Recession Recovery signpost

Statistical veneer of recovery covers reality of stagnation

The article was originally written in the middle of February 2015 as part of the pre-conference discussion of the Socialist Party. It has been slightly altered for publication.

By Paul Murphy TD

If the reports of the demise of Mark Twain had been much exaggerated, the opposite is the case for the southern Irish economy. Its rebirth, life and vitality have been declared and announced time and time again. The Irish Independent editorial headline of 6 February blared: “It’s official: We are no longer one of the PIIGS”. Exactly who made it “official” that we were no longer to be grouped with Portugal, Italy, Greece and Spain is not made clear. This is just a brash version of the narrative that has been promoted by the Irish government and their supporters internationally.

An example of how this story is used as a stick to beat working people elsewhere was given with an article in the Wall Street Journal headlined, “Ireland teaches Europe a lesson”. Here, Simon Nixon writing argued: “Ireland’s blowout second-quarter growth figures are more than just a domestic achievement. The wider political significance of this result shouldn’t be overlooked.”

In particular, with the election of the Syriza government and the discussion about the need for debt write-down or restructuring, the cries of “Ireland is not Greece” that were so loud before Ireland entered a troika programme, can now be heard again. The government has been at pains to explain how, in the words of Finance Minister Michael Noonan, Irish “debt is in a very good position now – it’s affordable and it’s repayable.”

On the face of it, some of the economic statistics would seem to back that claim up. Ireland is the fastest growing economy in the EU with GDP growth of 4.8% forecast (when the figures are in) for 2014 and 3.5% for 2015.  Yet working class people do not feel that recovery at all.
What is the reality that lies behind those headline growth rates? What is the true state of the Irish economy and what are the likely trends of development in the next years?

These figures contrast sharply with the feeling of the majority of working class people, who feel that there is no real recovery for them, and that there is a recovery only for the wealthy. The contrast between this sentiment and the official figures and propaganda is a factor in developing consciousness and in the struggle, for example, against the water charges. That feeling is essentially rooted in economic reality, which becomes clear when one examines the different components of the economy.

In order to understand the material basis for this sentiment, it is necessary to look behind the headline figures. In this way, we can properly assess the true state of the economy and the likely trends of development in the next years. It is also vital to situate that within developments in the international economy.

In essence, the headline figures tell a very misleading story –  there is no substantial recovery in Ireland. There is marginal growth, relating to Ireland’s integration into the world economy, in particular, the non-eurozone economy, which gives it an advantage over countries which predominantly export into the eurozone. However, this is not broad-based growth and it doesn’t translate into a substantial recovery for working class people. Instead, the domestic economy is largely experiencing continuing stagnation, rooted in particular in extremely low levels of investment by the capitalist class, while gross profits have recovered to pre-crisis levels through attacks on wages and conditions. The likelihood is that the next years will see a continuation of this stagnation, and this situation also contains the possibility of being hit by future external shocks, for example, a re-emergence of the Eurozone crisis.

Stagnation does not mean zero growth, but it includes a situation like currently, where low levels of growth are the norm, with high levels of unemployment. That perfectly describes the situation over the last couple of years and is likely to continue to be the case. It is worth noting that in the 1980s, there were only two years where there was 0% GDP growth. In other years, growth fluctuated around 3% or higher . So there was formal economic growth, but this was a period widely recognised at the time as recessionary. The period we are now in has important similarities with that and is experienced similarly as being without real growth for working class people. That enables us to understand the material basis for the widespread and radicalising sentiment that there is no recovery for working class people.

International backdrop

As always, economic developments outside of Ireland have a crucial importance in determining likely developments in the economy here. In general, the international picture is one of continuing low levels of growth and a failure to recover from the global capitalist crisis which started in 2007/2008. While the US economy has recovered to a greater extent than Europe, growth remains weak with real GDP growth raes of 2.2% in 2013 and 2.4% in 2015.  This compares to pre-crisis growth levels of around 4%.

Japan, despite the so-called Abenomics of Prime Ministser Shinzo Abe aimed at fiscal and monetary stimulus, had growth of a measly 1.6% in 2013 and 0.4% in 2014. China continues to experience high growth relative to the EU and US (GDP growth of 7.4% in 2013 and 7.4% in 2014), however, that is the lowest rate of growth since 1990 and indicates a fundamental change of pace of economic growth – with Chinese President Xi Jinping even describing this lower rate of growth as the “new normal”.

Europe is the region of the advanced capitalist world that continues to experience the lowest rates of growth. Eurozone GDP shrunk by 0.5% in 2013, while the EU as a whole experienced zero growth. Figures for 2014 suggest growth of 0.8% in the eurozone and 1.3% across the EU as a whole.

World growth rates are at low levels– with 3.3% growth in 2013 and 2014 – lower than the 4% average from 1997 to 2007 and significantly lower than the close to 5% in the post World War II period.  This speaks to the depth of the “Great Recession”. As the European Commission puts it: “the recovery from the recession in 2008-09 has been slower than any other recovery in the post-World War II period on both sides of the Atlantic.”  One important reason for this is the continuing overall high levels of debt, which are greater now than they were before the crisis, together with the lack of recovery in investment.

A rapid decline in oil prices has been a notable feature of the past six months. From a peak of $115 per barrel in June 2014, the oil price has now fallen to below $50 in Janaury 2015.  This is a substantial and dramatic decrease which has the potential to impact on the world economy, positively in those areas of the world that use more oil than they produce and negatively in the oil-producing regions.

The underlying reason for the decline in oil prices relates to both an increase in supply and a decrease in demand. Demand is low because of low levels of economic growth, including less demand than expected in China and efficiency measures and shifts away from oil. Supply meanwhile has grown, because the increased investment in shale oil and gas, in the US and particularly and the fact that the OPEC countries have not moved to cut supply in order to increase the price.

A bounce back to previous prices is not widely expected, instead, a gradual recovery in prices in the next year is likely. The impact is a marginal economic benefit for those regions that are oil importers, which includes Europe, and a negative for exporters, such as many countries in the Middle East. It also lowers inflation levels in Europe generally.

In attempting to explain the reason that Europe remains slowest growing region, the latest European Commission (Winter 2015) forecast document summarises:

“The pace of the recovery remains slow as Europe continues to struggle to leave the legacies of the crisis behind it. Economic growth remains also weighed down by unfinished macroeconomic adjustment and sluggish implementation of reforms, as well as long-standing weak growth trends. Moreover, uncertainty about the geopolitical situation, commitments to future policy initiatives and energy-price developments have gained importance in 2014. While private consumption has been the main engine of growth in the current recovery, investment has failed to recover and exports have done little to support growth.”

Although this contains an attempted blame of the lack of implementation of sufficient austerity and neo-liberal measures (“sluggish implementation of reforms”), it actually points to the key underlying features. The continued low levels of private sector investment (still 15% below the EU pre-crisis figures ), is the key factor, which, together with ongoing austerity and debt holding personal consumption back, which undermines the basis for sustainable growth. The “uncertainty about the geopolitical situation” is a euphemism for the crisis in Ukraine, at the borders of the EU and the increasing economic and political conflict with Russia, which itself has economic consequences, with potential implications for energy security and trade for Europe.

What is more, the election of the Syriza government and the conflict over debt restructuring underlines the fact that the eurozone crisis has not gone away. All the attempts to paper over the fundamental problems (the European Stability Mechanism, Outright Monetary Transations,  Draghi’s announcement that the ECB would do “whatever it takes” to save the euro) have not solved them. The debt of peripheral countries in Europe remains unsustainable. The core-periphery contradiction, between the stronger economies of the core (in particular Germany) and the weaker economies of the periphery (the so-called PIIGS), within the eurozone has not been overcome, in fact it has been exacerbated.  Eurozone break-up could come back on the cards in a dramatic way.

The nightmare of a Japanese-style deflationary decade looms large in the thinking of the strategists of capital in Europe. The EU-wide inflation rate was 1.5% in 2013, 0.6% in 2014 and predicted to be only 0.2% in 2015.  In the eurozone, deflation itself took hold in 2014, with a decline of 0.2% in prices from December 2013 to December 2014.  This is far below the targeted inflation rate for the European Central Bank of below, but close to 2%.

The central cause of this deflation is the policy of driving down wages across Europe as a result of the wage competition, which was started by German capitalism and has been imposed by the Troika and EU authorities across much of Europe – with disastrous effects in terms of domestic demand across Europe and wage-driven deflation. The spectre of deflation contains the prospect of a downward debt-deflation spiral. This is when consumers decide to delay purchases in expectation of cheaper prices in the future. Companies’ profits are squeezed, as they sell at lower prices while having already made capital investments at higher prices, and debt becomes a larger and larger burden – re-enforcing the decline in demand.

In response, the European Central Bank has kept interest rates effectively at 0%, with a deposit rate of -0.2% (which means banks must pay to place their money with the ECB) – and has finally joined the other major central banks with a major programme of “quantitative easing”. This is effectively the electronic printing of money in order to buy bonds on the world markets. The QE announced by the EB was bigger than generally expected and amounts to €60 billion per month (€50 billion of which will go to buy public debt on secondary markets) until September 2016 –a total of €1.1 trillion. It may be continued beyond that if inflation remains low.

Will it work? As in the US, it is likely to lead to growth in stock markets and other financial assets. However, its impact on the real economy will be significantly less – given that this deflation flows from the wage cutting that is the centre of the current neo-liberal approach in Europe. It may well be enough to prevent outright deflation. But in the context of lower oil prices, and low demand generally, it seems unlikely to be able to get close to the 2% inflation target in the short term.

While the ECB Quantitative Easing is designed to tackle deflation, its counterpart to tackle the low levels of investment is the European Commission’s “Investment Plan for Europe”.   This, in reality, will prove to be almost useless in doing so – because it stays well within the narrow confines of neo-liberalism. It contains literally no new money, instead taking €8 billion from the existing EU budget, adding €5 billion from the European Investment Bank and with three layers of leverage manages to multiply it to an incredible €315 billion. Wolfgang Munchau in the Financial Times aptly wrote that it reminded him “of a product that was briefly popular in the credit bubble of the past decade: a synthetic collateralised debt obligation – a horridly complicated instrument where the underlying assets were not real. It was an attempt to get from nothing to something.”

Instead of new investment, it effects a a transfer of risk from private investors to the public and represents a further drive for private financing and effective privatisation of public assets. The extreme limitations of this scheme, despite the belated, recognition that the low levels of investment is a serious weakness, illustrates the resilience of neo-liberalism.

The capitalist classes in Europe have proven unwilling to shift towards a more Keynesian position, with any significant level of state investment, despite the evident failures of this approach. Although a shift in the future is not entirely ruled out, this persistence of neo-liberalism relates to the ideological victory of Thatcherite ideas amongst the capitalist classes, as well as the relative strengthening of finance capital of banks and bondholders, who have most to benefit from a continuation of that policy.

Misleading headline statistics

Before assessing likely developments in the domestic economy, it is essential to get an accurate picture of what is – the true state of the economy behind the economic statistics and the spin. Given the nature of the Irish economy and the large role of multinational corporations (MNCs) headquartered here, GDP (which measures the value of all goods and services produced in Ireland) is not an accurate reflection of the Irish economy. That is because it includes all production by MNCs, while the profits are subsequently shipped out of the country.

The MNC profits are massively overstated, which in turn results in an overstatement of Irish GDP. The profits in reality are accounted for in Ireland, but not made in Ireland – it is a method of avoiding taxes. An illustration of this distortion is clear by comparing profits per employee between Ireland and other European countries. Michael Taft produced a graph, based on the figures given by the Irish government to the EU which illustrates the point:

As Taft argues:

“Profits in Irish manufacturing nearly 8 times that of other EU-15 countries; in the Information & communication sector, it is over 3 times.  Clearly, these are not profits generated by employees in Ireland; they are generated in other economies and ‘imported’ here to take advantage of our low tax rate and our position in the global tax-avoidance chain.

The point here is that our GDP is distorted by multi-national profit-shifting – and that’s before you start taking account profit-repatriation.”

So GDP remains an entirely inaccurate mechanism of measuring the real economy. We previously used Gross National Product (GNP – the value of all goods and services produced by all those resident in a country, regardless of where that wealth is produced) figures as being more accurate, because they factor out net factor income (overwhelmingly the repatriation of profits from MNCs to their home country).

However, GNP figures also no longer paint an accurate picture of the real economy because what is known as “re-domiciled” MNC profits are included. That is when major MNCs have their main headquarters here – and profits are shipped back to Ireland from other countries – but have no impact on the real economy. In 2012, this amounted to €7.5 billion, or 5% of GNP.  The operation of the IFSC has the same effect. The result being that GNP figures no longer provide an accurate measurement of the size or what rate of growth of the economy.  Instead of just relying on GDP or GNP figures then, it is necessary to have a more detailed investigation of what is actually happening in the economy.

Domestic economy

The GDP of an economy is made up of consumption, investment, government spending and net exports. When one examines a picture of where those components stand relative to before the crisis, one dramatic thing stands out.

The only element of GDP that is higher than it was pre-crisis is net exports. All of the other components – which together make up the domestic economy – are lower. The lowest point of the economic crisis was in the fourth quarter of 2009. From that extremely low point, the economy has experienced something of a “dead-cat bounce”. However, even including net exports, GDP remains 3.4% smaller than its pre-crisis peak. In the case of net exports, which we will examine later, a large reason for its dramatic increase is the decline in imports!

When you examine a picture of the domestic economy on its own, the reality of “bouncing along the bottom” economically becomes clear. The domestic economy (government expenditure, personal expenditure and capital investment) suffered a precipitous collapse in the course of the crisis and has essentially remained 15-20% smaller since then.

It is worthwhile investigating each of the components separately in order to assess the current situation and assess likely trends. In particular, it is necessary to delve further into the net export figure, as the driving statistical force in economic growth to get a true picture.

Austerity has ended?

First, however, we can examine governmental expenditure. Despite Michael Noonan’s announcement in the Dail that austerity “ended … 12 months ago” , austerity continues, in line with the feelings of the majority. The €31 billion of cuts and taxes implemented from 2008 are not going to be undone by this government, despite all of its pretences about ending austerity. Instead, even with the 2015 budget, which claimed to be an end to austerity, these cuts and extra taxes were overwhelmingly continued. In being continued, they in turn do lasting damage not just to society, but to the economy.

The €31 billion cut out (on a yearly basis) from the economy amounts to almost 20% of the economy as a whole. Even in their wildest statements with an eye to the election, none of the establishment parties suggest reversing any significant proportion of this austerity.

Personal consumption

Linked to the austerity of the government has been the decline of personal consumption. With the extra cuts and taxes, together with the collapse of the construction bubble, and a credit crunch, consumer spending plummeted. It fell from €95 billion in 2008 to €84 billion in 2009 – at which level it has essentially stayed since then, with 2014 being no exception.

One interesting feature highlighted by the above graph  is the growing gap between consumer confidence and consumer spending. Consumer confidence, presumably under the impact of all of the propaganda about recovery has recovered significantly. However, that is not matched by an equivalent increase in consumer spending. It has increased marginally in recent months and has an upward trend, which is probably related to the decrease in unemployment. However, the lack of wage growth and persistence of huge levels of household debt holds this back from being a dynamic factor.

People can be hit over the head with the message that a recovery has taken hold, and it can increase their confidence to spend in the abstract. However, when it comes to actually spending money, they are faced with the reality of their low level of income and often high level of debt. This indicates that without a significant increase in the number of jobs being created and an increase in wage levels, consumer spending is unlikely to become a major driving force for growth.

Investment

It is in the investment stakes that Irish capitalism lags furthest behind. While the EU on average is about 15% below pre-crisis norms, investment in the Irish economy is still an incredible almost 50% below (from close to €50 billion a year in 2006 to just over €25 billion in 2013) . This is the deepest ongoing weakness for the Irish economy. How this is being measured has been changed recently, to include R&D spending, which will result in distortions in the figure in the future. As a percentage of GDP, gross fixed capital formation (investment) remains at one of the lowest levels in the history of the state and is the lowest of any EU country. This collapse of investment was a driving factor in the economic crisis, collapsing by more than the decline in GDP as a whole!

Ireland offers a more extreme example in this regard of a Europe-wide phenomenon, which has resulted in what has been described in the Financial Times as “an era of corporate cash hoarding”  – with unprecedented cash piles being hoarded by corporations who are averse to investing. This has seen, for example, British firms hoard more than £500 billion.  Fundamentally, this is rooted in a decline in rates of profit and a lack of confidence in future profitability.

At the current rate of investment, it is barely keeping pace with depreciation. The capital stock in the economy is only marginally increasing on a year by year basis. Until that is transformed, significant growth in the domestic economy is unlikely. It demonstrates that the Celtic Tiger did not transform the Irish capitalist class into a strong, investing capitalist class. Nor has there been a significant increase in real investment in production by Multi National Corporations.

Exports

It is the export component of the economy which is the only driving force statistically in the economy. Upon further investigation, however, the high levels of exports turn out to be largely bogus. In the first place, three quarters of the growth of net exports is down to a decline in imports, rather than an actual increase in exports. Imports are down €14.6 billion, while exports are up €7.4 billion. As Michael Burke explains, “As both investment and consumption have fallen, this simply suggests that both firms and households have been priced out of world markets by reduced purchasing power.”

Even within that, the growth in exports is highly suspect. For example, the latest figures show total exports to be up 15.5% year on year from the third quarter of 2013 to the fourth quarter of 2014. Within that, the export of goods are up 18.4% and the export of services are up 12.5%.  However, the figures simply do not add up.

One peculiarity that indicates there is a problem in the figures is that while exports have been growing, imports have been shrinking. Goods that are exported from Ireland are generally not made entirely from raw materials made in Ireland, instead those raw materials have to be imported. So by rights, a real increase in goods exports from Ireland should come together with an increase in imports into this economy.

Similarly, while exports have risen, personal expenditure and investment have continued to fall – this illustrates that the exports are having little impact on the domestic economy.

When we look at another measure of exports – the external trade statistics, as opposed to the National Accounts, the more accurate figures for goods exports are revealed. Here the growth rate is 0.94% not 18.4%.  The explanation for the difference is provided by the Central Bank:

“… goods owned by an Irish entity that are manufactured in and shipped from a foreign country are now recorded as Irish exports.”

This means that exports from another country to a third country, which never had anything to do with the Irish economy are counted in export figures. In particular, this applies to major MNCs that are formally headquartered here for tax reasons – who contract out exports to manufacturers in low wage economies.

In relation to the service exports, a similar distortion is at play. As Michael Hennigan of Finfacts suggests a large portion of these “are fake tax avoidance related exports that reflect activities in many countries.”  He argues persuasively that:

“In 2013, we estimate that Google, Microsoft, Oracle and Facebook combined, were responsible for about €41bn of services exports and adding €6bn for other firms in excess company charging would give a total estimate of €94bn or 50% of services exports being tax-related or effectively fake.”

Effectively financial and computer services are easily accounted for as being from Ireland, when in actual fact, they relate to elsewhere. For example, according to the official figures, MNC exports in the computer services sector per employee are 12 times higher than the indigenous sector – illustrating the dubious nature of these figures.

The bottom line is that the export figures are grossly overstated. This explains the lack of increase imports and domestic economic activity. Underlying the Quarterly Account figures is a likely very modest increase in exports relating to the modest growth in Ireland’s major non-euro trading partners (Britain and the US), rather than anything spectacular.

The fact that the one dynamic element of Ireland’s growth figures turns out to be largely illusory blows a major hole in the government’s success story rhetoric. It is accurately summed up by Michael Burke: “Without the fakery of an ‘export-led recovery’, statistically there is no recovery at all.”  There is no reason why this would change dramatically in the coming years. Modest export growth, based on exports to the UK and the US is likely, but not the runaway figures trumpeted in recent years.

Any serious investigation of the underlying performance of the various aspects of the economy belies the official incredible success story. It shows an economy that continues to perform very weakly – with little domestic growth and highly exaggerated export performance. There is no reason to presume that will change in the foreseeable future – where would a major boost to investment, consumer spending or government spending come from?

High debt undermining real recovery

Debt remains a key underlying sore and weakness in the Irish economy. That is both national (state) debt and personal debt. The national debt to GDP figures now show a downward trajectory, and the government is telling everyone who will listen that Irish debt is “sustainable”, in contrast to Greek debt. The truth is that while official national debt to GDP has declined to 110%, the majority of that decline relates to the new method of calculating GDP. The Fiscal Council suggests that without that revision, the debt to GDP ratio would be 118%.  The debt burden is one of the highest in the EU – paying 4.7% of GDP a year in interest payments on this debt, paying €7.5 billion last year, compared to Greece’s €8 billion.

Can the national debt be brought onto a downward path? Yes, if artificially large GDP growth

continues, together with a growing primary surplus, the debt to GDP ratio will creep downwards. But that does not mean that the debt is genuinely ‘sustainable’. The primary surpluses (tax revenue minus expenditure, excluding debt payments) are only achieved on the basis of the continuation of savage austerity. It is in no sense sustainable from the point of view of the 1.4 million people now living with ‘multiple deprivation experiences’ . Without the artificially boosted growth figures, the ratio would not even be declining.

Side by side with this national debt, is the continuation of massive levels of household debt. The levels of mortgage arrears peaked in the middle of 2013 and has declined slightly from then. Household debt as a percentage of disposable income peaked in 2011 and has declined since then. However, both remain at historically extremely high levels, with household debt at over 180% of disposable income  and over 11% of mortgages in arrears of over 90 days.  This is a key reason that consumer spending has not matched increased consumer confidence and will continue to hold back any significant consumer spending growth. As the most recent European Commission report put it: “Overall, businesses and households remain focused on debt reduction, which keeps demand for credit subdued and weighs on domestic demand.“

Employment

The government and its cheerleaders has talked up the decrease in unemployment. We previously critiqued the government’s claim of adding 60,000 jobs a week, including during the European and local election campaign, arguing how half of this was a result of a ‘statistical quirk’ in CSO methodology.  That criticism has been vindicated as the change in CSO methodology has been worked through. It now shows an increase in employment on a yearly basis (Q3 2013 to Q3 2014) of 27,600 (75% of whom are employees, 25% are self-employed).  This is jobs growth, but slow jobs growth. The total number of people in employment is still 242,700 less than before the crash.  At this rate, it will be ten years before we are back to close to pre-crisis employment levels, while the British economy, for example, has gone back to previous employment levels.

Combined with this is the nature of the jobs that are being created. The sense that what is being created are low paid, insecure jobs is backed up by the figures. For example, average weekly earnings were down 0.8% from 2013 Q3 to 2014 Q3. Strikingly, 2014 saw the biggest fall in unit labour costs in the past number of years, of 4.3%. In addition, the Irish economy has one of the highest levels of ‘under-employment’, whereby people have some work but would like to have more. Combined unemployment and under-employment is 21.9%, relative to an average of 18.7% in the EU-28 countries.

Recovery for the rich?

While the statistical recovery is mostly jobless and certainly joyless for working class people, for the capitalist class there is another story. Profits have shown a marked improvement since the crisis – rising based on the decreased share of wealth going to labour, through the increased rate of exploitation. Profits had peaked in 2007, at €51 billion , dropped with the crisis to €38 billion , but have since recovered to €50 billion in 2012 and €47 billion in 2013.  So while employment lags is years away from recovering to pre-crisis levels, profits are almost at the previous high levels. This is reflected in the increased wealth held by the richest 300 people increased by €34 billion from 2010 to 2015 – rising from €50 billion to €84 billion.  Thus, the sentiment that there is a recovery for the 1% is grounded in reality.

Property – a possible future bubble

Property prices in Dublin in particular show signs of a redeveloping bubble. The ratio of price to earnings in Dublin at the end of 2013 stood at 8.3, which compares to a pre-bubble average in the ‘70s, ‘80s and early ‘90s of around 5. This is not yet at the heights of the 14 in 2003, but shows a potentially developing bubble. The latest house price figures suggested that prices fell slightly in the last quarter of 2014 , so this bubble may not simply be inflated month on month.

The capitalist class in Ireland contains differing class fraction interests in relation to property. On the one hand, the developers, construction companies and banks would like to see prices increased substantially. For the banks, they reduce the problem of negative equity and enable them to increase profits from mortgages. The interests of the developers and construction companies are obvious.

On the other hand, the recent moves by the Central Bank to alter the requirements to get a mortgage, although relatively minimal, reflects some understanding of the wider capitalist class learnt from the experience of the last crisis, of the need to avoid a new bubble and crash. However, the latest changes, which require a 20% deposit for properties over €220,000, are relatively minor and will not likely have a decisive effect. Although we are not quite there yet, a new bubble is a possibility in the medium term.

Conclusion

Far from experiencing spectacular growth levels, the Irish economy has experienced extremely modest growth in the last couple of years. It appears spectacular only because, on the one hand, of the generally disastrous picture across Europe, and on the other, because of significant distortions in the figures. There is no prospect of a genuinely broad-based recovery, which would impact significantly on people’s lives and create a sense of a “real recovery” for people.

Instead, the likely picture is one of low real growth, slowly declining unemployment rates, with low wages and precarious conditions being the norm. In general, the low levels of growth elsewhere in the world economy rules out a real substantial export boom. The international picture also contains the danger of major economic shocks. The most pressing of these is a re-emergence of the eurozone crisis.

At this stage, the exact outcome of the clash between the Greek government and the Troika is impossible to predict, but contagion is a key concept here. The possibility of political contagion has the establishment parties in Ireland, as across much of Europe, worried. Economic contagion, in the form of speculation about the break-up of the Eurozone and increased attention to the economic fundamentals of countries on the periphery of Europe, is also a serious danger to the political project of capitalist European integration and to the weak peripheral capitalist classes.

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