Wednesday, 22 May 2013

Ray Kinsella on Ireland and the Euro Zone

Nat O'Connor: Earlier this week, Professor Ray Kinsella wrote a powerful critique of current austerity policy in the Irish Examiner.

For example: "The austerity doctrine imposed the burden of adjustment to the post-2008 economic collapse on the labour market. It is an indefensible misuse of economics that the eurozone “authorities” should seek stability on the back of tens of millions of unemployed — this month’s eurozone unemployment figures reached yet another record. It is equally indefensible that, within an economic epoch characterised by intellectual capital and innovation, youth unemployment should now stand at an average of 25% — and more than double this in some of the peripheral countries which are most in need of their intellectual capital and capabilities."

I agree with practically everything in the article, but not his conclusion that a break up of the Euro zone is inevitable and desirable for peripheral countries, including Ireland. While it may be inevitable, the example of Denmark is unconvincing, as their currency is strongly pegged to the Euro.

While Ireland could in theory use its own currency for quantitative easing or other monetary policy to create inflation and grow its nominal GDP, this could be a short-lived benefit compared to the long-term costs. If Ireland or other smaller countries go too far with expanding the money supply, we could quickly run out of dollars, sterling and euro as who would want to buy the New Punt if it kept losing its value in currency exchanges? Moreover, we'd lose our position as a hub of imports and exports, and we'd be vulnerable to currency manipulation and speculation by global funds.

But if we can't easily exit the Euro, what is more worrying is that there is no quick or easy solution to the flaws in the Euro monetary union. What the peripheral countries need to do is to meet and demand a new monetary policy regime for the whole currency area. That's maybe harder to do than simply exit, but there is no other way to fill the political void at EU level than for countries to come together in their shared interests.


Paddy Healy said...

Dáil Debate on Future of Europe private members motion proposed by Deputy Thomas Pringle and seconded by Deputy Seamus Healy and 12 members of the technical Group is currently taking place.The Ray Kinsella article is germane.
Here is the link which includes Response of Eamonn Gilmore

Ray kinsella said...

Hi Nat, one of the key points of my article was precisely to argue the case for the Government to convene a meeting with other peripheral countries to set out what I call a 'New Growth Agenda'. Consider the disregard of Ireland's case for debt relief in 2011/2012-and the manner in which it was dismissed out of hand by Germany and also Sarkozy. By contrast,when Spain and Italy demanded changes in funding they succeeded. Numbers count.

Just one other point--you set out a number of standard arguments in connection with an exit which were not in the paper but to which I will be returning.

Tomboktu said...

A further point, outside Yasc's usual focus, is the human rights dimesnion to austerity.

The European Committee of Social Rights, a less-well know sibling to the European Court of Human Rights, has found in five cases that the pension cuts in Greece breach human rights law. Last week, I wrote about that over on Cedar Lounge Revolution and about the possible EU human rights aspect; last week Dr Darren O'Donovan wrote about the EU's human rights obligations on, and today the Human Rights Commission told the Oireachtas Committee on Justice, Defence and Equality that it wants to address the human rights issues that arise with austerity.

Here are links for two of those contributions (the Oireachtas proceedings aren't up yet).

Anonymous said...

Continued Dáil debate on the Future of the Eurozone can be accessed here:
The account is unrevised at this stage. Seamus Healy TD said that the top 300 were paying tax at a rate of25% not 5%. The debate also contains lively altercations with Labour Party Minister Joe Costelloe on the Connolly position on current issues