Bailout Policies 'Pushing Ireland to Default', Begg tells Brussels Economic Forum
18 May 2011
Congress General Secretary David Begg has told a major economic gathering in Brussels that "Ireland is being pushed towards default" as a result of the policies governing the EU/IMF/ECB bailout.
Mr Begg was speaking at the Brussels Economic Forum, an annual event that is described as "the European Union's premier platform for debate on economic issues."
The 2011 Forum also heard from EU Commissioner Olli Rehn, Commission President Jose Manuel Barroso and German Finance Minister Wolfgang Schäuble.
Speaking on the theme of Sharing the Burden of Adjustment, Mr Begg told the Forum that an insistence on repaying all private bank debt coupled with a programme of austerity will inevitably lead to Ireland defaulting.
"It makes no sense to persist with a policy that is pushing the country towards default in circumstances, which if they could be separated from (private bank) debt, are manageable."
He pointed out that the austerity programme is undermining any chance of economic growth and longer term recovery: "To deal with public debt we need to generate a sufficient level of primary surplus. This depends on growth but there is no growth because deflationary budgetary policy has collapsed domestic demand."
While acknowledging that domestic policy failures played a key role in the crash, Mr Begg said the EU and European Central Bank also bear responsibility.
"I make this point because the people from the EU and the ECB who are dictating the terms of our existence are not without responsibility for the crisis in Ireland, nor are they disinterested actors in determining who bears the burden of austerity.
"Economic and Monetary Union was based on the idea of an optimal currency area. Monetary policy dominated and the ECB operated an interest rate policy that suited France and Germany but was pro-cyclical for Ireland and unsuitable. Moreover, deregulation of financial markets combined with low interest rates was irresistible to the Irish banks and at least facilitated the orgy of lending."
Mr Begg also contrasted the disastrous impact on peoples' lives and livelihoods with the fact that the European financial system that gave rise to the crisis remains entirely unreformed.
"Despite the hardship they are enduring they see little by way of real reform of the European financial system. The hedge funds remain unregulated, there has been no reinstatement of the equivalent of the Glass-Steagall Act to separate retail and investment banking and, of course, the bonus culture operates as it always did."
Mr Begg said Congress supports the plan for the creation of a European Bond Market, as put forward by Professor Paul DeGrauwe of Leuven University, pointing out that this would create a "huge incentive" for countries to reduce their debt and lead to the development of a European Bond Market that would make "ample liquidity" available.
