanna Fail election slogan “some done, much to be done”.

The economic and social challenges facing the government in 2010 are reasonably clear. Unemployment is unlikely to decline and this will generate a situation where an unprecedented number of people will shortly be without work for 12 months or more. Training and retraining will become priorities and a debate has already started on this. The issue of negative equity as a consequence of the collapse in property prices will feature more and more as the numbers of unemployed unable to pay their mortgages increases. In a society which sets such store on house ownership, and where repossession and eviction generates high emotion, this issue promises to be the hot political potato of the year. There is no easy solution.

Finally, I must record, sadly, towards the end of the year, the passing of two icons of Irish music, Liam Clancy and Ciaran MacMathuna. No letter from the Motherland could or should fail to salute their enormous contribution to Irish culture everywhere.

NOT BY BREAD ALONE
Ireland, the USA, Australia and New Zealand have many things in common, not least historical Irish communities, a common language, a common legal system and a passion for sport. One link, not immediately apparent, is that in none of these sport- mad countries is soccer the number one spectator sport, in contrast to most of the world. There are historical, sociological, and developmental reasons for this, but what can be stated, with a reasonable degree of certainty, is that, in three of the four, failure by the national team to get to the soccer World Cup finals ( to take place in South Africa next summer) would not be a major news event. The odd one out is Ireland, where failure to qualify, and the circumstances surrounding it, dominated the media here (and indeed in Britain and France) for several weeks after November 19.

The explanation is simple. Soccer in Ireland is largely urban and working-class. It is also underfinanced and in constant competition for players and support with both Gaelic football and rugby. The most talented players have traditionally gone to England. However, the proximity of England, the presence there of a large Irish community and the free availability in Ireland of British and satellite television showing English soccer matches, has generated enormous interest in and support for soccer, albeit at one remove, throughout Ireland. Every week hundreds cross the water to attend games involving their favourite English teams. Add in traditional support for the man (or woman) wearing the green jersey and it is easy to understand why the fortunes of the national soccer team are front page news.

In 2009 the success of the team was invested with a new element. The country is in economic crisis, there is very little good news, and things have not been as bad for 20 years. Back then, in 1988 and more famously in 1990, the Irish soccer team achieved a level of success unequalled before or since, reaching the World Cup quarter-finals in Italy in 1990. Whatever about the footballing merits of the team’s performances (they reached the last eight without actually winning a game – advancing on a penalty shootout), in the rosy hue of nostalgia they are seen as having lifted the spirit of the nation at the time. Fast forward two decades and many hoped that, ceteris paribus, the current team might do likewise.

However, it was not to be. After an unbeaten but uninspiring campaign in the preliminaries, Ireland finished second in her section and qualified for a play-off with France, a footballing giant which was underperforming. The first leg, in Croke Park, was largely disappointing and saw France victorious by a lucky deflected goal. The second leg, in Paris four days later proved a different game. Ireland, needing a victory away from home, abandoned their cautious approach of earlier contests and dominated for much of the game, taking the lead after 30 minutes. The score stayed this way until the end of the regulation 90 minutes and then, since scores over the two games were level, went into overtime.

At a critical point a highly controversial goal was awarded to France after a clear handball assist by the French star player Henri, seen by everybody except the referee and his assistants. The incident was also clearly and unambiguously shown on TV. There was no further scoring and Ireland were out, denied even the opportunity at least to take part in a penalty shootout. Predictably the players and the fans were gutted. Soccer is well known as a game where the referee’s decision is final and also as a game which has up to now rejected the use of modern technology to assist officials with their decisions. There is no “Hawkeye”, there is no review procedure. That, you would think, was that.

Then a departure from the script. Public opinion in Ireland was outraged and refused to let the matter die. Radio and TV stations were swamped with complaints. There were widespread calls for the game to be replayed. The French players in general, and Henri in particular, were branded as cheats. At a higher level, there were dark rumours of a conspiracy by those who ran soccer to ensure that France (a soccer giant) would qualify and Ireland (a soccer minnow) would not.  People who should have known better joined in the chorus. An official complaint was made to FIFA (soccer’s international governing body).  Irish soccer officials reportedly requested that Ireland be invited to participate in the World Cup finals as an extra team.  The display was in some way a metaphor for the reaction of sections of society to the precipitate economic downturn of the last two years. It was unfair, a scapegoat had to be found and the situation rectified!

As I write emotions have cooled and public opinion has become more sanguine. Certainly Ireland were unlucky, having dominated the game in Paris,  but arguably the run which put Ireland into the play-offs was launched by an equally dubious refereeing decision in Ireland’s favour.  In a group game last February Ireland were trailing lowly Georgia – a real soccer minnow -in the closing minutes. The referee then awarded Ireland a penalty for a very dubious handball (the ball actually striking a defender’s shoulder), described by one commentator as scarcely believable. Ireland tied the game and shortly after scored the winning goal. The points gained proved vital later in the group. The coach of Georgia described his players as very angry and added “we did not deserve to lose”.  In both cases, as in many others over the years, the referee’s decision was final. The Irish coach, Giovanni Trapottoni, observed, in effect, that decisions like this happen and that on this occasion Ireland had had the luck. Significantly, Trapattoni was much more muted in his reaction to the Paris defeat than were the Irish players, officials, or sections of the Irish public.

There is no doubt that soccer could do with a good makeover – to include tightening up of discipline on and off the field and proper and severe penalties for downright cheating. There is also a strong case for improving officiating at games either by increasing the number of match officials or using video replays on controversial decisions. Up to now the argument has been that all this would take from the natural flow of “the beautiful game” but with so much at stake and the continued development of technology, it should surely be possible to arrive at some happy medium. At least some good could then come out of the Paris game and its aftermath. As it is, the referee and his officials have been unfairly pilloried, and Thierry Henri, by common consent one of the greatest soccer players of recent years, has had his reputation besmirched. Just last week an English commentator, referring to a hand ball incident, described it as “an Henri moment”.

In conclusion, it is ironic to note that, while Ireland will not be going to South Africa, the USA, Australia and New Zealand will.

IRELAND AND THE IRISH DIASPORA
Ireland is waiting for the Budget, possibly the most important and harshest in the history of the state. It has to address a situation which is unsustainable, where revenue from taxes only covers two thirds of government spending. The country has been running on empty since September. It is sobering to reflect that, since I wrote in the September issue, the government has been obliged to borrow six thousand five hundred million dollars just to keep going, an amount which increases by three million plus every hour.

The debate on what to do, who should pay, and how,  and where Ireland is going as a society has intensified in recent months as denial has begun to give way to a reluctant acceptance of reality. Arguably this debate will lead to a better and more mature understanding at all levels of who and what we are, and, after the Lisbon vote, what our position is in the world of today. One aspect of this could include some redefinition of the relationship between Ireland and the greater Irish nation overseas. I touched last time on the Global Irish Economic Forum held in Dublin in mid-September. This brought together a sizeable number of the great, the good, and the successful from among the Irish diaspora, the name currently in vogue to describe collectively those of Irish descent living outside Ireland. The forum tossed around ideas and initiatives which might assist Ireland in her current situation. The deliberations of the forum make interesting reading and can be accessed through the Department of Foreign Affairs website. Follow-up will be interesting.

The forum was organised by the Irish government but owed some inspiration at least to promptings from the Irish economist David McWilliams, who, as I have written earlier, has argued for some time for a new relationship between Ireland and the overseas Irish family. McWilliams has pointed to Israel and the Jewish diaspora as an example which Ireland might usefully take on board. His basic point, advanced before Ireland fell down its present hole, is that there is huge untapped potential for a fruitful interaction between the two, something that Ireland should not ignore.

The forum can be seen as a significant step in the process of drawing Ireland and the Irish family closer together, at a time when Ireland can do with help from any quarter. It comes several years after the report in 2002 of a special task force on policy towards emigrants entitled “Ireland and the Irish Abroad “. The document, though full of the rhetoric of the Celtic Tiger years, merits reading. It has proved a fruitful basis for subsequent government action, including substantial increases in financial assistance to groups assisting disadvantaged Irish outside Ireland.

The report was drawn up when money was no object and was pitched primarily at the perceived need then at last to do something for Irish emigrants requiring a helping hand, particularly those of the 1950s wave of emigration to Britain. It also addresses the wider issue of Irish communities and those of Irish descent worldwide. It acknowledges that there are a number of different Irish communities in the world, all with specific needs and aspirations, and that, in devising an official policy towards emigrants, one size definitely does not fit all. However, and unavoidably, given its remit, it draws a distinction between Irish citizens and those of Irish descent, with the bulk of its content and recommendations focused on recent emigrants from Ireland with special reference to the vulnerable and those in need of assistance and recognition.

The report falls far short of meeting the high watermark of the suggestions made by McWilliams but it is important, nevertheless. While not fully embracing the “mother ship” concept, it has established a benchmark for future official relations between the Motherland and the greater Irish nation and made a number of useful observations and recommendations.  In citing Article 2 of the Irish Constitution ,with its reference to the Irish nation cherishing its’ “special affinity with people of Irish ancestry living abroad”, and in its follow-up references, arguably it has begun the process of fleshing out just how to support those wishing to express and share the Irish dimension of their identity. Fully to do justice to this topic would require a separate report.

I would like to touch briefly on some of the issues broached in the report and which crop up whenever the subject of Ireland and the Irish abroad comes up. A central issue is that of citizenship and recognition. There is no halfway house where Irish citizenship is concerned. Every Irish citizen has the same rights, with the proviso that, in terms of voting and taxation, rules of residence apply. The Irish constitution provides quite generous access to citizenship, even if in recent years some of the provisions have been tightened. However, there is a clear cut off point at grandparent level, which, while making practical sense, excludes crudely most of the great family of Irish Americans, whose Irish origins stretch back further.

The unique nature of Irish emigration, proportionately far larger historically than any other, leaves little scope for future expansion of access to citizenship through descent.  For consideration, in my opinion, is whether or not some form of statutory recognition of Irish origin could be introduced, which would confer recognition and some advantages to those qualifying, but would fall short of actual citizenship. It could perhaps be hung upon the reference in the Constitution to “special affinity”.  While the practicalities of this may be difficult, at a time when Irish membership of the European Union involves giving access and advantages to those from other EU countries, it is surely appropriate to contemplate doing something for our own.

For those already citizens the issue of the right to vote in Irish elections arises. This issue raises particular emotions among many recent emigrants, who feel they have been driven to emigration and consider they should have a right to redress through the ballot box. The more detached acknowledge the practical difficulties and accept the logic of the argument  that voters must be resident, together with the additional point that there should be no representation without taxation. (The issue of taxation of Irish people living abroad has resurfaced this year but purely as a domestic issue aimed at certain high-profile personalities on the Irish scene who pay no Irish tax.) For consideration here, and the report refers to it, is whether some seats in the Irish Senate could be reserved for representatives of emigrants.

The report suggests giving recognition for Irish achievement overseas through the establishment of an annual awards scheme. This idea has some merit with regard to high achievers but misses the point of doing something for all. Moreover, the fact that Ireland has no honours system for achievers within Ireland means that any movement on this for the Irish abroad will not be in the short term. The British award to Teddy Kennedy shortly before his death, threw into sharp relief our inability to do likewise. On this, as on much else, swift action is needed.

— 6ytyt

TWO CHEERS FOR DEMOCRACY
Some good news at last. The second Lisbon referendum was won decisively by the “Yes” side. A hurdle on the road to national recovery has been successfully cleared. Taoiseach Brian Cowan, mugged last year by the earlier No vote, can now focus on the Economy. The final vote was two to one in favour, 1,214,268 to 594,606. The yes vote rose by 360,000, the no fell by 268,000. The total vote was up by 195,000, and the turnout, at 58% was higher than in any of the previous votes on Europe (six) since 1972.

A vigorous campaign was mounted by the Yes side. Of particular note also was the role of the Chairman of the (neutral) Referendum Commission, Judge Frank Clarke, whose clear and concise contributions on radio did much to dispel fears and misapprehensions among the public. However, a reality check. It should not be overlooked that a third or so of the electorate remains stubbornly opposed to strengthened links with Europe and that, in numerical terms, this group continues to grow.  The figure opposing Lisbon Two was 60,000 more than that opposing Nice Two.  Winning them over seems a forlorn hope. “Getting out the vote” will remain, therefore, of major importance to the pro-Europeans.

The experience also shows that Ireland needs another, major, reality check where relations with the European Union are concerned. Ireland is not at the heart of Europe, as is constantly claimed; if we were, our history would have been far different. The EU was founded on a Franco-German axis and the economic and political weight of the EU remains roughly situated around this core. Ireland is a small country on the periphery, with less than 1% of the EU’S population, which has enjoyed very substantial cash and capital transfers from Brussels (i.e. from other member states) over three decades. This money has in the main been put to good use and has been largely instrumental in hauling our living standards up to European levels. This era is now over, with the arrival of newer, poorer states from Central Europe.

Europe nevertheless remains of the utmost importance to Ireland, in terms of market access, the toleration of our business-friendly tax regime and the social fabric and progressive legislation which has flowed from Europe. More than that, Ireland is embedded in the European project, which is an inclusive rather than a “them and us” relationship. Fundamental to this is a collegiate approach to issues, so that vital national interests are not trodden upon (in our case neutrality and investment incentives), and the “national veto” is never invoked. Ireland has benefitted enormously from this European inclusivity which has given us both a voice and an audience. The picture is completed by the succour that our economy has received over the last year, which has seen the European Central Bank keep us afloat financially, as a member of the European family.

This almost unique relationship was jeopardised by the initial no vote on Lisbon and would have suffered seriously by a repeat. Up to then Ireland was seen as an EU success story and was the recipient of much good will from our European partners. These partners, particularly the ones who picked up the tab, regarded the first vote with incredulity, given the benefits Europe has brought Ireland. Their indulgence and patience would have been sorely tried by another no.  What would have been seen as wilful disregard of the nation’s self interest would lead to a cooling of affection by our partners. Nothing precipitate would happen right away. The EU would muddle through. But Ireland would have slipped from her “most favoured nation” status to one regarded as an awkward marginalised partner.  The yes vote has prevented this, but we will still have to re-establish our credentials and bona fides with a Europe which has greater issues and problems to confront.

Another reality check is required with regard to the economy, where denial persists regarding the extent of Ireland’s fiscal crisis. For many this is still somewhat of a phoney war despite the sharp tax hikes and the promise of more to come. The reaction to suggested welfare, health and education cuts has been disbelief, anger and a demand that scapegoats (i.e. someone else) be found to pay. The suggestion of wage cuts in the public sector (where jobs are guaranteed) has provoked fury and threats of strikes. Each special interest group has been vocal in defending its patch. Meanwhile the Government continues to borrow over $500 million per week.  Revelations of lavish expenses claimed by politicians, leading to one high profile resignation, have fuelled public anger and distracted from the reality of the economic crisis.

For some the phoney war is set to hot up. A large and increasing number of house owners are now in negative equity as property prices continue to fall. Negative equity does not matter in the short run as long as the mortgage is paid, but where jobs are lost repossession looms. This year has seen a trickle; 2010 promises a stream if not a flood as the banks cease to be “nice guys”. By then a scheme to bail out the banks – by diverting bad developer-loans – will be up and running. Nothing has been mooted regarding a bail out for home owners in trouble and this issue may well move to political centre stage next year. But first there is the December Budget which will certainly concentrate minds.

There are signs that the economy is indeed bottoming out, with unemployment flattening, some categories of exports booming, and the decline in government tax revenue almost halted .One central bank official recently described the economy as “bubbling along at the bottom”.  In the property sector this appears to be happening, at reductions of up to 50% from the peak. There are cautious official forecasts of a return to economic growth in 2011. However, even if this happens, recovery is likely to be lengthy and arduous.  It will be many years before the jobs lost are regained. Barring inflation, property prices are unlikely ever to reach the dizzy heights of 2006. Emigration has officially restarted, despite continuing immigration, but the economic situation elsewhere offers no solution to Ireland’s jobless.

One solution, though not in the short term, may emerge as a result of an event which took place in Dublin in mid-September. The Global Irish Economic Forum saw a gathering of almost 200 prominent international business and cultural figures of Irish birth or heritage. The Forum was at the invitation of the Irish Government, taking up an idea put forward by the economist David McWilliams, who has argued for some time for more interaction between Ireland and the Irish Diaspora. The idea behind the weekend meeting was to explore how the energies and expertise of those worldwide with an Irish connection might be harnessed fruitfully on Ireland’s behalf.  A report with follow up recommendations will be made to the Government. There is tremendous affection and good will for Ireland out there among the Diaspora. God knows Ireland need it!

YOU TOO COULD BE A TARGET
It was a long winter, colder than usual, and with an almost daily litany of growing economic woe. It was a winter during which we had glaring confirmation that, among bankers at least, “business ethics” is an oxymoron. It was a winter in which we learned a new meaning for “bed and breakfast”. It was also a winter in which we learned some at least of the reasons why our electricity is the most expensive in Europe.
But all winters come to an end and this has been no exception. Fittingly, St Patrick’s Day saw the weather pick up and with it the mood of the nation. President Obama’s observation “Is feidir linn”, delivered in the presence of the Taoiseach, might, hopefully,  herald a change. For morale, as FDR was acutely aware, is vital when seeking to turn around the fortunes of a nation. And, right now Ireland could do with a morale boost
There have been some nuggets of good news. The exploits of the victorious Irish Rugby team for one. A brave world boxing champion for another. We have high hopes of the soccer team qualifying for the World Cup Finals (with memories of the last morale boost during hard times). We now have a super song with a good chance of  winning the Eurovision Song Contest, provided voting is not along ethnic lines (last year there was national embarrassment at our entry – a turkey with a song to match!)
However, the economic situation remains dire. The emergency budget announced in early April has helped concentrate minds  The sheer scale of the deterioration in the country’s fortunes is awesome with the gap between what the government is committed to spending and its revenue from taxes now apparent to all. Correction is likely to prove a long haul. Public expenditure surged during the Celtic Tiger years. It wasn’t all squandered. Much went towards improving social services and payments to the less well off, including the elderly.  An ambitious programme to improve roads and the rest of the physical infrastructure was launched. . Unfortunately now the money has run out and we have been left with a realisation that, in the last few years, as a nation, we spent or committed  large amounts of money for which there is now no revenue to cover. Government expenditure covers public sector pay and pensions, social welfare expenditure and spending on everything else. The books can be balanced only by cutting this expenditure, or borrowing , or both.
We share with the USA and Britain the problem of what to do with the banks, and, also, what to do with the bankers, who, in Ireland as elsewhere, have paid themselves salaries and bonuses that beggar belief and who show  brazen indifference when asked for justification. One gentleman drew down enormous loans (in excess of $100 million) from the bank of which he was Chairman,  hiding them from shareholders through the device of repaying  them with matching loans from  a compliant bank just before the annual accounts were prepared so nothing would show on the balance sheet; this was repeated over seven years! Another caused public mirth when he confessed that he too would have to take a pay cut and in 2009 would have to try to exist on less than $2,500,000!
VWe have added a new meaning to the term “bed and breakfast”; in banking terms it means shifting millions between financial institutions for brief periods – even overnight. Meanwhile small businesses are being refused loans for vital working capital. There is a growing feeling that the two or three major banks may have to be taken in to public ownership, to join the one already there. The bank saga is ongoing, with investigations still underway and new tighter regulations promised.
We have also received some insights into how our electricity prices have risen from the lowest to the most expensive in Europe within a decade, seriously affecting our industrial competitiveness not to mention hitting everyone’s pocket. It has now emerged that the state owned Irish electricity company ESB (a near monopoly) has been forbidden to reduce its charges, in order to encourage other suppliers to enter the market. The theory is that “competitors“ would be attracted to enter the market by the  profits on offer!. With this has come the further revelation that the average ESB employee earns $100,000 per year!
The current public mood is one of resignation combined with anger. Spiralling unemployment and the enforced adoption by many of  short time working and pay cuts has fed into this. As in the US and Britain, the bankers are the chief scapegoats but the sense of national hangover – “we all share some of the blame“- requires that everyone must now share some of the pain. There is less agreement on how this is to be done but a highly vocal lobby has emerged demanding a pound of flesh from selected targets. Public sector employees, media figures and tax exiles (now branded in some quarters as “tax fugitives”) have already been targeted, not always consistently.

With assured employment and generous pensions, those employed in the public sector were obvious targets. The first move has been to levy gross pay for “pension contributions”; can a further levy on “job security” be far behind?  What price a pay cut on top? Elsewhere the national broadcaster, RTE, faced with declining advertising revenue, has imposed pay cuts of 10% on its employees, and, after a sustained and vocal public pressure campaign, cajoled its highest paid celebrities, who are on contract, to accept similar cuts.
Those who have exploited – quite legally – tax avoidance measures by becoming “non-resident” in Ireland for tax purposes are the object of particular opprobrium. Some voices, not just on the left,  have castigated them as “tax fugitives” and even suggested that henceforth citizenship should be in some way linked to paying taxes to the Irish state. Among those targeted in this regard are rock superstars U2, with some particularly nasty criticism directed at lead singer Bono, who has been accused of hypocrisy in terms of his championing of the cause of aid to the Third World.
Certainly we have been more than generous with our tax laws on residence, with 183 days per year the criterion and, until recently, a “Cinderella rule”-under which departures before midnight were excluded from the count. These arrangements have an obvious attraction for the rich and their accountants and may partly explain why the number of “tax exiles” has been climbing though even penal taxation of all those involved would at best only marginally improve our finances.
What is most interesting about this, of course, is floating the idea of linking Irish citizenship with possible tax obligations. This is new and it must probably await a report due midsummer from a commission examining taxation before it is given any substance. Moreover, it is not aimed at the great Irish overseas family, but rather at those Irish, identifiably functioning in Ireland, who are  perceived to be using technicalities to dodge paying  their fair share of taxes. U2 are a target (among others).  You too are all right!

IRISH NEUTRALITY

Ireland is not a member of NATO, nor is membership likely. Yet few things can be calculated to raise blood pressure (and voices) more at the dinner table or over some drinks than the subject of Irish neutrality. In the campaign on the Lisbon referendum just ending the issue has again loomed large. No one can seriously get worked up over the proposed changes in qualified majority voting, or the alleged threat of legalised abortion, or even over the prospect of a future ukase from Brussels on our company taxation rate. But mention European Defence and the spectres conjured up include conscription into a European army, involvement in foreign wars and the loss of our international “nice guy” image. In vain have the “Yes” side pointed out that Lisbon threatens none of this. Debates on neutrality generate much heat without corresponding light!

The intellectual justification for Irish neutrality can be summarised briefly. Our history of centuries-long subjugation to English rule involved us, involuntarily, in British military and colonial ventures worldwide. Independence finally gave us an opportunity to gain distance and determine our own policy. Most famously we asserted our neutrality during World War Two (described in Ireland as “The Emergency”). We were fortunate in that we were not attacked or invaded, like the Netherlands or the Baltic States. Ireland’s geographical location and island status were vital factors in maintaining our neutrality, as was the fact that we were not in the way of the major belligerents or their war plans.

Whatever moral doubts we had about not fighting the Nazis could be assuaged by the presence, on the allied side, of the equally monstrous tyranny of Stalin’s regime. The response of De Valera to Churchill’s intemperate outburst over Irish neutrality in 1945 is recalled with pride (his signing the book of condolences for Hitler’s death generates embarrassed silence). Post 1945, staying out of NATO was justified, at first semantically, by the issue of Partition, and later, after Stalin’s death, by an expressed wish to stay outside the military alliances of the Cold War. With the collapse of the Soviet Union the case for joining a military alliance further diminished.

To avoid charges of isolationism, Ireland could point instead to a long standing support for collective security; starting with her involvement with the League of Nations and proceeding through to the United Nations. Ireland’s high-profile involvement in UN Peacekeeping operations – a source of national pride – could be cited. Irish soldiers have died in such operations from the Congo in 1960 onwards – the first Irish troops to die overseas for Ireland and in the cause of the UN. Ireland was seen as one of a small number of reliable UN members which could always be counted upon to step up to the plate when troops were needed. And being militarily neutral was felt to increase Ireland’s acceptability for involvement in sensitive UN peacekeeping operations.

Military neutrality enjoys wide popular support, at least according to opinion polls. This is perfectly understandable. No one likes or wants war. Avoiding the horrors of World War Two was a plus. Our UN peacekeeping record another plus. Not having a colonial past or the moral ambiguities of involvement in questionable military ventures are other positives, qualifying Ireland for a potential “honest broker” role. All in all, neutrality sits well with public self-perception of Ireland as non-aggressive, anti-colonialist, progressive and supportive of assisting the Third World. Brownie points are awardedsubjectively) for the moral superiority associated with being neutral.

Neutrality has again become a live issue as the world has proved to be less secure in the post Cold War era. There have been moves within the European Union (which contains three other non-NATO countries) to develop a common defence and security policy. These moves were given impetus and some degree of urgency by the wars in Croatia and Bosnia, where meddling by the EC as it then was, was accompanied by total impotence militarily when faced with the forces unleashed, and where peace was achieved eventually only through US intervention. The high watermark of these moves, as set out in the Lisbon Treaty, proposes mutual assistance (of whatever form) where a member state is attacked, and a vague commitment to improve national military capability.

These moves have galvanised Ireland’s neutrality lobby, which sees them, despite Government denials, as the first steps on a slippery slope. This against a background of daily television reports from Iraq and Afghanistan. Indeed the Iraq fiasco has focussed attention also on the use of Shannon Airport by the US military as a troop stopover. The government has held firm against demands that this use be ended as it contravenes “Irish neutrality”.

Any attempt at debate on neutrality rapidly turns into a dialogue of the deaf. The suggestion that Ireland should do its bit to cooperate, in the context of membership of a Union which has served Ireland well, has had a mixed reception. Ditto with the argument that, if we are seriously neutral we should develop our defence capabilities like other neutrals (Sweden, Finland, Switzerland) so that we could give our neutrality a practical status. Indeed this argument is neatly sidestepped by a variant of the “nice guy” theme – who would want to attack Ireland, so why spend money on defence?

Ireland’s get out of jail card, action by and through the UN, has lost much of its lustre in the face of the manifest failures of the UN in Bosnia and Rwanda in the 1990‘s. Whether sufficient force could have been marshalled by the UN in time to prevent the genocide in Rwanda is debateable. What is a fact is that the Srebrenica massacre took place within a so-called “UN Safe Haven” which proved anything but. While the UN “is all we have”, as a leading Irish left wing politician put it to me, its shortcomings have become more apparent with the end of the Cold War paralysis.

The fact that a veto-wielding Permanent Member of the Security Council can thwart international action when its interests or those of a client state are at risk has become more evident in recent years. So also the difficulty of organising effective action against a regime practicing internal repression. “Collective action” and sanctions are difficult to enforce and often the regime remains untouched while the ordinary populace suffers (consider the sanctions against Iraq after the first Gulf War). We have become sadder, if not wiser, at world events this decade.

The nature of the debate within the EU on defence, and the mixed enthusiasm for involvement in NATO’s mission in Afghanistan among those EU states involved, means that it is likely to be some time before EU policy in this area has developed. Ireland’s military neutrality, in all practical senses, is not under threat. Only an attack could change this. One is reminded of the story that in 1940 Queen Juliana telephoned Churchill to tell him that Holland (neutral during the First World War) was under attack from Germany and asked what he was going to do about it. What indeed!

$500 MILLION PLUS
JFK remarked during the Cuba Crisis that it was the week he earned his salary.
It is now clear that the months between now and the end of the year will be when the Taoiseach earns his.  They promise to be the defining period of his political life. There are two tasks at least to be got right, plus God knows what may emerge from the long grass. It is probably fifty years since Ireland had need of the resolute leadership now required.
The issues looming are the Lisbon referendum and the 2010 Budget. Both will happen. What is essential is that both issues are approached in the proper manner, and prioritised, and got right. Nothing must distract from tackling these prime objectives. The extent of the furore in recent weeks on the recommendations by the McCarthy Report (“An Bord Snip”) for possible cuts in public spending give an indication of how difficult  the task ahead will be.  The McCarthy report has raised the debate to a new level of reality, by highlighting the fact that, to maintain government spending and benefits at current levels, involves borrowing more than $500 million each week. Whatever else happens, this is not sustainable and cannot go on. This figure and this fact seems to be getting through and displacing the collective denial of recent months.
The McCarthy Report has effectively established the framework for the December Budget. It has provided the Government, and the public, with a menu of possible cuts. Once the target savings figure has been identified (probably in the range of $5 billion), the budget can be fashioned by selecting from the cuts menu, supplemented with some possible extra taxation and levies (though here the scope is limited). All cuts are unpopular and some more unpopular than others. While politics is the art of the possible the government can justifiably ask its critics which cuts they favour if the current economic situation is to be addressed. In the end some cuts will have to prove less unpalatable than others.
But first there is Lisbon. What is unclear is whether and how the McCarthy report will factor into the Lisbon issue. The second referendum has been fixed for 2 October. This permits just a month of hard campaigning after the holidays. Polls currently suggest that sufficient of the electorate have come to their senses to deliver a positive result this time around. But the electorate can be fickle, moods (and votes) have changed in the last days before polling and it is essential that defeat is not snatched from the jaws of victory. The referendum must be won from the front by taking the initiative and by putting the No lobby, who are already re-hashing old arguments, on the defensive early on.
The campaign should be kept simple.  An early TV and radio Address to the Nation by the Taoiseach–sadly lacking last time—should stress the dangers of another rejection and  explain the assistance our European partners and the European Central Bank have been to Ireland over the past year. There should be major emphasis on what we will most definitely lose by voting no again.  Ireland will certainly lose Money, Power and Influence – to take up a theme cleverly exploited by the No lobby in the past. There is no percentage, and no votes, in being defensive. Significant assurances have been secured from our EU partners on the five major issues championed by the anti lobby; realistically there is nothing more to be achieved.
Ministerial speeches during the campaign should aim to get the same basic simple message across. Any literature produced should point up the relevant treaty articles and the assurances secured, in an accurate light. While there is no winning on any issue concerning Irish neutrality, points could be scored, and hard questions asked, of the opposition, about what to do about another Bosnia, should the UN fail again.   Other points which may appear relevant, such as what Europe has given us in decades past, will convince only the already committed and should be avoided as distracting from the core issue. Ditto with the issues surrounding McCarthy, beyond pointing up his major theme that borrowing $500 million per week is unsustainable and that the economic crisis would not be helped by a no vote.
The December Budget is critical for the country. The majority of economic advice is that taxation has reached its limits, hence the relevance of McCarthy.  However, the issue is muddied by the fact that a report by the Commission on Taxation, due in early September, is expected to recommend a property tax and other charges (including a possible levy on cell phone text messages, to yield up to $500 million in a year!).  Those demanding that the “rich” pay (and who therefore oppose any welfare cuts) look to this report. Even granting an immediate property tax averaging $1000 per house, and other rumoured charges, billions would still be needed.  Again, there is no quick fix. The folly of eroding the tax base during the tiger years becomes ever more apparent.
The Budget promises to be painful, controversial and politically fraught. The fact that the debate has shifted post McCarthy should help in the run up to December. It is essential that this budget does not unravel like last year’s over issues such as removal of medical cards, or the churlish paring away of relatively inexpensive programmes directed at those in special need, when a broad brush approach could have found the savings elsewhere and at less political cost. McCarthy serves up options here. There is no time before the Budget to consider adequately suggestions for new taxes (unless these are simple and transparent).  Debate on a property tax could result in a quagmire since any property tax would have to be paid from and by the same pool of punters who are paying all the taxes at present! Wrangling over an equitable arrangement could be divisive and a major distraction.
So what should the Budget contain?  On the revenue raising side I see some scope. The tax bands should be narrowed; the entry threshold lowered, spreading the pain, and the rates increased by 2% each. There is scope also for some modest increases in excise duties. On the expenditure side cuts can be anticipated in Health and Education (worth more in 2011 than 2010). Child benefit is a no-brainer; there is simply no money to sustain the current universal levels of benefit, maintained by borrowing. They should be cut (taxing or means testing is too imprecise and will not necessarily show up as an immediate saving).
Cutting other welfare payments, many of which have increased substantially in real terms since 2002, is politically unpalatable but may prove unavoidable. 3% overall seems bearable, with some tweaking. But in equity there must also be balancing savings in the public sector pay bill. Job security in this economic climate is a prize and a privilege. There will be complaints but I can see no real hardship in the introduction of a 5% solidarity levy on state employees in permanent, pensionable employment.
Bon Chance Taoiseach!