Wednesday, 3 November 2010

ICTU's Pre-Budget submission

Paul Sweeney: Congress has warned that a continuation of the current austerity programme could literally destroy the Irish economy and kill off any prospects of recovery for many, many years.

Austerity had delivered nothing but higher unemployment and a bigger deficit.
Congress said that “We have tried austerity and it just hasn't worked - it has just made matters worse. There have been three deflationary budgets that have taken €14.5 billion out of the economy and the result is clear: unemployment has almost trebled, the deficit is actually bigger than when we started and the cost of borrowing is at record levels".

This is clearly failure.

The period of adjustment must to be extended. The target of reducing the deficit to 3% of GDP by 2014 is arbitrary and artificial. There was no impediment to extending the adjustment period, either at a national or an EU level.

The focus should be on jobs and growth and the Congress submission contained a number of innovative proposals in that regard.

The full document can be downloaded here and the executive summary here.


Anonymous said...

There was no impediment to extending the adjustment period, either at a national or an EU level.

Other than that very large impediment called the ECB. You know, the guys kindly keeping our banking system afloat?

Michael Burke said...

This is a very substantial document and ICTU should be congratulated for producing a submssion which not only identifies the interrelated jobs, fiscal and banking crises - but also has viable solutions.

In particular, the role of investment in promoting recovery, using NPRF 'rainy day money' over 3 years is entirely correct. It is also heartening to see the entire emphais on any 'adjustment' measures shifted to wealth and similar taxes, which will do least harm to growth. To ensure there is no damage to growth at all would only require the transfer of funds to the poor via the restoration of social welfare cuts- but that is a small step from the current policy.

Two further highlights of the report:

1. Removing the guarantee (ex deposits) on the banks which would force the bondholders to accept a 90% discount and so save taxpayers €24bn

2. Extending the income levy to the corporate sector temporarily by 3%, so that it shoulders some of the burden of adjustment.

There are too very good sections opposing privatisations as foolhardy and questioning the establishment of an 'independent' fiscal council. (In Britain the OBR is the unlovely offspring of a union between the Treasury and ther Tory Party- you can imagine how independent it is).

All in all, a very good contribution.

paul sweeney said...

Anon, The "Adjustment" will not bring the deficit to 3% by 2014. I know of only one economist who believes that it will and I suspect that he he is just wishing! After the news that the 2011 "adjustment" is to be twice what it was promised - at a staggering €6bn, it is more certain that 2014 wont be met! There will be no growth even if we export everything and everybody! Also the ECB has a role in banking us for sure, but no explicit role on deficits - its the Commission. It is ruled by ex-Maoist Barrosso. Former Ultra-Lefties always seem to become the Hardest of the Right as they "mature"! But of course, the Commission, in so far as it does have a brain, does not really expect that Ireland will meet the 3% deadline of 2014. Its the rule of "never let a good Crisis go to waste" - de-regulation and tax cutting failed but we have turned the tables. Eyes off the bankers and we are succeeding in turning attention from real issues of reform. Now the poorest pay most. Worse, we it will not work in the longer term - without radical reform of governance, economics etc.