According to press reports the Fine Gael and Labour
parliamentary “think ins” this week were upbeat and confident. Although
the Irish Times reports that both parties were warned “to brace
themselves for the bumpy ride ahead”. There has been talk
about Enda’s “honeymoon period” over the last few months. Although in
large measure the new coalition is benefitting from not being Fianna Fáil or the Green Party, while Enda Kenny is doing well in the polls for being neither Brian Cowen nor Brian Lenihan.
According to press reports the Fine Gael and Labour
parliamentary “think ins” this week were upbeat and confident. Although
the Irish Times reports that both parties were warned “to brace
themselves for the bumpy ride ahead”. There has been talk
about Enda’s “honeymoon period” over the last few months. Although in
large measure the new coalition is benefitting from not being Fianna Fáil or the Green Party, while Enda Kenny is doing well in the polls for being neither Brian Cowen nor Brian Lenihan.
In a similar vein the pressure on the Irish economy
from the international bond markets seems to have settled a bit – for
now. But, while the bailout has reduced the immediate pressure on the
state finances the major reason for the apparent “calm” is the fact that
other countries, for example Greece and Spain are in the firing line.
The political relationship of forces is reflected in this excerpt from an article in the Sunday Business Post on 4th September:
“By virtue of its newness
and its massive majority, the coalition government remains firmly in
control of the political agenda. Kenny is still master of all he
surveys. There have been a few hiccups, but pre-summer polling showed
that the public was still favourably disposed to the new government and
its leader.
But ultimately
political fortunes are determined by substance as well as political
management, and the time for real action is coming. Privately,
government insiders agree that they haven’t had to do the tough stuff
yet.
The coalition now begins the
real everyday process of adapting to life as a government implementing a
harsh regime of austerity on public spending.”
The price for Enda’s honeymoon period is going to
be heavy. The EU/IMF bailout imposed serious penalties on the state in
the event that targets aren’t hit for cuts in the public sector. While
the Croke Park agreement has meant no further attacks on wages – for
now, the flipside is that the “reform” of the public sector that was
threatened in the Croke Park deal is now on the agenda.
But the problem for the coalition is that to
implement the so called “reforms” they will have to take on the workers
in the public sector. It is possible that they will seek a way around
taking the unions on directly – at this stage. This article from
yesterday’s Irish Times makes interesting reading:
“One of the problems is that it is going to be
hard, if not impossible, for Kenny and Gilmore to live up to the pledges
they have made about not increasing tax rates or bands or not cutting
welfare rates. Brendan Howlin’s comprehensive spending review is
unlikely to prove the magic wand some of his colleagues hoped for at the
beginning and there is no avoiding the twin imperatives of cutting
spending and raising revenue.
The sale of State assets, to which the
Government is committed in the EU-IMF bailout programme, would normally
be expected to generate considerable friction between Fine Gael and
Labour, but that does not appear to have happened, although final
decisions are yet to be made. Ironically the easiest way for the
Government to meet its fiscal targets would be to ratchet up income
taxes rather than widen the tax base or cut spending. Many of those who
are railing against the modest €100 property charge would probably make
far less fuss if €1,000 a year was loaded on to their income tax bill
and simply deducted at source.
The income tax option was taken during the
1980s and it prolonged the recession and stifled growth. An
over-reliance on further increases in income tax to solve the deficit
would be both bad for the economy and in breach of the terms of the
EU-IMF bailout. The problem is spending cuts and a widening of the tax
base are harder to sell to voters.
Whatever the formula adopted in the budget
further pain is in store for large swathes of the electorate, but there
is no way around it. The store of political capital built up by the
Coalition since it took office in March should be enough to see it
through the budget and out the other side.”
In other words the coalition are likely to try to
open up a number of options for their austerity programme; specifically
privatisations, tax increases, welfare cuts and “extending the tax base”
as well as severe cuts in public spending. They have been advised that
they are more or less “on course” and that they will come out “the other side”..
However, it cannot be ruled out that sooner or later they will be
confronted with a financial crisis in the eurozone; as the Irish Times
goes on to say:
“The Fine Gael parliamentary party heard a
relatively optimistic message from ESRI economist John FitzGerald, who
expressed confidence that a continuation on the current course would see
the country meet its targets and be free of the bailout on time. That
assumes the international situation stabilises and the euro survives,
but there is very little the Government can do about that.
In terms of international reputation Ireland is
beginning to put clear water between itself and Greece, as a range of
international bodies accepted during the week. There is no choice but to
continue with the EU-IMF programme so that we can survive the backwash
if and when Greece ultimately goes under.
One of the things that damaged the Fianna
Fáil-Green government was the perception internationally in the summer
of 2010 that it was slipping behind target as a result of the banking
crisis. That precipitated the EU-IMF bailout in November. This
Government appears to have learned the lesson and that means the budget
adjustment will have to be at least €3.6 billion as promised and
probably a bit more, just to be on the safe side.
The pessimists argue the euro is going to
collapse and that will make it all irrelevant, but these are the same
people, from far right and far left, who urged burning bondholders,
collapsing the banking system and refusing to accept the terms of the
bailout.”
For sure, the stabilisation of the euro and the
“international situation” is a bit of a risky assumption to make. Yes,
Ireland is not doing as badly as Greece, but that is hardly grounds for
optimism. Finally spreading the austerity burden onto the entire working
class through increased taxes and cuts in welfare as well as attacks on
the public sector means upping the ante politically. In politics after
all, it is inadvisable to attack all of your opponents and potential
opponents at the same time.
The Irish Times seems to think, however, that
Enda will muddle through. However, inevitably the austerity will result
in pressure from the working class, first on the trade unions and then
at a certain stage on the Labour leaders. In practice it’s likely that
the trade union leaders will be drawn into more “social partnership” negotiations. But the scale of the €3.6 billion cuts that are mooted in the Irish Times article together with the extent of “reform”
in the public sector means that the trade union leaders will come under
significant pressure to defend workers conditions and jobs. There is no
easy way out for Enda Kenny and Eamon Gilmore without attacking the
working class.
Under these conditions the active layers of the
trade union movement need to prepare for the prospect of more battles
ahead. We need to oppose every cut and question every review or
restructure in the public sector. Eamon Gilmore argues that he joined
the coalition to defend working people, over the next period that
statement is going to be put to the test. One thing is for sure, Labour
needs a fighting Socialist Programme and a clean break with capitalist
policies.
