Is the Greek crisis running an important political counterfactual on Ireland’s ‘nightmare bailout’?

I have to say that I take a rather different view from Paul on Ireland and the current phase of the Eurocrisis. Like all wicked problems, it is one replete with all sorts of layers and the Grexit issue is only one in a long line of thorny issues that will have to be dealt with.

If there is a value in the comparison with Thatcher it might be between Tspiras and Arthur Scargill. You cannot fail to sympathise with the invidious position the Greek people find themselves in, but their opponents have not been idle in their preparations for such a day.

First, back to the domestic situation in the south. I haven’t quite given up tracking the polls, but there’s not much play. Over time, even the slightest shifts appear  to have proven temporary.

Millward Brown for the Sunday Independent runs: Fine Gael 29 (+4); Fianna Fáil 23 (+4); Sinn Fein 21 (-3); Labour 6 (-2); Socialist 2; Greens 1 (-2); Renua 1; PBPA 1; Ind. 16 (-).

Whilst the Sunday Business Post/Red C poll stands: Fine Gael 28 (-); Fianna Fáil 20 (+1); Sinn Fein 18 (-3); Labour 7 (-3); Greens 2; Renua 1; Others 1; Ind. 23 (+5).

The only fixed aspect, Labour seem to be in line for a Lib Dem style thrashing. There’s no real movement for either FG or FF in the Red C poll. And Renua will be disappointed with just 1 point.

I suspect World by Storm has it right, that every cut in benefit is another nail in mainstream social democracy in Ireland. I would add too that they are suffering from over promising at the 2011 General Election. Frankfurt has had the definitive and final say over how the Irish recovery would shape up.

The three per cent loss for Sinn Fein comes on the heels of that odd controversy in East Cork (for which no real explanation has yet been offered). As Padraig Mac Lochlainn was quick to point out there has been some overwrought readings of their ‘virtual’ losses:

Apparently doubling our support in an opinion poll since the last general election is a “crisis” for Sinn Féin 🙂 http://t.co/fUCL0oYetL

— PadraigMacLochlainn (@PadraigMacL) June 28, 2015

If you believe opinion polls at all. Yet the party’s close and public association with Syriza may expose them further on the domestic front this week, as Greece faces bankruptcy and a hastily called (somewhat indecipherable) referendum.

Indeed on Thursday, former Taoiseach Brian Cowen faces the Oireachtas Banking Enquiry with a living counterfactual of what could have happened had he rejected the humiliating bailout (and attendant €6 billion worth of cuts in a pre election budget) which ended his political career and almost took his party with it.

Greece now has the near cashless ATMs which people only speculated about in late 2010. At the time, Sinn Fein’s newest elected TD, Pearse Doherty, was advocating default and energetically pointing to Argentina and Iceland as exemplars for way the Ireland should go.

The problem then as it is now is that that ignores the underlying problems which caused the soaring rates of debt in the first place. The case of Greece, as British Labour MEP Richard Corbett points out is very different from that of Ireland:

Deficits and debts of this magnitude are not a matter of Keynesian fine-tuning or counter-cyclical balancing. And there was little choice but to address them: this would have had to be done whether Greece was in the euro or not, in the EU or not.

I recently travelled from Bulgaria to Greece. Crossing the border was to go to a country with a visibly higher standard of living. But too much of that differential was engineered by the government borrowing money to pay higher salaries, and not for investment. Over the first decade of this century, unit labour costs rose by over 30% in Greece (compared to 5% in Germany).

For public employees, this was even more striking: up 117%! It is not surprising that, as a result, prices in Greece rose by 30% above the eurozone median — a massive divergence of competitiveness. By 2011, Greece had a current account (trade) deficit of 9% of GDP.

Continuing to finance this by borrowing meant Greek public debt was well over 100% of GDP even before the world financial crisis hit Europe in 2008. By 2011, it had shot up to 170% of GDP (€355.141 billion). On the markets, no-one would lend to Greece at normal rates as the perceived risk of default rose. [Emphasis added]

You don’t have to be a rigid advocate of sound money policies to see the underlying problem. And we don’t have an indulgent Fed to bail out a creative California everytime it fails to add up the huge sums of money it is NOT collecting to pay for its substantial public service infrastructure.

Ireland, by contrast, had a reasonably low public debt to GDP ratio. What caned the Irish economy was its reliance on building and construction and a bubbling housing market fueled by poor to, erm, non existing regulation of the banking sector, and a painfully narrow tax raising base.

The scissoring out of €6 Billion identified by the appropriately named An Bord Snip from the Irish public accounts in one budget sitting was a deep cut from which the then Fianna Fail led government would never recover.

As I’ve noted on today’s #SluggerReport, the medicine was harsh, yet not compulsory. Ireland could have dragged its heels and try to dump into that famous Somebody Else’s Problem Field so beloved of Irish politicians.

Meanwhile the independents are fast becoming interdependent. The onrush of an election date is forcing them into all manner of odd combinations. Social welfare champion John Halligan in with the Sindo’s long time Business Editor and former stockbroker, Shane Ross for one.

As Cowen gets a serendipitous day in the sun (which his opponents had hoped would be another hanging), there are other indications in the poll that Fianna Fail may be turning finally a corner. Jody Corcoran shares what could be the most telling detail…

Asked which party or political grouping they would not vote for in the election, those polled said: Fine Gael (32pc) down eight points; Labour (30pc) down two points; Fianna Fail (24pc) down six points; Sinn Fein (37pc) up five points; Socialist Party (18pc) up two points; People Before Profit (15pc) unchanged and Renua (13pc) down one point.

Today’s SluggerReport: