A visiting Estonian journalist asked me recently to quantify what had changed in Ireland as a result of the Troika Bail Out Programme and whether the programme – and Ireland’s performance – offered an example to the other PIGS in bailout.
Good questions, but who domestically is asking them? Already the Time of the Troika has been banished to the past – rather like a bad dream – though sure to be resurrected again as a stick to beat Fianna Fail with as the next election approaches. With most of the economic indicators suggesting the worst is over and recovery has begun, sentiments of doom and gloom are definitely out. And, as with a bad dream or unpleasant experience , the dominant sentiment is “out of sight, out of mind.”
Any analysis and stock-taking has been as a footnote to “ normal” politics. There’s been much to occupy the media and the politicians. The first of the bankers have gone on what promises to be a lengthy trial. There has been sustained public outrage at recent revelations that a number of Ireland’s leading charities, all in receipt of taxpayers’ money, have been using funds to top up the pay of already well paid senior executives. The “Voluntary Sector” has taken a hammering in consequence, with charitable receipts from the normally generous public showing significant falls. Then there’s the weather, with Ireland battered by a succession of storms in January and February.
Politically, with a general election less than two years away, and European elections imminent, electioneering has already begun. No talk of hair shirt now. The cautious trial balloon floated by Finance Minister Noonan in December regarding possible tax cuts in the next budget has been seized and run with. The Taoiseach has declared that the threshold at which taxpayers hit punitive rates is too low. There is now talk of half a billion euro available as the cost of water shifts from the state to the consumer next year. Elections have been won with far less.
So how much HAS changed? Park for the moment the freshly unemployed and those in mortgage arrears, where change has happened and definitely for the worse. The short answer is – Not Much. Remember Churchill’s comment after the First World War, that “ as the deluge subsides and the waters fall short we see the dreary steeples of Fermanagh and Tyrone emerging once again.”
In politics the Ship of State is unaltered. Indeed two attempts to effect significant change in the Constitution – by abolishing the Senate and by giving real investigative powers to Dail Committees – were rejected in referendums. The much vaunted project to amend and update the Constitution has been restricted to shadow boxing with “ issues” such as blasphemy, reducing the length of term of the (non-executive) President and reducing the voting age to 17.
Politically the Captain and indeed the deck officers have been replaced. Fine Gael have replaced Fianna Fail as the largest party and have hung on to that position despite austerity, the cuts and increased taxes. The probability is that this situation will last at least through the next election, making the case for Fine Gael becoming the new “natural party of government.” This has come about largely through luck. Whatever party was in power when the tsunami struck was destined to get the boot , its successor handed a gold wrapped gift : all the blame for the nasty, necessary, remedial regime could be dumped on those who governed before ( or the Troika – and look who brought them in!).
In the broad economy, it will be a long time, if ever, before the construction industry regains its Celtic Tiger heights. The crash legacy is roughly 200,000 unemployed, half the country’s total, requiring retraining, redeployment and new employment possibilities. A formidable task. Factor in the collateral damage – to those relying on the building industry, and the massive hole in consumer spending when ten per cent of the workforce disappears – and a lasting footprint has been left in this area.
The rest of the economy has survived largely intact. It has had, metaphorically, a cold shower, with a world recession to deal with on top of the domestic meltdown. But apart from some high profile collapses, the private sector has emerged, slimmed down, certainly, but more productive, more competitive than for some years past. Much fat has gone, but in the big bad world this was probably necessary.
In the public sector there have been economies, wage cuts and moderately successful attempts to prune the numbers. These, however, have been largely confined to the core civil service, the Gardai and teachers, where the Department of Finance can assert direct control. Elsewhere entrenched bureaucracies and powerful public sector unions have successfully protected their interests.
In the HSE, the country’s single biggest employer, top heavy with administrators and seriously deficient in the numbers of specialist consultants, the total employed shows no signs of diminishing despite official posturing about cutting the enormous health budget. Separately the electricity unions have faced down the Government and the ESB over pension reform, setting the bar for other public sector unions.
Promised reforms aimed at reducing the number of quangos and overhauling the system of (political) public appointments to state boards have proceeded at a snail’s pace. The number of state bodies has seen some closures and amalgamations, but to minimal effect, certainly nothing like the root and branch reform promised. And lucrative appointments to the boards of public bodies have gone on pretty much as before with numerous appointees serving on several boards.
On the plus side, the public finances have been restored. Not into balance, of course, but at least stable and steering the deficit towards the magical 3% Eurozone borrowing target. This has been achieved through new and increased taxation and some cuts in welfare spending. The new taxes and hikes do not “broaden” the tax base – a misnomer – but rather increase the burden on the middle classes. The cumulative squeeze on disposable income continues to be reflected in sluggish sales tax returns, hence the noises about tax cuts to woo or appease the “coping classes.”
The generous welfare system has also survived largely intact. The politically sensitive big trio of benefits were treated with kid gloves. Child Benefit was cut and trimmed but not means tested and remains, at $175 per child per month, a very generous tax free payment. Ditto with Jobseeker’s Benefit, cut by ten percent, but still nearly $250 per week. The sacred cow of the Old Age Pension, roughly $300 per week for a single person (almost double for a couple), was not touched.
There have been other welfare cuts and adjustments, of course. Here, in earnest, the devil is in the detail. A cascade of small cuts and adjustments over the last two Troika budgets has affected a wide range of existing benefits and has hit disproportionately the old, the sick and the handicapped. For many of those, certainly, things also have changed – and not for the better.
The journalist had one final question. Could the fiasco of 2008 happen again? Well, could it?
Lessons for the PIGs? Next time, maybe.