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Two years after bailout, we're in an even worse state, economists warn

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By Cormac Murphy

Thursday November 29 2012




IRELAND'S economic future is bleaker than ever, two years after the country was bailed out, financial experts have warned.


It was this day two years ago that a beleaguered Brian Cowen and the late Brian Lenihan signed over Ireland's financial sovereignty for the sum of €85bn.


Since then, the government of that day has fallen, Fianna Fail was almost obliterated at the polls and Brian Lenihan tragically passed away from cancer.


We are a country totally changed, yet some things -- such as the deepest recession to hit this country in generations -- have persisted.


The bailout -- a funding programme from the IMF/ECB/EC -- has seen a massive transfer of money from households to the banking sector through austerity policies, economists told the Herald.

But there has been no gain for the pain, as structural reforms have not taken place, they say.

Richard Tol, the former ESRI economist, believes the country is now in a worse state than before we were given the costly cash lifeline by the Troika.


"A lot of Irish people are a lot poorer and the Irish State has built up an enormous pile of debt.

"It is pretty obvious that Ireland is much worse off than it was a couple of years ago," the University of Sussex professor said.


The major issue which is affecting Ireland's chances of recovery, according to Tol, is the failure to implement economic reforms such as privatisation in the energy sector (this is bollox - its the privatization agenda that has us in this mess. What we need are more state companies.)


"We're still paying way too much for electricity and gas. The Minister for Energy (Pat Rabbitte) is pretending this is not a problem, (he is) still working for the unions and not the people.

"So in that sense Ireland hasn't changed. It's just a bit poorer and a lot more debt.


"If you compare the Irish economy now to what it was a couple of years ago, nothing much has changed. If you look at Irish politics, nothing much has changed.


"We have muppets with different names and different faces in the Dail but they're still muppets," he added.


Mr Tol said the only thing the ECB cares about is that we pay back the German banks who have lent us money.


Trinity College economist Dr Constantin Gurdgiev said judging the success or failure of the bailout is evading the real issue.


He believes the programme was not necessary in the first place as its only purpose was to "underwrite the transfers from the real economy . . . to the insolvent banking sector and the foreign bond holders".


Dr Gurdgiev added: "From the beginning of this crisis, the transfer should not have taken place. Except for that, we would not have needed a bailout in the first place."


He said: "What we're having right now is emergency austerity which means we are not undertaking structural reforms. We are not making this economy more sustainable in the long run."


Eddie Hobbs, meanwhile, holds an ever more negative view of the economic situation facing the country.


"We are in a worse state because we have borrowed more money," money guru Eddie Hobbs told the Herald.


"Overall, we're screwed. The idea that we can trade our way out is nonsense," he said.

Mr Hobbs, who recently quit RTE's The Consumer Show, said taxpayers are faced with "two big mountains of debt" -- public and private.


While €64bn went into bailing out the banks, most of the money has gone towards financing the deficit including paying for public sector pay and allowances, he said.

As well as paying for exchequer borrowings, the economy's 1.8 million workers also have to pay off massive private debt, he pointed out.



- Cormac Murphy

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