Executive Summary:
Learning from the Global South
This paper highlights a number of concerns about the nature of the EU-IMF loan agreement with Ireland. It is based on the experience of global justice organizations that have long monitored the impact of IMF policies in the Global South. The paper first takes up that experience and highlights the pernicious impacts the IMF — whose governance is skewed towards the interests of rich countries — has wreaked throughout the Global South. These include:
Increases in poverty rates as a result of inappropriate liberalization measures in countries such as Mali;
Reductions in education and other social sector expenditures in countries such as Zambia;
The erosion of democratic principles in the Global South as countries are browbeaten by the IMF into accepting certain, specific policy conditionalities.
However, the experience of the Global South also shows that it is possible to resist IMF prescriptions, such as Argentina did when it partially defaulted on its debt in the early 2000s and boosted its economic recovery as a result. There are important lessons here for Ireland.
The EU-IMF Loan Agreement and the Erosion of Irish Democracy
Drawing from this experience of the Global South, the paper highlights the fact that the EU-IMF loan agreement robs Irish people of their right to build a just society. This is because the loan agreement:
Locks Ireland into a very specific neo-liberal economic model dominated by policies which impose suffering on the less well off in Irish society.
Is coercive: policy conditionality, both explicit and implicit, is at the core of the document and is central to the process of its proposed implementation. Cash disbursements will depend on the implementation of the agreement and there is virtually no political flexibility to allow for changes to the content of the agreement.
Gives huge powers to the lenders in micro and macro level analyses and decision-making.
Is driven by a desire to meet deficit level targets, and not by a desire for fair outcomes, as evidenced by the strong emphasis on deadlines for policy and legislative changes rather than social and distributional outcomes.
Locks in the establishment of new decision-making structures with unclear mandate and/or membership (including a budget advisory council).
The agreement diminishes Irish democracy as it removes important facets of economic decision-making from democratic deliberation. It should be rejected so as to allow Irish people decide and advocate for the economic model they wish to be pursued.
The Default Option
By examining some proposals for bank debt default and unpacking the unnecessarily fearful discourse surrounding them, the paper finally reveals that people in Ireland are unjustly paying for mistakes of the European Central Bank (ECB) which allowed European banks to recklessly lend to Irish banks (themselves guilty of extremely reckless behaviour), and are thus being forced to protect German, French and other banks from the financial losses that they deserve to bear. The paper highlights that there are plenty of feasible proposals in circulation (such as debt restructuring through debt to equity swaps) that should be considered as alternatives to repaying unjust debts. We should suspend bank debt repayments (the state is funded until the middle of next year, which allows us to do this); carry out a debt audit, the outcomes of which would illustrate the nature and amounts of public and private debt, and what portion of it is legitimate and what is not; do not repay the unjust portion of the debt; instead, ensure that the ECB and other European actors that are largely responsible for creating this unjust debt are made to pay for it.
The concerns surrounding debt default proposals are unpacked and found not to stand up. The concerns highlighted relate to:
Punishment of Ireland by the financial markets. However the paper points out that the idea that the markets would ‘punish’ Ireland for a partial default is undermined by the fact that they are currently punishing Ireland (through exceptionally high rates being charged on Irish bonds and downgrades in Ireland’s credit rating) for trying to service an unsustainable debt.
Injustice to banks that lent after the bank guarantee was issued. However, the paper explains that the bondholders at the time the guarantee was issued can still be identified and levied to the amount that they would (and should) have lost out on had a proper debt restructuring then taken place.
Fears that Irish people’s private pensions may be impacted by a debt default. However, the paper asks why people with private pensions in the crisis should be better protected than people on social welfare who are being targeted by the cuts demanded to pay the debt. It also emphasises that we do not know which Irish pension funds are at stake and how much money is at issue. Thus, we need to know who this money is owed to and the terms on which it was lent. The paper therefore calls for a debt audit, along the lines of similar initiatives in the Global South, to determine the precise sums and actors involved — and until that audit is completed, debt repayments should be suspended. In the words of the Italian playwright Dario Fo, we need to insist that we “can’t pay, won’t pay” — and shouldn’t pay.
Full Text:
This paper was published by Action from Ireland (Afri) in December 2010; it is reproduced here for non-profit educational purposes.