Mephistopheles receives Ireland’s soul in a memorandum
Walking across the hospital car park, a theological question arose.
Never pretending to be a theologian, I shrugged. ‘I went to the LSE – I’m not good at theology; I can explain the bond market, though’.
‘OK, explain the bond market”.
‘Ah, right. The government bonds they keep talking about are the way the government borrows money. It says if you lend us so much for so long, we will pay you so much a year interest on that money and we will repay the money at the end of the period. If people feel certain about the promises made by the government issuing the bonds, then they will accept a lower rate of interest; if there is any doubt about the government’s ability to repay, then people will look for a much higher rate of interest to compensate them for the extra risk’.
The explanation might not have been entirely satisfactory, but was probably more coherent than attempting the theological question.
The bond markets make unhappy reading for anyone caught in the downward spiral of the Irish economy. No-one will lend us money; even after recent improvements, the yield on Irish bonds is over 10%. If the government wanted to borrow money on the open market, it would have to pay that rate, something it obviously could not afford to do. So, it has to borrow from the European Central Bank and the International Monetary Fund. It is a Faustian pact; Ireland is given money but Mephistopheles in the shape of Christine Lagarde and Jean-Claude Trichet comes to demand the soul of the nation.
Hyperbole? Well how many people read the memorandum of understanding between Michael Noonan and our European paymasters, details of which were only disclosed after the minister had escaped for the summer recess.
The memorandum proposes that, not those who profited, but working people pay for the lunatic policies of the last government. Here are the proposals for the next budget:
Government will propose a budget for 2012 aiming to further reduce the general government deficit in line with the fiscal targets set out in the Council Recommendation in the context of the excessive deficit procedure and including the detailed presentation of consolidation measures amounting to at least 3.6 bn. The EU/IMF Programme of Financial Support for Ireland agreed in December 2010 provides for the following commitments in relation to measures for 2012:
– Revenue measures to yield EUR 1,500m in a full year will be introduced, including:
– A lowering of personal income tax bands and credits
– A reduction in private pension tax reliefs
– A property tax.
– a reform of capital gains tax and aquisitions tax.
– an increase in carbon tax.– Expenditure reduction of EUR 2,100m including:
– social expenditure reductions
– reduction of public service numbers and public service pension adjustments.
– other programme expenditure, and reductions in capital expenditure.
It’s frightening stuff, particularly for the hundreds of thousands who are already struggling. But 2012, is only the first step. In 2013 it gets worse:
Government will propose a budget for 2013 aiming at a further reduction of the general government deficit in line with the fiscal targets set out in the Council Recommendation in the context of the excessive deficit procedure and including the detailed presentation of consolidation measures amounting to at least EUR 3,100 m. The EU/IMF Programme of Financial Support for Ireland agreed in December 2010 provides for the following commitments in relation to measures for 2013.
– Revenue measures to raise at least EUR 1,100 m in the full year will be introduced, including
– A lowering of personal income tax bands and credits
– A reduction in private pension tax relief
– A reduction in general tax expenditures
– An increase in property tax.– Expenditure reductions of no less than EUR 2,000 m, including:
– Social expenditure reductions
– Reduction of public service numbers and public service pension adjustments
– Other programme expenditure, and reductions in capital expenditure.
The poor and the sick and the vulnerable are to pay for the bankers and the developers. The bond markets represent the bars of a cage in which we are trapped with an evil that tells us we must allow people to die so that debts they did not incur may be paid.
And yet people are still not all that cross – or so it seems.
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There’s an air of resignation – whoever you vote for, the politicians get in. Kenny and Gilmore have offered nothing better than Cowen.