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Government exposed with U-turn on burning bondholders

In June the Minister for Finance, Michael Noonan, was in Washington DC and held talks there with the International Monetary Fund and with the US Treasury Secretary, Timothy Geithner, on Ireland’s financial crisis.

The Minister made headlines in the world’s financial media and got massive coverage in the Irish media when he declared that the Irish government would force unguaranteed bondholders in Anglo Irish Bank to take the hit for their gambling excesses in Irish and international property through that bank. The total amounts of these bonds came to €3.5 billion and the Minister said, ‘We don’t think that Irish taxpayers should redeem what has become speculative investment.’

Mr Noonan said that the IMF ‘supported the strategy’ and that banks like Anglo Irish were ‘no longer normal entities and are more like warehouses for bad debts.’ These bold statements were made to coincide with a major propaganda blitz by the government at home to coincide with the reaching of the first hundred days of the Fine Gael/Labour Coalition in office.

On Saturday last in a town in Poland, on the fringes of a meeting of EU finance ministers, the Irish Finance Minister capitulated utterly to the same speculating bondholders. Following a meeting with the President of the European Central Bank, Jean Claude Trichet, Mr Noonan announced that after all there would be no ‘burning’ of those who had recklessly loaned money to Anglo. The Minister was obediently following the diktat of the ECB laid down at that meeting.

The end result of the government’s capitulation is that massive sums of money are to be paid to the unsecured bondholders. According to Davy Stockbrokers, on November 2, one billion dollars (€740 million) will be paid over. On January 25 next year, a further €1.25 billion will be paid and in June that will be followed by €1.05 billion. The Irish taxpayer is being forced by its government to pay these exorbitant amounts for debts for which we have no more responsibility than we would have for an individual who gambles his life savings in a game of poker.

By coincidence the figure of €3.5 billion being gouged from the Irish people in this case is an almost identical amount to the savage cuts of €3.6 which the government is preparing to announce in the December Budget. This juxtaposition of cuts and payments to bondholders summarises the treachery of the policy adopted by the current government from its predecessor.

Unlike the banner headlines manufactured from Mr Noonan’s declaration in Washington, the shameful capitulation last week was barely reported in the Irish media. Even after I had trenchantly raised it with the Taoiseach in the Dail on Tuesday and demanded an explanation there was scarcely a murmur of reportage. This is doing a serious disservice to the Irish people and questions should be asked why the snatching of such a huge amount of money that should be going instead to public investment and services should be treated as a virtual non story.

In this shameful affair, the ECB should be seen clearly for what it is doing, that is salvaging the major European bankers from their speculative lending to Irish bankers and developers. The fact that this policy which has been hammered into the EU/IMF/ECB Memorandum of last November is causing mayhem in the Irish economy seems to be of no concern. The fact that nearly half a million of our people are unemployed or seriously under employed and suffering real hardship seems to be immaterial when the interests of the faceless, unelected and unaccountable financial institutions that constitute the financial markets are at stake.

 

Mr Noonan’s pathetic excuses for reneging on his declared intention to make the bondholders pay show which forces really rule the economies of Europe. This wouldn’t be the way forward ‘if you were trying to encourage the markets’ he declared and referred to a ‘quick knock on effect into Italy and Spain’ when there had been suggestions earlier this year that bondholders who had lent to Greece should also take a hit.

What happened is that the bankers and hedge fund operators drove up the interest they charged to Italy and Spain to exorbitant levels in order to blackmail the European political establishment from insisting that they should pay for some of the crisis of their system. It worked for them.

However the disaster in the Greek economy and the savage assault on the living standards of the Greek working class bear cruel witness that the EU policy of austerity is failing disastrously as it is in Ireland. Surely all this cries out for revolutionary changes involving the breaking of the markets system and the creation of a financial system that is brought into public ownership and democratic control and directed toward the wellbeing of society rather than private corporate profit.

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