The View From the Ground in Ireland (A Disaster Cat Meow Moment) - pt 1

Today, I'm going to side step a bit from the on-going saga of Water-World Ireland.  I am happy to report that my husband's office is almost dry, due to the predicted rains going South and East.  This has resulted in Dublin now being under flood warning, but here in Offaly we get a bit of a chance to dry out.  Many fields and roads are still flooded, as are the affected towns.  But our house is now covered in frost from the cold nights, rather than surrounded by runoff, and we have a totally dry floor by this evening.

However, in addition to the flooding, another crisis is looming, and that is the economic one.  I read an article earlier today from FT.com on the situation in Greece which is doing even worse than Ireland, in terms of its economic sector going south this Winter.  It seems the writer is predicting that the EU will tell Greece they need to solve the problem themselves, that they will not be bailed out, unless they agree to all sorts of "cuts."  For some reason, to the people on the ground, these cuts always seem to look like a million ways to inflict pain on the average person, while the large corporations and banks go on as before.  This may not really be completely true, but that's how it often feels.

Since I know that Ireland may be next on the list of the EU's bad children to be brought to the woodshed, I thought I would write just a bit of what I have observed on how people on the ground here feel about the situation.  I can't speak for everyone, and the Paddy I'm writing about is pure fiction, but it's based on people I know or have seen interviewed.

First a bit from the story that started me thinking about this:
snip...

Greece can expect no gifts from Europe

 http://www.ft.com/cms/s/0/de16732a-dd14-11de-ad60-00144feabdc0.html

By Wolfgang Münchau
Published: November 29 2009 19:22 | Last updated: November 29 2009 19:22

After Dubai, will Greece be next? This question is technically a category error, since Dubai World is not a state but a state-owned company. But many investors rightly do not care about the difference. Last week investors started to fret about sovereign default in earnest. So what about Greece?

We were already wondering about a Greek default at the beginning of this year, when eurozone bond spreads suddenly widened. In February Peer Steinbrück, the former German finance minister, abruptly ended the speculation by saying the eurozone would act if someone got into trouble. There was no concrete action plan. No work had been done to amend European treaties. There was no budgetary appropriation. Just a sentence. Investors believed him and all was well – for a while.

The speculation is now back, but there is one difference. The eurozone will not come to the rescue this time, verbally or otherwise, unless Greece meets a number of conditions the European Union is likely to impose in the coming months.

The EU’s authorities, rightly or wrongly, are more afraid of the moral hazard of a bail-out than the possible spillover effect of a hypothetical Greek default to other eurozone countries. If faced with a choice between preserving the integrity of the stability pact and the integrity of Greece, they are currently minded to choose the former. To safeguard what is left of the stability pact, they are determined to link any help to a country’s willingness to comply. Otherwise the EU fears it might lose all leverage over budgetary processes elsewhere in the eurozone. And no country in the eurozone has flouted the pact more than Greece.....snip

and a bit further down the page:
snip....Unlike Argentina, Greece cannot devalue, and leaving the eurozone is not a realistic policy option either. Latvian-style austerity could thus come one way or the other, with or without default. But it might be politically easier for the present government to have austerity imposed on it from the outside than from the inside. This is another reason why the EU would be happy to let the IMF take a lead....snip

Right, so let me get this straight, the EU's solution to member states who have such high levels of economic collapse and unemployment that they can't feed their folks without borrowing money is to turn them over to the International Monetary Fund?  For this, countries joined a common ecomonic union that was supposed to make things better for them?  In exchange for no longer being able to manage their own currency, the traditional way they would handle such a crisis, the EU member states were promised help from the majority when troubles arose.  I guess this is no longer the case.

Now one of the reasons Ireland was able to shove the Lisbon Treaty down the public's throat on their second vote ("No" means "vote again until you get it right"), was the threat that if they voted no a second time, the EU would hang Ireland out to dry. There were even posters "do you want to be Iceland...?"   Now that they have Ireland in their pocket and the new EU President can make use of the planes and official residence mothballed after the first no vote, it looks like the EU may be prepared to hang them out to dry anyway.  Well, hang Greece out first...but I have a nasty feeling Ireland could be next.

Remember, as part of the EU, Ireland no longer has the power to manupulate currency or so many of the other things a sovereign nation can do to handle an economic crisis.  It gave them up when it joined in with Germany, France, and the other Euro states.

But that is just a lot of economic theory to most people and far from their daily lives.

Let me tell you how this looks on the ground from Ireland, which is probably a hair's breath away from a similar "dressing down" by the EU.

A view on the Ground from Ireland

A Disaster Cat Meow Moment

The average person on the street sees their government pouring money into banks, billions of euros worth, numbers that Mr. Paddy Guinness-Pack can't even get his head around.  The government promises this is so his small gas-station and village shop combination will be able to get their bridge loans to make payroll.  The same ones his dad got when he expanded the business sixty years ago. Paddy's grandfather owned the village shop before then, but his dad went into partnership with the bank when cars became numerous enough to need petrol.

Now, a year after the big loans, the banks are throwing public fits like children to keep paying outrageous bonuses and salaries to their higher-ups.  Paddy knows that part of these banks are owned by him, the tax payer.  He also knows that in January he will have to declare bankruptcy on a 120 year old business because one of these banks is still not renewing his bridge loans, the local manager saying "I'm sorry Paddy, I'd do it if I could, you know that, but me hands are tied." 

Paddy also knows that, unlike when his father and grandfather owned the business, there is no use trying to boost sales in December by ordering small Christmas toys and treats for the shop.  Most of his neighbors will drive to Northern Ireland where the taxes are much lower and the goods are cheaper.  Still, he sells enough to the locals for daily stuff to get by, but, like most small places, he can't survive without those basic bridge loans to pay his staff.  Nor can he risk ordering any more products that might not sell.

So, now he hears that the EU has decreed that Ireland must "be prepared to suffer."  He is already suffering, now they want everyone to pay more taxes?  He sees people on welfare - the really needy ones, not just the "gurriers" (low life) - those with disabled children, those who were laid off last year and have no hope of a job, not getting the Christmas bonus they have had every year since anyone can remember.  There goes Paddy's last hope of any extra Christmas sales.

Instead he thinks, "Why should the taxpayer be bailing out banks and big property developers while my sister isn't able to buy her disabled daughter a teddy bear this year? Why does the EU demand people pay more taxes, when so many people have already lost their jobs and can't pay any at all?" 

And finally he thinks, "What will happen to my four employees when this shop closes?  They will be on the 'dole' along with everyone else."

His own family may be in danger too, since he won't "have a hope o' selling" the place once he shuts down.  He is lucky in that his brother still has the farm, so if they have to, his wife and children can move into the old "granny" house in the back.  He worries that the new home he bought "at the height of the boom", the home the bank assured him he could "always sell later," because "property values always go up", is now worth much less than the huge mortgage he took out when he bought it. 

But then he reads again how the EU "demands" that Ireland "cut back even further" and he gets angry again.  "Where?" he thinks, and "Why?"  He never really enjoyed much of the Celtic Tiger, all it did in his village was put up a lot of houses on the flood plain.  The ones that are now underwater after the recent rains.  More people out of work and homeless now, where will the cuts come from...?

And then he thinks, "The banks, they got all this money, where is it?  What did they do with it and what's gonna happen next?"

I don't think Paddy is mad enough yet to hang bankers from lamp posts, but that does not mean he may not get mad at the  EU and the current government for forcing the Lisbon Treaty down his throat.  You see, Paddy was told to vote yes or the EU would leave Ireland "to hang."  If the EU seems to be doing that anyway...well, let's just say I would not want to be a banker, a huge property developer or an EU official in Ireland over the next few months.

Not that I expect anything really serious to come of this anger, but the Celts did invent Halloween, both the treat and the TRICK part.  Everyone knows the faerie folk can be dangerous to deal with, best to keep them at a distance.  Same with Paddy when he's really unhappy and needs someone to blame.  And this time, I don't think the global warming lobby will be able to distract him with the weather.

No, I suspect that Paddy's first target is likely to be the usual choice in a Democracy.  That of "throw the bums out."  The current government knows their days are probably numbered. You also wonder if they are acting like a combination of Grinch and Scrooge under EU orders to push through as many cuts as they can, before the new guys take over?  Would political parties make deals like that?  Well, I'm not privy to their personal and private meetings, but it does make you wonder, especially since "Lisbon II: The Empire Strikes Back" proved that Ireland's government is more interested in staying in the EU's good books than in respecting the will - and maybe the needs - of their citizens. 

And when the new guys are voted in, what then?  Will they really be able to turn this around or keep the EU from allowing the IMF to come in and treat Ireland as if it were a small Banana Republic whose El Jefe has just skipped town with the National Treasure in his briefcase?  

I don't know, but trust me, Paddy will be watching, as will everyone that lives here.  Ireland may be a small place, but small places are often the bellwethers of what happens in larger places.  


I am going to keep my eye on Greece because the cavalry promised them is starting to have a whiff of Trojan Horse about it.  Perhaps the Greeks should beware of Belgians bearing gifts, and Ireland should pay very close attention to what turns out to be under the wrapping paper?