Wednesday, November 30, 2011

Darren Scully's comments: are we racists, or realists?

A group of participants at the Nigerian Irish Expo in 2009 in Dublin

Probably the most talked about story here over the past week has been the allegedly racist comments made by a local politician called Darren Scully, the mayor of Naas, a large commuter town about 20 miles from Dublin in Co. Kildare.

Scully said in an interview last week on a local radio station that he had a problem with black African immigrants who are now living in the Naas area and who were coming to see him about issues like housing and welfare benefits.  

There is nothing unusual in people going to see local politicians to get their help in accessing council housing or welfare benefits. But Scully said in an interview on local radio last week that he would no longer represent black Africans in his area because of their attitude.

"I have been met with aggressiveness and bad manners," he said.

The story received blanket coverage not least because Scully is a Fine Gael councilor, and there was an immediate focus on how embarrassing his remarks were for the government.  

The media here, all singing from the same hymn sheet, condemned him and demanded action from the powers that be.  In these politically correct times, an incident like this provokes a furious reaction, and it did not take long for party headquarters to lean on him.

Within a day, Scully had acknowledged his error, publicly and abjectly apologized and handed back his mayor's chain of office.

But it did not end there.  Scully works as a structural engineer for a small private company (he is a part-time politician), and he now says he has been suspended and could lose his job.  

He says the reaction to his remarks has been so intense that he has been close to a breakdown.  He says he has been subjected to a torrent of abuse, and that the experience has almost destroyed him.  

Media commentators are still calling for his head.  A Labor politician has reported his remarks to the Gardai (police) for a possible criminal prosecution. Various organizations demanded that he be excluded from politics altogether.

A support group for African immigrants held a press conference which criticized him and also pointed to the killing of an African taxi driver in Dublin recently as evidence of how serious racism here has become (although it is not yet clear whether this was primarily a racist attack).

By the time you read this Fine Gael may have thrown Scully out of the party altogether, although he remains a councilor until the next election, unless he resigns his seat.  

This whole controversy is interesting for a number of reasons.  For a start, although official Ireland and the media turned on Scully as though he was Hitler reborn, what he actually said was relatively moderate.

He said the Africans who had come to see him had been aggressive and bad mannered.  He did not say that all Africans had behaved towards him in this way. He did not say that he never had to put up with aggressiveness and bad manners from other immigrant groups or from Irish people who came to see him.  

But he did say that he would no longer represent black Africans because of the general attitude he had experienced.   Even if not all of them had been aggressive or rude to him, he clearly felt enough of them had behaved in this way so that he was justified in excluding them as a group from his political services.  

And that is racist.  It is taking a decision for an entire group based on skin color/ethnic origin rather than on an assessment of people as individuals.  

Racism is something that cannot be tolerated, either in Ireland or anywhere else.  But even with that as a guiding principle, there should be room for discussion here about what former Mayor Scully was expressing.

In these politically correct times in Ireland, however, no such discussion is possible.  Anyone who attempts to start such a discussion is immediately called a racist and is vilified and ostracized, as Scully has been.  

He was both stupid and naive if he thought he could make comments like he did without provoking a backlash of political correctness from official Ireland.

But one of the interesting things about the controversy was the wide difference of opinion between official Ireland and the majority of anonymous people who went on-line or rang up radio stations about the issue over the past week.  It looked to me like 70 or 80 percent of people supported Scully, to some degree at least.

The reaction varied from a few outright racists to many more people with moderate views who are deeply concerned about the ongoing effect of the immigration that took place here during the Celtic Tiger decade.

The reaction in general was an illustration not only of how sensitive the immigration issue is here, but how that sensitivity is increasing as the pressure of cutbacks and unemployment intensifies.  With huge cuts in state spending on the way over the next few years, this is likely to get worse.  

The way to deal with the pent-up concern or anger here on the issue is not by smothering it under a wall of political correctness.  That increases the frustration of the people who do not agree that sharing scarce resources in a multi-cultural Ireland is a wonderful, life-enhancing development.  
Rather than propaganda, what is needed is honest, open and realistic discussion.

The scale of immigration that took place here in the last decade and a half was higher per capita than in any other country in the western world.  Was that necessarily a good thing, given the pressure that schools, hospitals and our welfare system are now under?  Or was it another mistake that we made during the Celtic Tiger years?

Even though we are continually told that multi-culturalism is good for us, have Irish people the right to say that, actually, they preferred the way things used to be?  And if they do, does that make them racist?

Let's take one example.  The relentless propaganda about the benefits of multi-culturalism makes little impression on many parents in areas here where there is a high concentration of immigrants.  

In commuter towns and suburbs around Dublin and other cities, there is particular pressure on schools which have a high number of immigrant children who do not have English as a first language or who have no English at all.  

In some classes in primary schools, more than half the children may have little or no English, which means the teacher takes much longer to get through lessons.  This means that the progress of the Irish kids is much slower that it used to be.  

Of course there were promises of extra language support teachers for these schools, but the resources available are a fraction of what would be needed to deal with the situation.  

How would you, as the parent of an Irish child, feel if you were confronted with this problem, especially if you realize that that it could mean that your child will still be behind when he or she leaves school and tries to get a college place or a job?

That's what multi-culturalism means in practice in some areas here.  No one denies that being able to get a flavor of other cultures is interesting.  But the happy clappy propaganda that insists multi-culturalism is creating a far better new Ireland does not convince many people who deal with it on the ground on a daily basis.

Schools are just one area where this pressure is visible.  There is intense competition for the few jobs that become available, with downward pressure on wages.

The lines outside welfare payment offices get longer. The overcrowding in hospitals gets worse.

Rightly or wrongly, our high level of immigration is now perceived by many of the people who have expressed support for former Mayor Scully as part of the problem, especially since the economy has tanked and state spending on all kinds of services is shrinking fast.  

The increased competition for increasingly scarce resources is producing tension, both among and between immigrants and locals.  It is against that background that the Scully controversy must be seen. On a general level, there are cultural differences between the Irish and some immigrants, and between different groups of immigrants, which can mean they do not easily co-exist in every situation.

There is no value judgment between cultures involved in this observation.  It's not racist, merely a statement of fact.  To pretend otherwise is disingenuous.

This question of cultural difference may possibly be a factor in Scully's difficulty with his black African constituents.  Most of the Africans here are from Nigeria, and as a group they tend to be louder and more assertive than most Irish people.  Not all of them, but many of them.  

This is not something negative and it is certainly understandable.  To make yourself heard and to survive in a teeming city like Lagos (or many other cities in Africa) you have to be loud and assertive.

Given the competition and the corruption, you may even have to be aggressive in some situations.  The etiquette of queuing is different, as is putting your case to officials.  

In Ireland, the tendency is to line up in a subdued, orderly manner and to put your case or make your request quietly, almost apologetically.  It's just the way we are.  We don't like to make a fuss.   We never complain in restaurants because we don't want to cause any embarrassment.

The Nigerians, by and large, are not hampered by such reticence and demand their rights in an assertive manner.  As I said, it's a cultural difference.

These differences do not make either us or them bad people.  It does not mean that an immigrant is of less value as a human being than an Irish person.  We are all equal.  

But there are differences.  And these differences can cause problems, as Scully has found out to his cost.

This is a situation that will need careful management in the immediate future as the pressures increase. The various quangos set up by official Ireland which deal with immigration issues seem incapable of more than wishful thinking about the benefits of multi-culturalism.  

Everything will be all right, they keep saying.   Official Ireland wants to be like a Coca-Cola commercial teaching Ireland to sing in perfect harmony.

But real life is more complicated than that.  Just ask former Mayor Scully.

Wednesday, November 23, 2011

Running Ireland from Germany

German Chancellor Angela Merkel and Taoiseach Enda Kenny in Berlin last week

The revelation that key parts of the Irish budget were being discussed in the German Parliament last week -- weeks before the Dail (Irish Parliament) will get to hear about them -- has caused outrage and humiliation here.

Outrage at the way we are being treated, and humiliation at the realization that we have fallen so low.  It's humiliating that our budget, our private national business, is being analyzed in the corridors of the Bundestag before the Dail is told what's in it.  

That really puts us in our place.  It's the perfect illustration of what losing economic sovereignty actually means.

We don't take the decisions about our future anymore.  We can propose, but we have to get approval from our masters before we can do anything.  

Of course Taoiseach (Prime Minister) Enda Kenny and his senior ministers were furious and embarrassed when this happened last week. Their cover had been blown.  They might look like a government, but this exposed the fact that the real power now lies elsewhere.
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As luck would have it, the day before the leak happened Kenny had been on his first visit to Germany as taoiseach, and there was lots of red carpet posturing and air kissing between himself and German Chancellor Angela Merkel.

The pretence of a meeting of equals was carefully presented for the TV cameras.  But the next day the leak revealed the truth.

Maybe everyone here should know by now what losing our economic sovereignty means.  But they don't.

The phrase has been used casually in conversation over the past year since we got the bailout money, as though it was some kind of technicality which did not matter too much.  Apart from the quarterly visits by the inspectors from the EU-IMF to check our books, things appeared to be continuing much as before.  We appeared to be running our own affairs, like any other country.

But the truth, as last week's leak revealed, is very different, and a lot of people here only woke up to the demeaning new reality last week.

Apart from having to open our books to the EU-IMF and pass quarterly inspections, it also means that we have to get our budgets approved in advance by our European "partners.”

The most important "partner" is Germany.  Which is why the budget for 2012 which our Minister for Finance Michael Noonan will present to the Dail in two weeks was being discussed last week by a finance committee of the Bundestag.

The discussions were supposed to be confidential.  But these guys are putting up the cash, so they are more concerned about where their money is going than about secrecy and the sensitivities of Irish ministers.

The information about the upcoming Irish budget, particularly the 2% hike in sales tax, was given to the German Parliament by the European Commission, which had been given the details in confidence by the Irish government.

When the leak happened last week, the commission explained that it had a legal obligation to supply the information to the German Parliament, and it blamed Bundestag members for leaking it.  

But members of the Bundestag finance committee were perplexed at what all the fuss was about, and one of them said that the Irish people needed to understand that this is what being an EU-IMF "program country" means.

The institutions providing the money for the bailout to keep Ireland going (the EU-IMF-ECB troika) oversee and sign off on Ireland's budget, on our taxation and spending.  They make sure we're sticking to the program.  That's the reality.

Before they can approve our budget they have to discuss it.  And our budget information goes in advance not just to Germany but to all EU governments, since they all play a part in propping us up.  

The fact is that "losing our economic sovereignty" is not just an empty phrase.  It's a day to day reality with consequences.

And it means exactly what it says.  Other people are in ultimate charge of our economy, our tax, our spending and our budgets.

One area the troika want to see changes in is our system of public service pensions, which was discussed in this column last week.  Under this system, retiring politicians, civil servants and other state workers in Ireland are guaranteed generous pensions for life, even though the country can no longer afford to pay them.
At the top end, pensions of around €100,000 a year are common.  It's one area where the troika can be sure they will have the backing of most people here for change.

Private sector workers in Ireland have seen their pensions collapse and they are outraged that state workers are being completely protected. There is absolute outrage here on the issue, particularly at some of the examples that have surfaced.

The most high-profile civil servant involved is the former secretary general to the government who retired at 57 earlier this year.  His golden handshake was €570,000, with a €142,000 a year pension for life.

If you had to buy this on the open market you would be talking millions, since he's only 57.  And this guy was a key player in the management of the Irish economy over recent years!

Then there's the case of the outgoing head of the Department of Finance who is getting almost as big a pension, even though he's even younger, and he was the key official involved in the state guarantee for the banks which has bankrupted the country.

On top of that, he is getting a new job as a member of the European Court of Auditors, even though the department under his leadership recently got its sums wrong by over €3 billion. You couldn't make this stuff up!

Assuming he gets the European job it will be worth around €1.6 million over his six-year term there, with another big fat pension to follow. And this is the guy who earlier this year said that the terms of the EU/IMF bailout mean that the government cannot pay the €13 billion actuarial cost of providing a state guarantee for the pension entitlements of workers in cases of employer insolvency in the private sector.

So if you're in the private sector, tough!  But if you're in the state sector, your pension will be paid in full by our bankrupt state borrowing more. As I said, you couldn't make it up!

Another case that raised eyebrows last week was that of the secretary general of the Department of Education who is retiring in February at the age of 53.  She will be getting a pension of €114,000 a year for life, plus a handshake of over €200,000.

And of course there is the former tanaiste (deputy prime minister) in the last government, Mary Harney, who has retired from politics at 58 and is on a €130,000 a year pension for life.  She went public last week to defend this saying that although it was a "very decent" return for her 34 years in the Dail, she deserves it.

Like most of these senior politicians and civil servants, she misses the point.  The point is that the state cannot afford to pay such a huge pension, whether she deserves it or not.  The only way it can pay is by borrowing even more.
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Even top executives in the private sector cannot get pensions on this scale because their pension investments have collapsed.  Their private companies cannot borrow the millions to make up the pension deficits.  Why should the state sector be different?

And it's not just those at the top.  Middle income workers across the private sector who have been paying into retirement funds for years are now finding that these investments have collapsed and that they have very small pensions, if any.

Yet average workers in the state sector (teachers, nurses, police, etc.) are getting at least half their final salary in guaranteed pensions for life.

Figures published recently show that the average private sector pension payout over the past year was just over €3,000, and the average state sector pension was between six and seven times that amount.

Maybe the Bundestag finance committee could have a special (non-secret) debate on the scandal of state sector pensions in Ireland.  I'm going to Berlin if they do!

Wednesday, November 16, 2011

Irish politicians five-star pensions - huge disparity has to stop

Michael D Higgins and his wife before in inauguration as president


President Michael D. Higgins at his inauguration on Friday, with former presidents Mary Robinson and Mary McAleese in the background.


Like me, half the country here stopped what they were doing last Friday to turn on the TV and watch the inauguration of our new president.

The first thought that struck me looking at the high and mighty assembled for the ceremony in the splendor of Dublin Castle was that they all had one thing in common. Can you guess what it is?

The elite group present included retired presidents, former Taoisigh prime ministers), ministers, senior politicians, attorneys general, and the holders, or former holders, of many other important state positions.

It was a mixed group from the top layer of officialdom, which crossed all parties and all the offices of state, including the civil service, the diplomatic service, the judiciary, the army, various government bodies and so on.

There were perhaps 200 or 300 people at this exclusive ceremony inside Dublin Castle at which Michael D. Higgins was sworn in as the ninth president of Ireland. And as I said, they all had one thing in common.
With the exception of a few of those present, like the church leaders and the Higgins family, every one of them was either already on, or in line for, a big fat state pension.
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We're not talking chicken feed here. At a time when pensions across the private sector here have been decimated by the financial crash, these guys (and gals) are getting pensions that are enormous by any standards. We're talking up to €100,000 a year, or even a lot more.

And it's not just the level of these five star pensions that is so valuable. Even more valuable is the fact that they are guaranteed. For life.

They are unaffected by the collapse of the stock markets. Why? Because these pensions are not funded by investments in the markets, which can go up or down (or even way down, as we now know).

No, these pensions are paid out of current state revenue from either taxation or borrowing. So they are insulated from anything as vulgar and uncertain as the markets.

They don't depend on whether a pension fund has gone up or down in value. That kind of thing, as Leona Helmsley once said, is for the little people, the ordinary Joes who work in the private sector. The state sector elite and their huge pensions are above all that.

Now you might think that I'm being inappropriate and small minded here. That I should not be discussing this in the same context as the inauguration of our new president.

But it is the other word beginning with P -- pensions -- that everyone here was talking about last week as more information about the scandalous level of state pensions made the news.

This is the one issue that enrages people here in the private sector more than anything else. Because of the stock market crash, close to 80% of all private sector defined benefit pension schemes here are now in deficit. Many of them have huge black holes in their funding and are virtually bust.

Defined benefit schemes are the ones run by most of the big companies here, which supposedly guaranteed you a defined pension, usually between half and two thirds of your pay level. Both you and your employer paid into the fund over the years and to get the full pension you had to be paying in for 40 years.

As I mentioned above, nearly all of these pension funds now can't meet their obligations because the money they invested in property, the stock markets, bank shares and so on has collapsed in value. There are tens of thousands of people across Ireland (like this writer) who are affected by this.

In fact, my own case is typical. I've spent a lifetime in the newspaper business, paying the required amount into my pension fund over the years.

Now the deficit in the pension fund of my employer, the biggest newspaper group in Ireland, is so huge that there is a question mark over the ability to pay my pension into the future. There are rumors circulating that the scheme could be drastically curtailed or even wound up altogether.

And it's not just in the newspaper industry; the pension funds in so many of the biggest companies in Ireland are in such trouble that the government set up an expert group to advise on what can be done, with the report due by the end of the year.

Everyone knows what the outcome is going to be -- private pensions are going to be cut heavily, perhaps in half, to stop these pension schemes going bust altogether. So in the case of a typical middle income earner, like a journalist, an expected pension of €40,000 may end up being €20,000. And that's after a lifetime's work and a lifetime paying into the scheme.

Contrast this with our state sector elite, whose pensions are enormous and guaranteed for life.

Figures released last week showed that this year around 100 former government ministers got €8.8 million between them in pension payments, or close to an average of €90,000 each.
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And it's not just ministers. There are many other people who held senior positions in the civil service and other state organizations who are also in the pension golden circle.

This is the same elite who were in the hall in Dublin Castle last Friday and got all misty-eyed as Higgins went through the more emotive passages of his inauguration speech dealing with the plight of people trying to survive in today's recession-devastated Ireland.

He did not specifically say so, but one presumes he was including all those older people in the private sector whose pension funds have been decimated (or even wiped out altogether if they invested all their retirement savings in bank shares).

Our new president is well known for his emotive speech-making, and his inauguration address was replete with ethereal meandering about needing to get away from the narrow greed of the boom years and back to an earlier time when the dignity of people was valued.

We need to shift to a new paradigm, he said, we need a new aisling (national dream). Our creativity and innate goodness as a people will save us, as long as we get back to being a community and abandon individual greed. And so on.

It was stirring stuff. And the elite in Dublin Castle listening to him applauded warmly.

It was a special moment . . . especially if you had the security of a big fat state pension to allow you to wallow in the emotion for a few seconds.

One can't blame Higgins for this situation (although as we pointed out here last week, as a teacher and politician he has been cosseted by the state all his working life and his pay and eventual pension as a president make Barack Obama look like a pauper). It's the system we have here.

The state elite look after themselves very nicely, and no one challenges the status quo.

But people in the private sector here are now waking up to the scandal of these state pensions and are asking how this situation can continue when their pensions are facing collapse.

One of the most annoying aspects of state pensions for politicians is that they are cumulative. They get so much for years as a member of the Dail (Parliament) and so much for being a minister, etc.

And they don't have to wait until they are 65; they get the pension straight away when they leave the Dail. This is how our former Taoiseach Brian Cowen -- the man who signed the bank guarantee which lost our economic sovereignty to the IMF -- is now retired at the age of 51 on a pension of over €150,000 a year, for life!

His predecessor Bertie Ahern, who oversaw the boom and bust in our economy, gets even more, at €152,000 a year. Do a web search and you will get the details of the astonishing number of our former politicians, civil servants, judges and so on, all of whom are on huge pensions for life.

And the politicians and others in the state elite keep getting their pensions even when they take on other jobs and get big salaries, like the former Taoiseach John Bruton, who became EU ambassador to the U.S. after he "retired" and is now head of the International Financial Services Center in Dublin.


Even that embodiment of virtue Mary Robinson has been getting around €180,000 a year in a pension (for her years as a senator and then as president) -- and that's before we add in whatever she gets from the UN for her time there and whatever else she gets. She's been getting her pension from here since 1997 when she left the presidency, it goes on for life and she's still only 67!

One of the really nauseating examples of this greed is the attorneys general here, all of whom are top lawyers and go back to their lucrative careers (€3,000 or €4,000 a day) after their average three or four years in office as the government's legal advisor.

Eight of these guys signed a public statement recently which derailed the government's attempt in the recent referendum to replace our expensive tribunal system (a gold mine for lawyers) with cheap parliamentary inquiry committees.

They are all on pensions of around €50,000 a year for their three years or so of state service, even though some of them have earned millions before and since then (they include a head of Goldman Sachs, a head of the biggest bank in Ireland and an EU Commissioner). They're all millionaires but as far as I know they're all taking their €50 grand a year!

Most of the state elite also get big lump sum "packages" when they retire, as well as their pensions. They start getting their pensions immediately no matter what age they are and they go on getting the money no matter how much they earn if they go back to work.

Worst of all is the current example of the retiring head of the Department of Finance here, a case so grotesque that we will devote a full column to it next week.

Of course it's not just the elite in the state sector who benefit from this system. All state-paid workers like civil servants, soldiers, police, teachers, nurses, and so on get guaranteed pensions of around two thirds their pay level.

Their pensions are guaranteed for life. They may not be huge, but they are still likely to be double what similar middle-income workers in the private sector will be getting from their devastated private pension funds. How can this be justified?

Higgins -- whose inauguration speech was an appeal to the country to get back to caring and sharing and the old Irish values -- needs to do some soul searching on all of this if he is to lead the Irish people into a new era of fairness and equality, as he wishes.

His predecessor, Mary McAleese, voluntarily took a cut in her presidential pay from €355,000 to €250,000 when it became the new maximum for state pay last year. (The president was exempt from the maximum but McAleese took the reduction anyway and Higgins will do the same.)

So his pay will be just €250,000 a year. But then the president of that tiny country called Germany gets only €213,000.

Higgins’s pension will be half of his salary ... and of course he will have his ministerial pension and his Dail pension to add to that, and maybe a pension from Galway University where he used to teach as well. He could end up with more pension money than Brian Cowen or even Bertie Ahern! And it all comes out of state funds!

To summarize all this, there is a lot of talk about fairness here and there was a lot of emotional stuff about it in our new president's inauguration speech. But the political elite in Irish society are far better at talking about a fair society than doing anything about it.

If they are serious, they should immediately cap all state pensions at around €30,000 a year, which is more than many middle income private sector people here are now ending up with after paying into their private pension funds all their working lives.
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Wednesday, November 9, 2011

Can Ireland get a Greek deal too?

Sinn Fein president Gerry Adams attends a protest in Dublin last week to protest the payment of €700 million worth of unsecured Anglo Irish bonds.
With the distraction of the presidential election over, it was back to reality here last week.  And what a shock to the system it was!

It was the reverse of waking up from a nightmare.   We woke up from a few weeks of pleasant daydreaming and joking about who we should choose to be our next president to find ourselves deeper than ever in the economic nightmare.

After all the pious, pretentious waffle from the second rate candidates in the presidential race about inspiring us to get through our present difficulties, it was clear last week that inspirational speeches were not going to be much help.  The mess we're in won't be fixed with poetic blarney.  

The shock awakening from our presidential day dreaming began last Wednesday.  That was the day the former Anglo Irish Bank was due to pay back over €700 million (or around $1 billion) to unsecured bondholders.

Anglo, as you know, is bust and is being wound up.  It owes tens of billions to European banks that it borrowed during the boom.

Much of this debt is secured.  But a lot of it, like the Anglo bonds due last week, is unsecured.  The investors got a higher interest on these bonds because there was some risk involved. That's what "unsecured" means.

Given that we are facing huge cutbacks in state spending here in the budget in a few weeks time, a lot of people here felt that we should not pay this unsecured bond back in full.  A lot of services that are about to be cut could be kept running with that  €700 million.

Yet to the horror of people here the government insisted last week that, yes, we were going to pay back all the money.  We are not going to go down the same road as Greece, Minister for Finance Michael Noonan said.

Our problem, of course, is that all our bank debt has been guaranteed by the Irish state.  That's why we're in this terrible mess.

The state guarantee covers all bank debt, including unsecured bonds.  Cover for these bank debts was part of our EU-IMF bailout.   But it's the ordinary taxpayer here who will be paying for the bailout for years, through lower services and higher taxes.

So understandably people here are looking at the deal Greece has got and are asking can we get that too?
The latest deal that Greece got just a couple of weeks ago includes French and German banks writing off nearly half of the massive mountain of debt that the country owes them.   They are doing this even though
Greeks have behaved badly since they got into the EU, borrowing, overspending, failing to collect taxes and cooking the books to hide what was going on.

They have failed to meet the reform targets set for them in the past few years.  Yet they are now being rewarded for this irresponsible behavior not just be getting even more money, but by having half of their debt written off.

Meanwhile the Irish, the good boys of Europe, are getting no debt relief.   All we have got from the EU-IMF inspectors is praise for sticking to our austerity program to reduce our budget deficit.   We've got lots of praise, but no debt relief.

This matters to everyone here because in the end the burden of repaying the huge EU-IMF bailout falls on our
taxpayers. Our services are about to be slashed and we will be paying a lot more tax.

And the misery is going to continue for at least the next three  years, with huge cutbacks and extra taxes in each budget up to 2015 in an austerity program which was outlined by the government here last week.

So the announcement last week that the government was going to repay this unsecured  €700 million euro bond in full enraged people here.  It seemed unjust and unnecessary.   Unjust because of the deal that was cut for Greece and unnecessary because the bond was unsecured.

There was outrage in the Dail (Parliament), with the opposition demanding that the government give a severe haircut to the Anglo bondholders.

We don't know, but it is likely that many of the original bondholders will have sold on to other investors at a reduced rate anyway, perhaps at 80 or 70 cent in the euro, or even less.  The speculators who now hold these bonds probably can't believe their luck that the Irish government has redeemed them in full.

And the Anglo nightmare doesn't end with the bond that matured last Wednesday.  There's a bigger bond, also unsecured, maturing next year and more to come after that.

People here last week were furious when the €700 million euro Anglo bond was repaid in full.   It's going to be even worse in the years ahead as the cuts and taxes bite deeper and deeper.

So there was a strong view among people here last week that we need to stop being the best boys in the
European remedial class and start being as difficult as Greece.  Maybe we should threaten a referendum as well!

The government here explained last week that we really had no choice.   We have been instructed by our EU masters that all bank bonds must be repaid in full.

That's why we were given the bailout, partly to cover the sovereign debt and partly to stop our banks defaulting.  Ongoing payments under the bailout depend on us repaying bondholders in full.  But people here are not buying it.  It's more of the same stuff, they say.

If Greece got a deal, why can't we?  Europe is giving us the mushroom treatment (keeping us in the dark and throwing manure over us).

At the very least we should be burning unsecured bondholders, people here were saying last week.  These bondholders took the risk and they need to take at least some of the pain.

It's a popular view and one that is hard to disagree with.  But sadly things are never as simple as that in the financial world.

In spite of the fury of people here about this, the truth is there is no easy answer to the problem.
Yes, we can start burning bondholders, but we need to be very clear about where that could lead.

The first thing that could happen if, say, we had imposed a 50% haircut on the bond we repaid last week is that all other Anglo bondholders would start looking for their money back.  If one bond is not paid, legally all other bonds become payable immediately.    And there are over €12 billion in Anglo bonds out there.

So what, you say, give a big haircut to the lot of them!  Well, okay, but that would undermine confidence in the other Irish banks and their bondholders would soon be lining up to get their cash as well.

The government could have tried to ring fence this one Anglo bond, of course, and say that all other bonds would be paid in full.  But how much credibility would that have?

Markets make up their own minds and are currently very slow to believe what governments say.   At the very least a default on the Anglo bond that matured last week would have completely messed up Ireland's plans to get back into the money markets in the next couple of years to access normal funds to replace the bailout.

It would also have led to a hike in the interest rate both for our sovereign debt and all the rest of our bank debt.  In the end that would have cost us a lot more than the €700 million we paid back last week.  It would certainly have delayed the time when we can get out of the bailout and back to normal financing of the state.

All of that makes sense.  It's what most (but not all) the economists and experts here think.
Yet there is still a lingering feeling that we are being taken for a ride.  That we need to start kicking back to see what will happen.

There is, however, a problem with that.  It's the doomsday scenario.

The EU has hinted that if we default on any of our debts, they will stop the bailout immediately.  That could be a bluff, but we can't be sure.

If it did happen, Greece wouldn't be the only place with riots in the streets.   In an instant, the pay of everyone who works for the state and all welfare payments would be cut in half.

Many schools and hospitals would close, among other state services.  The state here would implode.
So the lesson is clear.  We have to work steadily over the next few years to eliminate our budget deficit in an orderly fashion.

If we have to fund all state pay and state services from tax, then revenue and tax must be in balance.
When we get to that point, we can then default on bonds if we want, without threatening the future of the state.  Until then, we are stuck.  

We can use the Greek comparison to pressure the EU and the IMF for a better deal, for much lower interest
rates on our bailout money and for longer repayment terms.

A debt reduction deal was given to Greece because they simply couldn't pay.  We still can, so far.
That's the reality, no matter how unfair, painful and sickening it is.

Wednesday, November 2, 2011

President elect Michael D Higgins: the man who will talk for Ireland

President elect Micheal D Higgins and his wife Sabina - press conference in Dublin Castle. Photo Photocall

May the best man win, people here say before a contest.   Fairness is important and the best man should always win, of course.

But in real life, as we know, it doesn't always happen that way.

In this presidential election, however, the best man did win.   Which wasn't really a surprise because, despite his diminutive stature, Michael D. Higgins was head and shoulders above all the other candidates.

That was recognized by the voters as the campaign went on.  And he ended up getting the resounding victory he deserved.  

The man could talk for Ireland, people said in wonder after some of his effusive speeches.  That's what the presidency is largely about.

So on that level Higgins was the perfect candidate and will be an able president.  But there are other levels and we'll come to that in a moment.

He's been around a long time, so everyone in Ireland has a Higgins story.  This one is mine:

A long time ago, shortly after I started in journalism, I used to do Mayfly fishing on the Corrib every year.  In case you're not familiar with that, it's the week or two when the Mayfly hatch on the bottom of the lakes, rise to the surface and dance over the water. The trout go crazy for them so the fishing is terrific, if you hit it at the right time.

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The exact time varies from year to year, depending on sunshine, rain and water temperature, but it's usually in May. When we would hear the Mayfly were "up" a small group of us would drop everything in Dublin, grab the rods and the sleeping bags and head for Galway.

For us, it was always to the upper end of the Corrib, to a little cottage on the edge of the lake rented by the photographer Liam Jordan from Ballinasloe.  The place was quite remote, had no TV, and in the evenings we would sit around the unlit hearth chatting over a few bottles of Guinness.

One evening Liam arrived back with a friend called Higgins, a young lecturer from Galway University who was a rising light in the Labor Party and had recently become a senator.

That night he held the company spellbound with his passionate analysis of what was wrong not just in Ireland but in various other places around the world.  It was the early seventies and the North had recently gone up in flames so there was lots to talk about.  The conversation went on until it was starting to get bright outside.

I remember being impressed at the time and, when I got back to Dublin a few days later, telling the newsroom to watch out for this guy Michael D.  A future leader of the Labor Party, I told them.

Back then, of course, we all had hair, even long hair, and we were all socialists who were going to change the world.  “The Seventies will be Socialist” was the Labor slogan.

We had all been part of the student revolution in the late sixties, and being left wing and anti-establishment was the norm, unless you were a hippy who had dropped out, man.  Higgins was the kind of radical young lecturer we all looked up to.

Since then, most of us have grown up and realized that the world is more complex than it seemed back then.  We got middle aged and our politics moved to the middle -- and then even a bit to the right.

Over time we learned that it's not always the establishment's fault and left wing solutions don't always work in the long run.  Individual enterprise and personal responsibility are factors in making a society a success.
Too much state intervention and support can produce a dependency culture that saps initiative.  You can end up with a lower tier of society in which being unemployed is a choice.

Crime, drugs and alcohol become major problems and families become dysfunctional.  No one takes any responsibility for anything.  Everything is the state's fault.

Listening to the passionate outpourings from Higgins over the past few days since he became president-elect, it struck me that he still sounds very much like he did that night on the Corrib all those years ago.

One can understand his euphoria, but it's harder to pin down exactly what he is saying about the future of Irish
society, other than that his vision is still very much a left wing one.  All that stuff about fostering an inclusive society, about the old values of sharing, about uniting us with new ideas and a caring, cooperative approach rather than the narrow individualism and greed of recent years.    

It set me to thinking about what had changed me, and to wonder why he seems not to have changed much at all over the nearly 40 years that have passed in the meantime.  And the conclusion I came to is relatively simple.

As a journalist over the years I have had to scrabble hard to make a living, working for various newspapers.  It's the free market.  You produce or you don't get paid.  It always boils down to that.

The better you are and the harder you work, the more you get.  And it's the same in most areas in our economy and our society.

In most, but not all.  Higgins, for example, has lived a life in the warm embrace (and pay) of the state as a university lecturer, a politician, a minister and, in the future, will be doing so as president.

Of course we need public servants and they deserve to be paid.  But it's not an area that is as demanding as the private sector.

The pay levels for state employees here, particularly for the jobs Higgins did as university teacher and politician, are extraordinarily high in comparison with other countries.  There are long holidays, your monthly paycheck is not dependent on the company you work for making a profit, and when you retire you get a generous guaranteed pension that very few people in the private sector these days can match.

All wonderful and laudable, of course, and in an ideal world we would all be this lucky.  But is it possible to spend 40 years cosseted in this system without being influenced by it?

Or does it mean that, without realizing it, you end up with a view of society that may be a bit naive?  
Higgins can talk for Ireland and he can talk 'til the cows come home.  His effusive sentences form a stream that swell with emotion and flow onwards gathering momentum as they go, with no end in sight.

He's an interviewer's dream.  One question produces a torrent.

Stopping him is the only problem. That and understanding exactly what all that flowery passionate language is saying.

It's seductive, of course, and vaguely nostalgic, which is why people respond to it so well.  He could talk for Ireland, they say.

But does all the worthy talk make sense?  Is it setting out a coherent, realistic vision?  We will see.

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There is no doubting his sincerity.  That is not in question.

It's more a question of keeping a grip on ourselves and our emotions as we face into the all too real economic challenges that lie just ahead of us.  For that we need a president who will set out a realistic, achievable vision without too much embellishment.

Listening to Higgins speak, it always seems to me that the effusive emotion signals some unresolved inner pain.

It may well be rooted in his father’s poverty and illness in Limerick in the forties which forced his parents in 1945 to send five-year-old Michael D. and his younger brother to live with his unmarried aunt and uncle on a bleak small farm in Co Clare.

By the time he sat his Leaving Cert both of his parents were seriously ill and Higgins and his brother, both teenagers, had to take jobs in factories in Shannon to put food on the table.

It was a tough start in life.  But he was bright and education saved him.

After school he got a job as a clerk in the ESB (power company) in Galway.  He had also started to write poetry, and it was an admirer of his verse who gave him the money to enroll in Galway University.

So it's clear that his powerful sense of social justice and his hunger for equality lies deep in his psyche and was probably developed in adolescence. There followed a stellar academic career as a lecturer in political science and sociology before he moved into politics.

He has said that he wants to develop a presidency where the ideas and beliefs that led to Ireland's economic collapse will be challenged. "I have lived by ideas all my life, and one thing you can take in this presidency is that ideas will be valued," he said.

But will they be the right ideas? The 70-year-old Higgins was once derided by the former Progressive Democrat leader Dessie O'Malley as likely to "go mad" if he was made minister.

Well he was, and he didn't (although being minister for the arts is never too stressful).

So Higgins is unlikely to go mad in the more benign role of president, even though his head is always bursting with ideas and worthy analysis.   He may not go mad ... but what about the rest of us?