By Michael Murphy
IN A graphic validation to the old adage “one law for the rich and one for the poor”, the decision of the Fianna Fail/Green Party government to buy the bad debts from the Irish banks for up to €90 billion while making cuts to the poorest sections of society in the form of social welfare Christmas payments and rent allowance is a scandal.
The billions in bad debts in the banks are owed by some of the wealthiest people in Ireland. Primary amongst them are the property developers and speculators who used their borrowings to massively inflate the property market, which in turn saddled people with 40 year mortgages.
This is an attempt to take all the bad loans off the books of the major Irish banks and place them with a new agency called the “National Asset Management Agency” which will hold the debts for up to 15 years. The government is buying the debts at a “discounted price” of anything up to 76.5 billion euro.
The government hopes that international banks and investors will then lend money to the Irish banks and in turn credit will be extended to consumers and businesses in Ireland to stimulate the economy.
Brian Lenihan claims this process will be cost neutral in other words that the taxpayer will get their money back at some stage. However, the reality is that the debts will add significantly to the national debt, the equivalent of €75,000 for every household in the country and is expected to cost 18 cents of every euro taken in taxes by 2013.
This is an astonishing bail out of those that caused the economic crisis and places the burden of cleaning up the speculators’ mess onto the shoulders of working class people.
The Socialist Party is in favour of nationalisation but not this form of capitalist nationalisation whereby we take on the debts of the rich and leave them with all of the profits. The banks should be nationalised and the assets of the developers who owe billions should be seized and this money used to invest in a state development programme to build schools, hospitals and other projects that will benefit society and create jobs. House repossessions could be stopped and mortgages adjusted to reflect real house values with affordable interest rate repayments.