Ireland - the working class as "collateral damage" of the on-going tremors of the crisis

Jan/Mar 2011

On 7th December 2010, the Irish parliament adopted, by a tiny majority, the annual budget drafted by Brian Cowen's ruling Fianna Fail-Green Party coalition, as part of its "National Recovery Plan". This was the country's fourth austerity package in 3 years - the most drastic in some respects.

Officially, this new round of austerity was implicitly blamed on the strings allegedly attached to the "aid package" provided by the European Union and the International Monetary Fund, just agreed by Cowen at the end of November. The Irish government claimed that economic conditions as well as political pressure from the rich European countries had forced it to concede reluctantly to the demands made by the EU and the IMF. However, this was to a large extent, a cynical sleight of hand, aimed at deflecting the public outrage caused by the new austerity measures.

It may well be true that Brian Cowen would have preferred a more discreet arrangement providing his government with some temporary funding to reduce the burden of its bank bailout, rather than such a high-profile international "rescue", which was bound to upset the nationalist prejudices of a large section of Fianna Fail's traditional electorate - especially when his party was already at an all-time low in opinion polls. And it is also certainly true that his government was browbeaten by the three main EU countries - i.e Germany, France, but also Britain - into agreeing to this "rescue", not to help the Irish economy, let alone the Irish population, but primarily to protect the interests of the large international banks operating in Ireland. But to infer from this that the austerity measures included in the government's budget were by-products of the international "rescue", is quite another thing.

Another offensive against the working class

In fact, the prospect of a new austerity budget for December 2010 had been on the agenda ever since March 29th, when a sudden 20% fall in the share price of Allied Irish Banks (Ireland's largest bank) prompted the announcement of another banking bailout. Moreover, since the end of September, following the emergence of yet more major cracks in the banking sector, the government had been preparing public opinion for even more stringent measures than originally expected.

By late October, long before there was any talk of an international "rescue" for Ireland, most of the attacks against the working class contained in the 7th December budget had already been outlined by the government, including the increase in the planned deficit reduction from 7 to 15 billion euros over four years, and the "frontloading" of 40% of this reduction during the first year of the plan. So, although a month later, Cowen made a point of appending the details of his austerity plan to the text of his deal with the EU/IMF, as if they were an integral part of the deal itself, this was an outright lie.

Like the previous austerity plans, the 7th December budget will mainly hurt the poorest sections of the population: all welfare benefits will be cut and more punitive measures will be introduced against the jobless; the state pension will be frozen and retirement age raised to 66 in 2014 and 68 years by 2028; changes in income tax band rates will mean that many more low-income households will be subject to taxation; and VAT will increase from 20 to 23%. In the public sector, already badly hit by past austerity plans, the government is cynically reneging the Croke Park agreement, signed by union leaders as part of the previous austerity drive, in which it had pledged to refrain from cutting wages or seeking compulsory redundancies, in return for drastic changes in working practices. Not only does this budget include 24,000 public sector job cuts, but it also cuts the wages of all new public sector recruits by 10%. By contrast, none of the extravagant perks enjoyed by the capitalist class are to be affected. It is as if, unlike public sector wages or welfare benefits, allowing companies to pay a 12.5% corporation tax, or no tax at all for three years in the case of start ups, did not affect the budget deficit!

But probably the most scandalous and the most wide-ranging attack of all in this budget is the 11% cut in the minimum wage which is to be imposed straight away. Predictably this was the main reason for the anger expressed in the demonstrations against the planned austerity measures which took place in Dublin on 27th November and 7th December - anger which prompted Brian Cowen to stress that the new rate would only apply to new recruits. But who will fall for this when it is so easy for the bosses to sack workers on the minimum wage, who are mostly casual, in order to re-hire them at the new lower rate!

What is particularly cynical about this reduction in the minimum wage is that it has nothing to do with the proclaimed justification for the austerity budget - i.e. deficit reduction - and everything to do with placating the bosses' greed. Indeed, for months, bosses' organisations have been clamouring for wage cuts in their respective industries. For instance, in October, bosses in the electrical industry presented the unions with a demand that the wages of the industry's 10,000 workers should be cut by 10%. Likewise, the Construction Industry Federation, which had been demanding a 30% pay cut earlier this year, has just applied for the implementation of a lesser, 7.5% pay cut recommended by the Labour Court (a kind of Irish equivalent of Britain's ACAS) for the industry's 120,000 workers. By cutting the minimum wage, the government is not only pushing a sizeable section of the working class even more into poverty, it is also signalling to the bosses that the time has come for them to use the crisis as an excuse to impose wage cuts on workers.

Mudslide under a castle of cards

What this new turn of the screw on the Irish working class and the intervention of the EU/IMF in the Irish crisis have in common, however, is that they both reflect the impact of the on-going tremors of the capitalist crisis. After Greece, Portugal and Spain, tremors have recurred in Ireland. And, once again, despite the relatively small size of the Irish economy (roughly 13 times smaller than Britain's), even compared to Greece, this resurgence has sent shockwaves across the world's financial markets, while the Irish working class ended up in the position of "collateral damage" of the system's attempts at correcting its own imbalances - and at what cost!

Today, anyone who would say that the Irish government has ever been on top of handling the banking crisis which stemmed from its home-grown real estate speculative bubble, would look like a fool. Yet this was what Irish politicians claimed for much of last year. And not just Irish politicians. When a financial storm threatened the finances of the Greek government, in the first quarter of 2010, Jean-Paul Trichet, the head of the European Central Bank (the ECB, which acts in a limited way as the eurozone's central bank) declared that "Greece has a role model and that role model is Ireland"!

At the time, it was still universally assumed that, by making the working population pay for its bailout of the banking system through drastic austerity measures, the Irish government's policy provided the best possible protection against the risk of state bankruptcy and the safest ticket for the recovery. It was claimed that such a policy would eventually be "rewarded" by markets which would be only too willing to provide cheap money to back up such deserving behaviour. As if the markets or, rather, the big financial institutions which control them, had ever been concerned with anything other than their own short term profits! In fact, if there was ever a case illustrating the stupidity of wooing the financial markets, Ireland must be it!

There were isolated voices which disagreed, though, warning that the Irish government's policy did not and could not address the scale of the problem posed by the mountain of unrecoverable loans that Irish banks were hiding in their books and treating in their accounts as bona fide assets. Already the markets had "rewarded" Allied Irish Banks and its own hidden junk loans, by downgrading its shares in March. And everybody knew, except those who made a point of looking the other way, that there was a lot more of this to come.

In May, for instance, an article entitled "Burden of Irish state could yet eclipse that of Greece" was published in the Irish Times, in which the mainstream economist Morgan Kelly pointed out that, on the basis of known data, "between developers, businesses, and personal loans, Irish banks are on track to lose nearly 50 billion euros if we are optimistic (and more likely closer to 70 billion)." And he added: "The Irish economy is like a patient bleeding from two gunshot wounds. The Government has moved competently to stanch the smaller, budgetary hole, while continuing to insist that the litres of blood pouring unchecked from the banking hole are 'manageable'. Capital markets are unlikely to agree for much longer, triggering a borrowing crisis for Ireland. The first torpedo, most probably, will be a run on Irish banks in inter-bank markets (..). Already, Irish banks are struggling to find lenders to leave money on deposit for more than a week. (..) Our problem is bank debt rather than government debt."

In fact, Kelly's scenario was already unfolding behind the veil of banking secrecy. Considering that Irish banks were virtually bankrupt, other banks - especially their European rivals - were refusing to lend them money for any significant length of time. This prompted the ECB to step in, soon followed by the Central Bank of Ireland, in order to avoid a freeze-up of the banking system. In a matter of six months, the six largest banks built up another debt mountain, including 45 billion euros borrowed from the Central Bank of Ireland and 136 billion euros borrowed from the ECB - a combined total of 181 billion, equivalent to almost 1.4 times the Irish GDP!

This huge debt mountain was used to make up for three types of banking losses.

First, there were the losses resulting from the banks' toxic loans themselves. An increasing proportion of these loans was being transferred to NAMA (National Asset Management Agency), the "bad asset bank" set up specially for this purpose by the government. In the process, NAMA was buying these toxic loans at an average 50% discount. This was a very generous valuation considering that these loans paid no interest and would never be repaid in full, or even partially, but it meant that the banks had to take this 50% discount as a loss on their books - thereby revealing more and more the real extent of their losses.

Second, from April onwards, there was a haemorrhage of cash from the banks' only tangible source of funding - their deposits. This was not the kind of run on the banks which caused the downfall of Northern Rock in Britain. There were no queues outside branches, no need for the police to contain irate depositors. Instead, very quietly, large corporate accounts began to be emptied by both resident and non-resident investors in equal proportions. By the end of September, it was estimated that a combined total of 35 billion euros had vanished in that way from the main banks' vaults - more than a quarter of the country's GDP! Having made fat profits for so long out of the Irish speculative bubble and low-tax regime, financial businesses were now walking away with their cash, fearing a total collapse of the banking system.

Thirdly, another big haemorrhage occurred in September. In an article published a month later in the Irish Times, Morgan Kelly explained what happened: "September marked Ireland's point of no return in the banking crisis. During that month, 55 billion euros of bank bonds (held mainly by UK, German, and French banks) matured and were repaid, mostly by borrowing from the European Central Bank. Until September, Ireland had the legal option of terminating the bank guarantee on the grounds that three of the guaranteed banks had withheld material information about their solvency. (..) With the 55 billion euros repaid, the possibility of resolving the bank crisis by sharing costs with the bondholders is now water under the bridge."

Kelly's point was that given the illegal dealings of the banks, the government would have had very good grounds to renege on its blanket guarantee of inter-bank loans to the Irish banking system and would have been in a good position to negotiate some sort of deal with the banks' big creditors - i.e. mostly international banks. Instead of this, the government and ECB ensured that these international banks got all their money back, as if the banking crisis had never happened, at the cost of a considerable increase of the Irish banks' indebtedness.

By the end of September, therefore, the Irish banking system was even closer to bankruptcy than it had been in March and it only really managed to survive thanks to being drip-fed by the Irish state and the ECB. However, given the secrecy covering banking operations in Ireland as elsewhere, only those in the know had any real idea of what was going on. So that, on September 28th, most people were taken by surprise when the government issued a statement revealing that unforeseen difficulties meant that the "total" injection of public funds required by the Irish banking system would have to be increased (once again!) from 33 billion euros to somewhere between 46 and 50 billion (38% of GDP!). This, of course, coming on top of the 30 billion euros already committed to be spent on buying back the banks' "toxic" loans through NAMA. As part of this additional injection of cash, it was expected that the government's share in Allied Irish Banks would increase from 25 to over 90% and its share in Bank of Ireland from 36 to 62% - meaning that the government will now be in full control of five of the country's six largest banks.

The same statement also announced that, after a brief respite during the first quarter of the year, the Irish economy had returned to its previous downward trend, while government income from taxes was shrinking alarmingly. A week later, Finance minister Brian Lenihan announced that, due to the worsening of the banking crisis, the deficit reduction planned for 2011-14 was to be more than doubled from 7 to 15 billion euros - on top of the total 14.6 billion reduction achieved since 2008.

The fears of international banking

In the article mentioned earlier, Morgan Kelly had this assessment of the government's policy towards the banks: "Everyone is a winner. Or everyone who matters, at least. The German and French banks whose solvency is the overriding concern of the ECB get their money back. Senior Irish policymakers (..) have their tummies tickled by their European overlords and be told what good sports they have been. And best of all, apart from some token departures of executives too old and rich to care less, the senior management of the banks that caused this crisis continue to enjoy their richly earned rewards. The only difficulty is that the Government's open-ended commitment to cover the bank losses far exceeds the fiscal capacity of the Irish State." In this context, concludes Kelly referring to the austerity package announced by the government, "what is the point of rearranging the spending deckchairs, when the iceberg of bank losses is going to sink us anyway? What is driving our bond yields to record levels is not the Government deficit, but the bank bailout."

Indeed, despite the new austerity measures announced by Brian Cowen, the Irish government was not "rewarded" by the markets. Quite the opposite, in fact. Speculators carried on gambling against the Irish government bonds, driving down their prices. As a result, from October, the yield of its bonds - an indication of the interest rate that Dublin would have to pay on future borrowing - soared well above the 7% barrier, coming close to 10% in November.

Of course, the Irish government deficit - which was estimated to reach 32% of GDP for 2010 - was certainly a factor in the speculation against Irish bonds. But everyone knew that, in the best of cases, this deficit only represented a fraction of the government's existing and future commitments in the Irish banks' bailout and speculators were factoring the likely additional cost of this bailout into their bets, regardless of the austerity measures announced.

In any case, after the Greek government debt crisis at the beginning of 2010 and at a time when Portugal's and Spain's government bonds were already caught in an on-going speculative storm, this sudden run on the Irish government bonds significantly increased the risk of contagion to other eurozone countries, thereby threatening the stability of the euro and causing headaches to its governments and financial authorities.

However, it was the threat raised by the Irish banking crisis itself, or rather the increasing fears that it might directly affect the balance-sheets of international banks, which really prompted the European governments to consider a direct intervention in the Irish crisis - and not just the governments of the eurozone, but also the British government.

Ironically, though, the spark which really triggered these fears resulted from steps taken by the authorities, both in Ireland and in Europe, to try to reduce the impact of the financial crisis.

First, there was the Irish government's attempt at trying to reduce the colossal indebtedness of its banking system. Leaving aside their debts to monetary institutions, the Irish banks' debt was, as is usually the case, roughly split in two: a "senior" debt, owed mostly to large foreign banks and pension funds, which enjoyed a high level of protection in case of bankruptcy and paid a moderate interest rate; and a "junior" debt, held mostly in the form of speculative bonds (quite similar to the opaque bonds which helped the US sub-prime crisis to spread across the world) which paid higher interest rates but enjoyed no protection in case of bankruptcy. As "junior" bonds were virtually unsaleable, the Irish government was counting on the fact that bondholders would be keen to sell back their bonds, even at a reduced price, in order to cut their losses. In the case of Anglo-Irish Bank, for instance, "junior" bondholders had to exchange their bonds against shares in the bank, whereas in the case of Bank of Ireland, they had to sell their bonds for 20% of their face value in cash.

However, when this plan began to be implemented, it opened a Pandora's box by sparking off widespread speculation about a possible extension of this plan to some "senior" bondholders at least, especially as the guarantee offered by the government to many of these bondholders was due to end at the end of the year. Yet there was never any explicit indication that Cowen's government had ever considered such an option. Not only that, but in order to stop any more rumours, Cowen moved immediately to announce the extension of his government's guarantee until June 2011!

But as far as the financial markets were concerned, this was already too little too late. The large international banks were horrified at the very idea that, as "senior" bondholders, they might be made to share the pain of the Irish crisis. Just as they were terrified that these rumours might drive their own future borrowing costs through the roof. Meanwhile speculators had seized the opportunity to bet against banking shares far beyond Europe.

After this, came the scandal caused by comments made by German prime minister Angela Merkel, when, in the discussions about the setting up of a permanent bailout mechanism for the EU from 2013, she hinted at the possibility of getting bondholders to share the cost of future EU bailouts. For Merkel, this was certainly no more than political posturing, designed to reassure German taxpayers that they would not have to foot the bill for rogue speculators. But her comments were vague enough to be open to any interpretation. And although EU leaders used the opportunity of the November G20 summit in Seoul to stress that, in any event, no bond issued before 2013 would be affected by the new regime under consideration, this did not prevent banking shares from taking another nosedive.

The international banks' spider web over Ireland

Why should the big international banks have been so concerned about the impact on their profits of the Irish crisis since, after all, the Irish economy represents no more than 2% of the EU economy? This was directly linked to the particular role played by this country in the European financial setup since the so-called "Celtic Tiger" period.

To all intents and purposes, Ireland was (and remains) used as a convenient tax haven by just about every international bank, in one way or another. It offered all the technical facilities and skills that could be found in a rich country, combined with the most lenient tax regime in the industrialised world. It was part of the eurozone, thereby providing eurozone banks with the same ease of operation that they could find in their country of origin. And it had close historical links with American and British finance, thereby providing a convenient base for US and British banks to operate in the eurozone, and for eurozone banks to operate in Britain.

All these factors helped to attract into Ireland huge flows of capital coming from all over the world - but especially from the rest of Europe, of course - thereby feeding its colossal speculative real estate bubble over the decade before the crisis. The more this bubble inflated, the more international finance wanted to have a bigger share of the cake. This is what accounts for the enormous stock of debt owed by the Irish banking system to international banks.

Today, all in all, this stock of debt represents, according to the latest figures released by the Bank of International Settlement, 4.25 times the country's GDP - of which 70%, or 390 billion euros, is owed to EU banks. Among the EU countries, the biggest creditors, are British banks, with 114 billion euros, followed by Germany with 106 billion and France with 38 billion.

Some of this debt is made of more risky "junior" bonds, which the international banks have known for a long time already, would only be repaid at a heavily discounted price, if at all. This is why, for instance, Lloyds announced at the end 2010 that it had to make provisions of £4.3bn to cover expected losses on its Irish property loans portfolio, 90% of which is considered by the bank as partly or totally unrecoverable.

The bulk of this debt mountain, however, is made of "senior" debt whose fate will depend entirely on the financial capacity of the Irish government to use public funds to help its banks to repay this debt, as part of the guarantee it has provided for this type of debt. This is where the line separating the indebtedness of the Irish state and the indebtedness of the Irish banking system becomes totally blurred. Due to the de facto nationalisation of a large part of the Irish banks' "senior" debt through the mechanism of the state guarantee, suspicions that the Irish banking system might go bust feed suspicions that the Irish state might go bust, and vice-versa.

In addition, the particular role of Irish banking in Europe means that its crisis represents a definite threat which, in a number of European countries, stretches far beyond the banking sphere itself. This is because a significant part of the funds invested in one form or another in Irish banking by international banks were actually intended to be re-invested outside Ireland.

An example of these practices is provided by the now state-owned German bank Hypo Real Estate, which used an Irish subsidiary, Depfa Bank, in order to channel most of its real estate investment in Italy.

But probably the most spectacular example is that of Britain. Among the large British banks, RBS - mainly through its subsidiary, Ulster Bank, which is the Republic's 4th largest banks - and HBOS (now part of Lloyds), were the biggest investors in Ireland. In addition to taking their cut of the Irish speculative bubble, they also used Irish banks to increase their cut of the British real estate bubble. In particular, British banks used Irish banks to fund the building of big property developments by Irish companies in Britain. This is why, when the crisis broke out, many prestige developments in London were Irish-owned - like some of the best known Docklands tower blocks, the Spitalfields office and shopping centre, Bishopgate Goods Yard, part of the Battersea power station, Bow street magistrates court, five star hotels like the Claridges, Connaught and Berkeley, the City Rothschild headquarters, etc..

However, because many of the Irish developers who owned these properties have gone bust following the implosion of the commercial property bubble in Britain, their present owner is, or is bound to become soon, NAMA - that is, the Irish government. Should Dublin be forced by financial difficulties caused by its banking crisis, into disposing of the assets under its control in order to generate fresh cash, the size of NAMA's British commercial property portfolio is now so large that a fire sale of this portfolio would almost certainly depress Britain's commercial property market - with unpredictable consequences for the British banking system which, itself, is still up to its neck in this market.

To complete this description of the complex intertwined links between Irish banking and international banks, it should be added that British banks also sought to play on the differences in banking interest rates between Britain and the eurozone, where lending rates were lower. This accounts for the huge stock of debt owed by British banks to their Irish counterparts - a total of 159 billion euros, equivalent to 1.2 times Ireland's GDP! Such a huge amount means that British banks could be at risk should the Irish government put some of its banks into administration and proceed to recover part of the funds they are owed, even at a discounted price, especially at a time when the Bank of England itself admits that British banks will have difficulties meeting their combined £250 bn worth of debt repayment falling in 2011.

In other words, because of the spider web woven around Ireland by British and other international banks, the boomerang of the crisis was now threatening to hit back at them. Having used Irish banking as an instrument for their European-wide plundering, to great profit, they now feared the risk of a backlash, as they could be hit by the ripples of an Irish banking crisis in which they had a heavy responsibility.

The EU/IMF step in... to bail out international banks

Of course, the EU authorities could have kept bailing out the Irish banking system through the backdoor by means of ECB loans and, certainly, this is the option that the Irish government would have preferred.

However, this raised a number of problems. On the one hand, this form of intervention had been unable to stop the on-going speculation against Irish government bonds, which was threatening to contaminate other eurozone countries. On the other hand, the stock of Irish banking debt held by the ECB had become unsustainable: this debt represented almost a third of the ECB's net commitments, far out of proportion with the importance of the Irish economy, and the restrictions imposed by the ECB on lending to Irish banks since October had only resulted in these banks borrowing what they needed from the Central Bank of Ireland, thereby fuelling the speculation against Irish government bonds.

Above all, though, the big European banks wanted a more tangible protection against the ripples of the Irish banking crisis. Their experts were arguing that although the Irish government claimed to have borrowed enough funds to cover its deficit for the next six months - something no-one disputed - it simply would not have the resources, nor maybe the political will, to cope with another flare up in the banking crisis, whichever form it took. And if this was the case, the cost for international banks would be simply unacceptable.

It was for those reasons that the rich EU countries joined ranks with the IMF to impose a loan package on the Irish government. The aim of the exercise was neither to help Brian Cowen to pay public sector wages, as was claimed by the media, and even less to prevent more drastic cuts in the country's welfare system. If this was an "aid" package, it was not aid for the Irish population, but aid for the international banks which had an exposure of some sort to the Irish crisis.

In fact, significantly, the strings attached to this package were less designed to reassure financial markets about the health of Ireland's state finances, than to give the EU/IMF authorities enough leverage on the Irish government to ensure that, whatever happened, it would do what was required to prevent international banks from having to suffer from the Irish banking crisis.

The same preoccupations were behind the British government's £3.25bn bilateral loan to Ireland. Osborne's claim in the Commons that "our engagement in this is because we are good neighbours of Ireland, not because we have particular concerns about any particular UK bank" was an outright lie. In fact Osborne contradicted himself by declaring four days later that "the bilateral loan was given because of the very specific economic relationship between the UK and Ireland, the inter-connectness(sic!) of our banking systems, the fact that we share a land border, the importance of the Irish banks in Northern Ireland." The only name of the game was indeed to protect the specific interests of British banks, without having to depend on the goodwill of the EU/IMF authorities!

Although not much filtered about the negotiations between the EU/IMF authorities and the Irish government, they must have involved a lot of arm-twisting judging from the draconian conditions included in the final agreement.

Although described by newspaper headlines as an 85 billion euro loan package, it only provided a combined 67.5 billion from three equal lines of credit contributed by the IMF and two EU stabilisation funds. The remaining 17.5 billion of the package, equivalent to 13% of the country's GDP, would have to come out of... the Irish government's own resources, including 12.5 billion which will be taken from the National Pension Reserve Fund - more than half of the total assets of this fund, which was set up in 2001 in order to meet an expected sharp increase in the funding requirement of the state pension from 2025 onwards.

The agreement was quite explicit as to how the Irish government was meant to use these funds. 35 billion euros out of the total, including the 17.5 billion taken out of public funds, were to be used exclusively to shore up the banking system, with an immediate injection of 10 billion euros designed to recapitalise the banks - coming on top of the Irish government's existing commitments. The deal also included the reassurances demanded by international banks in the form of an explicit undertaking by the Irish government not to try to impose discounts on "senior" bondholders.

The remaining 50 billion euros of the loan package were supposedly designed "to cover the financing of the State" according to the official statement which followed the deal. However, this could just as much mean that these funds are used to pay for expenditure not considered as part of the banking bailout, such as the extension of NAMA's acquisition of toxic loans or the funding of the Central Bank of Ireland - all of which will bring benefits only to the banking system.

As to the 5 billion euros or so bilateral loans made by Britain, Denmark and Sweden (the richest EU countries which are not part of the eurozone), they will undoubtedly be used to shore up the Irish-based subsidiaries of British, Danish and Swedish banks.

Finally, since nothing comes for free in this capitalist world, the Irish government stands to pay an average 5.8% interest annually on the funds its uses from the bailout package. In other words, for every 10 euros paid in income tax in Ireland, 2 euros will be go into the pocket of the international banks which are providing the funding for this bailout package. So that the large European banks will actually line their pockets on the back of a bailout whose only purpose is to protect their profits, while the Irish working class will be told that it has to tighten its belt even further, in order to bridge a budget deficit caused by the profiteering of the same banks!

Worst of all, there is not even the slightest chance that this combination of austerity and international bailout will put an end to the tremors of the crisis, neither in Ireland, nor elsewhere. First because imbalances may re-emerge anywhere and send shockwaves across the world economy. And second, because in Ireland itself, a massive amount of financial junk left over by the collapsed real estate bubble is still littering the economy in general and the banking system in particular. As Morgan Kelly pointed out, "where the first round of the banking crisis centred on a few dozen large developers, the next round will involve hundreds of thousands of families with mortgages. Between negotiated repayment reductions and defaults, at least 100,000 mortgages (one in eight) are already under water, and things have barely started." No amount of austerity and certainly no such costly international bailouts, will be able to shield the economy from the impact of mass mortgage defaults, let alone prevent the resulting social catastrophe for the Irish working class.

If there is an illustration of how unaffordable the parasitism of capital has become for society, Ireland is certainly a case in point. If anything, it highlights the urgency of stopping the gigantic worldwide waste involved in depriving society of trillions of public funds, which are thrown at the banks and instantly used by them to create even more chaos. In short, it highlights the urgency of expropriating the financial system and reorganising it under the control of the population as a first step towards freeing society of the parasitism of this bankrupt system.