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Economy / Ireland and Greece

A TALE OF TWO CRISES

Ireland: the perils of


social partnership
Crises erupt at their weakest link. But, as Maureen Harrington and
V I Gellis show in this study of Ireland and Greece since the credit
crunch, they can spark very different reactions in the working class

Ireland’s slump in spending, dwarfing the £6bn announced in the UK by


the end of May.
Last year Ireland suffered its worst ever economic cri- And what’s more, the worst is yet to come. The Minis-
sis. The banks that had recklessly encouraged people to ter of Finance, Brian Lenihan, has said extra billions will
take out loans and mortgages ran out of cash. Output be needed for the bail-out not only now, but in future
plummeted 7% as construction collapsed in the wake of years too, bragging that cuts in the recent budget will
the credit crunch. Unemployment, at 13%, has claimed be minor in comparison. The bottom line is that taxes
nearly half a million victims in a country of 4.5 million. will be higher, spending on social services will be slashed
The numbers on short-time working and slashed wages and all agencies that represent the most vulnerable will
come on top of that. be exhausted.
In March this year the Irish government signed a
cheque for =C  25bn to bail out the banks and set up the Economic collapse
National Asset Management Agency (Nama) to buy their
toxic property loans worth =C  50bn. Slumping tax revenues As a small open economy, multinational investment
and soaring handouts to the banks have led to Ireland formed the backbone of Ireland’s extraordinary export-
becoming, per capita, the most indebted country in the led growth in the 1990s. As the world economy soared
European Union (EU). Its budget deficit of 14.3% is higher the global foreign investors – much of it US investment
even than in Greece. This deficit could well balloon to – came to Ireland, given the shared language, access to
over 20% in 2010 when the full cost of recapitalising the EU markets, as well as rock bottom corporate tax rates.
banks is factored in. Underpinning this was IR£8.6bn from EU structural funds
On the same day as Nama was established the trade between 1987 and 1998 to help build the infrastructure
union leaders and the government signed the Croke Park that would lure companies to Ireland.
Deal to slash the public sector wage bill to pay for this This development was hijacked by property interests
largesse and reduce the deficit. around the turn of the century, as Ireland’s growth during
As the government throw taxpayers money at the banks, the last decade – largely illusory – generated a property
public sector workers’ jobs, wages, pensions and services bubble fuelled by reckless bank lending. In 2007 20% of
are to be sacrificed on the altar of the financial bond mar- our national income and employment came from build-
kets. The government has slashed public sector spending ing houses and commercial property. Between 1985 and
by 7.5% of GDP this year, public sector pay by 15%, child 2006, Irish house prices rose by almost 250%. The inevitable
benefit by 10%, unemployment benefit by 4.1%. Another bursting of the housing bubble triggered a severe contrac-
=C  3bn will be removed next year, a total of 10% of GDP tion in economic activity. Now 300,000 houses are unsold
over three years. To put it in context that would be the while foreclosures escalate and homelessness rises.
equivalent of the British government making =C  150bn cuts This global mess was created by privatised, deregulated

page 20 / permanentrevolution
markets. The Celtic tiger years were a period of reckless, and a levy on pensions, the union leaders organised work-
tax-cutting, free-spending and huge subsidies to property to-rule protests and a national demonstration against the
investors. These actions greatly inflated the bubble and pension levy. More than 100,000 people took to Dublin’s
exacerbated the bust. Ireland was in effect looked on as a streets that month.
tax haven due to the lax regulatory environment. Ireland’s The work to rule had some effect (resulting for exam-
status in the world economy has been exposed for what ple in a backlog of 50,000 unprocessed passports) and
it is: a semi-colony at the mercy of the ebbs and flows of the Labour Relations Commission was called in to bro-
international finance. ker a deal.
The most important objective for public sector workers
Bank rescue in these talks was the scrapping of the pension levy, the
restoration of pay cuts, and the protection of pensions
The three main Irish banks account for 85% of the bank- and terms and conditions. None of these were met. At the
ing system and all are heavily linked to construction. Anglo end of March the trade union leaders and the government
Irish, the third largest, which lost 98% of its value in the
crash, was nationalised in 2009, which means that the Irish
workforce is now banker to most of the larger property This is in effect a ban on strikes when
investors and property speculators in the state, including
Sean Quinn, who alone owes =C  2.8bn to Anglo. public sector workers’ jobs, wages
Nama will pay the banks=  
C50bn for loans totalling= 80bn,
C
most of the money going to Anglo Irish Bank and Irish and conditions will be subject to
Nationwide. In addition, the banks also need to build up
their capital reserves if they are to ever lend again. The unprecedented change for the worse
vast bulk of this will come from the state.
More than =C  22 bn, in total, is being raised to recapi-
talise the Anglo Irish bank, =C  2.6bn for the Irish Nation- announced an agreement that copper-fastens public sec-
wide Building Society (INBS). More than =C  2bn a year to tor pay cuts of up to 19% and brings in hugely worsening
these two banks, for ten years! This is about half of what changes in our public services.
is spent in running our public services each year. Mean- Some workers have seen their wages cut by 40% as a
while, the Bank of Ireland needs =C  2.7bn of new capital, result of the pay cut and short-time working, including in
with the state forking out up to a half. the private sector, as employers crack the whip, threaten-
ing workers with an ultimatum: your wages or your jobs.
The Croke Park pay agreement Often the former is just a prelude to the latter.
The deal includes a so-called industrial peace clause
When Brian Lenihan in the December budget announced which prevents public sector workers taking industrial
savage pay cuts across the board for public sector workers action in relation to any aspect of the government’s reform

1 Five year pay freeze


1 Pension levy remains
1 Moratorium on recruitment to
The Croke Park Deal
continue three teachers’ unions have voted the health sector, a reduction of
1 Working day from 8am to 8pm
against the deal. The Teachers some 3,500 hospital beds and a
1 Review of all pensions Union of Ireland (TUI) voted by 75% curtailment of services.
1 Potential forced redeployment to 25% against the deal. The In June 65% of public sector
1 Outsourcing to be implemented Association of Secondary Teachers workers in the largest union Siptu
1 Ban on strikes and industrial (ASTI) voted to reject by 62% to 38%. voted in favour of the Croke Park
action relating to the reforms in The Irish National Teachers Deal. Impact also voted in with 77%
the agreement Organisation (INTO), as expected, in favour.
1 No guarantee of restoration of voted for. How Siptu and Impact have
pay cuts The nurses’ union (INMO) voted is crucial, as together they
1 A get out clause for the rightly said it fails to provide represent almost half of the
government if the economy gets guarantees that there would be no 250,000 public servants and
worse, i.e. further pay cuts further salary reductions and accordingly, half the votes at Irish
contains policies that would Congress of Trade Unions.
The Civil Public and Services further damage the health service. The ICTU meets in mid-June to

1 Union (CPSU), which was at


the heart of the passport go-
slow and represents lower paid
It would mean signing up to the
current moratorium on
recruitment and the McCarthy
make a final decision on the deal
based on the overall result of
ballots by public service unions.
civil servants, rejected the Croke report, which would involve a The outcome is by no means a
Park deal by 67% to 33%. Two of the further 6,000 posts being lost in given.

Summer 2010 / page 21


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Economy / Ireland and Greece

programme. This is in effect a ban on strikes when public the Audit Committee). He is a Governor of the Irish Times
sector workers’ jobs, wages and conditions will be sub- Trust, a non-executive Director of Aer Lingus, a member
ject to unprecedented change for the worse. Thousands of the National Economic and Social Council (NESC), a
of jobs are to go. member of the Advisory Board of Development Opera-
Trade union leaders claim it’s “the best that can be tion Ireland and he sits on the executive of the European
achieved in the current economic climate”. Siptu leader Trade Union Confederation (ETUC).
Jack O’Connor says “the balance of advantage” rests with To fight social partnership between the bosses, gov-
acceptance of the deal but with some “further clarifica- ernment and union bureaucrats, there is a need to build
tion”. Peter McLoone of the biggest public sector union, from the grassroots, reaching out to the rank and file
Impact, declared that the proposed deal was “transfor- in the trade unions and broadening out the struggle to
mational”. All this despite the fact that the terms are sub- embrace the unemployed, agency workers, students and
ject to there being “no currently-unforeseen budgetary community groups to oppose cuts in health, education,
deterioration”, a clause that workers rightly dub as the welfare and local services.
“get-out-of-jail card” for the government.
Working people feel outrage at the incompetence of a Future prospects
government presiding over a collapse in the economy, the
catastrophic loss of jobs, the erosion on a massive scale of Having contracted by more and faster than most EU
wages and conditions and the bolstering of corrupt bank- economies last year, growth in 2010 is expected to fall
ers. And yet union leaders continue to insist on a social a further 1%. Unemployment, at a 15 year high, is still
solidarity pact as a fairer way to economic renewal. Their climbing with no end in sight for 2011 and 2012. Already,
agreeing to a work-to-rule and limited strike action early one in three people under 30 are jobless.
in the year was so union members could let off a bit of The global speculators that closed in on Greece watch
steam in order to roll back into partnership talks. Ireland closely. Between mid-April and mid-May the cost
Why is it Irish workers are so passive in the face of sav- of Ireland’s borrowing rose over a percentage point to
age attacks in comparison to the militancy of the Greek 5.8%, dropping back after the Greek bailout.
workers in a similar situation? The fact is 20 years of “social The national debt, at present =C  79bn, is expected to rise
partnership” has paralysed worker activism: many have to =C  120bn in the next few years. In addition gross debt as
no experience whatsoever of fighting for a pay claim since a percentage of Ireland’s gross domestic product, which
their wages have been settled nationally. Faced with this was 24.8% in 2007, is now 65%, which pushes it above the
unprecedented crisis there is no tradition of self-activity, 60% EU criteria.
little confidence, few networks of militants and socialists The bond markets stand ready to “punish” Ireland for
exert little influence as a result. any let up on its savage attacks on public spending; after
The so-called “social partnership” process was pioneered all every euro saved on this is a euro secured for inter-
est payments.
Fianna Fáil do not have to stand before the electorate
The global speculators that closed in on again until 2012; they know they are going to take a hit
and right now they are being trashed in the polls. In the
Greece watch Ireland closely Between mid- last MRBI poll they fell below Labour in popularity, sup-
port for whom is running at record highs. Fianna Fáil are
April and mid-May the cost of Ireland’s embarked upon a slash and burn campaign, prepared
to wear out their credentials with the Irish people if it
borrowing rose over a percentage point means polishing their reputation with the banks and the
ruling multinationals.
However, workers would fare no better under a Fine
in 1987 with the Programme for National Recovery, under Gael/Labour coalition, which would almost certainly imple-
the stewardship of David Begg, leader of the Irish Con- ment the same austerity measures. What is needed is net-
gress of Trade Unions (ICTU). Industrial peace was traded works of community activists, trade union rank and file
for promises which were rarely kept. Sacrifices were to groupings and the political left coming together in action
be made by workers in wage restraint and productivity groups on every estate and workplace to plan how to resist
increases so that they would be rewarded in better times, the government attacks and complicity of the union lead-
at some time in the future. ers. Any menu of demands to focus struggle would need
But when the future arrived the times were worse to include the following:
and Begg suddenly found a flaw in the social partner- 1 For an end to business secrecy
ship model. “The access and influence we had isn’t there 1 Open the books to workers’ inspection.
any more,” he said recently. “The reason it collapsed is 1 Jail Fingleton, Fitzpatrick and all the corrupt
because the government wouldn’t retain the terms of 22 bankers
years of social partnership, which was abandoned by gov- 1 Nationalise all the banks without compensation
ernment and employers at the first sign of trouble.” Who 1 Vote NO to this rotten deal
would have thought?
But “social partnership” served Begg very well. He is a
Director of the Central Bank since 1995 (where he chairs

page 22 / permanentrevolution
The crisis of Greek
capitalism
In October last year George Papandreou, the leader of crunch. Historically the building workers in the 1960s
Pasok (Pan-Hellenic Socialist Movement) and recently and 1970s were the wage setters for the whole of the labour
elected prime minister, announced that Greece’s public movement, but their union organisation was broken in
finances were much worse than he expected. the early 1990s and the workforce was replaced on the
Six months later he announced that in order to bal- whole by cheap immigrant labour, initially from neigh-
ance the budget it was necessary to embrace an austerity bouring countries.
programme drawn up in collaboration with the Interna- Average wages are about =C  50 a day for more than eight
tional Monetary Fund (IMF) and the European Union (EU). hours’ work. Insurance cover is non-existent and health
Yet as recently as March this year the IMF chief, Strauss and safety measures rarely count. The 2004 Olympics
Kahn declared Greece did not require a bailout. Yet now “boom” led to many building workers’ deaths and hun-
we have lived through the biggest EU “bailout” in history, dreds of millions spent on infrastructure which for the
what happened? most part is now rotting or has been handed over to ship
Thirty years’ membership of the EU has brought Greece owners for free.
to the verge of economic collapse. Predominantly an agri- The health and education sectors have not fared much
cultural producer, it never industrialised to the extent of better. Whilst an “NHS” was created in the 1980s, succes-
the northern countries of the EU. During the 19th cen- sive cost reductions over the last decade (due to siphon-
tury Greece itself was a colony of the Ottoman Empire ing money off to pay for the Olympics and arms budgets)
and following “liberation” after 1918 was under the joint mean many Greek islands no longer have national hospital
supervision of France, Britain and Russia. facilities and people die on the way to hospital or while
After the World War Two the EU was presented to the waiting for helicopters to take them off. Doctors only
Greek people as a way of promoting development. Instead
the exact opposite has occurred. Certain infrastructure
projects have been completed – including airports, roads Greece has lost almost all its
and telecommunications – but with medium-sized heavy
industries predominantly in shipping repairs, bus manu- manufacturing under globalisation in
facturing and solar panels, it has lost almost all its man-
ufacturing in a de-industrialisation frenzy that would a de-industrialisation frenzy that would
make Thatcher proud. Globalisation has brought it to its
knees. From the 1970s on almost all the shipping crews make Thatcher proud.
of one of the world’s largest shipping fleets were replaced
with lower paid labour from developing countries like
the Philippines. function with a “bribe” – a way of supplementing their
The EU was sold to Greek farmers as the path along exceptionally low average government salaries.
which Greek producers would increase their exports but Educational provision has expanded with many univer-
instead, via the domination of the supply chain by multi- sities built (16 in total) but without basic infrastructure
national supermarkets, non-EU imports have increased linked to them. Universities in name, they exist to mask
exponentially to the detriment of Greek produce. the dreadful youth unemployment figures, which hover
The crippling forest fires and the destruction of olive around the 20-40% mark. Unable to get decent jobs, many
trees, as well as the heat waves of the last few years, have are forced to live with their parents throughout their
meant agriculture is on the verge of meltdown. For the twenties and thirties.
last 20 years agricultural workers have lived in huts with Most of the secondary schools in the Athens region con-
the animals and are paid poverty-level subsistence wages. tinue to have two shifts as there is not enough classroom
Agriculture now constitutes a very small percentage of space to handle the volume of pupils. Pupils spend most
GDP – around 8% – compared to the 1970s when it was of their time either at school or in night classes, which
around 28%. they have to pay for, to cover the course work they were
The mass building boom in holiday flats led to huge supposed to have done in the day; it is the only way of
oversupply; thousands of properties remain unsold and having a realistic chance of passing the exams.
building activity has dropped by 45% since the credit Insofar as job opportunities and conditions were

Summer 2010 / page 23


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Economy / Ireland and Greece

c­ onstantly deteriorating in the private sector, people they want to do the same in the private sector but didn’t
sought refuge in the public sector. That kept the work- actually explain how they would engineer it. However, the
ing poor afloat, since if one person in a family had some- more serious attack has been on pensions, extending the
one working for the government then the family could years required for pension entitlement to a minimum of
survive. But in the last few years the privatisation of OTE- 40 for both men and women. In addition the dispensation
Telecommunications, Olympic Airways, together with for the disabled or for those who do heavy duty labour
the subcontracting of many public sector posts in the has been abolished (you were entitled to a pension if you
railways, post offices, water company etc, many Greeks worked for a minimum of 15 years and could receive it
were offered part-time posts on different rates of pay to at 58 if you were a building worker).
the full-timers as well as some doing full-time work on But its main anti-labour component is the way the new
part-time rates. pension arrangements throw the principle of subsidising
weaker socio-economic groups (the disabled, those injured
Role of the left at work) out of the window. You will only get back what
you have paid in. Today state expenditure on pensions
The Greek TUC (GSEE) and the public sector workers’ represents 4.8% of GDP. This now will now be frozen to
union, the ADEDY, have traditionally been Pasok fiefdoms the year 2030 and pensions will in future be reduced by
with the leaders appointed by Pasok. Often, after being at least 30% from today’s levels.
a leader of GSEE or ADEDY, they “graduate” to become a
Pasok MP. The fightback
The other union federation – belonging to the Stalinist
KKE party – is PAME. It split from GSEE a few years ago, Once the measures were announced a very large dem-
claiming it is building class struggle union. In the last six onstration of around 250,000 people – a scale not seen
months it says it has got the majority of 85 trade unions since the pension battle of 2001 – congregated outside
on its side. The demonstration on 15 May – where about parliament in Athens. It was to be a typical union dem-
200,000 took part – certainly backed this up. Both federa- onstration. GSEE members would meet in one square (Sin-
tions have called a series of 24-hour strikes, sometimes tagma) and march to another (Omonia) while the PAME-
extending for as long as 48-hours. KKE contingents would do exactly the reverse.
However, the general strike of 5/6 May did not take
The austerity packages the normal course of events – marching from A to B,
listening to the standard rhetorical speeches promising
The measures announced have included basic across- militancy in the future, but not here and now. The police
the-board pay cuts of about 10% combined with pension did not expect the ranks of the KKE-PAME to get out of
entitlement reductions. These have been pushed through control as they have strong stewards, but the masses of
at the same time as petrol prices have soared 100% in a few working class people who happened to be on the dem-
months, prices of basic foodstuffs have risen by anything onstration far outnumbered the organised columns of
between 10-20% and unemployment is skyrocketing, as the KKE-PAME.
many small firms are going out of business. People showed a determination and a willingness to
Basic pensions for those who have contributed to them encircle parliament, even to break through inside and
are about =C  500-700 euros a month; those who have not not allow the politicians to leave. Individual workers
paid in contributions receive about =C  300, but without a shouted very militant slogans about “hanging traitors
and burning down parliament”. Some workers confronted
the police individually with a determination not seen
People showed a determination and for many years.
At the same time something else was happening in
a willingness to encircle parliament, another part of town. A bank, belonging to the business-
man who bought out Olympic Airways, was allegedly burnt
even to break through inside and not down by anarchists. Three bank workers were burnt to
death. This event was used as an excuse by the KKE-PAME
allow the politicians to leave to tell people to disperse and go home – after they were
tear gassed by the police on the steps of parliament.
The following day the KKE announced that those who
contribution to their housing costs. Unemployment pay tried to storm parliament were the Greek equivalent of
only exists for those who have contributed at least a year the fascist BNP and “provocateurs”. This language is quite
and then it only lasts for six months, so many bosses hire familiar given the KKE’s pro-establishment history, from
people then sack them, as they know they will get money the murder of their guerrilla leader Velouhiotis during
from the state and the bosses receive a subsidy if they World War Two, to the student killed in the July days
take on people sent from the dole office. Long term work of the 1960s Petrula and to the occupation of the Poly-
has become a thing of the past or only for those who still technic on 17 November 1973 which triggered the fall
have state jobs. of the junta.
After having agreed to reduce wages for public sector as Despite having gained a majority in the unions and hav-
part of the IMF-EU bail-out, the government announced ing impressive numbers at their command, the KKE only

page 24 / permanentrevolution
continued the policies of the GSEE – calling 24-hour token the wishes and desires of the hedge funds. No doubt when
protests. Every opportunity was squandered or demobi- his job here is done he will relocate to Switzerland or New
lised on the pretext of them being a provocation led by York to work for them. The hope is that his exit from gov-
. . . extremists. ernment will be provoked by some spark that will truly
light a fire and he will suffer the same fate as some Latin
Parliament passes the attacks American politicians who in the space of hours ended up
in private jets trying to get out of their country after a
A week later the austerity measures were voted for by mass rebellion.
the Greek parliament. During the evening the KKE deliber- For Greece to survive even in the short term, it has to
ately marched from Sintagma square (where parliament is) abandon the Euro, try to control imports, in particular
to Omonia and the GSEE marched the other way with the agricultural ones, cancel all the foreign debts and embark
ex-EuroStalinists and other leftists behind them (SIRIZA on a programme of nationalisation without compensa-
– the EuroStalinists – NAR, EEK and the SWP gathered tion of the major industries and banks. It should stop
under the organisational framework of Antarsya). paying =C  7bn annually to European arms’ manufacturers
Whilst this time 30,000 refused to leave parliament and demand restitution for all damage inflicted on the
and wanted to block the MPs’ exit, the left put down their economy from World War Two. Without a militant fight-
banners and asked via their loudhailers for people to go ing programme that doesn’t limit itself to 24 and 48-hour
home – thus adopting the policies of the KKE which they token protests there will be no hope within the EU.
are allegedly against. The hundreds of thousands willing The first signs of this starting are two events. There
to fight that day found no leadership worthy of the name, are reports that Pasok politicians have been abused in
just endless speeches about how the measures will be public and women have started a protest in Thessalonika,
beaten in the future. banging their cooking pots demanding food Argentinian
Despite having been offered loans at 1% by both the Rus- style. Let us work for a movement such as rocked that
sia and China, Papandreou is dead set on ­implementing country in 2001-02.

Summer 2010 / page 25

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