Category: EU

Why current crisis is more political than economic

by dsmooney, posted in EU, Policy

My latest Evening Herald column from August 8th 2011 – you can also see it online: here

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Euro Parliament Committee Room - Bxl

Success has many fathers, but failure is an orphan. Clearly, no one has told the economists this.

In any other walk of life — architecture, dentistry, cake decorating — people run away when they see failure or disaster looming.

Not the economists. They embrace disaster. They revel in it.

As soon as a crisis looms they rush to the TV camera and the microphone to say how they predicted it.

They take a pride and pleasure in being associated with doom and failure that would do your heart good, if the consequences were not so dire for the rest of us.

In the wake of last week’s market turmoil, the weekend papers and discussion shows were full of economists doing what they do best.

Switching between the radio stations on Saturday and Sunday mornings was like playing some demented radio five-card stud — I see your dollar bond collapse and raise you an Italian bailout.

The Sunday newspapers were as bad with even more dire predictions of either the collapse of the euro or the dollar, or both.

We are living in uncertain economic times … and will be for some years to come. No one needs to tune into the radio to learn that.

This is a major culture shock for many, though not for those of us who lived through the Eighties … and no one wants to see another decade lost to despair and inactivity.

But I digress. So why have we seen renewed predictions of crisis this week? They do not seem to have been prompted by the publication of any eurozone statistics or hard figures.

Neither could they be reasonably explained away as just the result of a global slow news day.

While they may, in part, be due to the outworkings of the American debt ceiling compromise, the giveaway is in the word most often employed by economists in describing the crisis: confidence.

We have seen share values drop and bond costs increase over the past week because market analysts and investors do not have confidence in the capacity of eurozone countries to deal with all the debt in the system.

Could these possibly be the same investors who were protected from massive losses in banks and bad investments by those same governments?

Ironic, isn’t it? Eaten bread may be soon forgotten, but never with anything like the speed and hypocrisy with which socialised private losses are forgotten by the markets.

It is tough to make someone have confidence in you, particularly when you have not got much confidence or trust in them. But wringing our hands in anger on this won’t make the problem go away.

As I said earlier, the past week’s scare does not have its origin in a spreadsheet. It is fundamentally a political issue; not an economic one.

The real danger for us is that the dramatic actions and reforms the market is demanding in return for their “confidence” would be deeply unacceptable to people here and across the Eurozone.

This is the almost impossible balance that the eurozone leaders are trying to strike. To make the changes just about needed to gain market approval without totally alienating public opinion at home. The political spectre of Brian Cowen must stalk their deliberations.

Not that the eurozone leaders merit much sympathy. Merkel and Sarkozy’s slowness to act decisively in the early stages of this crisis has cost us all. Their dithering and loose talk threw Ireland to the market wolves in a futile attempt to stem the tide at no cost to themselves.

Their recent reforms to the European Financial Stability Fund have been more carefully judged, though these will take a while to work their way through.

Meanwhile, the next time you hear an economist demanding firmer and more determined actions, just remember that translates in higher taxes and higher charges for you and yours.

– Derek Mooney

Ireland and Norway are very alike. So, could it happen here?

by dsmooney, posted in EU, Government, Policy

This article can also be viewed on the Herald.ie site here

 

Monday July 25 2011

Not only has Norwegian PM Jens Stoltenberg shown great leadership in his measured response to the atrocity which had befallen the Norwegian people, he has also given a new measured response to such attacks with the words: “The answer to violence is more democracy, more humanity, but not more naivety.”

The appalling atrocities in central Oslo and the island of Utoya have rightly shocked us all, not just for their ferocity and callousness but for the fact that they have been perpetrated in the city and a country one associates most with peace building and peace making.

Oslo is not just the home of the Nobel Peace Centre and the location for the awarding of the Nobel Peace Prize, it has also given its name to the 1993 foundation on which peace negotiations between Israel and the Palestinians were based: the Oslo Accords.

Briefly, during the first hours after the car bomb exploded in Oslo many minds turned to the possibility that the attack was the work of Islamist terrorists. The attempted car bombing in Stockholm just before Christmas was as hard to understand, but that attack was linked to Islamist terrorism: the first such attack in the Nordic nations.

It took some time for the full scale of the slaying to emerge for experts and analysts to realise that this was not an attack from extremist Islamists.

It was the polar opposite. It was from a local home-grown ultra-nationalist who feared and hated Islam.

This attack, on his own people, was perpetrated by a man whose own warped world view sees Islam as a threat to the Western way of life and whose online writings denounced Norwegian politicians as failing to defend Norway from Islamic influence.

As we look at the horror, should we consider if such a thing could happen here?

Up to last Friday afternoon the Norwegians did not think such a thing was likely.

They, like us, considered this to be something one only read about in other larger cities and countries. Yet, it happened.

In many ways Norway and Ireland are alike. We are both small, quiet, friendly, liberal democracies most noted in the international context for our contributions to peace support and international diplomacy.

During those brief few hours when speculation focused on an external terrorist cause some suggested Norway’s having troops in Afghanistan as a possible reason why it could be a target.

We too have troops serving in Afghanistan since 2002, so it could also potentially make us one, though Norway’s membership of Nato and participation in the Libyan campaign were also cited as possible causes.

But, as we now know, the reason was not external – it was internal. In Norway’s case this domestic threat was aided by their gun laws: Norway’s large hunting and sports shooting traditions does allow regulated access to a range of firearms.

Back in 2008 the Justice Minister, Dermot Ahern, moved to clamp down on gun controls, especially on the numbers of legally held handguns. Yet there are still many thousands of legally and illegally held guns on this island.

The one thing we cannot legislate for, though, is what goes on in someone’s head. A society cannot protect itself 24/7 from the actions of a lone crazed attacker.

To tackle that we need to turn to the last part of Stoltenberg’s advice: we cannot be naive. While the likelihood of such a thing happening here may be small: it is not zero. We must not be naive, we do need to be vigilant.

How politicians helped redeem themselves by taking on the big guys

by dsmooney, posted in EU, Fine Gael, Politics

My Evening Herald article is online Here

Saturday July 23 2011

JUST by coincidence, I happened to be passing through Brussels this week.

From the window of my hotel room near the Schuman roundabout, I could both see the European Council building and hear the sirens roar as EU heads of government arrived for the emergency EU summit.

From the the TV in the background I could hear and see the continuing fallout on BBC World news from the hacking scandal, while on my laptop I read and listen to the deserved praise being heaped on the Taoiseach for his speech on the Cloyne scandal.

As these three separate news stories competed for my attention it began to dawn on me that these three very different events have a common thread: how politics can work and how politicians can make a difference when they reflect the public mood.

In the case of the News of the World hacking scandal we see the politicians finally recovering their sense of confidence and self worth and shedding their decades of deference to one media mogul.

In the European Council decision we see politicians taking bolder and coordinated actions to exert some meaningful control over Europe’s economic destiny and shunning the cautious advice of bankers or ratings agencies.

In the case of Enda Kenny’s Cloyne speech we see a political leader not just standing up to Rome, but finding his voice calmly and forcefully telling it some home truths and reminding it how much it has lost its way.

redeem

By their actions and words, across these three events, public representatives have helped redeem the profession of politics somewhat by taking on three of the most powerful interest groups: the Church, the banking sector and the media.

This is no renaissance for politics, but just a timely reminder that politics and politicians can rise above the cynical and do good.

While the common thread in the three events is the primacy of democratic politics, it is no harm to reflect on how much further Enda is along the road of telling the Church its role and place in modern society than David Cameron is in his attempt to break this news to Rupert Murdoch and News International.

Nonetheless, this should not stop us taking a leaf out of Westminster’s book and, just as the MPs did with the Murdochs, bringing senior churchmen before a public hearing of a Dail Committee to answer questions from the people’s chosen representatives.

Just over a year ago the Papal Nuncio refused to appear before a committee considering the report of the Murphy Commission.

Let us test the water now to see if the Vatican and the Nunciature think they can sustain this refusal to answer for their actions.

As Fergus Finlay said, the Taoiseach’s Cloyne speech has set the bar high.

It follows on from Brian Cowen’s hard hitting speech responding to the Ryan Report and Dermot Ahern’s declaration following the Report of the Murphy Commission that a “clerical collar will protect no criminal”.

To quote Brutus in Shakespeare’s Julius Caesar: “There is a tide in the affairs of men, Which taken at the flood, leads on to fortune.”

Enda has taken that tide and the Cloyne speech will help establish a political legacy.

However, while he is entitled to enjoy the coming few weeks as the speech continues to reverberate, he should make a quick call to a certain former Taoiseach in Drumcondra to discover how quickly the sheen on his real achievements in the Good Friday Agreement can be dulled by harsh economic realities.

opportunity

Enda needs to apply the same clarity of language and and certainty of approach to tackling the economy that he has found in tackling the Vatican and Catholic hierarchy.

The new measures agreed by euro leaders at the emergency EU Summit may just afford him such an opportunity — but he needs to take this particular tide soon and not squander the opportunities it affords.

Germany lectures us on debt — forgetting the lessons of its own history

by dsmooney, posted in EU, Government, Policy, Politics

Here is my column on Germany forgetting the lessons of its own history from the Herald (Tuesday June 28 2011)

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Signing the London Agreement on 27 Feb 1953 (Pic via: http://www.tlaxcala-int.org/article.asp?reference=8440)
Signing the London Agreement on 27 Feb 1953
(Pic via: http://www.tlaxcala-int.org/article.asp?reference=8440)

The media has been full of hourly reports of how the Greek debt crisis has the capacity to send the global economy back into the doldrums.

The Greeks, and by extension, the Portuguese, Irish and Spanish have had to endure tough lectures from France and Germany about the need for austerity.

The German government has been particularly forceful in delivering these lectures. Its leaders tell us their taxpayers do not want to subsidise bloated public sectors or unproductive workers across Europe.

And who could blame them? It is understandable that German workers do not want to pay extra taxes to send money across Europe, even if it is in the form of a loan with generous interest payments attached.

Understandable … but only if you have a short memory and disregard the history of the past century.

An economic historian at the LSE, Prof Albrecht Ritschl, has pointed out that the worst debtor nation of the past century is not Greece, it is Germany — and by a wide margin too. Worse still, Germany is denying to Greece, Portugal and Ireland the precise remedies it needed to rebuild itself. Twice in the last century, after WWI and WWII, Germany has ran up levels of debt that would make the Greek crisis look like a bad night at a mythical Tipperary Casino.

The cost of Germany’s 1930s debt default was as significant as the 2008 financial crisis. A default they were forced into as they could not repay the debts and war reparations set out in the Versailles Treaty following WWI.

This was the result of the rest of the world doing to Germany what Germany and others in the EU are now doing to us. Tons of new debt (in Germany’s case it was war reparations) were heaped on top of existing debt thereby draining the German economy of the ability to rebuild itself.

By the end of WWII, the rest of the world had learned a lesson. It recognised that lumbering a devastated and demoralised Germany with more debt was not a workable solution.

In the 1953 London Agreement on German External Debts, the Allied powers did the exact opposite of what the German and French governments are doing today. They wrote off half of Germany’s total mountain of debt and gave it additional time to repay the monies it owed.

It was thanks to the foresight and generosity of former enemies that West Germany was able to deliver the Wirtschaftswunder (economic miracle) of the 1950s.

This was a deal negotiated between leaders who had learned from the mistakes of the past and could see beyond the political demands of the next election, particularly Germany’s own Konrad Adenauer.

Remember, also, that one of the occupied countries owed money by Germany was Greece. Those protesting in Athens remember that their parents and grandparents had to forego the compensation owed to them.

How galling must it be for them to take lectures from the current German Chancellor on the virtues of paying your debts?

And, in case anyone thinks this is all reaching too far into the past, think again. According to Prof Ritschl, Germany defaulted on one of the conditions of the 1953 London Agreement as recently as 1990.

TOOLS

It is a sad indictment of the current German leadership that it cannot see that denying others the tools that it required to rebuild itself is only storing up trouble for the future.

It does not take a Konrad Adenauer or a Willy Brandt, however, to recognise that Germany’s economic fortunes are so closely intertwined with the other eurozone countries that if part of the eurozone falls, Germany could flounder.

So, even if heeding the lessons of history cannot bring Germany to realise the current policy is not working, self interest just might.

– Derek Mooney