News Continues to Disappoint; Irish Turn to 2011 with Hope

By Joe Leary
Special to the BIR

Unemployment is high, existing salaries have been cut, taxes are being increased, furious bitter criticism is everywhere, politicians are screaming at each other, and amateur economic experts are demanding their economic solutions be adopted. Newspaper reporters are delighted to offer their own advice and commentary.
This is an unhappy time in Ireland.

The 85-billion euro loan to Ireland from the European Central Bank (ECB) and the International Monetary Fund (IMF) has been approved, permitting Ireland to conduct its business and maintain its banking system.
ECB President Jean-Claude Trichet is apparently having second thoughts as the Irish government tries to assert control over its wayward banks. He objects to a recently passed Dublin banking bill that gives Irish Finance Minister Brian Lenihan substantial power to regulate and supervise the current system. This kind of second guessing from Europe is not helpful and further feeds the discontent already present amongst the Irish people.
There is ample evidence that the Irish banking system requires discipline and government supervision. Perhaps Trichet fears such controls may spread to other countries in Europe.
Government tax receipts are currently substantially less than government expenditures, resulting in new deficits every month. In order to pay back the European loan and run the government without having to borrow more funds, the Irish Parliament passed a bill to cut expenses and provide more tax revenue. The Fianna Fail political party, now ruling Ireland, was successful, with some small party and independent vote support, in getting the bill approved, 72 to 68. The legislation, actually a series of bills, will broaden the tax base, requiring more citizens to pay taxes but not raising tax rates.
The bill will reduce social expenditures by cutting payments to the unemployed and trimming the minimum wage from roughly $11.67 to $10.32 if you use 1.35 euro to the dollar as the exchange rate. The minimum wage is far lower in the United States, depending on individuals state laws.
Two examples of the effect of some of the expense cuts: Two years ago, the prime minister of Ireland was paid $415,000 yearly; under the new bill he will now be paid $294,000. Salaries of ministers of government will be reduced from $325,000 to $244,000. These are just some of the many decisions. Ireland’s citizens will be experiencing years of austerity before a return to full economic health.
Ireland is facing an election in the spring and there is little doubt that new political leaders will be chosen. Not a day goes by without the opposition parties offering severe criticism about all that is going on. Fine Gael, Labour, and Sinn Fein all hope to gain seats in the parliament. The new government will be a forced coalition since no one party is expected to gain a majority.
The Irish Times’s most recent poll, in December, showed dramatic fluctuations in voter disposition. The polls questioned 20-25 voters in each of the 43 constituencies to predict probable results. The party in control at present, Fianna Fail, is doing very poorly with only 17-18 percent of the preference. Many Fianna Fail ministers and parliament members have announced they will not run again and are leaving politics.
The idea that new political leadership can solve all the problems is not considered likely, as the electorate surely will soon find out. But change is coming, and that is probably a good thing for everyone.
The Christmas and New Year’s holiday season in Ireland is the country’s most festive time of year. This year the fine hotels in Dublin were expecting exciting busy weeks and there are increasing signs that good news is just around the corner. Few don’t anticipate a better 2011 than 2010.