Protests in Ireland
In a stew
Feb 26th 2009 DUBLIN
Feb 26th 2009 DUBLIN
From The Economist print edition
Tough times for Ireland’s government—and its people
WHEN more than 100,000 people paraded through Dublin on February 21st, it was the biggest march the Irish capital had seen since 1980. Then, binmen joined bankers in protest against Ireland’s high tax rates. This time there was less social solidarity. The marchers were mostly public-sector workers angry over a plan to cut their pay, via a 7% pension levy. They were also outraged by the behaviour of bankers, whom one union leader accused of economic treason.
The government has injected €3.5 billion ($4.5 billion) into each of the country’s two largest banks, but this has not impressed markets. Shares in Allied Irish Banks and Bank of Ireland have fallen sharply. After the bursting of the property bubble, more than €7 billion may be needed to cover bad loans to developers. In January the government nationalised Anglo Irish Bank (often seen as the builders’ bank), after its chairman, Sean Fitzpatrick, failed to disclose some €83m in personal loans. This week anti-fraud police raided the bank to investigate alleged breaches of company law.
The prime minister, Brian Cowen, faces two crunches: the banks and the public finances. So far, he has had little success in tackling either. His government’s popularity ratings, and his own, have dived. He is struggling to avoid nationalising the two biggest banks. And his fiscal plan is in trouble. It aims to keep the budget deficit below 10% of GDP this year (the highest in the European Union), and to achieve balance by 2013, via spending cuts and tax rises worth 8% of GDP. Tough, yet most economists doubt it is enough. The European Commission is sceptical. The government’s proposals, it has said, lack detail and its growth assumptions are too optimistic.
This may force the government to try to trim the deficit sooner, this year and next, not later in its five-year plan. That would mean raising taxes earlier than expected. Mr Cowen had been hoping to delay that unpalatable medicine. He faces European and local elections in June and, in the autumn, a second referendum on the EU’s Lisbon treaty, which recent polls suggest should be winnable. The state now pays higher rates on its bonds than Greece. With increasing talk of potential default on its sovereign debt, Ireland has become the weakest link in the euro. Mr Cowen has little time left to turn things round.
WHEN more than 100,000 people paraded through Dublin on February 21st, it was the biggest march the Irish capital had seen since 1980. Then, binmen joined bankers in protest against Ireland’s high tax rates. This time there was less social solidarity. The marchers were mostly public-sector workers angry over a plan to cut their pay, via a 7% pension levy. They were also outraged by the behaviour of bankers, whom one union leader accused of economic treason.
The government has injected €3.5 billion ($4.5 billion) into each of the country’s two largest banks, but this has not impressed markets. Shares in Allied Irish Banks and Bank of Ireland have fallen sharply. After the bursting of the property bubble, more than €7 billion may be needed to cover bad loans to developers. In January the government nationalised Anglo Irish Bank (often seen as the builders’ bank), after its chairman, Sean Fitzpatrick, failed to disclose some €83m in personal loans. This week anti-fraud police raided the bank to investigate alleged breaches of company law.
The prime minister, Brian Cowen, faces two crunches: the banks and the public finances. So far, he has had little success in tackling either. His government’s popularity ratings, and his own, have dived. He is struggling to avoid nationalising the two biggest banks. And his fiscal plan is in trouble. It aims to keep the budget deficit below 10% of GDP this year (the highest in the European Union), and to achieve balance by 2013, via spending cuts and tax rises worth 8% of GDP. Tough, yet most economists doubt it is enough. The European Commission is sceptical. The government’s proposals, it has said, lack detail and its growth assumptions are too optimistic.
This may force the government to try to trim the deficit sooner, this year and next, not later in its five-year plan. That would mean raising taxes earlier than expected. Mr Cowen had been hoping to delay that unpalatable medicine. He faces European and local elections in June and, in the autumn, a second referendum on the EU’s Lisbon treaty, which recent polls suggest should be winnable. The state now pays higher rates on its bonds than Greece. With increasing talk of potential default on its sovereign debt, Ireland has become the weakest link in the euro. Mr Cowen has little time left to turn things round.
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