With every day that passes the euro crisis gets deeper. Last night Italy was again in the spotlight as Standard & Poor's cut its credit rating by one notch from A+ to A. Meanwhile the world's financial media is camped out in Athens waiting for what many people believe is the inevitable Greek default. All the while the financial markets circle the eurozone like a wake of vultures, drooling over the prospect of yet another currency carcase to devour.
In response to this escalating crisis, the Governments of Germany, France and Greece hold endless emergency conference calls, followed by resolute words but very little action. On the sidelines, the rest of Europe's governments sit passively, watching on and hoping that somebody else does something about the crisis which they were partly responsible for creating.
In truth the actions and inactions of leaders across Europe are making the crisis worse. Endless EU summitry, ambiguous summit conclusions and the inevitable post-summit disagreements are wasting valuable time and energy. All the while the ordinary people of Greece, Ireland and Portugal are paying a very real human price as endless rounds of austerity push hundreds of thousands if not millions of families further into poverty and financial hardship.
At the core of this failure of political leadership across Europe is the simple fact that our governments do not understand the causes of the crisis in the eurozone. This is not a debt crisis. This is not a crisis of overspending or bad economic management in the periphery of the eurozone. This is not a crisis that can be solved by forcing countries to bleed their economies and societies dry in return for meeting EU and IMF-imposed deficit reduction targets. The crisis of the eurozone is first and foremost a banking crisis. Years of reckless lending and borrowing within the European banking system created a financial bubble of enormous proportions. When that bubble burst the result was a drought of investment and a slowdown of consumer spending. In turn unemployment rose, tax revenues fell and borrowing increased.
Some countries, such as Ireland, added fuel to the recessionary fire. A reliance on property-based tax reliefs and other fair weather taxes hollowed out the tax base. When the bubble burst they went even further by excessively guaranteeing the toxic debts of bad banks such as Anglo Irish Bank and underwriting loans from the ECB to repay these debts. Is it any wonder that the deficit spiralled out of control? The end result was an ever-growing mountain of sovereign debt bloated with extra toxic banking debt coupled with spiralling unemployment. Under this dual strain of debt and unemployment the euro started to crack. Inherent design flaws and clear mismanagement exposed the fact that the single currency was not designed to handle a crisis on this scale.
Unfortunately, European political leaders appear even less equipped to handle this social and economic strain. Rather than dealing directly with the growing levels of debt and the drought of investment, the EU institutions, supported willingly by member state governments, tried to treat the symptoms of the crisis rather than the cause. Their response was to deal with a banking crisis by bailing out the banks and to impose the cost of these bailouts on ordinary working people through crippling EU-IMF austerity programmes. Somehow this magic formula was supposed to reduce the governments' deficits and reassure the markets to lend to the indebted states at lower interest rates.
The European Financial Stability Facility was a key element of this policy. Using guarantees from all EU member states it borrowed money from the financial markets to lend back to member states that were blocked out of the international markets. This money was and is being loaned to Ireland, Portugal and Greece, on condition that the EU-IMF policies of bank bailouts and crippling austerity were adhered to. The proposition was as simple as it was illogical. Seeking to resolve a debt mountain by heaping more debt on member states is absurd. It is not possible to stimulate economic recovery by wrenching billions of euro from the domestic economy and from the pockets of those who spend in the local economy.
More than 18 months has passed since the EU agreed the first austerity programme with Greece. Has the policy prescription meted out by the European Union and the IMF cured the Greek patient? Clearly it has not. If anything it has made the Greek economy weaker and the suffering of the Greek people greater. It gives me no pleasure at all to say that former Deputy, Arthur Morgan, predicted this when he opposed the original Euro Area Loan Facility Bill in May 2010. He said then that the EU facility and the loans it would provide to Greece were not an act of solidarity to assist a beleaguered fellow member state. He told this House that it was a massive bailout for toxic banks the cost of which would be paid by taxpayers across Europe. Unfortunately the recent news from Greece confirms beyond any doubt that Arthur Morgan's and Sinn Féin's analysis at that time was right. Greece is probably soon to receive its second bailout. Its government bond yields have hit historical highs of 23% and almost every economist and commentator in the world believes that it is only a matter of time before Greece defaults.
Clearly aware of the fact that their dual approach of bank bailout and crippling austerity was not working EU leaders gathered in June and July this year in Brussels. We were told that these summits would be different. We were told that our governments finally understood the scale of the crisis and decisive action would follow, yet when the dust had settled after the summits, a very different picture emerged. While some form of burden sharing on toxic private banking debt was to be allowed for Greece, albeit of a voluntary nature, all other member states, including ours, agreed to "solemnly reaffirm their inflexible determination to honour fully their own individual sovereign signature". This is Euro-speak for a cast iron commitment to bailing out toxic banks irrespective of the cost to the taxpayer. However, worse was to come. The summit conclusions also included a guarantee from each government to meet "commitments to sustainable fiscal conditions and structural reforms". In Ireland's case this is a commitment to fully implement the EU-IMF austerity programme agreed by Fianna Fáil in 2010.
Greece, weighed down by bank bailouts and crippling austerity, was brought to the brink of financial collapse, a collapse that contained the potential to destroy the euro. In response the governments of the eurozone, including this Fine Gael and Labour Party Government, signed a commitment to follow exactly the same policies, and to blindly follow in Greece's footsteps, led ably by the IMF and the European Union.
The summit also agreed to further centralisation of fiscal and macroeconomic decision making at an EU level, further undermining the ability of individual member states to respond with the flexibility required to meet each state's individual economic and social needs. The stupidity of all of this is truly breathtaking. Even more breathtaking was the spin placed on this agreement by the Fine Gael and Labour Party Government when its delegation returned from Brussels. We were told this was a major achievement in that the Government secured an interest rate reduction and in addition the State would have an option of extending the maturities on that debt from 7.5 years to 15 years at a minimum. There were other changes of which the State could avail at a later stage, including accessing EFSF moneys to further recapitalise the banks and facilitating the ECB to buy back government bonds on the secondary market at a potentially reduced rate.
Sinn Féin's response to these measures was very clear at the time. Of course, we welcomed any reduction in the interest rate — we called for it — and any other measure which would assist in making the State's sovereign debt more sustainable. However, crucially the package of measures outlined in the 21 July eurozone summit conclusions completely ignored the central problems facing the peripheral eurozone economies and the eurozone as a whole. It completely failed to address the overall level of debt held by those eurozone countries most at risk from default, including Ireland. It did nothing to address the urgent need for investment in job creation and economic and social recovery. The so-called positives at the 21 July summit are nothing more than a sideshow when compared to the tsunami of debt currently engulfing the State. The much lauded July deal was nothing more than a sticking plaster on a wound so great that only amputation would halt the loss of blood and keep the patient alive.
Two months have passed since the leaders of the eurozone economies agreed to this package of measures. Have the markets calmed since? Have the Government bond yields of Greece, Portugal and Ireland fallen sufficiently? Has the prospect of a Greek default receded? The answer to each of these questions is "No". Once again European leaders, including Fine Gael and the Labour Party, are failing. They are failing their own citizens, the citizens of their neighbouring countries and the eurozone.
On this basis Sinn Féin is not in a position to support this Bill. While it contains some elements that without doubt are positive, particularly the interest rate reduction, it cannot be presented as anything close to the kind of comprehensive solution to the crisis gripping the eurozone. Worse still, it introduces, in the most underhand way, the permanent European Stability Mechanism which contains greater risk to Ireland and the European Union as a whole. Sinn Féin is already on record calling for a referendum on the ESM, and for the Government to introduce this measure under the cover of the EFSF legislation is downright dishonest.
Stabilising the euro will only be achieved when the policies of bank bailout and crippling austerity are abandoned. In their place the Government and its eurozone counterparts need to force significant burden-sharing on toxic debt from the European Central Bank such as the infamous Anglo Irish Bank promissory note. As the overall toxic debt burden is lifted, governments across Europe must start to invest in social and economic recovery. Anything short of this will drive the eurozone, and the economy, deeper into crisis.
Sinn Féin is against bank bailouts, austerity and making ordinary working people and those on low incomes pay for the reckless behaviour of banks and governments. Sinn Féin is for banks shouldering their fair share of the burden of the crisis and investment in jobs, services, communities and people. We are for a new deal for Europe that puts economic recovery first. On that basis we will oppose this Bill and continue to argue for a more comprehensive and sustainable solution to the crisis across the eurozone.