BARCELONA – Spain – What would Picasso have thought about the euro? Maybe what is going to transpire soon in the country of bullfighting tapas eating Spaniards will be reminiscent of Picasso’s greatest piece Guernica.
“If you are a British expat, get your money out yesterday, if you are Spanish, get your money out sooner than yesterday, if you have a property in Spain, try and sell it, although I’m afraid you may be mierda out of luck with that idea, how can you sell something that is pretty much worthless now and will be even more worthless soon when the debt maelstrom hits?” an insider from the Spanish Finance Ministry told a Spanish business journal.
What happened in Cyprus is destined to happen in Spain soon therefore it seems the wheel of misfortune turns its weary cycle over the troublesome euro waters daily, churning away leaving frothing sewage water in its cumbersome wake.
As the Eurogroup President, Jeroen Dijsselbloem said, that “if necessary the uninsured deposit holders” will be gored by the bull’s horns and thus there is the rub, there is no chivalry left in Espana as Don Quixote has been kicked firmly in the cojones by his trusty squire’s donkey; Picasso would surely have crafted a diabolical sculpture of a deformed woman to represent the broken euro and Salvador Dali would have simply shat in a purple bucket standing on top of a lobster, as for Gaudi, his representation of the euro would be a pile of ceramic rubble.
“Spain is the big one for the euro. When Spain’s banks need to be recapitalised again, you can simply kiss your bank deposit goodbye. Especially with Spain’s unemployment currently at 26.7% things are definitely not getting better for people. There may very well be real bloodshed when the country’s economy collapses completely under its soon to be massive 110% gross debt of GDP,” an economist said from the UK.
What does ‘Euro’ mean?
Is a euro in a Cypriot bank, locked down by withdrawal limits and capital controls, the same as a euro in an Irish or French bank? Is a euro sitting in, say, a payroll account in Laiki with a balance of more than €100,000 (and subject to an unspecified “haircut” on Thursday) the same an “Irish euro”?
They’re both euro, both promises to pay the bearer, but honestly, do you have a preference? Of course you do. You’d prefer your money to be outside Cyprus. You’d prefer an Irish euro to a Cypriot one. So they’re not the same. Do we even have a single currency now, then? What does the Euro mean?
And how did this happen? At least in part, it happened because all the finance ministers of the Eurozone sat around earlier this month and let the Cypriots leave the room with a proposal to make depositors pay for bank losses, including insured depositors with balances of less than €100,000. They rowed back on that part, but you can’t undo the damage of their having taken it seriously to begin with. Imagine a snowed-in family just once agreeing “if we get really hungry, we can eat the rabbit”. You can take that back all you like – everybody knows the rabbit’s not safe any more. He’s not just a pet, he’s protein. Depositors aren’t just protected customers now, they’re also a source of money to save the bank.
We sat back and let that happen – all the Eurozone countries did. We let deposits in Cyprus undergo that subtle shift in meaning. We let their banks be closed for ages, with devastating impact on small firms and families. We let their tax rate be changed. We let them hang out there, hoping it would save us, the rest of this uneasy union. Where does that leave solidarity, in this European Project under our presidency?
Just now, you’d prefer an Irish euro to a Cypriot one. Remember that feeling, because, as Martin Niemöller might have written were he more interested in money, and living in more peaceful times, “First they came for the Cypriots …”
Is the Euro a Weapon of Mass destruction
There has been a very conscious use of the Euro to drive these right wing politics through, behind the backs of voters, who have constantly been lied to about the real intent of their European project.
How much longer are people of Ireland going to be fooled ?
Robert Mundell, evil genius of the euro – Greg Pallast
The idea that the euro has “failed” is dangerously naive. The euro is doing exactly what its progenitor – and the wealthy 1%-ers who adopted it – predicted and planned for it to do.
That progenitor is former University of Chicago economist Robert Mundell. The architect of “supply-side economics” is now a professor at Columbia University, but I knew him through his connection to my Chicago professor, Milton Friedman, back before Mundell’s research on currencies and exchange rates had produced the blueprint for European monetary union and a common European currency.
Mundell, then, was more concerned with his bathroom arrangements. Professor Mundell, who has both a Nobel Prize and an ancient villa in Tuscany, told me, incensed:
“They won’t even let me have a toilet. They’ve got rules that tell me I can’t have a toilet in this room! Can you imagine?”
As it happens, I can’t. But I don’t have an Italian villa, so I can’t imagine the frustrations of bylaws governing commode placement.
But Mundell, a can-do Canadian-American, intended to do something about it: come up with a weapon that would blow away government rules and labor regulations. (He really hated the union plumbers who charged a bundle to move his throne.)
“It’s very hard to fire workers in Europe,” he complained. His answer: the euro.
The euro would really do its work when crises hit, Mundell explained. Removing a government’s control over currency would prevent nasty little elected officials from using Keynesian monetary and fiscal juice to pull a nation out of recession.
“It puts monetary policy out of the reach of politicians,” he said. “[And] without fiscal policy, the only way nations can keep jobs is by the competitive reduction of rules on business.”
He cited labor laws, environmental regulations and, of course, taxes. All would be flushed away by the euro. Democracy would not be allowed to interfere with the marketplace – or the plumbing.
As another Nobelist, Paul Krugman, notes, the creation of the eurozone violated the basic economic rule known as “optimum currency area”. This was a rule devised by Bob Mundell.
That doesn’t bother Mundell. For him, the euro wasn’t about turning Europe into a powerful, unified economic unit. It was about Reagan and Thatcher.
“Ronald Reagan would not have been elected president without Mundell’s influence,” once wrote Jude Wanniski in the Wall Street Journal. The supply-side economics pioneered by Mundell became the theoretical template for Reaganomics – or as George Bush the Elder called it, “voodoo economics”: the magical belief in free-market nostrums that also inspired the policies of Mrs Thatcher.
Mundell explained to me that, in fact, the euro is of a piece with Reaganomics:
“Monetary discipline forces fiscal discipline on the politicians as well.”
And when crises arise, economically disarmed nations have little to do but wipe away government regulations wholesale, privatize state industries en masse, slash taxes and send the European welfare state down the drain.
Thus, we see that (unelected) Prime Minister Mario Monti is demanding labor law “reform” in Italy to make it easier for employers like Mundell to fire those Tuscan plumbers. Mario Draghi, the (unelected) head of the European Central Bank, is calling for “structural reforms” – a euphemism for worker-crushing schemes. They cite the nebulous theory that this “internal devaluation” of each nation will make them all more competitive.
Monti and Draghi cannot credibly explain how, if every country in the Continent cheapens its workforce, any can gain a competitive advantage.
But they don’t have to explain their policies; they just have to let the markets go to work on each nation’s bonds. Hence, currency union is class war by other means.
The crisis in Europe and the flames of Greece have produced the warming glow of what the supply-siders’ philosopher-king Joseph Schumpeter called “creative destruction”. Schumpeter acolyte and free-market apologist Thomas Friedman flew to Athens to visit the “impromptu shrine” of the burnt-out bank where three people died after it was fire-bombed by anarchist protesters, and used the occasion to deliver a homily on globalization and Greek “irresponsibility”.
The flames, the mass unemployment, the fire-sale of national assets, would bring about what Friedman called a “regeneration” of Greece and, ultimately, the entire eurozone. So that Mundell and those others with villas can put their toilets wherever they damn well want to.
Far from failing, the euro, which was Mundell’s baby, has succeeded probably beyond its progenitor’s wildest dreams.
The numbers going to jail over in relation to unpaid TV licence fines is higher than ever.
Some 194 people were sent to prison last year for non-payment of TV licence fines, compared to 31 in 2006 at the height of the boom.
The majority of those sent to jail were women, the Irish Prison Service confirmed. Females accounted for 121 of those sent down, while the remaining 73 were men.
Figures show that 25 people a day are now being sent to prison for not paying court fines.
A spokeswoman also expressed concern that women, the primary carer for children, make up the biggest number of those imprisoned for failing to pay fines related to TV licences.
“It is over two years since the Fines Act 2010 was signed into law and the Courts ICT system still hasn’t received the upgrade necessary to process payment of fines by instalment,” the IPRT said.
New legislation on this would be of little effect “unless this system is put in place with urgency.”
Figures show that 4,470 people were imprisoned for non-payment of fines and debts in the first six months of the year, compared to 7,514 in 2011. This compares with 1,335 just five years ago in 2007.
It urged that the minimum of €100 for eligibility for payment of a fine by instalment be removed.
The trust also said it had reservations about the admin charge of up to 10pc to be imposed on those who opt to pay by instalment.
The IPRT recently called on Justice Minister Alan Shatter to consider making use of the right of pardon and and the power to commute or remit punishment – with one suggestion an amnesty for some or all fines defaulters to ease pressure on strained prison resources.
The fact that more women are being imprisoned for failure to pay fines was of “serious concern,” it said.
Out of 1,680 women committed to prison last year, 1,300 were for non payment of court ordered fines.
Last year, 16,000 court summonses for not having a TV licence were processed in the first nine months of 2011. About 7,000 cases ended up in court.
FAMILIES are facing a €10 cut in child benefit and medical card holders will see a doubling of the charges they pay for prescription drugs in next week’s Budget.
Pensioners are also still in the firing line, with changes to the over-70s medical card and the home package of free TV licence, electricity and telephone allowances still on the table.
Although the pension is safe, the rest of the benefits for the elderly have yet to be decided upon by ministers.
The Cabinet met twice yesterday to work through the health and social-welfare aspects of the budget, with another special meeting tomorrow evening.
Among the swingeing measures to emerge from the discussions are:
* A €10-a-month cut in child benefit, which will drop from €140 to €130.
* A cut to the time for which non-means-tested dole is paid from 12 months to nine months.
* A doubling of the 50 cent charge that medical card holders pay for medicines and other items that they get on prescription from pharmacies, up to a maximum of 10 items per month.
And further details have emerged about the property tax, which will come into effect next year, following yesterday’s revelations of the plan in the Irish Independent.
* Elderly people will be given the chance to pay the property tax on their home from beyond the grave
* People living in council houses are expected to be hit with higher rents – with rises of €1 or €2 a week to bring in €50-€100 a year per house.
The Government has devised a way of protecting old people who live in large houses where they raised their children and who now can’t afford to pay the property tax from their meagre pensions.
Rather than forcing them to borrow or sell their home, elderly people will be able to apply via a means test for a deferral of the property-tax payment. However, there will be a cap on the number of years that can be deferred.
Similar to the Fair Deal nursing-home scheme, the accumulated bill would then be paid when the person sells their house or if they pass away, when their estate would pay it off.
Although local-authority housing will be exempt from the property tax, the occupants will have to make a larger contribution to take account of the charge going to local services.
Those in council estates who bought out their houses will have to pay the full property tax anyway, so the Government wants to see every home make a contribution.
The property-tax rate will be at 0.2pc in a self-assessment system, with bands starting at €50,000 and going up by €50,000 each time.
There is no cap on the market value of the home, so millionaires living in mansions will pay the same percentage on the total value of their house.
Someone living in a house worth €100,000 will pay up to €200, while someone living in a house worth €1m will pay up to €2,000.
The amount of tax to be paid is set at the mid-point of the bands. For instance, where the value of the house falls anywhere within the band of €100,000 to €150,000, the homeowner will pay on 0.2pc of €125,000 i.e. €250.
A special meeting of the Cabinet yesterday saw the detail of the health and social-welfare budgets thrashed out.
Any changes to the medical-card system are not yet signed off. But the over-70s are being closely examined, especially the means-testing threshold of €72,000 for a married couple and €36,000 for a single person.
A move towards a GP-only card is being examined for those on healthy pensions. The pension will not be cut and the free travel scheme is not expected to be touched. But a cut to the package of free TV licence, electricity and phone is still alive.
There will be a change to the entitlement to the dole. When someone becomes unemployed, they go onto the non-means tested dole, unemployment benefit, of €188 a week.
After 12 months, they move to the means-tested payment of the same amount. However, if another member of their family is working, this can put them over the means-test limit.
This period will be cut back to nine months to encourage people to get back to work.
But Labour Party sources believe this will not have a major effect on its policy not to cut welfare benefits. Party figures claim it is not a direct cut to a core social welfare payment.
– Fionnan Sheahan and Fiach Kelly
Austerity has been an economic failure and a social catastrophe.
Domestic demand has collapsed. Five businesses closed down each day in 2011 – and this year’s figures are likely to be worse. 300,000 are unemployed, and many more are underemployed. Over 1.8 million people are left with less than €100 at the end of each month after paying essential bills. One in ten of us is living in food poverty. One million of our fellow citizens are living in deprivation as measured by the CSO – including over 335,000 children.
And these figures would probably be even starker were it not for emigration: in just one year – between April 2011 and April 2012 – a total of 46,500 Irish people left the country.
Behind each of these figures lie individual stories – and increasingly, those stories are of despair.
Communities throughout Ireland see the economic and social consequences of current economic policy every day. They see that austerity does not work – and they know that continuing the same policy will not produce different results.
There will be no new deal for Ireland until we have closure on these matters.
The negotiations with Spain and Italy will be tough. The Spanish Finance minister Luis de Guindos has told the creditor bloc that the battle for the survival of the euro will take place in Spain. Some people see this as a threat to walk away from the Euro if pushed too far.
If deals are not stuck over the coming months, the outlook for Ireland just becomes that bit harder.
Our Government appears to rely on a positive outcome, and we suspect that they have no alternative plan if the negotiations prove to be futile.
In the long term, this debt problem will, hopefully be solved resulting in debt stabilizing at a high level. This of course means for the participating bailout nation’s years of austerity.
It of course remains debatable even if the plan comes to fruition, it will correct these very complex problems. However, then again, that is another story.