Sunday, February 24, 2013

It's the Elite, stupid - What happend to the Irish Economy ?!? /Der Fall Ireland ENG/DEU

(Deutsch ganz unten - dazu müsst ihr auf "read more" klicken) One of the reasons for choosing Ireland (even though seemingly Ireland had chosen me, in a chain of events that I call destiny), was my superficial perceptions of the "Fighting Irish". While I had watched the Arab Spring unfold from SA (South Africa)which had infected large parts of the continent,  Greece’s demonstrations were on all channels, and the Occupy movement had taken Spain, Portugal, the United States among others, surely the Irish would take massive action also? Well, not ye.... while Island (who had similar issues) let their banks fail, in a move in which the government proved to truly represent the people, Ireland’s government failed its average people, yet protest was described as ‘muted, moderate and passive'. What happened?? My initial questions was: Do the Irish have reason to protest ? YES!!! Of all citizens in Europe the Irish have plenty of reason to get mad as hell and not take this s*!$ anymore!

Let me explain: In August of 2008 reckless financing practices had lead Ireland’s banking sector to an imminent collapse, forcing the government to take an extraordinary actions: Underwrite the entire network for the four Irish banks and two building societies, effectively turning private corporate debt into private sovereign debt -> burdening the Irish taxpayer with a liability of approximately €400 billion in leveraged loans at the onset of a recession.
As Ireland has only 4.6 million people and the bailout currently stands at €69.7 billion, this turned an Irish into the most indebted citizen in Europe ( with ratio of General Government debts to GNP of 131%, and when you include NAMA** debt a 153% dept to GNP*** !!surpassing even Greek which has the highest General Government debts/GDP with 132.4%). Ireland’s debt levels are extreme, and based on Gurdgiev (2012) had the highest level of debt to GNP ratio, and the fastest increase of the ratio from 2000 to 2010 in the developed world! Barrett (2012) calls the ease with which the banking lobby imposed massive costs on Ireland “the most successful lobbying exercise ever.”

Ireland was the first EU country to declare itself officially in recession and was the second EU country (after Greece) to have a Structural Adjustment Program imposed by the IMF/ECB/EU, known as ‘the Troika’, during the ‘bailout’ in November 2010 (these sort of things used to only happy in developing countries until then). It’s important to remember that Ireland has only emerged recently from ‘a long and difficult recession in the 1980’s, during which a ‘third of the population’ was living below the poverty line (Lewis, 2011). Only in the 1990'S an era of ‘incessant corruption’ came to an end and ‘the country eagerly leaped forward to embrace a very new world’ (Sweeney, 2009:11).

This new world has often been described as :THE CELTIC TIGER It was a genuine Irish economic miracle in which Ireland caught up with the European frontier after a long period of underperformance, in which conditions where more like in a third world country. With an educated workforce and a low 12% corporate tax rate it was the darling of Multinational Cooperation’s (especially computers and pharmaceuticals from the US) ready to enter the EU market. Employment between 1990 and 2007 doubled and Gross National Product (GNP) quadrupled (Kelly, 2010).  

“They [the Irish] had gone from being abnormally poor to being abnormally rich, without pausing to experience normality” (Lewis, 2011 : 176-177)

Really there were two distinct booms: one export-driven growth during the 1990s and another of credit fueled construction boom after 2000.This second phase of the ‘Celtic Tiger’ was driven by investment in housing and commercial property with dramatic increases in property prices, accompanied by rapid credit expansion, leading to high indebtedness of many Irish.
Where did all this cheap money come from? Well, once Ireland became a member of the Eurozone Irish Banks suddenly had the ability to borrow at virtually the same price (interest rate) as Germany. The reason behind the low interest rates was the ECB’s (European Central Bank) attempt to encourage higher levels of economic growth in economies which were perceived as underperforming (mainly Germany and France). From 1999 to 2008, large export countries in the center of Europe (such as Germany) continued to run a current account surplus - capital and savings - which were channeled into peripheral economies (such as Ireland, Spain and Greece (Regan, 2012). By 2008 the global financial crisis arrived in Ireland and the impact of the bursting housing bubble, which had been engendered by an over-extension of credit, threatened an imminent collapse of the Irish Banking system.

Consequently, this lead the Fianna Fáil-Green coalition government, after a panicked all-night meeting, to give a blanket guarantee for the six main domestic financial institutions in need. On the 30th of September 2008 the Government Decision to Safeguard [the] Irish Banking System was released, and the public was presented with a guarantee arrangement to safeguard all deposits, covered bonds, senior debt and dated subordinated debt of Allied Irish Bank (AIB), Bank of Ireland, Anglo Irish Bank, Irish Life and Permanent (ILP), Irish Nationwide Building Society (INBS) and the Educational Building Society.

At this time it was estimated that ‘only’ about €5billion in bad debts were in the banks and the Minister of Finance at this time, Brian Lenihan of the Fianna Fáil party described this approach as providing ‘the cheapest bailout in history’ (Irish Times, 2008). Since then it actually turned out to be one of the most expensive bailouts in history with the tap rising from €5.5 billion in December 2008, €11 billion in March 2009, €35 billion in March 2010, to €46 billion in September of the same year to currently €69.7 billion. In the beginning the government used the entire €20.7 billion the National Pension Reserve (among other things) to handle the first two years after the bank guarantee, but as more bonds came due in 2010 and the extend of the ‘bailout’ needed became clear. Fears of contagion swept the European Union ultimately leading to the arrival of the Troika (ECB, EU and the IMF) in November 2010.

A curious fact is that the identity of the bondholders is a secret !!!! (all over the globe, not just in Ireland, as they claim this to be a company's secret). So we don't know who gets to benefit from the 'bailout' but it is certain that they are wealthy investors mainly from France, Germany, the Netherlands and the UK, important enough to demand such action. Furthermore the funds given to the Irish financial institutions are not disclosed to the public. For example Anglo Irish and INBS were provided with €34.7 billion to pay of their bondholders of the next decades, yet we do not know how much is left of this money and when it will become due.

It should be underlined that while the bank guarantee was given based on a decision within Ireland in 2008, the government was put under severe pressure by the EU to take on large amounts of additional bank-related debt in 2010, even though now there is widespread agreement that the “Irish model” to handle bank debt does not work (Whelan, 2012).

Three fiscal austerity packages have been introduced since (2008, 2009 and 2012) and by 2012 the government will have implemented a fiscal consolidation package amounting to €25 billion (or 16% of GDP). Presently the health and education sectors are most drastically affected with radical reduction in staff numbers (Regan, 2012).

The effect on the Irish people have been adverse but on many accounts not equal, as the government has ‘plucked all the low hanging fruit until now’ (Minster of Finance Michael Noonan). Unemployment soared when the construction bubble burst in 2008 and the unemployment rate went from one of the lowest in the EU of 4.2% to a new high 14.9% in 2012 (CSO). So far the Irish are angry, but why have they not taken to the streets yet in a fashion that would cause real change??... see next entry

** The National Asset Management Agency (NAMA), which is not counted as part of General Government Debt as it is a ‘Special Purpose Vehicles’ , has additional outstanding debt of a €29.4bn. Special Purpose Vehicles (SPV) are used to isolate financial risk and also referred to as a “bankruptcy-remote entities” whose operations are limited to the acquisition and financing of specific assets, which have become a household word thanks to Enron according to investopedia *** A more realistic debt ratio for Ireland should consider the GNP however. The CSO (CSO, 2012a) published GNP for 2011 of €129 billion (GDP was €161 billion). Considering the €169.3 billion in General Government debts, the debt per GNP ratio is up to 131%, barely less than Greece (yet clearly surpassing Greece if the NAMA debt is included to 153% of GNP ).

Hier die (verkürzte) Deutsche Version:

Die kleine Insel am Rande der EU, stand am Anfang meiner Suche nach einer geeigneten Uni gar nicht mit auf der Liste (hier noch ein Dank an Swantje!). Aber wie es der Zufall will war es dann noch die Universität Dublin (University College Dublin) an der ich meinen Master in Internationalen Beziehungen absolvieren durfte. Vor Ankunft hatte ich große Hoffnung dass das kleine Land mit der turbulenten Geschichte, von der Rezession und dem sogenannten Bank-'bailout' (Banken-Rettungsplan), auf die Barrikaden gehen würde um das bestehende System zu ändern.

Ganz ähnlich wie in Spanien und in Island war das Land 2008 hoch (privat)verschuldet, und als die weltweite Rezession (gestartet in Amerika) in Europa die Märkte erschütterte, war es nur noch eine Frage der Zeit wann die Immobilienblase platzen würde. Sie tat es im August 2008. In einer Nach und Nebel Aktion, und nur durch 'gute Beziehungen' zwischen Irland's Bänkern und den Regierungschefs,  wurde ein Rettungsplan (für die Bänker) geschmiedet um die Märkte zu beruhigen. Die Irische Regierung verkündete am 30 September 2008 für alle Schulden der sechs grössten Finanz Institutionen Irlands gerade zu stehen (insgesamt Schulden in Höhe von €400 Milliarden)!

Was im Klartext passierte: private Schulden wurden verstaatlicht. Somit wurde der Irische Bürger für das zocken und die geldgier der Bankiers herangezogen, und der Fianzminister fügt im nationalen Fernsehen hinzu: let’s be fair about it, we all partied’  (lass uns fair sein und zugeben: Wir haben alle viel gefeiert - frei Übersetzt). 

Bis heute (Feb 1013) hat das riskante Handeln der Bänker den Irischen Steuerzahler €69.7 Billionen in 'Rettunsschirm  Geldern gekostet/in zukünftigen Schulden bzw Kürzungen zugemutet. Mit nur 4.6 Millionen Einwohnern ist das ne Menge Holz und macht einen Irischen Bürger zu dem höchst Verschuldeten in der EU (153% per BNP, im Vergleich Griechenland: 131% per BIP)

Die Frage ist: Wie konnte es soweit kommen? Irland, in den 80's noch fast Dritte Welt, durchlief einen gewaltigen Aufschwung - den Sogenannten Celtic Tiger. Die erste Phase - in den 90'ern -wurde durch gut-ausgebildete, englisch-sprechende Arbeitskräfte und niedrigen Unternehmensteuern (von nur 12%) angekurbelt. Vor allem US-amerikanische Multi-Nationale Unternehmen kamen nach Ireland (viel Pharma und IT) um den Europäischen Markt besser zu erschließen.

Die zweite Phase war ein Bau-Boom, angeheizt von billigen Krediten, die erst möglich wurden als Ireland der EU beitrat und Gelder zu extrem niedrigen Zinsen von der EZB beziehen konnte (zum selben Zinsatz wie Deutschland!). Unter anderem weil die EZB Wachstum (vor allem in Deutschland und Frankreich) fördern wollte und keine Zentral Kontrolle installierte um die Massen an Geld zu kontrollieren. Somit wurde Geld billig vergeben, gebaut wie nie zu vor, und die Immobilieblase immer weiter aufgebläht - bis sie platzte und der Steuerzahler nun herhalten muss um die Schulden der Banker zurückzuzahlen. 

Kurioserweise sind die Anleihenhalter, die genau dieses Geld wieder haben wollen, stets geheim. Man weiss dass die Investoren meist aus Deutschland, Frankreich und den Nierelande kommen, allerdings ist eine Liste von Personnen, für die die €69.7 Milliarden Schulden aufgenommen wurde, nicht verfügbar. Dazu eine tolle Doku auf ARTE - Staatsgeheimnis Bankenrettung:

Anfangs (Ende 2008)  hieß es noch, Irland bräuchte nur €5 Milliarden um alle Schulden zu deken, u.a. weil die Regierung erst mal die Rente-Reserve von €22
Milliarden leerte um die Anleihen zu bezahlen die fällig waren. Allerdings war Nichts mehr da als 2010 der nächste Stoß Anleihen fällig wurde - somit kam die Troica (EZB; EU, IMF) um 'aufzuräumen und zu kürzen. Mittlerweile mussten auf diese Herrschaften (Troica) zugeben das ein so radikales Sparprogramm eine Wirtschaft nur weiter nach unter zieht und hat andere Lösungen z.Bsp. im Fall Spanien gefunden. Aber Ireland wäre zu riskant gewesen, da es potentiell ein 'Domino-effekt' in der EU ausgelöst hätte.

Die Frage, die sich bei mir (und vielen Anderen auftat) : Warum sind die Iren nicht auf der Strasse gegangen um diesem groben Missbrauch von Macht anzuprangeren und ein gerechtes System zu verlangen?.... siehe Nächten Eintrag : )  

Einen netten Überblick von Ireland bietet: Mit offenen Karten 2013: 

No comments: