Finally, Ireland exit the bailout and they might even stop eating pigeons

Anti-austerity protesters on O'Connell Street last week.

First, I want to assure you that, tough though it is for journalists here now, no pigeons were hurt during the writing of this column. 

You will have seen The New York Times story about how things are so bad in Ireland that an out of work company director has to hunt and shoot pigeons to survive. 

He has since admitted that this was a slight exaggeration.  Yes, he likes shooting as a sport and he may have shot the odd pigeon.

But the welfare payment here for someone like him who is out of work is €188 (or $258) a week. In the discount stores like Lidl and Aldi you can buy a week's food for less than a quarter of that.

So unless you're a really gullible New York Times reporter you're not going to believe that someone like that is depending on pigeons he shoots and barbecues in the back yard. 

The former company director does not deny that he said it.  The really shocking thing is that the reporter, Liz Alderman, who is chief European business correspondent for the Times, believed that this was how he fed himself.

She needs to get out more.  Or at least become more familiar with the Irish tendency to spin yarns.

Alderman was in Dublin recently to set the scene for Ireland's exit from the bailout last weekend. 
She told a cautionary tale.  And despite the dead pigeons story that she swallowed and regurgitated, she was right to do so.

So, leaving the pigeons to rest in peace, what does Ireland's exit from the bailout actually mean? 

Taoiseach (Prime Minister) Enda Kenny went on television to address the nation on Sunday night to mark the bailout exit and to explain exactly what is involved.

On Sunday we reached the end of the three-year bailout program which began at the end of 2010.  Over the three years we have been given €67.5 billion by the Troika -- the IMF, the EU and the ECB -- to keep the country going when we could not borrow money from anywhere else.

We have made considerable progress in getting our finances back on track, and at this stage the financial markets are now cautiously willing to lend to us again. So from now on we can manage without any more bailout money.

That means that we have our economic sovereignty back, or as much sovereignty as any other European country has these days.  Taking the Troika money meant that the Troika laid down the budgetary targets Ireland had to follow for the last three years.  Now that we are out of the program, instead of the Troika being in control of our finances, we are in charge again. 

But as Kenny made clear in his TV speech to the nation on Sunday night, it does not mean that our financial troubles are over.  Kenny put on his sternest face to emphasize that.

The fact is that we still have a long way to go to reach a position that is financially sustainable.  But it is only fair that we briefly pat ourselves on the back, as Kenny did. 

We are the only one of the European countries who got in a mess which has managed to get out cleanly and on time.  We're not Greece, which is still a mess, and we're not even Portugal, which is likely to need another bailout.

We managed to implement the tax hikes and spending cuts that were part of the bailout program without mass demonstrations on the streets.  All of this can be seen as a success. 

But it is success that has come at a heavy price.  It's much too soon for anyone here to go around singing “A Nation Once Again.”  Hence Kenny's serious face.

The Irish economy is still limping along. Unemployment is still 12.5 percent.  And it would be much higher except that tens of thousands of people, especially young people, are emigrating every year.

Since we started the so-called austerity program our budget deficit has come down bit by bit.  Under the Troika program we are supposed to reach the bailout target of a deficit of three percent of GDP by 2015, the level that all EU countries have agreed not to exceed.

The forecast deficit for 2013 is 7.3 percent of GDP, for 2014 it is 4.8 percent and for 2015 it is 2.9 percent.  But it is still a struggle and the last steps are the hardest to achieve.   Even though we have slashed state spending and hiked taxes in the last few years, our budget deficit next year, for example, will still be around €10 billion. 

In the years between 2015 and 2020 we are supposed to start running budget surpluses, enabling us to begin paying back the mountain of money that we owe.

The size of our national debt is enormous, now over €200 billion, including the 67.5 billion euro bailout money.  Our debt to GDP ratio is around 125 percent which is on the borderline of what the financial markets regard as unsustainable.  Any slippage in our austerity drive and the markets will pull the plug on us again. 

Interest payments on our national debt are now running at around €10 billion a year and that is a crippling drag on our economy as money is sucked out of the country, money that otherwise could be spent on state services and job creation.

In a few weeks around €7 billion euro in bonds are maturing and the investors will have to be paid. 
Since we are back in the financial markets we can roll over debts like this into new bonds. 

But that €7 billion is just one of a succession of bond lots that will be maturing in the future; it shows what we are facing in the years to come.  Between interest payments on the debt and repayments on maturing bonds we are trussed up like a Christmas turkey, even if we are out of the Troika bailout.

We got into this mess, you will remember, because we were spending far too much during the boom years and when revenue collapsed as the bubble burst we were caught.  As Kenny said in his speech, "Everyone knows that you can’t keep spending more than you are earning."

Complimenting the Irish people on staying the course, he said that we have already completed over 90 percent of the necessary cuts and tax increases.  That is true, but the last 10 percent will be the most difficult. 

Kenny is optimistic.  As a result of the progress we have made, he said, we can now begin to reduce the national debt burden.

By 2020, he said, with continued effective management of the public finances, "we can eliminate government borrowing and cut public debt by a quarter, relative to the size of the economy."

That sounds great.  But the key phrase here is "relative to the size of the economy." 

Built into the government forecast are projections for growth of at least two percent a year, and you have to be as optimistic as Kenny to believe we will achieve that consistently. 

The forecasts right now are good, but it's really out of our control since it depends so much on a significant recovery in our export markets. 

There is also our ability to control spending.  Next year we are supposed to be taking a further €2.5 billion out of the budget, close to €1 billion of which is supposed to be cut from health spending. 

Given that the Department of Health seems incapable of enforcing cuts (instead of the planned cuts this year there was a spending over-run of over €200 million) that seems like pie in the sky. 

Where that will leave the deficit next year is anyone's guess.  And if you add in a failure to grow the economy we could be in trouble again.

The bottom line on our bailout exit is that it is a precarious business which, even if we stay afloat, will leave very little over to revive the economy here, thanks to the huge burden of debt we now carry.  We could be looking at a lost decade, or longer.

We have got this far thanks to the squeezed middle class in the private sector here who have been bled dry by tax hikes and hit by cuts in or charges for 'free' state services.  They have also seen their incomes stand still or go down at a time when everything seems to be as expensive as ever.

And as you know, tens of thousands of them are struggling and failing to pay mortgages on properties they bought during the boom and which are now worth half what the homes cost. 

You are familiar with the stories from here about all the ordinary couples who work hard and find that at the end of each month they have nothing left over when all the bills are paid.  And on top of this most people in the private sector here have seen their pensions vanish with the market collapse.

In contrast with this there is a large section of the Irish economy -- professional people and people on the state payroll -- who have escaped much of the squeeze that has hit people in the private sector. Their pay is largely intact and their pensions are protected. 

Our politicians, judges, civil servants and so on are all part of this elite.  Our saintly president, for example, who never misses a chance to deliver a sanctimonious lecture, is in line for four pensions.

That's another legacy of the bailout, a deep feeling here that the pain has not been applied equally. 
And that is why the radio stations here that did street interviews with people in the past few weeks found very mixed feelings about the Troika departure. 

A lot of people feel that it was the Troika which was pushing for cuts in wasteful state spending, often on pay and pensions, and demanding that professional fees from lawyers, doctors and others be cut so that they are more in line with European norms. 

Without the Troika there to tell our politicians what to do, will these reforms ever get done?  Or will the elite escape while ordinary workers are squeezed even more?

The government announced a new six year plan on Tuesday which sets out the steps the government will take to continue our economic recovery between now and 2020.  In the last few days some ministers have also begun to talk about a slight easing of the tax burden for the middle class (just in time for the next election). 

But the reality is that things will be tough here for the foreseeable future, even though we have exited the bailout.   

It may be a historic moment, but Kenny was right to down play it.

Now where did I leave that shotgun?  It's time to bag a few pigeon for the Christmas dinner. 

"Greed is good", especially in Ireland it seems with pillars of society on the take

Dr. Rhona Mahony, the master of the National Maternity Hospital in Dublin

Greed is good, Gordon Gekko said in the movie "Wall Street."

Well, Gordon sure has a lot of followers in today's Ireland.  Because over the past few weeks here we have seen examples of greed that would make even Gekko blush. 

One thing you can say about real people who resemble the fictional Gekko is that at least they take risks in the financial markets and make their money that way.  They may be capitalists who are red in tooth and claw, but they don't pretend to be anything else.

What we have seen here in the past couple of weeks, however, is a different kind of greed.  It's greed by the “top people” in senior positions in “official Ireland” who are regarded as pillars of our society, and it's greed that frequently feeds off state money.  In that sense it's more despicable and sickening than anything the real life Gekkos get up to.

Over the past four or five years here, the austerity regime enforced by the IMF and the European Central Bank has hit the living standard of people at all levels in the private sector hard.

Unemployment has soared, pay has been cut and private company pensions have collapsed as companies have struggled to survive or have gone under. 

The state sector has also taken some pain, but nothing like that which has been suffered in the private sector.  We have ended up in a situation where state workers on average earn far more than their private sector counterparts and where their generous pensions have survived, even if trimmed a little.

It's obviously unfair, but nothing has been done about it because it goes on under the radar. 

In the last few weeks, however, we have seen several examples which have enraged people in the private sector who were under the impression that the burden was being shared equally, at least to some degree.

One of the measures that has been in place here for a while now is a cap on state sector pay.  This is supposed to mean that the top earners in the state sector have had their pay capped to mirror the pain in the private sector. 

But instead of accepting this and being grateful that they still have big salaries and fat pensions, some of the top people involved have sidestepped the cap.   

The most high profile example of what has been going on is the case of Dr. Rhona Mahony, the master of the National Maternity Hospital in Dublin (it's the biggest maternity hospital in the country with around 10,000 babies a year born there). 

Because she is young, attractive and a woman in a profession dominated by men – and also because she played a starring role in the parliamentary committee hearings that preceded the abortion legislation here – Mahony has been the pin-up girl for the media here, and that made the revelations about her pay all the more shocking. 

As head of the hospital, Mahony is paid a state salary of €236,000 ($321,000), far more than her equivalent in other European countries would earn.

That's not unusual here – professional salaries in Ireland are way out of line.  But what came to light in the last few weeks is that she is also getting a €45,000 ($61,200) addition (or “top-up”) to her salary, which was not publicly known.

At a time when state spending on health is being slashed and ordinary workers have been hit hard by austerity, this kind of secret “top-up” is disgusting, particularly since it is on top of such a very high salary, a salary that ultimately comes from the ordinary taxpayer.  As such, it is clearly a breach of the public sector pay cap. 

Mahony denies this and says that her top-up actually came from fees from her private patients.  She has yet to explain how those fees added up to such a neat figure as €45,000. 

The wider question, of course, is whether someone like her in such a demanding role should be seeing private patients at all.  Since she's on such a huge salary from the state, surely she should be giving all her time to public patients?

Her claim that she has been singled out and vilified by the media is a reference to the fact that most senior consultants in the Irish health service earn big money from private patients in addition to their pay from state funds. 

One way or the other, it seems shocking that money from hospital car parks or shops or, even worse, public fundraising should be going to fund top-ups for the top people running our hospitals. 

A lot of hospitals here, including children's hospitals, have extensive fundraising operations, and people who support these are disgusted that some of the money they were raising was being diverted into the pockets of senior managers.   

The outcry over the Mahony case led to a review of pay to top managers in the other hospitals here and, surprise, surprise, it was revealed that nearly all of them are getting big top-ups in breach of the public sector pay cap. 

As public anger grew last week, the net was cast wider and other cases emerged in organizations that get public money.

Probably the most shocking was the case of the Central Remedial Clinic, one of the best known charitable organizations in the country which provides remedial care to handicapped people, accident victims and so on.

The clinic admitted last week that Paul Kiely, its former chief executive, had his state salary of €106,000 ($144,000) topped up by €136,000 ($185,000) in funds that came from public donations meant to support the work of the organization.  Charitable donations were also used to top up the salaries of several other CRC executives.  Kiely, who retired this summer, is a close friend of the former Taoiseach (Prime Minister) Bertie Ahern. 

As far as most people here are concerned, this was taking money away from handicapped children and adults who desperately needed it.  It is beyond disgusting. 

And to make matters even worse, it has been discovered that the fundraising arm of the CRC put €3 million ($4m) into the pension pot of the organization over the past year.  That's an awful lot of euros from CRC collection buckets filled by a sympathetic public on the streets of Ireland.  As I said, it is beyond disgusting.

All this is typical of what has gone on here since the austerity drive started after our economic collapse a few years ago. The top people – and particularly people who are paid by the state – have managed to insulate themselves from the shocks being felt among ordinary workers in the private sector. 

They have found ways of maintaining their Celtic Tiger pay, pensions and extras.  And their sense of entitlement – as in the case of Mahony – is staggering. 

It's a different mindset, a them and us mentality. They feel so important and essential that they regard themselves as exempt from the grinding austerity afflicting everyone else.

This is seen in particular in the whole pensions issue.  The pension schemes run by 80 percent of private companies in Ireland have been decimated by the economic crisis leaving the staff who have been paying into these schemes all their working lives with a very uncertain future. 
An example would be Independent News and Media (INM), the biggest media company in Ireland.  Its pensions have been cut in half.  Yet people in the state sector are still getting pensions that are almost as good as when the crisis began.

How?  The state simply borrows the money to pay them.

All state workers – teachers, nurses, police, etc. – benefit from this.  It also extends to the semi-state sector, like the ESB, the giant electricity supply company here which used to have a complete monopoly of the power market in Ireland and is still the dominant player.  Workers there (among the highest paid electricity workers in the world) are now threatening a national power strike in a few weeks because they are unhappy that their pension scheme is underfunded.

The value of the ESB pension scheme crashed with the stock markets, the same as the pension scheme in INM and numerous other private companies.  The difference is that workers in private companies are being left in the cold, but workers in the state and semi-state sectors, like the ESB and Aer Lingus, are getting their generous pensions paid.

No one should be surprised at this because all our politicians and senior civil servants are part of this system that protects their fat pensions.  Even our saintly president is in line for several guaranteed pensions when he retires. 

It's not just pensions.  The top-up scandal that breaches the public sector pay cap is also found at senior political level. The president, the taoiseach and senior ministers all have advisors who are getting salaries that are way above the capped level they are supposed to be at.

They are all special cases, you see, so talented and important that they must be paid extra.  No austerity there. 

All this illustrates that the top people in Ireland – including the top people in our state-owned banks – look after the most important thing first: themselves.  Their sense of entitlement and importance is so strong that they are deeply resentful at the suggestion that they might be doing anything wrong. 

The top people here have the morals of the elite in the worst banana republics.  And that did not change, even when we moved from the Celtic Tiger to the austerity program.