Tuesday, March 1, 2011

Ireland hits the polls, and the wall

In terms of politics, this is truly an earthquake.

True, the top two parties in Ireland are pretty much Tweedledum and Tweedledee (they're both centre right) but after all the ballots have been counted in Ireland the party that has pretty much dominated politics in the South for 80 years or so, the Fianna Fáil  (Soldiers of Destiny, the party that opposed the Irish Free State created in 1921 and created the modern Republic in 1937) lost big time to the Fine Gael (literally the Gaelic Kindred, the party that supported the Free State).   Matter of fact, the FF dropped to a humiliating third place.   Seems tribal loyalties don't matter much in the age of the EU and post-Great Recession.

The FGl will likely team up with its usual partner in crime, the left wing Labour.   It looks like the grouping won't have to rely on Sinn Féin, but even that party more than tripled its seat count and finished in fourth, an indication just how angry Irish voters are.

The new Taoiseach (Irish PM) is Enda Kenny.  He's promised to renegotiate the rather humiliating terms his country had to come to in order to be bailed out by its fellow EU members.   In exchange for getting a credit line of €85 billion or USD 113 billion, the country has had to float bonds at a pretty high rate right now, 5.8%.  When you consider the overnight rate in the Eurozone (i.e. the rate banks charge each other, not regular Joe and Jane Blows like you and me) is 1% and in the States it's a paltry 0.25%, Mr. Kenny has a pretty steep hill to climb.   Not to mention that the population of the country drops by about 10,000 every month, so desperate young people are to leave.


One:  Don't bail out the banks for the mess they created.   Ordinary people suffer if the government has to absolutely backstop everything.   While the floor on deposit insurance in the EU is maybe still too low, €50,000 per depositor minimum although countries can set higher limits than that, it was insanity for Ireland to guarantee an unlimited cap (even the US has a USD 250,000 limit which covers maybe 95% of people).   To think that in just the course of a few months in 2008 Ireland and the rest of the PIIGS (Portugal, Italy, Greece and Spain) could have brought Europe to the brink is simply astonishing.   Where are the prosecutions for bank officials who screwed it up?  Why can't the politicians be called to account either?

Two:   Economic integration has its benefits but also its downfalls -- not the least of which is one country may be forced to bail out another against the interests of its own people.   Germany, France and the Benelux states are already pulling their hair out over Greece and Ireland.   When the next shoe drops (probably Portugal) the fit will really hit the shan.    The US may not be able to handle another huge shock to the system and I think we in Canada need to say that we're not going to be handing out blank cheques willy-nilly to either the US or Europe once China gives up on its enemies.

Three:   Don't be so cocky that you think God is on your side.   Every election is a new cycle with a new story developing.  We've seen many parties around the world with this kind of hubris -- even Canada's Liberals.   It can take just one event and a misplaced or ill-timed response to make things go haywire for the incumbent party.   Look for instance as to how long it took for Canada's Cons to respond to the Libya crisis.  The bank accounts should have been frozen the day the rebellion started -- not waited all the way until now.  And only now we're sending two frigates?  It's not quite the same level of course, but these things tend to pile up and eventually your credibility is shot.

Iceland went the exact opposite route to Ireland.   The people there are pissed off at the "reparations" they've had to pay to depositors in other countries.   And they have had huge short term pain when the government forced the banks to fail, but the country is recovering relatively quickly.   Enough that it could get early entry into the EU, maybe as soon as 2013.   I can't see Ireland being kicked out of the grouping -- once you're in you're in -- but Ireland will need more than just more friendly terms from its partners to get out of its pickle.  It needs to make hard choices.  Choices that sooner or later much more prosperous countries will have to make.

Vote for this post at Progressive Bloggers.

No comments: