Cyprus: The ghost of the West yet to come

Get used to it

When the European Union (with German money) mounted its most recent bailout of Greece, one of the conditions was a 75 percent write down of Greek government debt. For the Cypriot banks, which had made loans to the Greek government totalling 160 percent of Cyprus’s GDP, this was disastrous.

With their capital bases smashed the Cypriot government felt obliged to bail them out. Lacking the funds to do so (in 2011 the IMF reported that the assets of Cypriot banks totalled 835 percent of GDP) it turned to the European Union (in reality Germany again) for a bailout.

The Germans are reluctant to lend money without conditions. If the terms of the bailout are accepted by the Cypriot parliament, in return for the €10 billion corporation tax will rise from 10 percent to 12.5 percent and interest on bank deposits will be subject to a withholding tax.

But the most controversial aspect is the proposal that bank deposits will be subject to a one off “solidarity levy”, amounts under €100,000 at a rate of 6.75 percent and those over €100,000 at 9.9 percent.

This is the eurozone crisis at its most extreme but it only differs from events in Ireland, Greece, Spain, Italy, and Portugal, by degree. And in as far as  government eventually has to tailor its outgoings to suit its income it is really just an extreme version of the situation which will also eventually face Japan, Britain, and the US, probably in that order.

So what lessons does Cyprus hold for those who still have all this to come?

The first concerns the relationship between banks and our politicians. Over the last few years politicians elected to represent the people have rarely missed an opportunity to dump debts on those people in the interests of saving banks and other financial institutions which have hit trouble. We have been told that banks occupy a unique position in our economy such that the laws of economics don’t apply to them as they apply to Woolworths or Blockbuster. They are too vital, we are told, too big to fail.

Functioning banks certainly are a key part of a modern financial system but why should the same be said of the toxic zombies who are blundering round the current financial landscape?

And how did these rotten banks get so big in the first place? It’s because governments and central banks prop them up. Bad banks rarely go out of business, they just lumber on, soaking up and destroying more wealth. Goldman Sachs and JP Morgan were bailed out five times in the 20 years before 2008.

The second lesson is that there really is no such thing as private property. In extremis the government considers itself entitled to any amount of your property it desires even if, as in the Cypriot case, it means revoking its own commitments to protect bank deposits.

But then this is the logical outcome of taxation. If you think that a shortage of government revenue can be solved by the government simply helping itself to someone else’s revenue you really can’t have a philosophical problem with this. If you believe in the 50p tax rate this is where you end up.

The third lesson is the limits of democracy. The Cypriot Prime Minister, Nicos Anastasiades, ran at the last election on a promise to protect depositors. Now he stands behind a lectern explaining why he cannot protect depositors. The greater a country’s debts the fewer are its options and in the euro, with no possibility of devaluation, this problem is exacerbated.

The Cypriots will probably feel much as the Irish or Portuguese did to have their economic policy decided by the Troika of the EU, the International Monetary Fund, and the European Central Bank. They may feel a touch like the Spanish or French did when they elected an anti-austerity candidate only to find that they get some measure of austerity anyway. They may end up feeling like the Greeks or Italians who skipped these intermediary steps and went straight to having their governments foisted upon them by the European Union.

This isn’t just a lesson for eurozone members. Labour currently lead in British opinion polls, appealing to soft-headed types who think that we can back to the big spending and even bigger borrowing days of Gordon Brown if only we tick the right box on a ballot slip. In the United States Barack Obama won re-election last year on the promise that the Chinese will continue to lend the US the money to live it up.

British and American voters might not have been slapped in the face with reality in the same way as the bottom half of the eurozone has thanks to their ability to trash their currencies, but it will come. Sooner or later they will be faced with the fact that a country cannot indefinitely live beyond its means and that voting for snake oil salesmen who tell you there is, is a sure fire recipe for disappointment.

The final lesson though, and perhaps the scariest, is that those in charge are no smarter than the average bloke in the street. It is difficult to find the words for the stupidity of trying to shore up Cypriot banks with a policy which will cause a run on those very same banks.

Cyprus offers a grim glimpse of a possible future for the wider western world: politicians who will sacrifice the people for banks, the expropriation of private property to pay for it, the diminishing options offered by the political process, and idiots in charge. Let’s hope they aren’t coming to a crisis near you.

This article originally appeared at The Commentator

Crisis of statism, not capitalism

In search of that magic money tree

t might not have been the ‘crisis of capitalism’ which some have been waiting so long for, but it is widely thought that the last few years certainly represent a “crisis of capitalism”. But if you think of capitalism as a system whereby profits and losses acting unhindered by the hand of government guide capital to its most productive uses, this is difficult to sustain.

The sectors which blew up and took the rest of the economy with them were riddled with intervention. Banks have their capital adequacy rates set and their bad investments covered by government. The housing market is kept inflated with all manner of tax breaks and politically motivated distortions like Fannie Mae, Freddie Mac, and the Community Reinvestment Act. Behind it all interest rates are set by a small panel of political appointees, much as the price of alum keys was set in the Soviet Union.

But as we see violence on the streets of Athens and Madrid, the Occupy protests in the United States, and unadulterated rage on the pages of The Guardian’s Comment is Free (Cif), there is certainly some sort of crisis afoot. It is, however, a crisis of big government.

Over the last few decades governments throughout the western world have made extravagant spending commitments. In Ireland the welfare budget was tripled. In Greece pastry chefs, radio announcers, hairdressers, and steam bath masseurs were included among 600 professions deemed so “arduous and perilous” that workers could retire at 50 on a state pension of 95 percent of their final salary.

But it wasn’t just small basket case economies doing it; big basket case economies were doing it too. France decided that its workers could work no more than 35 hours a week and still generate the wealth to pay for everyone to retire at 60 and spend a third of their lives as state pensioners. In the United States the Bush administration launched the largest expansion of Federal spending since Lyndon Johnson’s Great Society program of the 1960s. In Britain the Labour government increased spending by more than half in six years.

As long as you didn’t look either too closely or too far ahead, these massive spending commitments looked just about affordable as long as there was plenty of money to spend. And there was. In Britain tax receipts rose by 40 percent between 2001 and 2007. In the United States, Federal tax revenues rose by 30 percent between 2000 and 2007. French tax revenue increased by 30 percent between 2002 and 2008.

But these were the effects of the bubble. These were taxes swelled by property values, house sales, and bank profits on those house sales and the myriad ancillary transactions such as securitisation. With the bursting of that bubble that wealth is gone, if it was even there in first place, and it is not coming back. Nor should it.

That does mean, however, that lots of the extravagant government spending promises made before the bust now stand revealed for what they are; unaffordable in the absence of bubble taxation. And given the undesirability of bubbles, that just makes them unaffordable full stop. No amount of general strikes, protesting, occupying, or posting on CiF will change that. We do not have a mighty oak of a money tree, but a bunce bonsai and, in truth, that’s all we ever did have.

Since the crisis hit we have seen both the unavoidability of this truth and the reluctance of electorates to accept it. In the last few years the voters of Greece, Spain, and France have voted out ‘austerity’ governments only to have ‘austerity’ visited upon them anyway by their replacements (at least they were asked, unlike the Italians). There is a very good chance that this November and in May 2015 the voters of the United States and United Kingdom will discover that reality doesn’t just disappear because you tick a box marked ‘Obama’ or ‘Miliband’.

The amount of money spent by the government has grown inexorably. We have reached its limit. In Britain, since 1964, whether top rates of tax have been at 83 percent, as in the 1970s, or 40 percent, the percentage of national income paid in taxes has never exceeded 38% of GDP.

Whatever the designs of the politicians, the social democrats, the Labour party, the Guardian, or Polly Toynbee, the British people, collectively and unconsciously, seem to have decided that they are not willing to fund a state sector any bigger than this. When the share of state spending as a share of GDP reaches 45 percent or 50 percent, as it has recently, the only way is down. That is where we are now.

If the extravagant spending promises of politicians outstrip both the capabilities of even a well-functioning capitalism to generate the necessary wealth and the public’s willingness to pay for it, that is not capitalism’s crisis, but a crisis of big government. Its time is up.

This article first appeared at The Commentator

The battle of the euro – how much will Germany stomach?

Ever further union

Our European neighbours used to sneer at us Brits for our apparent obsession with World War Two. But the unfolding Eurozone crisis has shown that those same feelings have been always been present in continental Europeans, they just hid them behind a wall of rhetoric about shared futures and broad smiles at places like Maastricht. The question of wealth has shattered the façade.

Back during the wars that it’s now ok to mention again, the Germans used to worry about fighting on two fronts, quite rightly as it turned out. Now the struggle over the future of the euro is also settling down to a war on two fronts: the monetary and the fiscal. At the heart of the struggle is the question of whether, and if so, how German wealth can be transferred to heavily indebted PIIGS.

On the monetary front the Germans are trying to hold the line that the job of the European Central Bank is to fulfil its mandate of price stability.

On the other side of the hill are those – the PIIGS, most eurocrats (though few have the bottle to stick their head over the parapet), the Obama administration, and the British government – who think it should be focusing on employment or GDP growth. To accomplish this they want the ECB to print money which, the Germans believe, would be inflationary and scupper the ECB’s price stability mandate.

This is what lays behind the bond buying plan which the ECB announced recently.

When yields on Spanish or Italian bonds reach a given level the ECB will step in to buy these bonds with newly created euros in an attempt to drive these yields down. Crucially, the programme is, on paper at least, effectively unlimited. Under this programme the ECB can expand the monetary base of the eurozone as much as it likes as long as it is used to buy the sovereign debt of PIIG – something which isn’t in short supply.

The other front, the fiscal front, has also been far from all quiet lately. The German Constitutional Court recently ruledthat the European Stability Mechanism does not violate the country’s constitution. This gave the green light for a program which will see Germany liable to bail out stricken PIIGS directly. The German judges did leave one potential poison pill however; they ruled that any increase in German liabilities beyond €190 billion be subject to a vote in the Bundestag.

Both the ESM and unlimited bond buying represent ways by which German wealth can be moved to PIIGS. The ESM is a frontal assault while Mario Draghi’s bond buying is an oblique approach. Creating money does not create wealth, it only redistributes it. In this case debtors would benefit from having a devalued currency in which to pay back their creditors. In many cases the debtors are PIIGS and the creditors are German. Either way, the result is the same.

Last week the BBC broadcast a show about John Maynard Keynes. The host, Stephanie Flanders, attempted to draw parallels between the reparations imposed by the Allies upon Germany at Versailles at the end of World War One (which Keynes famously opposed) and the demands made by Germany now for fiscal restraint in PIIGS in return for their money.

This is a pretty inexact comparison. The war debts of the Allies were exogenous to the German economy; they were just dumped upon it in 1919. The debts of PIIGS, by contrast, were incurred by them quite consciously. Nothing the Germans did made the Greeks promise to pay pastry chefs and hairdressers to retire at 50 on 95 percent of their final salary.

A more exact comparison, in fact, in comparing the sudden requirement to pay exogenously incurred debt which Germany faced in 1919, is with Germany now. As at Versailles, Germans are being asked to foot the bill for the spending decisions of others.

Given the aggression of Wilhelmine Germany you could even argue that ‘reparations’ are less justified now. Germany’s invasion of Belgium in 1914 might have necessitated Britain’s war expenditures, but what German action could conceivably have necessitated the Irish tripling their welfare budget?

Germans seem to have some inkling of this. The court case against the ESM was brought after a petition was raised with 37,000 signatures. According to a recent poll, 49 percent of Germansnow see the EU as a hindrance.

Keynes wrote of Versailles that “If we aim deliberately at the impoverishment of Central Europe, vengeance, I dare predict, will not limp.” This is not to say we are about to see a rerun of 1933 in Germany, but it is worth reflecting how long Germans will continue to abide by the economic and political arrangements of the euro and EU that exist to redistribute its wealth to others.

This article originally appeared at The Commentator

The sack of Berlin

Time for the return fixture?

Behind the current rebellion against ‘austerity’ lies the idea that we can carry on as before if only we can screw the money to pay for it out of someone else. But if the bond markets won’t continue to fund them, who do the anti-austerity activists think will?

The most popular answer is ‘the rich’, AKA ‘the 1 percent’. Musing on the Sunday Times Rich List recently, eccentric Labour MP, Michael Meacher observed that “the richest 1,000 persons…increased their wealth over the last three years by £155bn. That is enough for themselves alone to pay off the entire current UK budget deficit and still leave them with £30bn to spare.” Meacher clearly doesn’t know or doesn’t care how wealth works; the £155bn might not be in the form of cash but (more likely) in the form of assets which would have to be sold for cash which could only then be used to plug the deficit. However, there is no guarantee that these asset values would hold up if these 1,000 rich folks tried to sell £155bn worth at once.

But you also wonder how closely Meacher scrutinised this list. The top six on the list weren’t even born in Britain and attempts to expropriate their earnings so that our government can carry on spending could well see them skedaddle. Francois Hollande’s plan for a 75 percent top rate of tax will see a wave of latter day economic Huguenots flee France, taking with them the capital and entrepreneurial expertise that their religious forebears did when Louis XIV kicked them out.

But at the European Union level, for ‘the rich’ read ‘the Germans’. The backlash against EU austerity amounts to the argument that Germans should hand over more of their money to their Mediterranean partners.

There are two programmes which are widely trumpeted as being able to take the edge off European austerity. The first is the provision of liquidity by the European Central Bank. In practise this means that the ECB will begin printing money to buy the bonds of the squealing PIIGS, much like the Quantitative Easing carried out by the Bank of England. The effects are likely to be just as inflationary. The purchasing power of German incomes will be reduced to help out their Greek and Spanish neighbours.

The other is debt mutualisation. This essentially means that the debt of the eurozone members will be spread around more evenly. This is great if, like Greece, your debt is way above the average. It is less great if, like Germany, your debt is way below it.

Debt as a percentage of GDP

Source: The Guardian

But since the anti austerity activists are all about fairness how fair would it be to the Germans to have them fork out for everyone else? We hear that the “social fabric” of places like Greece, Spain or Ireland is tearing asunder but wasn’t that always the inevitable fate of a social fabric woven from easy credit and borrowed money?

Over the past decade, German workers, with the cooperation of their trade unions, accepted wage restraint and a rise of the retirement age from 65 to 67. As a result German unit labour costs fell by 16 percent between 1999 and 2007.

It was a different story elsewhere in the EU. With Germany running a current account surplus, it was sending capital abroad, essentially lending foreigners the money to pay for German goods, like a mini China.

This money flooded into the nations at the fringes of the eurozone who got German interest rates along with the single currency. And they knew how to spend it.

In Ireland, the boss of Dublin airport was awarded a salary double than that of the Chancellor of Germany. Government spending rose between 2000 and 2008 by 144 percent; welfare spending tripled. In Greece the public sector wage bill doubled. Pastry chefs and hairdressers were placed on a list of 600 professions deemed so “arduous and perilous” that they could retire at 50 on a state pension of 95 percent of their final year’s earnings.

So when you hear cries for the ECB to provide liquidity or for debt mutualisation, you are hearing cries for German workers to work till they’re 67 so Greek crimpers can retire at 50.

Sensibly you know that Angela Merkel will balk at turning her electorate into the galley slaves of Europe.

But then the EU and the euro have never been run on good sense. Between 387 and 455 tribes swarmed from modern Germany, across the Danube and carried off the wealth of Rome. The existential question for the euro is whether Angela Merkel will allow a return fixture.

This article originally appeared at The Commentator

Meet the new boss in Ireland

It would be hard to imagine a more rancid collection of chisellers running a developed nation than the Fianna Fáil government which ran Ireland until a year ago. They were involved in corruption scandal after corruption scandal. And when Irish banks which had gambled on property (and donated to Fianna Fáil) got into trouble in 2008, Fianna Fáil, in a locked room, late at night and probably over a couple of drinks, guaranteed not only their deposits but the investments of their bondholders. The Irish public was put on the hook for billions of euros of bad investments. With one or two noble exceptions Fianna Fáil were, as a Dublin friend of mine put it, “Greedy, unprincipled gobshites”

In February 2011 the bums were kicked out. Fianna Fáil lost 24% of their vote and over 50 seats in the Dáil Éireann. They finished in third place and a coalition of Fine Gael and Labour swept into office with a record majority.

But what was any of it for? In what way was Ireland or its political life different after 2.2 million Irish men and women voted?

One of the most craven aspects of the Fianna Fáil government was its slavish obsequiousness towards the European Union. A party which claimed to be heirs to the nationalist spirit which is such a key part of the foundational myths of the Irish Republic, they gave Brussels whatever it asked for.

In June 2001 the Nice Treaty was put before the Irish people in a referendum. They rejected it. In the EU, votes and referendums don’t exist to discover the will of the people but simply to rubber stamp whatever decision the political elites have already taken. So the EU told the Irish to vote again and the gutless lackeys in Fianna Fáil facilitated it. The Nice Treaty passed at the second time of asking in 2002.

But Ireland’s constitutional requirement to put major changes to the Constitution to the vote remained. In 2008 the Lisbon Treaty was put before the Irish people and they rejected it. Again, the EU elites were dismayed that the people had given the wrong answer and Fianna Fáil was ordered to hold another referendum. The Lisbon Treaty passed at the second time of asking in 2009.

But any notion the Irish might have had that this supplication to a foreign power had ended with Fianna Fáil government has lately been rudely disabused.

The momentum behind the collapse of the Euro has proved less responsive to EU elite diktat than EU member governments. The latest useless attempt to stop it is the proposed ‘Treaty establishing the European Stability Mechanism’. In effect, this is simply a beefed up version of the old widely ignored and selectively enforced Stability & Growth Pact.

But in Brussels the Irish voters, unlike their politicians, have a reputation for thinking for themselves won in those two brief EU rejections. This makes giving them a say very dangerous, so the EU is looking at ways it can avoid doing so.

And, disgracefully, the Fine Gael government is proving every bit as accommodating as Fianna Fáil ever was. Enda Kenny’s government believes that, legally, they can just about get away with the argument that the new treaty does not represent a large enough change to the Irish Constitution to necessitate a referendum. But there’s not much in it, the government is rehearsing its arguments ↑ for the eventuality that they are challenged on this point in court.

That’s how democracy works between the EU and Ireland. The EU and its servants in the Dáil either give the Irish people too many votes or none at all.

Ireland is not the only country whose political class is acting on the bidding of Brussels rather than its people. The new EU imposed Italian government contains no elected officials and the Germans want the EU to take control of Greek fiscal policy away from the Greek government.

This represents a real danger for Europe. How long will the peoples of European nations tolerate a situation where, whoever they vote for, they end up being run by the EU? Democracy is never more vulnerable then when it is seen to be dysfunctional.

For their part the Irish might have expected rather different treatment after handing Fine Gael a landslide last year. But that’s democracy in the EU for you. It was never better described than by The Who ↑ ; “Meet the new boss, same as the old boss”

This article originally appeared at openDemocracy

Morrissey is still playing the same old tunes

A level of ‘constructive’ debate

There was an old guy who stood at the top of Carnaby Street, outside The Shakespeare’s Head, and did tricks. According to his cardboard sign his name was Conker Mustard. He didn’t smell so good and he couldn’t talk so well, but he tap danced to inappropriate music like ‘The Heat Is On’. In the days before the smoking ban, when the pavements outside pubs were less crowded than now, I would sit and watch Conker Mustard do his thing for hours.

But as much as Conker Mustard entertained me it never crossed my mind to seek his advice on the political matters of the day. My loss perhaps. Maybe, lurking beneath that mop of unwashed hair, was brain that combined the philosophical depth of a Mazzini with the breadth of vision of a Kissinger? Maybe entertainers can offer profound political insight?

Not if Morrissey is anything to go by. The front man with seminal 80’s indie group The Smiths, he has struggled to maintain his former fame. He has lately taken to puffing his profile by saying silly things about politics like this letter to noted political periodical ‘Hot Press’ released today.

Morrissey responds to the Queen’s historic visit to the Irish Republic. The first monarch to visit the only country that shares a land border with the UK since George V, several decades of rebellion, war, civil war, terrorism, bad feeling and death separate the two.

He opens his letter with the observation that “The message from the Queen will be the same as ever: who we are born to is more important than what we achieve in life”. I would actually be pretty surprised if the Queen did stand up and say this in Ireland, the general belief among the British and Irish, the majority of whom support it, seems to be that the message of the visit is that ‘We’re all friends now’, helped, no doubt, by a British loan to cash strapped Ireland of £7 billion. Maybe Morrissey knows better. Or maybe he’s just been playing his anti Monarchy greatest hits for so long he can’t learn a new tune?

Indeed, Morrissey, such a popular icon in the 1980’s, is soon scampering back there, like one of those tiresome hippies trying to relive the 60’s. Morrissey writes

“It should be remembered by the Irish people that as recently as the turn of the 1980s the Queen supported Margaret Thatcher by not dismissing Thatcher as she allowed hunger strikers to die at the Maze Prison…”

This is quite bizarre. Morrissey is a well known Republican (in the British as well as the Irish sense) and as recently as last month he was demanding that the Royal Family be abolished. Now, however, it appears that Morrissey wants the Queen to go round dismissing democratically elected leaders.

He goes on to say

“The Queen also has the power to give back the six counties to the Irish people, allowing Ireland to be a nation once again”

Firstly Morrissey is plain wrong, the Queen does not have that power. But again, his thinking is hilariously muddled. Not only does Morrissey’s new found fondness for absolute Crown authority cover deposing Prime Ministers, but he also wants the Queen to hand over 1.7 million of her subjects to a foreign government without them having any say in the matter at all. This contradiction to his usual utterances is so glaring that you can only conclude that Morrissey is particularly stupid not to realise the fact.

The more you read the more the evidence that Morrissey isn’t very bright piles up. He brands the Queen’s decision not to hand Ulster over to the Republic “Fascism in full flow”. In fairness, Morrissey is only the latest in a very long line of people to use the F word without having a clue what it means. But, really, what could be more fascistic than an unelected head of state simply telling 1.7 million people that as of tomorrow they will be living in another country, under another government, whether they like it or not?

Let’s cut Morrissey some slack; perhaps he isn’t stupid as much as ignorant. After all, he asks us to “Name one other European country that is controlled by its neighbour”. Well, there’s northern Cyprus. The South Tyrol. The Basque Country. East Prussia. Lombardy. Catalonia. Indeed, ask a supporter of Plaid Cymru or the Scottish National Party and you can add Wales and Scotland to that list. Quite a few in the Republic of Ireland, where fiscal policy is being dictated by the European Union, would add themselves to it.

Morrissey simply isn’t even aware of any of this. But then again, when you’re reading from 30 year old sheet music you won’t be doing much improvisation.

Morrissey isn’t totally ignorant of affairs beyond the end of his nose. He casts his rhetorical net to the Middle East saying “For a broad historical view of what the Queen is and how she ‘rules’, examine Gaddafi or Mubarak, and see if you can spot any difference”

One difference is that the Queen doesn’t ‘rule’, Parliament does although here Morrissey is contradicting what he wrote just a couple of paragraphs ago when he wanted the Queen to ditch elected leaders and tell large chunks of the UK population which country they should be living in.

And another difference; Iman Al-Obeidi was arrested by Gaddafi’s security forces and repeatedly gang raped while in custody. When she reported this to the western media she was arrested again. Consider the genuine horror that woman went through and now see if your stomach doesn’t turn when Morrissey, millionaire rock star, tries to tell you we have it as bad over here.

Morrissey is stupid. Morrissey is ignorant. Morrissey is inconsistent and hypocritical. But he’s a pretty good musician. As with smelly old Conker Mustard, I’ll happily tap my foot along but if I want political insight, I’ll look elsewhere.

Don’t fear to speak of Easter Week, but speak the truth

Speaking for himself

“The only solution is to kill 600 people in one night. Let the UN and Bill Clinton and everyone else make a scene – and it is over for 20 years”

Such was the late Alan Clark’s prescription for dealing with the Provisional IRA. It says much for the peace process and the changed state of Northern Ireland that yesterday’s ‘rally’ by the Real IRA drew only half that amount.

The gathering was held to commemorate the Easter Rising of 1916. The 300 souls in attendance, clad mostly in tracksuits as befits such a somber occasion, listened to a speech read haltingly from a crumpled bit of paper by a fat man kitted out from Millets. Many of his words were lost in the strong wind which whipped the hillside cemetery.

What could be made out was chilling. With the Queen due to visit Ireland next month this tubby masked man claimed to speak for “the Irish people” and warned that “The Queen of England is wanted for war crimes in Ireland and not wanted on Irish soil. We will do our best to ensure she and the gombeen class that act as her cheerleaders get that message”

This mans grand claim in front of his smattering of followers to be speaking for “the Irish people” is rather undone by opinion polls suggesting that the majority of Irish citizens actually support the visit. But then men dressing up in military uniforms and issuing declarations which claim their opinion is shared by all “Irishmen and Irishwomen” and that they are “entitled to…the allegiance of every Irishman and Irishwoman” is something of an Easter tradition in my ancestral homeland. At least Patrick Pearse had a way with words and enough personal bravery to show his face.

More chilling given the recent murder of young policeman Ronan Kerr was the warning that the Real IRA would target police officers

“Oglaigh na hEireann (the IRA) call on any young nationalist who may have been sold the lie that the RUC/PSNI (Royal Ulster Constabulary/Police Service of Northern Ireland) is somehow an reformed, non-political police service to think again, those who think they are serving their community are in fact serving the occupation and will be treated as such. The GAA (Gaelic Athletic Association), Catholic Church and constitutional nationalism will be unable to protect those who turn traitor, they are as liable for execution as anyone else regardless of their religion, cultural background or motivation”

Threats to the Queen and threats to police officers; why did the police not swoop in and arrest these people?

Sadly, despite the pitiful crowd yesterday and all the outrage over PC Kerr’s death, the answer is that a strong police response to these people would probably have been condemned. ‘Counter productive’ and ‘harmful to the peace process’ are phrases which would, no doubt, have been quickly on the lips of even supposedly respectable nationalists like Sinn Fein.

This is because even now Sinn Fein are not anti violence, they are just anti other people’s violence. Violence, after all, got them where they are so, unsurprisingly, they take a pragmatic rather than moral view of it. Gerry Adams condemned the murders of two soldiers in 2009 as “counter productive”

But even mainstream nationalism is tainted with this equivocation. As my friend Ruth Dudley Edwards pointed out recently the men of 1916 “were a clique within a clique within a clique”. The Irish Volunteers who, along with the Marxist Irish Citizen Army, mounted the 1916 rebellion, numbered 180,000 men on the outbreak of the First World War. 170,000 of these joined the British army. Of the 10,000 left only 2,000 went out with Pearse at Easter Week. Yet Pearse, like the sweaty terrorist yesterday, claimed to speak for the Irish people.

Yet these men who, acting on their own, unleashed violence on the streets of Ireland are venerated by mainstream politicians in the south. Until this changes we will never hear a true condemnation of dissident Republicanism. As Dudley Edwards puts it “as long as we continue to glamorise 1916 and any of what followed, we legitimise the activities of those who believe they carry the torch lit by Patrick Pearse”

This is why we wont yet see strong action taken against the Real IRA. Newly respectable Sinn Fein and long respectable parties in the Republic might well look at the Real IRA and see only an unwelcome, distant, grubby and deluded cousin, but they see a cousin all the same.

The failure of Fianna Fáil

So long Soldiers of Destiny

Fourteen months ago Fianna Fáil were in a coalition government with the Progressive Democrats. The PD’s no longer exist and on 25th February Fianna Fáil was wiped out at the ballot box.

The defeat was seismic. Going into the election Fianna Fáil had 70 seats out of 166 in the Dáil Éireann ruling in coalition with 6 Green Party members. Afterwards the Party was reduced to 20 seats having lost 24% of their vote, the worst result in the party’s history. The Green Party lost all its seats.

The defeat was also historic. Fianna Fáil were founded in 1926 by Eamonn De Valera who had fought in the Easter Rising of 1916 and been a leader of the Anti-Treaty forces in the Irish Civil War of 1922-1923. The winners of that war, the Free State government established by the treaty with Britain, formed a party named Cumann na nGaedheal, later Fine Gael, which dominated Irish politics in the first decade after independence.

Formed to rid Ireland of what it saw as lingering British influence Fianna Fáil became one of the most successful political parties in the western world. In the 79 years since the election of its first government in 1932 Fianna Fáil has been in power for 61 of them.

Beyond its commitment to Irish Republicanism Fianna Fáil never had much in the way of a coherent ideology. Its perennial opponents, Fine Gael, were generally described as ‘centre right’ but whereas they often worked in coalition with Labour in their rare spells in government it was Fianna Fáil which allied with the free market PD’s in the 1980’s and 1990’s to enact a raft of reforms which reinvigorated Ireland’s moribund economy.

If a party has no clear ideology what sort of person does it attract? Sadly for Fianna Fáil and Ireland the answer was all too often crooks and chiselers on the make. The business dealings of the notoriously corrupt Charles Haughey, Taoiseach on and off between 1979 and 1992, prompted two separate public inquiries. His successor but one, Bertie Ahern, was embroiled in yet another corruption tribunal.

It was this ceaseless quest to line its own pockets that did for Fianna Fáil. They schmoozed with Ireland’s bankers who were getting rich thanks to the low rates they could borrow at following euro membership. And when the banks got into trouble in 2008 Fianna Fáil agreed, late at night, behind closed doors and with almost no consultation, that the Irish taxpayer would cover their losses. The party of De Valera’s ‘frugal comfort’ lashed themselves and their prospects to the fortunes of the banks and as the banks losses spiraled Fianna Fáil’s electoral prospects withered.

The prospects for Fianna Fáil are not good. The rump left in the Dáil are mostly the party’s old hands, linked with the government that bankrupted the country. A party which has relied on patronage (also known as kickbacks) will find this power deserts it in distant opposition. A party founded on Republicanism has been crowded out by Sinn Féin. They have no flag left to rally round.

The prospects for other parties appear better. With 37 seats Labour had their best election result ever and look set to join Fine Gael in government. But that could just be the start of their troubles. They are closely linked to Ireland’s trade unions which are unlikely to suffer the implementation of EU dictated austerity in silence. Unless there is significant give in the conditions of Ireland’s bailout from Brussels Labour could end up skewered like the Liberal Democrats across the Irish Sea.

Fine Gael has not been in such a commanding position since the late 1920’s but they too could find a warning in Britain. There a coalition elected to clean up the fiscal mess of a previous government is struggling in the polls against the party which left it. People have short memories and the more unpleasant the medicine the more they are inclined to discount the illness that necessitated it.

For Labour and Fine Gael triumph might be short lived but Fianna Fáil, once the natural party of Irish government, will struggle to capitalize. A sad impasse for the Soldiers of Destiny, but an utterly deserved one.

This article originally appeared at Global Politics

How Ireland’s 88-year experiment in self-government came to an end

A Province Once Again?

On December 17th 1922 the Union flag was lowered over the Royal Barracks in Dublin, marking the end of British rule in southern Ireland. To a large extent (quite how large was the cause of the brutal civil war) this moment marked the achievement of the dream of Patrick Pearse who, on Easter Monday 1916, had announced, “We ordain that the elected Representatives of the Irish people alone have power to make laws binding on the people of Ireland”.

On November 22nd 2010, the 88-year experiment in Irish self-government came to an end. Worried that Ireland’s economic woes could infect them, its partners in the Euro, accompanied by representatives from the IMF, descended on Dublin to demand that the Fianna Fail government accept a loan. After days of brow beating and arm twisting that would have put Lloyd George and Churchill to shame, the Irish acquiesced.

The Irish experiment in self government ended in regret. In their anger, the Irish cursed everything that had happened to their economy in the previous twenty years, anything to do with the ‘Celtic Tiger’ was now reviled. This risked throwing a decent fiscal baby out with rancid monetary bath water. The famously low corporation tax of 12.5% introduced in the 1990s attracted business to Ireland; by 2001, more than 13% of all Foreign Direct Investment into the European Union went to Ireland. Between the late 1980s and Ireland’s entry into the Euro, this helped to add 500,000 jobs to the Irish economy’s existing 1.3 million. This led to a doubling of Irish GDP per capita. Then the Euro came along.

The experiment ended in excess. When they entered the Euro in 1999, the Irish inherited the low interest rates of the Euro area’s dominant economy, Germany. Able to borrow cheap, government and individuals alike went on a spending binge. Between 2000 and 2003 public spending rose by 48%. The boxwallahs from Brussels and Washington arrived at a Dublin Airport – whose manager is on a salary twice that of the German Chancellor.

For individuals, debt as a percentage of household income rose from 68% in 1999 to 113% in 2004 to keep up with house prices, which tripled over just ten years. Irish banks were happy to help the housing bubble inflate, tripling their lending between 2002 and 2007 to over €360 billion. Builders borrowed to supply the housing to meet this growing demand. At the height of the boom in 2006-2007, approximately 90,000 new dwelling units were built in Ireland. In the UK in the same year – with a population 13 times the size of Ireland – the number was just 120,000. When all this was revealed as unsustainable, Country Leitrim was found to have three housing units for every resident.The experiment ended in confusion. The Irish weren’t sure who or what to blame for their economic collapse. The ‘who’ became the ever popular bogeyman, ‘bankers’, the ‘what’ became fiscal austerity introduced to balance the budget. In reality the ‘who’ should be the politicians and European leaders who took Ireland into an unsuitable and unsustainable currency arrangement, letting economic reality get trampled in the rush toward the dream of “ever closer union”. The austerity is a consequence of this disastrous decision.
And it also ended in irony. There is a certain historical symmetry about the fact that the last German handout to Ireland, a boatload of rifles which found their way to the bottom of Cork harbour in 1916, were sent to aid Irish independence, to accomplish Pearse’s dream. The current one is intended to do exactly the opposite.

The last foreigner ‘invited’ to Ireland to sort the country out was Henry II of England and his descendants ended up staying for 700 years. Given the rumours surrounding the state of Portugal, Spain and Italy’s finances, you wouldn’t bet on the chaps from Brussels sticking around that long, although, if a bungalow in Leitrim tickles their fancy, there will be plenty of places for them to stay.

But given Ireland’s history of bloody struggle for its independence, we can ask whether it was all worth it. Commenting on Eamonn De Valera’s typically impenetrable alternative to the treaty with Britain, ‘External Association’, one participant in the Dail debates commented “For centuries men have been willing to fight and die for the cry of ‘Up the Republic!’ I can’t imagine many dying for the cry ‘Up External Association!’”

Indeed, would Tone, Emmett or Pearse have died and caused so many other deaths for the right of Irishmen and women to have their fiscal policy dictated in Germany? What would Thomas Davis write now? A Province Once Again?

This article originally appeared at ConservativeHome

It’s the end of the road for Ireland’s Progressive Democrats

So long it’s been good to know yuh

On November 8th 2008 Ireland’s Progressive Democrats did something unusual; they voted themselves out of existence.

The PD’s formed in 1986. Then, Irish politics was dominated by two parties, Fianna Fail and Fine Gael, and party allegiance depended on attitudes towards the Civil War. Both parties embraced corporatist economics and Ireland’s economy was a mess. Culturally the Catholic church still dominated.

Formed by a group of Fianna Fail members, led by Des O’Malley, disgusted by the corrupt leadership of Charles Haughey and a couple of high profile members of Fine Gael, the PD’s sought to inject ideology into Irish politics. A small presence in the Dial, peaking with 11 seats in 1989, Ireland’s proportional election system saw the PD’s enter a coalition government with Fianna Fail.

The PD’s pushed on Fianna Fail the free market approach of Margaret Thatcher and Ronald Reagan to resuscitate Ireland’s economy. Business taxes, 30% in the UK, went to 10% and the Celtic Tiger began to roar. Government spending fell from 30% of GDP in 1990 to 25% in 2000. In the same period economic growth rose from 2% annually to 11% and unemployment fell from 12% to 4%.

The PD’s liberalism extended from the economic to the social sphere. By the end of their first spell in government in 1992, the PD’s had helped liberalise abortion laws. Back in government in 1997, under the first female leader of an Irish party, Mary Harney, divorce became legal with PD support.

The PD’s social attitudes chimed with a broader reassessment of Irish nationality. Long based on the twin pillars of nationalism and Catholicism, these were questioned from the late 1980’s. ‘Father Ted’ and Sinead O’Connor mocked ascetic Catholicism with differing degrees of severity as the PD’s social stance challenged it directly.

Michael McDowell, the PD’s spokesman on foreign affairs, took a strong line against Sinn Fein and the IRA just as nationalism too came to be questioned in the south. The Cranberries song ‘Zombie’ discarded the mythologizing of ‘The Foggy Dew’ to cast a jaded eye over the Easter Rising. The popular film ‘The Commitments’ ignored the national question altogether, a far cry from Yeats’ Cathleen Ní Houlihan who said of the nationalists “The people shall hear them forever”. The Irish were no longer listening.

But the PD’s were never able to expand their support much beyond middle class south Dublin and Limerick, Des O’Malley’s old powerbase. Fianna Fail took the credit for the Celtic Tiger and at the 2007 election the PD’s lost 6 of their 8 seats. At a meeting a meeting in November, considering their work done, the PD’s disbanded.

R. F. Foster wrote of a “pragmatic new Ireland” determined “to live aggressively in the present”. In government for 13 of their 23 years, the PD’s played a vital role in bringing this new Ireland about economically and socially. Journalist Ruth Dudley Edwards says “The PD’s had a short but glorious life. Once they had brought the Fianna Fail party to its senses, they became electorally expendable”. The party is over, but it was good while it lasted.

Printed in London Student, vol 29 issue 8, 02/02/09