Political pundits here studying the current socio-political situation might consider the relevance of two stories, one a joke, one a fable. The joke is the old medical one about the operation being a success but the patient dying. The fable is the well-known one about a scorpion hitching a ride across a river from a frog. Despite giving assurances for the frog’s safely, the scorpion stings and kills the frog in midstream, dooming them both, telling the frog, “because it’s my nature.”

The current patient is the Irish Economy and its Siamese twin – the government. The operation, or rather the medical team carrying it out, is the Troika and the procedure itself the Troika Rescue Plan. As I write, the Plan is largely on target and collateral political successes within Europe on the pace and scale of Irish borrowing , with hope of more to come, have raised the prospect of an early Troika departure. But this is only part of the story.

The Troika came to Ireland in late 2010 to provide life support, i.e. cheap credit, to an economy which could no longer borrow money elsewhere to sustain itself. The price extracted from reluctant Irish politicians has been the, on paper, not unreasonable one that the country should seek to live roughly within its means, or at least get down borrowing to an annual 3% by 2015. This to be achieved by a combination of spending cuts and tax increases, within broad parameters, including the widening of the tax base.

The devil, of course, has been in the detail, aggravated by the shadows cast on Ireland’s cave wall by changing and evolving external circumstances within the Eurozone and the EU and exacerbated still further by the red herring of the bank bailout. Arguably the most relevant of these images has been the recent spectacle of the banks closure in Cyprus, something that could have been sprung on us had the infamous bank guarantee not been given in 2008. Arguably also the Eurozone is lurching slowly towards an eventual US – style system with the ECB a type of Federal Reserve, shouldering the debt burdens of member states, solving, inter alia, Ireland’s problems.

The snag with any “ with one bound our hero was free” solution is that, in the real world this does not happen overnight (we may be talking five years) and in the meantime politicians have to face angry and disillusioned electorates ( witness Greece and Italy).

Ireland is not immune to this, as the recent Meath by- election showed. It was nemesis of a sort for Labour which was beaten into fifth place, securing less than 5% of the vote. Whether the damage will be temporary or fatal remains to be seen, but with the double whammy of a property tax and water charges to come within a year, public disaffection seems likely to grow in the short term.

Certainly also Labour did not help its own cause by focussing on issues such as same sex marriage in a constituency where the electorate (as elsewhere) were concerned with jobs, the cost of living and the mortgage crisis.

As spending cuts and tax increases have been introduced there have been predictable howls from every interest group affected. Given that cuts in welfare spending are more likely to hit Labour supporters, these have proved particularly damaging for the junior government partner, Labour, which gained votes and seats in 2011 on a completely unsustainable and unrealistic election platform. Fine Gael was more realistic, promised less, vacuumed up the floating (and decisive) middle class vote, and has at least managed to hang on to its core vote and more.

Labour’s survival, and that of the government in its present form, now seem to rest on Fine Gael agreeing to raise more direct taxes from the better off in the October budget. This was resisted last time and there have been well flagged statements from Fine Gael that the direct taxation limit has been reached. With two new indirect taxes pending, which will squeeze disposable income further, as well as cuts to public sector salaries and pensions from July, most family budgets are delicately balanced, making the scope for any tax increase extremely limited in October.

By then, however, there could be preoccupation with another major issue. Long brewing, long signalled ( I wrote about it in October 2010), the Mortgage Crisis is now firmly centre stage, with 94,488 mortgages (12% of the total) now 90 days plus in arrears, including almost 20% of buy-to-let mortgages. What has changed in recent months has been that the government now at last seems seized of the issue – having managed to do deals in the macroeconomic areas – but its reaction seems to be one of sleepwalking towards potential disaster.

The main elements of the new official approach all heavily favour the banks. These involve the plugging (through legislation) of the loophole that has blocked bank repossessions, a change in the terms of the “ code of conduct” under which the banks have been obliged to conduct negotiations with those in arrears, the introduction of new insolvency legislation, reducing the period of bankruptcy from a horrendous twelve years to a still awful three years, and the “ setting of targets” by the Central Bank for the commercial banks – most of which the taxpayer owns and funds – to “solve” the problem of mortgages in arrears, beginning with the buy-to-lets, all this to be achieved over the next twelve months or so.

As I write, also, “guidelines” are being drawn up under which, in the case of those deemed hopeless debtors ( most of that 94,488), personal and family budgets for up to five years will be dictated by the banks to the debtors as quid pro quo for relief ranging from partial debt write off to “parking” the capital sum owing for a number of years.

Some elements of the guidelines have already been leaked. These include severe restrictions on all spending, including holidays, cars, consumer goods, casual entertainment, children’s education, private health insurance, satellite television, expenditure on clothes and even on food, where $7.00 per person per day is the suggested maximum. For those taking the insolvency route, i.e. accepting immediate bankruptcy, which means losing the family home, jewellery items above a certain value are among those proscribed during the three year purdah period.

This is not some gigantic leg pull. Mixing metaphors, the resuscitated and unrepentant banks, like the scorpion, are to be let off the leash to pursue those who owe them money. Those without sin in the community are quoting that odious concept of “ moral hazard” as justification for supporting/advocating a regime that is not far off some form of indentured servitude. Those potentially affected range from first time buyers through small investors to a handful of (once) well off speculators. There was no talk of “moral hazard” when the banks – and bankers – were being bailed out. Those in difficulties represent collateral damage for the national economic mismanagement spearheaded by the banks.

If this regime goes ahead along the lines currently envisaged the government would do well to remember the fate of the frog. Bankers will be bankers.


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