The recession is over? Don’t believe the hype!

The government, the media and various economists all trumpeted recently released figures that apparently show that the Irish economy came out of recession in the first three months of 2010. However for the unemployed, workers and their families this miraculous recovery has by passed them. This propaganda is deliberately being pushed by the government in an attempt to justify the cut backs, job losses, wage cuts and bank bail outs because we are apparently seeing the benefits of these measures. More importantly they will use this so-called economic turn around to force workers to accept the €3 billion in cuts and new taxes that are pending in December’s budget.  As Minister for Finance, Brian Lenihan said recently “our plan is working” and “we must stick to it”.

The recession is not over, there is no recovery, much of the hype has been based on a growth in exports in the first quarter of the year, aided by the weakening of the euro and primarily led by multi-national companies which hides huge weaknesses in the domestic economy in terms of investment, sales and crucially employment. 

The key figure that has been trumpeted is that Gross Domestic Product (GDP) grew for the Irish economy by 2.7% in the first quarter of the year compared to the last quarter of 2009. The reality, unfortunately, is different, as a closer examination of the figures reveals. GDP still fell year on year in the first quarter, i.e. there was less economic output in the first quarter of 2010 than there was in the first quarter of 2009. The 2.7% upturn referred to, relates to a comparison of the last quarter of 2009 with the first quarter of 2010. This simply demonstrates that economic output cannot fall indefinitely forever – at a certain stage even a falling rock hits the ground.

Even more revealing in the figures is the gap between Gross National Product (GNP) and GDP. While GDP grew quarter by quarter at 2.7%, GNP declined 0.5% quarter on quarter in the same period. This gap (which is overwhelmingly made up of repatriated profits by the multinational corporations) graphically demonstrates the point made in the “Is the worst over?” (articles which can be read at www.socialistparty.net) – the continued weakness of Irish indigenous industry and the reliance on multinationals.

While different commentators predict varying degrees of growth in the coming year the most startling point they all agree on is that mass unemployment will continue for at least five years. The numbers signing on rose by 5,800 in June bringing the unemployment rate to 13.4%.

The IMF in a recent report predicted that unemployment will remain at 9% until 2015. That means over 300,000 people will remain unemployed for at least another 5 years, other organisations have predicted higher numbers. However, that figure and others like it, are based on a certain recovery in the Irish economy. If this does not happen, then the reality is that unemployment could be far higher.

The OECD in early July predicted a certain economic recovery but at the same time illustrated how weak that recovery would be by saying “Ireland’s recovery will not be vigorous enough to re-employ the 174,000 people who have lost their jobs”…. “so many unemployed construction workers are unlikely to find building jobs again.”

There are huge dangers and problems facing the Irish economy. The Irish banks are still extremely weak despite billions being pumped in and with increasing unemployment, falling incomes, bigger numbers experiencing negative equity then the possibility of major debt default is a very real prospect opening up a new banking crisis which could lead to a sovereign debt crisis, as the government find it harder and more expensive to borrow money on the international markets. Ireland is currently paying interest rates on borrowings higher even than Greece. This is not sustainable in the longer term. 

A double dip recession in the world economy is a real possibility which will impact massively on an open economy like Ireland particularly as the “growth” to date has being export led – this would be brought to a shuddering halt in the context of a further world downturn.

Working class people are hoping for an economic upturn in the short term. However this does not seem to be on the agenda and bigger cuts and increased unemployment are set to be an ongoing reality. Workers need to get organised in the unions and communities to build a movement to stop the government’s austerity measures.