Taoiseach’s misplaced celebration as interest rate cut announced

Socialist Party MEP Paul Murphy has dismissed Taoiseach Enda Kenny’s statement that the last minute deal struck in Berlin was “a good day for Ireland.” Instead, Mr Murphy said if the Taoiseach truly believed that, he had been taken for a ride.

When the Taoiseach celebrates the cut in interest rates, what isn’t factored in is the impact of the potential extension of Ireland’s loan maturities from seven to 15 years. Imagine telling a homeowner in negative equity that their mortgage had gone from 30 to 60 years. Whilst they might initially be relieved that their monthly repayments have lessened somewhat, the reality would soon dawn on them that extending their mortgage to 60 years would mean they actually pay more in the long run.

In reality, this deal, like the previous attempts to hold together the house of cards that is the eurozone, is based on protecting the interests of the bankers and speculators who gambled on the peripheral eurozone economies. Yes, the private sector is to take some of the hit in Greece, but this deal is an attempt to isolate this to a portion of Greek debts, by ruling it out for Ireland and other economies. The potential extension of the terms of the loan for Ireland is also about trying to ensure a return to the bankers and speculators.

However, the back-slapping and hand-shaking in Berlin tonight is naive in the extreme. Whilst they applaud the rescue of Greece, the EU leaders seem oblivious to the twin icebergs drifting ever closer to their rickety boat, Spain and Italy. They really are the elephants in the room. The debt burden of these economies makes the European Financial Stability Facility look like pocket change.

What is also being missed in much of the initial commentary about the EU Council Agreement is the extent to which it is an agreement for austerity right across Europe. The agreement demands that ‘all euro area Member States will adhere strictly to the agreed fiscal targets, improve competitiveness and address macro-economic imbalances’ and calls for the ‘rapid finanalization’ of the ‘new macro economic surveillance’. Pure and simple, this is a demand for austerity right across Europe, supervised and implemented by the European Commission and Council. The devastating results of austerity for economic growth have already been seen in Ireland, Portugal and Greece. A Europe-wide austerity package will be even more damaging and ensure that the kind of economic growth that would be needed to make the debts sustainable does not develop.