John Bruton

Opinions & Ideas

Month: January 2010

Divided Societies-How will they survive the Recession?

Northern Ireland faces real economic threats. It is heavily dependent on the UK Exchequer. 32% of its work force is employed in the government sector. That sector is kept going by an annual net transfer of 16 billion pounds from the UK Exchequer. But the UK Exchequer is running short of money. It has a deficit of 13% of its GDP.

Both major parties in the UK are agreed that after the Election there will have to be big cutbacks in spending by the UK Exchequer. Such cutbacks are more of a threat, the more dependent one is on public sector employment, as Northern Ireland is. Is the Northern Ireland powersharing systemcapable of making quick, fair and efficient decisions to reduce public spending in a timely way?

As I write these words, the talks between the Democratic Unionist Party, Sinn Fein and the other parties to save the power sharing Executive in Northern Ireland are still dragging on. All night sessions have been a feature, which puts a premium on physical stamina rather than on political sensibility.

The trouble is that the parties are not staying up all night discussing the threats to employment in Northern Ireland arising from the financial crisis and what to do about them. Instead, the issues which brought them to the precipice have nothing to do with the economy, have also been around for a long time, and could have been settled years ago.

The issues that divide them are control of the police and provocative parades. The parties have been sitting together in the Executive for a long time too, tackling other problems, and presumably interacting on a daily basis. One might therefore have expected that they would have quietly come to some common understanding on how to tackle these two well rehearsed problems, policing and parades, without the need for high profile all night sessions attended by the Irish Taoiseach and the UK Prime Minister, both of whom have plenty of other things to do.

The fact that they have not used their time to sort out these entirely predictable issues illustrates an underlying problem with the arrangements underlying the Northern Ireland Executive, which were put in place by the Belfast, or Good Friday, Agreement of 1998. These arrangements mean that the Executive does not face an opposition that is ready to take over from it. So long as each of the two bigger parties keep their own supporters in their own “community” happy, they are guaranteed their places, and do not have to worry about what the supporters of parties from the other “community” are thinking.

These arrangements were, of course, put in place for understanable reasons and to deal with an historic problem. In order to prevent a majority take all system coming about, as was the case in Northern Ireland from 1920 to 1972 when the Unionist majority had all the power, the 1998 Agreement required that every decision have the agreement of a sufficient number of both Unionist and Nationalist representatives. This is what is called cross community consent. Each decision must, at minimum, have 40% support of representatives who have registered themselves formally as “unionist” and also 40% of those registered as “nationalist”. Representatives of parties who decline to register as either “unionist” or “nationalist” may vote, but their votes do not count when it comes to deciding if cross community consent has been obtained for a particular decision. Thus the votes of members of the Assembly who do not register in one of the two ancient camps are worth less than the votes of those who do.

Thus there is a built in disincentive to the formation of parties that strive to win support on the basis of providing a new politics that transcends the historic divisions, and a disincentive to voting for them too.

Likewise, because parties have an incentive to identify themselves exclusively with one
community or the other, they tend not to bother to appeal for votes from the other side at all. Electioneering thus becomes a process of segmentation of the electorate, not of reconciliation.

And, as the work of the Executive and the Assembly is a search for a permanent and perfect balance on a see saw between the weights of two narrowly defined communities, there is a tendency for voters to choose parties at the more extreme end of their own particular community spectrum to maximise leverage for their side or to counterbalance or anticipate the election of extremists on the other side.

In fairness, it must be acknowledged that there might never have been an agreement at all in 1998, if these complicated, and apparently perverse, arrangements had not been put in place. And if there had been no agreement in 1998, a lot of people might have been killed in conflict since then.

But it is now time to accept that, while the arrangements have kept the peace, they have also preserved the divisions that led to the conflict in the first place.

Now may be the time to start thinking about ways toachieve cross community consent without polarising representation in the way the present system does.One might , for example, say that for any Executive to be formed, it must have the support of 75% of the Assembly, and that all decisions of the Assembly must have a vote of 75% to go through. One could then requiring parties to register as “unionist” or “nationalist” for the purposes of establishing cross community consent. That would reward parties who seek the centre ground between the two communities, in ways that the present arrangements do not. But it would still, in practice, require cross community consent, because no decision could assemble 75% support without a lot of support in the two traditional “communities”.

Divided societies like Northern Ireland, Belgium, Macedonia and Lebanon will not escape the need to make tough decisions to curb spending, any more than more united societies will avoid such decisions. They need systems that are robust enough to make decisions that are speedy as well as fair, and which promote a search for the centre ground rather than for leverage at opposite ends of the spectrum.

The current difficulties in Northern Ireland illustrate a wider design problem that needs to be studied by all those who want to build structures that will reconcile divided communities, whether in Afghanistan, Iraq or elsewhere, while also providing effective and cost efficient Government.

A Two State Solution?

The preferred solution of the international community for the dispute between Israelis and Palestinians is two states, one Israeli and one Palestinian existing side by side , with international guarantees. One of these states, the Palestinian , would be demilitarized while the other, Israel , would presumably remain a fully armed nuclear power.

As of now, the Palestinian and Israeli populations are roughly equal in number. Israel proper has 78% of the territory. This leaves 22% for the Palestinians. Israelis continue to build settlements in the 22% left to the Palestinians.

In fact the rate of Israeli population increase in this 22% (the occupied territories) is much faster than the rate of population growth among Israelis in the 78% of mandate Palestine that makes up Israel proper.

One does not have to be a brilliant mathematician to work out that if this trend of extra Israeli settlement in the 22% of the land left for Palestinians continues, a two state solution will become physically and geographically impossible. There would be no manageable space left in which to found a Palestinian state. Little islands Palestinian land, cut off from one another by Israeli roads, settlements and security barriers, would not leave the Palestinians with a territory over which they could realistically be expected to establish a state that would be effectively sovereign and capable of taking on the responsibilities of control over its own territory that sovereignty implies.

President Obama asked the Israeli Government to stop settlement building in the Palestinian territories. Israel has declined to do so. There have been no consequences for Israel of this refusal.

The United States continues to buy arms from Israel. Israel remains the largest per capita recipient of US foreign aid, although it is a prosperous country. Americans can claim tax relief on financial contributions they make to Israeli settlement activity, even though their President has asked that it should stop. The US continues to buy arms from Israeli manufacturers.

My belief is that a perception of inequitable treatment of Palestinians has an effect on attitudes towards the West in countries with large Muslim populations. I also believe that it has contributed indirectly to the decline in the Christian populations in Middle Eastern countries. It assists creating a climate of opinion among Muslims that helps the recruitment to terrorist organisations.

The Civil Rights movement in the United States initially focussed on the equal right to vote. So also did that in Northern Ireland. Palestinians living in the West bank have no right to vote on the composition of the government that ,in reality, controls their lives, the Israeli Government. While that situation can be sustained militarily, it cannot be sustained politically. The indefinite continuance of this situation puts supporters of Israel , who believe in democracy for all, in a false position. That is not wise from an Israeli point of view.

Serious pursuit of a two state solution would resolve that contradiction, so long as what is to be created is a genuinely sovereign Palestinian state. I doubt whether the pursuit of a two state solution will be seen as serious as long as Israeli settlement activity, in the 22% of the territory that might become the territory of a Palestinian state, continues without any negative consequences for Israel. I do not know how long this can continue, perhaps a long time, but the ultimate result will be tragic for all.

Remarks by John Bruton at the launch of the book “Is it possible to live this way? An unusual Approach to Christian Existence “

This book seeks to make sense of the lives we all have to live today. Does sacrifice make sense? What is the place of forgiveness? What does charity mean? Can we come to an understanding of these things in such a way as to enable us to place our own daily experiences and troubles in a context that gives hope and purpose to all we do?

As Monsignor Giussani puts it

“When a mother gives birth of a baby, it is the beginning of sacrifice; when a boy marries a girl, it is the beginning of sacrifice “

He argues that sacrifice run not only against the grain of modern, gratification driven, consumer society. It also goes against our nature, he says. Yet we all know that sacrifice is necessary and inevitable, if life is to be passed on to another generation. Making that necessary sacrifice something which people willingly accept, is where religious belief can make all the difference.

As Monsignor Giussani puts it, sacrifice is

“worth the trouble when it is done for something else that does not wither like the autumn leaves, that does not rot like a man who dies, something else that challenges time, something else that grows more beautiful with time, that persists, and that make you persist in the same way”

That “something else “, that does not wither like the autumn leaves ,is God.

A God that will help people accept sacrifice has to be One who is more than a distant abstraction, more than a default explanation for things that would otherwise be unexplainable.

No, the “something else” that makes sense of sacrifice, is a God who actually cares, a God who cares about not merely an abstraction like “mankind”, but who cares about each one of us individuals, who cared enough to send His only son to become a man and die a painful human death to atone for our sins. By becoming one of us, God tells us we are uniquely valuable.

Belief in such a God makes sense of essential incompleteness of everything we do. It opens us up to a new understanding of other people, of all faiths and none, if we accept that Christ died for each one of them too, whether they know it or not. It thus makes sense of love for others, of love that goes beyond some mere reciprocal relationship where one gives in order to receive, one which gives to others without hope of return , so that they, not the giver, can achieve their destiny. That is what Charity means.

Belief in such a God should make it impossible for us ever to see other people as mere objects. If God sent his only son to die for each person, how could we see anyone else as an object of any kind, as an object to be used for sexual gratification, as an object to be exploited for financial gain, or as an object to be sacrificed in a class war, a war of nations, or any other kind of war. The twentieth century was one in which human beings were treated as objects by tyrants, by sales people ,and also by each one of us individually whenever we treated another person without respect.

It flows from that that belief in such a God also makes forgiveness possible. If sacrifice goes against nature, so also does forgiveness. Forgiveness is hard. It requires us to do more than just forget, more than just bury a bad feeling behind an insincere smile and a tepid handshake, more than just accept monetary compensation. It requires us as Monsignor Giussani puts it, “to give back space and freedom within yourself” to the person who has offended you.

Forgiveness is one of the highest expressions of Charity, of giving without expectation of return, of giving for the sake of the other, not of oneself.

I think we have become a society whose mode of discourse, in the media and social networking has found many ‘inventive ways of taking offence, and far too few ways of expressing forgiveness.

Accountability has become an end in itself, and not what it should be , a necessary prelude to forgiveness. We need to create a new mode of public discourse, that puts forgiveness back at the heart of our culture. Surely a Christ who died on a cross for our sins would expect that of us .

Christ did not die for accountability, He died so that we may forgive and be forgiven.

I believe is the unique contribution Christianity can make to our world is to put forgiveness back at the centre of human relations, at the centre of relations between states and communities, and at the centre of relations between religions too.

If you look at the Middle East today, you see lack of forgiveness in its most extreme forms. You see people being treated as objects. You see people being corralled and confined, their land stolen. You see them being used as living bombs. You see sacrifice twisted towards obscene ends.

You also see a lack of forgiveness, a lack of Charity, in the criminal justice system, especially in the United States since the beginning of the so called war on drugs, where mandatory and long sentences are imposed, and where people are left to rot in overcrowded gaols. In our modern crowd pleasing media, criminal trials are often presented primarily as a means of providing catharsis for victims, rather than, as methods of making a fair and objective assessment of the crime, and of what should be done with the criminal in the interests of society.

This is a challenging book. It is not a light read. Some of its passages need to be read over again, just as the scriptures need to be read over again. It is a pathway towards a new way of looking at our own lives, a new way of hearing and seeing what goes on around us, a new way of understanding why we are here at all.

Remarks by John Bruton at the launch of the book

“Is it possible to live this way? An unusual Approach to Christian Existence “

By Monsignor Luigi Giussani

In Dublin on 7th January at the IFSC Campus of the College of Ireland

Salazar, a political biography

The author of this major work of European history is a senior lecturer in NUI Maynooth and a graduate of Trinity College, Dublin. De Meneses has drawn on Irish official archives and was assisted in preparing the book by the Irish Research Council for the Humanities.

Antonio de Oliveira Salazar governed Portugal from 1928,when he became Finance Minister at the age of 38, until his enforced retirement because of his entry into a coma in September 1968.

His background was academic, but his mentality was bureaucratic. Although a dictator, he scrupulously respected civil service protocols and never destroyed documents. He never married, was a strong Catholic, but had several affairs.

He came to power two years after a military coup had overthrown the chaotic, virtually bankrupt, Government of the Portuguese Republic. The military soon found that they did not have the skills to administer the country’s finances, so they turned to Salazar whose economic specialism was taxation. He quickly restored discipline to the national finances, balanced the budget, and enabled Portugal to weather the Great Depression better than most European countries. On that record, and with the use of great skills as a political infighter, Salazar became the indispensable and almost irremovable dictator of his country’s fortunes.

Unlike Franco, he was a hard worker, with little ego. He rarely travelled outside Lisbon. Unlike Hitler, Mussolini and Franco, he generally avoided the use of violence and never used demagogic methods. He distrusted paramilitary movements and dissolved those set up by supporters of his regime. He accumulated no wealth during his long period in office, and when he finally retired, he had no money even to pay for his nursing care. Unlike Franco, although he was sentimentally a monarchist, Salazar never restored the Portuguese monarchy.

This book gives a detailed survey of the major challenges Portugal faced during Salazar’s long reign.

An ally of Britain for centuries, Portugal remained technically neutral in the Second World War. It sent vital tungsten supplies for making explosives to Germany, while also ceding a base in the Azores to the Allies. It did not introduce rationing until 1944.

Portugal followed corporatist and protectionist economic policies until the 1950’s. It then turned to foreign investment to help raise the funds it needed to pay for the long war it fought until 1975 to keep its African colonies, after all other European colonial powers had left. Portugal argued that it could build a truly multiracial society where others failed.

It is good to see an historian based in an Irish university tackling a non Irish theme in such an authoritative way.

Book Review for “The Irish Independent” by John Bruton

Title; Salazar, a political biography

Author; Filipe Ribeiro de MenesesPublisher;

Enigma Books

The changing of the Guard

The European Union is in the process of installing a new Commission of 27 Commissioners, which will act as its executive arm over the next 5 years. Each individual Commissioner has been proposed by his or her home Government, has been accepted by the President of the Commission Barroso, and is now having to be approved by the European Parliament.

This power to accept or reject individual Commissioners is one of the important powers that the directly elected Parliament has. It is seen as an expression of EU democracy. There is, however, a temptation for the Parliament to use this power just to remind its electors that it has the power. For example a nominee for Commissioner in the last Commission was forced to pull out because of his private convictions on issues that he said he derived from his religious beliefs, even though he assured the Parliament he would not allow these beliefs to prevent him fulfilling his public functions.

This time the debate in the Parliament about the suitability of some nominees is breaking down on party lines, even though the ostensible arguments are to do with other ethical matters. I cannot comment on these ethical matters, although it does seem that they are ones that might be better adjudicated upon by an independent non political body. There seems even to be a sense that if one side in the Parliament blocks one nominee from the other side, then the other side should do the same in reverse. In that way, it is supposed, the Parliament will enhance its role as a power in EU affairs.

The controversy brings into focus an issue as to what sort of Commission Europe should have.

Should the Commission be a political body that reflects some sort of compromise between the political composition of the European Parliament and the political composition of the 27 member Governments?

Or should it be a body that tries to be above national and ideological differences and which seeks a common European interest?

The original idea of the European Commission was in the second category.

Without ever really deciding that that was what the EU and its citizens want, we are now drifting quite quickly towards the former model. But all this politicisation of the Commission is taking place in a way that does not directly involve the European public. If we are going to incur the cost of having more a politicised Commission, we should get something more for it in terms of greater EU level direct democracy.

In the Convention which drafted the Lisbon Treaty, I argued for the direct election by all the people of the EU of the President of the Commission. This would have given the EU a Presidential election on US lines, and would have created a genuinely pan European debate about the direction the EU should take.

Notwithstanding the fact that they themselves were directly elected by the people and that the Parliament presented itself as the primary organ of EU democracy, I received no support for this proposal from the members of the European Parliament in the Convention. They were instead focussed on getting more powers for the Parliament, an exercise in which they had remarkable success.

The EU is not the only entity which gets into difficulty agreeing on new members of its Administration. The United States has similar difficulties.

The Partnership for Public Service has recently produced a paper on progress in filling the 500 or so politically appointed posts in the US Administration.

As of 31st December, 40% of these posts (295 key jobs) in the Obama Administration remain unfilled. This is almost a year after President Obama came into office! 67 nominees are awaiting Senate approval, even though the Senate majority belongs to the same party as the President .

Some are being held up by individual Senators as hostages in order to obtain a concession from the Administration on some unrelated matter. Some of the unfilled positions are in critically important jobs in security, economics and trade. At the same stage in the first term of the Bush Administration, it had a similar number of unfilled positions. Many able people are unwilling to allow their names to go forward for Administration jobs because the process is so onerous and unpredictable .

The EU should not go down this road. It should consider some non partisan pre vetting process to identify genuine ethical concerns in advance of names being put forward for the Commission, so as to enable the European Parliament to focus on the political choices the Commission as a whole will make, rather than on a party political game of tripping up individual nominees .

Figuring out the USA

It is interesting to compare statistics and reflect on the insights they give us into the very different lives that people lead. My attention was drawn today to the statistical abstract of the United States, which gives a glimpse of how diverse that country is.

Take commuting to work. The longest average commute in the US is in New York-31 minutes and the shortest is in south Dakota- only 16 minutes. So the idea of Americans spending long hours in their cars going to and from work is not borne out. I was particularly surprised at the South Dakota figure, for this is big state with a low population density.

The US does not believe in taxing motor fuel, as we all know. But even here there are differences. The highest gasoline tax is 36 cents per gallon in Washington State and the lowest is 7 cents in Georgia.

There are big gaps in income in the United States and income inequalities have risen. Some say this is because of free markets; others blame it on technology replacing people at the lower end but not at the top.

The highest incomes per head are found in New York, almost 61000 dollars, and the lowest in Montana at only 31000.

This situation will be aggravated by the growth in unemployment. A study by Colombia University shows that people who lose their job, are unemployed for a while, and then find another job, will do so at a wage that is on average 20% below the one in the job they left. And, even after 20 years, the research found that they do not make up the 20% differential. I expect there would be similar findings here in Europe.

The Statistical Abstract shows that the suicide rate in the US is half that in Japan.

But the prison population is enormous 2.29 million people are in US gaols, as against “only” 1.1 million people in 1990. This is huge toll in human lives and time. The rate is up to six times that in Europe.

Perhaps it is to do with the weather, but Alaska has the smallest share of its population over 65, only 7%, whereas 17% of Florida’s population is of that age.

Utah has 31% of its people under 18 and Vermont 21%, not a huge difference between the two extremes really.

What is going to happen to Europe’s economy?

President van Rompuy of the European Council is convening a meeting of the Council next month to look at how best to revive Europe’s economy. It is a field he knows a great deal about.

The OECD forecasts that the EU economy will grow by about 1% in 2010, whereas it sees the US economy growing by 2.5% and the Chinese economy growing by 9%.

It is likely that the dollar will continue to weaken relative to the euro. This will give US exporters an advantage over EU exporters in the markets where they compete with one another.

Looking to the longer term, an ongoing shift of wealth away from Europe and North America and in favour of Asia will continue for a generation, unless disrupted by some major political event. If this proves to be the case, there will be a growing disjuncture between the continuing overwhelming military power of the US ,and its declining relative economic power. Tougher prioritization of military spending by the US will become necessary, as health and pensions come to absorb more of available tax receipts.

The nations of the European Union and the United States both face a major problem arising from the ageing of their societies.

In the US case, this will take the form of burgeoning medical costs. Already 50% of all US health costs are incurred in respect of those over 55 years of age, and, as the share of the total population in that age group increases ,the gap between what Americans expect from healthcare, and what they are willing to pay for it through taxes and insurance premia, will grow. This gap is likely to be filled by adding to already large Federal and State deficits.

In the EU case, similar pressures will arise, particularly in the pension field where the unaffordability of some national pension systems will become very acute. The health systems of EU countries will also face ageing pressures.

An EU Commission study suggests that, if policies are not changed, the average debt/ GDP ratio of EU member states will reach 550% by 2060. This is similar to the figure that US Federal debt/GDP ratio could also reach, if current policies remain unchanged.

The ageing of societies will also have an adverse effect on productivity on both sides of the Atlantic. The skills of older workers skills are liable to higher rates of obsolescence than those of younger workers. Older workers are likely to be less willing to move house to find new work. Thanks to its one child policy, China, but not India, will eventually be subject to this problem too .

On the other hand, the ageing of society should help reduce unemployment among the young. There will be less people of working age than at present, but there will be no reduction in the amount of work to be done, particularly in areas like personal services (hairdressing, cooking, and cleaning). This is work that cannot be outsourced to other parts of the world. But these jobs will not pay well.

There will be increased tension between generations over the distribution of resources . Younger people will resent the amount of tax they will have to pay to fund healthcare and pensions for older retired people who are no longer working.

How well has the EU equipped itself , in its long gestated Lisbon Treaty, to deal with these challenges?

Given that the EU and the US will be facing similar challenges, and in many cases defending similar interests, are the mechanisms they have for promoting their joint interests in global negotiations fit for purpose?

These are the two questions to which I would now like to turn.

As far as general social and economic problems are concerned , the main responsibility rests with member states rather than the EU. It is the member states who retain the power to raise taxes and they control the vast bulk of public spending

The Lisbon Treaty has introduced additional area in which the Council of Ministers will vote by majority and this will enable the EU to react to problems more quickly in some areas. But these are not areas of direct relevance to the economy.

As for controlling public spending, the Lisbon Treaty has not resolved the problem of enforcing discipline within the euro area. As is known, in November 2003, two big countries got a free pass although their deficits were well above permitted limits under the then applicable Stability and Growth Pact. Now, in face of the economic crisis, almost all the euro countries will exceed these limits.

A more realistic discipline is needed, one which distinguishes between excess deficits that arise because of one off events or from factors that affect all economies, and deficits that arise from an enduring imbalance in a particular economy that must be addressed by that country if it is to remain a credible member of the euro. Now that the Lisbon Treaty is ratified, that problem will have to solved by a means that do not require a change in the Treaties. Hopefully the new version of the Stability and Growth Pact will prove to be more robust in practice than the old one was. But it is more likely that bond markets will be more effective than warnings from Brussels in forcing countries to bring their finances under control. Unfortunately bond markets often leave it to late to give their warnings, and then they overreact.

The EU will also have to develop a way of giving political guidance in respect of exchange rate policy. A radical devaluation of the dollar, sterling and other currencies against the euro would impose severe political strains within the eurozone, and it will not be impossible to ignore this. The arrangements for dealing with this are not altogether clear, although the subject is covered by Article 219 of the Lisbon Treaty.

A critically important area for the EU is energy policy. EU countries will go from importing 57% of their natural gas today, to having to import 84% by 2030. The corresponding figures for oil are even worse. And, unlike the US, the EU does not have vast reserves of coal. Thus the EU and/or individual EU member states are vulnerable to political blackmail by energy suppliers.

The trouble here is that it is the member states of the EU, not the EU itself, that has the legal and practical means of guaranteeing minimum supplies of energy to its own citizens. It is states, not the EU, that can impose rationing. It is states, not the EU, that own big energy utilities. And, while the EU as a whole is increasingly dependent on imports, not all states are equally so. Some have reserves of coal, and others have nuclear industries, often owned by their taxpayers. All these factors make it difficult to frame a common EU policy. The Lisbon Treaty does give the EU greater power to promote a single market in energy . But that will require huge investments in cross border pipelines and power lines. The Lisbon Treaty does not give the EU the power or the money to make that happen.

In these ,and other areas like creating a single market in services and opening up all Government purchases to cross border competition , there are real economic efficiency gains to be made. But the benefits gained will be diffuse and will be enjoyed by everybody in general but by nobody in particular. Consumers would benefit from such EU policies, but consumers are notoriously difficult to mobilize. The problem is that he EU has masses of policy, but very little mass politics. And without mass politics, it is hard to move forward on really difficult , politically sensitive, issues that benefit consumers rather than entrenched producer interests.

The Lisbon Treaty did not address this properly. To create mass politics at EU level, one needs to have EU wide elections that mobilize opinion across national boundaries . If the President of the Commission ,or the new President of the European Council, had to get their mandate directly from the EU electorate, there would be a much better chance of building the sort of mass politics at EU level that would move things forward. It is unrealistic to complain of lack of popular political will at EU level, if the means of creating it were not put in place.

Finally, how well equipped are the EU and the US to act together to defend their interests when these interests converge, as they often do? My answer to that question is “not very well”. There are lots of institutions and dialogues linking EU and US policy makers , but the policy making processes are so different on each side of the Atlantic that it is difficult to synchronise them.

My own feeling is that the priority of the EU should be to spend more time working out what its own needs are, and forging common positions on them between its 27 members. When it has first done that, it will find that the US will be more willing to listen to it.

Cardinal Cathal Daly

Today I attended  the  funeral of Cardinal  Cathal Daly.  He was  the  Catholic Archbishop of  Armagh and leader of  the  church in Ireland during a critical  time in  the island’s history.
 He gave  great moral leadership, and  showed  real  moral  courage, in opposing  the use  of  violence  to  achieve political  goals. The  so  called physical  force  tradition  in Ireland  has had a  great  deal of undeserved  respectability from historians  and romantics. Cardinal Daly  restored morality to  the  debate  by  stressing  the  sacredness of  human life and  the total  unacceptability of  the use of   violence as a  means of  resolving  the  differences  that  exist in Northern Ireland.  

Justin Keating RIP

Justin  Keating RIP

I am very sad at hearing the news today of the death of Justin Keating. As a broadcaster and as a politician, he was a man of deep and sincere conviction, who took   positions  on the basis of  careful  deliberation.
It was my privilege to serve as his Parliamentary Secretary from 1975 to 1977. He was a  considerate and  fair person to  work for, and he  was always willing  to give a hearing  to views other  than  his own.
His  work as Minister  for Industry and Commerce laid  the  foundation, in  difficult  times,  for  Ireland’s  subsequent  modernisation  through overseas investment.

Statement by John Bruton, former Taoiseach

Is Ireland’s economic problem different to the one faced by other countries, and will it take longer to solve?

This question has  been on my mind  quite a  bit after  spending  two months home in Ireland  following  five  years in the United States.
The physical appearances are positive.   A new terminal is moving rapidly toward completion in Dublin Airport. The  road  system around my  own  town of Dunboyne is  undergoing a  transformation greater  than  anything  that  happened in the last  two  centuries, and a  rail service , that closed  when I was a  small child, is on the  way toward being  reopened.  Real wealth has been built up by many families whose homes have been reequipped with modern conveniences of all kinds , and  most of  those gains have  been preserved  despite the   40% fall in house prices. Meanwhile the shops are full, and a tough pay and welfare cutting budget apparently has   been accepted with remarkable maturity by the electorate.
Given that Ireland enjoyed  almost miraculously high  growth rates from  1994 to 2007, it is easy for a  people  who became so used  to success,  to see  the financial crisis of 2008 as not much more than a  temporary interruption of the  earlier growth trajectory.
It is only  when one  analyses  the  figures in  more  depth  that one  sees  that problem  facing Ireland is  quite  different  from  that  facing other  countries, and   that  the path  to recovery may  have  to be  much longer.
The  deeper problems are  well analysed  by  a  Professor of  Economics  from my  old university, UCD, in a  paper  entitled   “The Irish Credit  Bubble” published a  few  days  ago.  See
Professor Morgan Kelly identifies two features that distinguish the Irish problem from that of most  other  countries.
One is the disproportionate reliance  Ireland placed on  the building industry to  generate  jobs, spending and  tax  revenue .
The other is the disproportionate increase in bank lending   in Ireland since 2000.
House building provided just 4 to 6% of national income in the 1990s, but it provided   15% of Irish national income in  2007.
Bank lending  amounted to only  60% of  GNP in Ireland  in  1997(slightly below  the  European average), but by  2007 bank lending  had risen  to 200% of  national income (twice the  European average).   And to make matters worse, that lending was no longer based , as it was in  1997, on Irish  deposits  but predominantly on money borrowed  on a short term basis on  foreign money markets, some of  it was in  bonds that will  mature  for repayment in  2010.
Professor Kelly foresees a  substantial  further  fall in Irish house  prices.  He  argues  that  this  will lead to people,  who  find  that their  mortgage then  exceeds the reduced  value of  their home ,   walking  away from  their liabilities by  emigrating as soon as  they  can find  work abroad . He  foresees  write downs in the value  of  the mortgage book  of  some of the banks having to be  so great  as to  eliminate even  the extra  capital  the banks  recently obtained  from the Irish taxpayer .  He argues that in 2008 the Irish Government should not have guaranteed all the debts of the bank, just the deposits. He believes that the taxpayers should not take this on the next time there is a problem.
Professor Kelly is one of the few economists who foresaw the crisis and his views deserve attention.
Many of   the houses  built during the credit boom  were needed and will still be needed.  Before  the  boom started , the Irish  housing  stock  was insufficient for  a population  that was growing and  which contained an increasing number of people living  on their  own . But some of the houses were built in the wrong places, in low density schemes far away from public transport and other amenities.
I argued in 1999 in a policy document of my party entitled “Plan for the Nation” that houses should have been concentrated in growth centres close to rail links. If that policy had been followed, the  houses  would have  been more  saleable  and the  write downs  facing the mortgage  holders and  the  banks today  would  be less.
Looking to the  future, it  appears that Ireland is  saddled   with a banking  problem  that  will drag it  down and hold it back  for  years to  come, long  after other  countries have resumed  growth.  The Irish banks  will not  be  able to  give credit even to  good Irish businesses  with good  prospects. But Ireland  has  many of  the ingredients for a  dynamic  economy- a relatively young, educated and internationally minded population ,  good  natural resources,  and a political system which is capable of making  relatively speedy decisions( which some bigger countries lack).
Banks in other European countries are in a better state than the Irish banks, and it should be possible to encourage them to lend directly to viable Irish businesses and households. This would need arrangements  for easier  cross border debt  collection and  standard  terms for bankruptcy and priority  between  creditors.  This should be a test for the European Union, to find a way to encourage   cross border banking as part of a programme for economic recovery.
Ireland itself desperately needs to  bring its personal bankruptcy laws  up to  date,  so that people  get a  chance  to start again  rather  than remain in  bondage  for   up to  12  years as is now  the case.


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