The Irish and European debt crises are inextricably linked.
It is impossible to talk about national strategies for tackling Ireland’s massive debt problems without touching on the wider European debt crisis. The extent of the massive debt crisis that Ireland faces is linked to our membership of the Euro-zone, and in particular the access it provided for Irish banks to cheap credit. Ireland is not the only Euro-zone Member State experiencing a crisis – the EU countries in crisis now account for about a third of the Euro area’s GDP. The banking and financial systems of EU Member States are closely connected, and also the political decision-making systems which support them. There is a legitimate expectation that a European level solution can be found to the Euro-zone’s debt crisis.

Ireland’s withdrawal from the Euro would have a very negative impact on the Euro-zone, and the global economy.
If Ireland were to decide to withdraw from the Euro-zone, the decision would have potentially very serious consequences for other Member States. Financial analysts and commentators have expressed their belief that the “mother of all crises” or a “financial Armageddon” could result if the already very volatile markets were to become spooked by the sovereign default of one or two Euro-zone Member States. It would not just be other crisis-stricken EU Member States that would be affected. The Italian Finance Minister recently likened the Euro-crisis to the Titanic. He pointed out that even though stronger Euro-zone countries like Germany are in the first-class cabin, when the boat hits the iceberg, all of the passengers are affected.

The financial disarray and systemic dysfunction that would infect not just the European but potentially the global economy if the Euro collapsed would be immense. The Euro is now the world’s second international currency after the US dollar, making it of major significance for market transactions, central bank holdings, pension funds, insurance companies and government agencies. There are more euros in value than dollars circulating this year – 820 billion euro against 940 billion dollars. About one quarter of China’s 3.2 trillion overseas currency holdings are in euro, giving them a real interest in the euro’s survival.

It goes without saying that one of the results of the break- up of the Euro-zone would be a considerable amount of “wealth destruction” – the loss of a huge amount of value that is stored in bonds, stocks and shares on the international financial markets. But the real litmus test that should be applied in assessing the impact of any meltdown of the Euro-zone would be its effect on ordinary people, and on the most vulnerable in society. These people are usually the real casualties of any deep economic recession. In the event that the Euro-zone broke apart as a result of one or several sovereign defaults, it is very likely that general liquidity would dry up as part of a overall credit crunch, citizens would not be able to access cash from their bank machines, small businesses would not be in a position to pay their creditors, and the continued payments of public sector wages and social welfare entitlements would be difficult, if not impossible. Chaos and turmoil would rein and great hardship would be inflicted on the population at large.

The option of Ireland reverting to its national currency is not a panacea
As Europe’s political class shows little real leadership, and as the international markets become more volatile by the day, the opportunity for Ireland to regain control over its own monetary policy and to benefit from many of the advantages of competitive devaluation appears superficially at least to be a sensible course of action for the Irish economy.
Unfortunately this approach is sometimes advocated on the basis of ideological and nationalistic reasons rather than an objective analysis of the likely economic consequences of this course of action. A recent UBS report suggested that the costs for countries leaving the Euro could be up to 50% of GDP. I don’t have the time to mention all of the potentially negative consequences of a reversion to a national currency and its devaluation. Let me take one example – that of our energy imports. Although a devalued currency might be very helpful to Ireland in some respects, how would the country deal with the high, and rising prices of our imported energy- oil and gas – which we rely on to meet over 90% of our energy needs on this island? Oil and gas are priced in dollars on world markets. After a devaluation, the costs of these fuels would hugely increase in terms of the devalued currency .People being paid in the devalued currency would find their fuel and indeed all their imports more costly. Wages would have to be allowed to rise to some extent to correct for this. The positive impact of the devaluation could neutralized in this way. These are the kinds of issues that need to be fully considered as Ireland tries to identify the most appropriate strategy to respond to its massive debt crisis.

An effective European-level response to the crisis is more compatible with Ireland’s long-term strategic interests
It is important to look closely at the long-term implications of any decision by Ireland to leave the Euro. Quite apart from the immediate and potentially serious market impact it is likely to have for other EU Member States, it is also likely to undermine the political and economic cohesion of the European Union in the longer –term.
Why should this be an issue for Ireland? Firstly Ireland’s membership of political and economic community that it joined almost 40 years ago, and from which it has gained significant benefits, cannot be an a la carte one which is abandoned when times are difficult and renewed again when conditions have improved. No political system could accommodate this kind of radical flexibility and continue to offer stability and continuity to its member states, or instil confidence in the wider international community. Furthermore, if Ireland leaves and the Euro-zone breaks up, the wider European project will be fatally damaged. I want to suggest this morning that it is in Ireland’s long-term strategic interests that the European Union remains a strong economic and political player in an increasingly uncertain international economic context, one where the global economy was already shifting to the East – to emerging economies like China and India – even before the crisis struck.

The international context is characterised by growing levels of risk and uncertainty
What do I mean by this? The excellent work that Feasta has carried out over the past decade has concentrated on the issues of economic growth and the debt –based money system, energy and climate. The organisation has consistently predicted that the international community will face three major interconnected crises over the coming decades– a financial crisis linked to the way in which the global debt-based money system works, an energy crisis and the crisis of accelerating climate change. We are in the midest of a very serious international financial crisis right now. The global energy crisis and the growing crisis of climate change still confront us. In the past it has been easy to dismiss Feasta’s predictions as typical of a group of environmentalists!! Unfortunately its predictions are being borne out to a greater extent with the passing of time.

A politically strong and economically cohesive European Union can play an effective role in global efforts to tackle risk and uncertainty in the global economy, particularly where energy scarcity and climate change are concerned.

The development of a continent-wide Energy Community is a major policy imperative for the EU, as it should be for Ireland
The ratification of the Lisbon Treaty enabled the European Union to gain new powers in the area of Energy Policy. The urgent need to develop an Energy Community within the European Union was seen as a major policy imperative. The International Energy Agency accepts that the peak in conventional oil production (otherwise known as Peak Oil) has been passed, probably in 2005. Energy prices reflect this, and continue to rise. Ireland has one of the highest energy import dependency rates of any country in Europe with 91% of all the country’s energy needs having to be imported. This costs the country at least €6bn a year at present. Ireland is not alone in its vulnerability to rising energy prices, or to potential interruptions to global oil and gas supplies. Already the 27 EU member states import more than half their supplies of oil and gas, a proportion that will rise to 70 per cent in 2030 if nothing changes. The recent upheavals in the Middle East and North Africa have also introduced some uncertainly in relation to the EU’s reliance on this region for a large share of its future energy supplies. EU leaders have pledged to reinforce the union’s fragmented energy infrastructure with new interconnections so that gas and electricity can move more freely between member states. They have also promised to boost investment in renewable energy sources to reduce harmful emissions, and to allow the Union become more energy independent.
As a small, peripheral energy market on the outer reaches of Europe’s existing energy systems, Ireland has much to gain from the implementation of a comprehensive EU energy strategy and much to lose if it fails. The plan involves the creation of an offshore North Sea electricity super-grid, an initiative already backed by Ireland and nine other partner countries. This grid would offer connection to northern and central Europe to transport power produced by offshore wind parks to big cities on the European mainland and to store it in hydro-electric plants in the Alps and the Nordic countries. There would also be new electricity interconnections in south-western Europe to transport wind, solar and hydro power to the rest of the continent. A southern gas corridor would be created to deliver the gas directly from the Caspian Sea, reducing dependence on Russian supplies. From a financial perspective the investment required is very considerable indeed. In the next decade, the EU Commission President José Manuel Barroso believes as much as €1 trillion may be required to replace old systems and to cater for increased demand. It is clearly in Ireland’s interests to remain centrally involved in a strong, economically cohesive European Union in which these ambitious but critically important energy objectives can be realised. There will also be many economic opportunities created in Europe’s energy sector that can be exploited by Irish companies, not just in our domestic economy, but across other European Member States and internationally.

Ireland’s membership of the EU enables it to participate in international efforts tackle climate change

Former Vice President of the US, Al Gore, a prominent voice in the international debate on climate change, has spoken of the need for an unprecedented level of global co-operation in order to respond effectively to the growing threat of climate change. The international community has begun to accept that if tackling climate change does not become a global priority, the economic devastation that it will eventually wreak will be immeasurable. The Stern Review on the Economics of Climate Change commissioned by the British government and published in 2006 by economist Sir Nicholas Stern stated that climate change is the greatest and widest-ranging market failure ever seen, and that the costs of not acting on this growing global threat will be equivalent to losing at least 5% of global gross domestic product (GDP) each year, now and forever. The report conceded that including a wider range of risks and impacts could increase this to 20% of GDP or more.

The kind of international co-operation called for by Al Gore has already begun within the UN’s International Framework Convention on Climate Change. Indeed the European Union has demonstrated considerable climate leadership to date in within this framework while many other global powers are unwilling to live up to their responsibilities. The EU is a signatory to the Kyoto Protocol and is the only major power to have established its own internal Carbon Emissions Trading System (ETS). It is also trying to promote the establishment of a common carbon market involving OECD countries and other emerging economies by 2020. An EU-wide climate and energy package has been adopted by member states which commits them to binding emission-reduction and renewable energy targets to be reached by 2020.

Importantly, the EU is also a major signatory to an international climate agreement reached in Durban last year which will direct substantial flows of climate finance to the developing world over the coming years. This will be an extremely important part of an effective global response to the impact of climate change. The financing requirements for climate change adaptation and mitigation will be considerable for developing countries which are already disproportionately experiencing the impact of climate change, a problem largely created by the rich developed world in the first place. As the populations of many developing countries live in poverty and are dependent on subsistence farming, the negative impact on their livelihoods of unseasonal weather, extreme floods, droughts, desertification and so on is immense. There is an urgent need to ensure that the resilience of communities in much poorer parts of the world to the impacts of climate change is greatly increased. It is also important to recognise that the spending of this climate finance will present significant overseas economic opportunities for Irish and European businesses, as a significant transfer of technology, expertise and services will be required. If the Euro-zone were to break up however, and the European Union significantly weakened as a political system, the probability of its global leadership on climate change being abandoned would be high. This outcome would significantly undermine existing international efforts to tackle climate change, and should be avoided at all costs.

Any European- level solution to the debt crisis must be based on an acceptable level of popular consent
The perception that politics and economics are very separate spheres of activity is a popular one. In fact macro-economic decision-making is highly political in nature. Politicians understand the importance of popular consent where economic policy is concerned. In modern liberal democracies, governments cannot make economic decisions or implement economic programmes without at least the tacit support of a majority of the electorate. This can pose difficulties where governments have to implement economic policies that inflict pain on their populations. The assumption underpinning representative democracy is that enough of the population are capable of recognising when the economic conditions are so serious that they justify tough economic policies, to enable politicians to introduce the difficult measures without inciting revolution. What are the implications for the Eurozone’s debt crisis?

The European establishment’s response to the Euro-zone debt crisis has breached the most fundamental rules of the free-market capitalist system
Free-market capitalism has been a popular economic model that has commanded broad public support in the US, and increasingly in Europe over the past few decades. Political parties promoting these policies have been successfully re-elected. However, few would disagree that the excesses of free market capitalism caused the current debt crisis in the Euro-zone, facilitated by the flawed design of the Euro-zone project. The immediate reaction of the European establishment to the crisis has been to rescue the banking systems by facilitating the injection of vast amounts of capital into banks, many of whom acted delinquently during the boom years. Governments assumed the massive debts of the banks as sovereign debt. The ECB subsequently insisted on the implementation of a policy whereby no senior bondholders were permitted to suffer losses when their bonds matured. (This is despite the fact that the bondholders had accepted a certain level of risk when they took the bonds out in the first place). These actions – an emergency response to prevent the possible systemic collapse of European banking systems – breached and indeed corrupted the most fundamental rules of the free market capitalist system. They significantly undermine the credibility of any subsequent official attempt to impose punitive austerity programmes on the European public as part of an orthodox free- market capitalist response to the Euro-zone’s debt crisis

The banking debts for which ordinary citizens now bear the burden meet the definition of illegitimate or ‘odious’ debt
Having converted bank debt into sovereign debt, the burden of fiscal adjustment has since been shifted on to wage, welfare and labour market policies. From the perspective of ordinary people, the interests of the rich have been protected while the pain of the corrective measures will be borne by the middle classes and the less well- off. The approach lacks the kind of fairness and equity that must characterise any approach to tackling Europe’s debt crisis if it is to have democratic legitimacy. The concept of ’odious’ or illegitimate debt was one that was introduced into public debate about the debts of developing or third world countries whose despotic rulers had borrowed large amounts of money from the international community to fund what were often vanity or white elephant projects. These poor countries were left shackled by debts and interest repayments for expenditure from which they gained no benefit. Major international debt cancellation campaigns such as Jubilee 2000 were based on a fundamental rejection of the foisting of these illegitimate or odious debts onto populations that had no responsibility for creating them in the first place. It is not unreasonable to suggest that the banking debts for which ordinary citizens now have to bear the burden are equally illegitimate and should be subject to debt write- off or cancellation.

Mainstream political parties and, in the longer run, the EU’s parliamentary democracies, are likely to be the casualties of the ECB’s misguided approach to tackling the debt crisis
Developing the theme of democratic legitimacy a little further, it is because of the deep inconsistency in the overall response of the European establishment to the debt crisis that the austerity programmes being promoted increasingly lack democratic legitimacy. Unfortunately a rigid adherence to neo-liberal monetary policy has characterised the approach of the ECB to date. Marshall Auerback – one of our speakers this morning has accused them of “sado-monetarism” while other commentators like Paul Krugman has accused them of subscribing to a simplistic morality tale of debt and punishment where austerity programmes are imposed on delinquent states to pay for their alleged fiscal sins. These programmes will be more and more difficult for governments to implement as the austerity measures bite deeper. If the austerity programmes result in the kind of prolonged deflation, economic recession and high unemployment across the European Union that is widely predicted, the outcome will be even greater levels of economic crisis, matched by considerable political instability and social disorder. In the absence of an acceptable level of public consensus to support the hard-line policies of the ECB, the ultimate casualties of this misguided approach are likely to be the mainstream economic parties which have governed in Europe over the past few decades, and who are currently implementing these policies. In fact public trust in representative democracy itself will be seriously undermined. This is not in anybody’s interests. Any economic response to the debt crisis must be based on an acceptable level of popular consent.

Ideology must be set aside, and political and economic innovation embraced if Europe’s massive debt crisis is to be successfully tackled
It is clear that when attempting to resolve the massively complex debt crisis in Ireland and across the EU, there is a need to move beyond fixed ideological positions and to be willing to embrace new forms of political and economic innovation if a major financial and economic catastrophe is to be averted. ‘New paradigm thinking’ is needed, as the financial and economic problems that have been created by the neo-liberal paradigm are so great that they cannot be resolved within that same paradigm. The extent of the problems presented by this massive debt crisis will mean that the process of tackling them will result in a fundamental transformation of the system of economic management in Europe. Indeed it has been suggested by some that as the EU debt crisis is part of a global crisis, there will be a need for a co-ordinated, creative and multilateral response by the international community. This may involve the equivalent of a Bretton Woods II to rewrite the rules of the global economy for the new more uncertain future that confronts us. In other words the current global economic crisis, of which the EU debt crisis is a part, is likely to usher in a new global economic order. Given the extent of the debt crisis, the huge levels of uncertainty and the horrific scenarios that could unfold if the wrong policy decisions are made, there may be reluctance on the part of political leaders to engage in innovation. But innovate they must. European citizens must be convinced that a well-designed European level solution is more likely to promote economic recovery across EU Member States than purely national efforts.

Fiscal Union will not be enough
Fiscal Union is now spoken about as a major element of any likely European –level response to the debt crisis. This will require a new European treaty, which will have to be popularly ratified by some, if not all of the electorates of the Member States. I think most politicians who are living in the real world realise how difficult- if not impossible- it will be to secure the necessary levels of public support for such a treaty. Having been personally involved in two Nice Treaty & two Lisbon Treaty referendum campaigns in Ireland over the past decade, I think it would represent a political miracle if the Irish Government succeeded in persuading the Irish people to vote to ratify a treaty that introduces a fiscal union, as things stand. This is not because the Irish people are not capable of acting in their own economic self-interest, but because the prospect of having fiscal decision-making centralised in Brussels is likely to fill them with horror. Irish citizens, along with the citizens of countries like Greece, Portugal, Spain and Italy increasingly view the ECB as the institution that has bailed out banks, protected the interests of wealthy bondholders and acted as the enforcer of punitive austerity measures that are causing growing levels of unemployment, a reduction in wages and social welfare, the fire sale of strategic public assets to private interests etc.
Furthermore, in the inevitable push for the harmonisation of taxation that would follow a fiscal union, the loss of Ireland’s low corporation tax rate would be seen as a very negative outcome. For a peripheral island nation like Ireland, a low corporation tax rates helps us to attract foreign direct investment and compensate for the economic disadvantages that do not apply to many of the economies of mainland EU Member States. In fact, each EU Member State has its own particular set of economic concerns. Any European- level solution would need to be broad enough and sufficiently flexible in its design to accommodate the diverse needs of the different economies (In other words a ‘one size fits all’ approach won’t work). Finally, one of the most significant issues for EU citizens in relation to the Euro-zone debt crisis is that of the huge need for employment/ job creation, on which the livelihoods of most Europeans depend. Any European level solution to the debt crisis must be seen to tackle these issues if it is to win the support of the European public.

What might a comprehensive European- level solution to the debt crisis involve?
A European-level solution to the debt crisis will elicit the support of many citizens if they are convinced that sustained economic recovery is more likely to occur through closer EU economic integration rather than through national efforts. In my opinion, any comprehensive EU-level solution to the political and economic crisis that faces us at present needs to include the following elements if it to gain broad public support : (i) A fundamental reform of the ECB’s monetary policy, as has been suggested by the proponents of Modern Monetary Theory (MMT) in order to remove any risk of future insolvency on the part of the EU or its Member States, give the ECB the spending power it may require to realise its ambitious energy and climate objectives and enable it to respond to other major challenges or crises as they arise in the future. (For more information on MMT and its applicability to the Eurozone debt crisis, please see paper by Marshall Auerback on the Feasta website) (iii) Immediate debt relief provided by the ECB to Member States through the distribution of several trillion euros of debt-free money across all euro- zone nations on a per capita basis. This could be done in a controlled or staggered way to minimise the risk of inflation. This would not constitute a “bailout” as such, as Germany (with the largest per capita economy) would be the largest recipient. Each individual euro-zone nation would be allowed to use this emergency relief as it saw fit- whether to purchase some of its outstanding public debt or to introduce fiscal stimulus packages. (iii) A widening of the remit of the ECB to include the objective of creating full employment as well as maintaining price stability (Modern Monetary Theory also proposes a Job Guarantee Scheme which has the state taking on the role of employer of last resort) (iv) The introduction of a fiscal union with the flexibility to accommodate the diverse needs and circumstances of the economies of different Member States, and to allow for their gradual harmonisation over time (v) A clear and coherent overall macro-economic strategy supported by investment which will stimulate demand. This strategy should centre on the promotion of a green industrial revolution across the EU, and prioritise innovation and employment creation. The strategy could foster a much greater use of the Services Directive through the deliberate promotion of trade between member states in the areas of emerging green/knowledge industries. Many economic opportunities could be created for European businesses overseas as the EU met the climate financing commitments it has entered into as part of the international climate agreement it has signed (v) A material stake for EU citizens in the strengthening and consolidation of the European economy. Governments would be required to pass some of the money they receive from the ECB on to each of their citizens on an equal basis. The money could be used to either reduce citizen’s personal borrowings (ie mortgage debts) or people with no debt would be required to invest their gift in existing and new green industries to speed the EU’s transition to a low carbon economy.

It is essential that Ireland prepares its own national strategy
Although a European level solution to the debt crisis best reflects Ireland’s short and long-term interests, it would be a mistake for this country to adopt a passive approach to the overall resolution of the crisis. Ireland must be proactive in promoting its own proposals for a comprehensive EU-level solution. It must also have contingency plans in place to deal with a default on the part of another Euro-zone Member State and the possible disintegration of the Euro Area. Finally, it must have a strategy prepared to deal with the scenario whereby Irish citizens reject an EU-level solution in a popular referendum that they deem to be inadequate.
Thank you for listening to me this morning and I look forward to your questions later on.

The dawning realisation that conventional economic thinking, that did not foresee the crisis, cannot help solve the problems we now face means that we must be open to exploring new economic ideas.
It is time to move beyond criticizing the clear shortcomings of our country’s economists and politicians and consider – with open minds – economic ideas that are being developed outside of the mainstream.
Such a new macroeconomic model has been developed by a pioneering community of heterodox economists based in the University of Missouri, Kansas. Their Modern Money Theory (MMT) approach predicted the current crisis and so unsurprisingly, their analysis and economic solutions have attracted intense interest amongst economic commentators including Nobel Prize winning, Paul Krugmann.
MMT will inform a number of economic policies to be presented and debated in a conference entitled “Lessons from the Crisis: Money, Taxes and Saving in a Changing World” co-hosted by Smart Taxes, (Fiscal Policy for Sustainability Network) and TASC (Think Tank for Action on Social Change) on the 9th May 2011 at Croke Park, Dublin.
What does Modern Money Theory have to offer us that is different?
Although Modern Money Theory describes the money creation and management system of a fully sovereign (i.e. currency issuing) state, MMT is still relevant to Ireland in formulating strategy and its negotiating stance with the European Central Bank and European Parliament to address the debt crisis.
MMT tells us that the ECB can issue currency or liquidity at no cost to itself, nor to its constituent central banks, nor to the national economies of the Eurozone. The ECB already tacitly acknowledges this fact because it has declined to turn its liquidity support to the Irish banks – currently at €70b – into a medium term loan. Such a loan is actually unnecessary and not in Ireland’s interest as it would carry a substantially higher interest rate than the current 1% charged for the liquidity. The ECB provides the liquidity by simply crediting it in the accounts of the banks. The pretence that the liquidity given to Irish banks was provided in exchange for valuable assets has been shown up to be a non-essential requirement and notional fiction because the ECB has permitted the Irish central bank (a subsidiary of the EEB) to also credit the Irish banks without a matching transfer of bank assets of equal or greater value.
Under the MMT perspective, a central bank should not be concerned per se by the mounting sum in the sovereign government’s deficit account as it does not, despite ‘common sense’ claims to the contrary, represent a debt analogous to that of a household, business or bank debt. Instead the central bank should watch intently for signs of inflation – of which there are few at present in our struggling economies – as its overarching guide for money creation and taxation levels. Taxation both destroys money – by removing it from circulation – and gives it value – as only a national currency is ever accepted in payment of taxes. Once it is understood that money can be safely issued by a central bank without repayment of capital and interest and does not have to be first borrowed in the bond market or raised in taxes (yes, that means given free) new policy options open to tackle unemployment and inflation – not forgetting resource peak and climate change.
Furthermore, MMT suggests that, instead of making liquidity available to the banks, the ECB could just as easily and probably more safely, give it directly to member state governments. It can write a metaphorical cheque for immediate and annual distributions of for instance, 10% of GDP on a per-capita-basis to pay down member state outstanding debts. It should, at the same time impose national deficit ceilings sufficiently high to promote desired levels of aggregate demand.
This positive attitude to government deficits is another counter intuitive aspect of MMT compared to conventional analysis and goes beyond promoting deficits to counter liquidity traps in a depression. Once you accept that all non-government money i.e. bank money is matched by liabilities it follows then, for the private sector to net save, the government has to be in net debt. Even though a sovereign government does not have to sell bonds to raise money, MMT tells us it should still do so to a certain extent, in order to provide secure interest-bearing saving vehicles for its citizens.
Another important policy of most MMT economists is the Job Guarantee, i.e. that the government should act as an ‘Employer of Last Resort’. A job guarantee is a permanent job offer from the government to all citizens of a certain age who are ready, willing, and able to work, for a basic wage. Some MMT economists suggest that the ECB could directly fund a Job Guarantee Programme in Ireland and in any other EMU state that requested it. Or if general EU agreement cannot be got, a national government could fund a Job Guarantee out of their allocation of EEB issued liquidity.
The banks of Member States would still benefit from an ECB directly or indirectly funded Job Guarantee as the newly employed lodged their salaries in their accounts and paid off their mortgages. The exchequer would benefit as people came off social supports and paid income and indirect taxes out of their wages. The resulting increase in circulating money would transfuse the economy to provide the confidence that is so lacking and which no amount of direct liquidity injection into the banks appears to be able to create.
The Irish Environmental Pillar contends that the jobs provided in the Job Guarantee programme should ideally be Green Jobs and should address the most important challenges of our time : resource peak- especially fossil fuels, climate change and biodiversity loss. In addition to the obvious need to tackle these issues, a Green Job Guarantee programme would have no real impact on the public or private sectors as these environmental resources and systems are not yet priced (i.e. are accounted as externalities) in the marketplace.
Who will Present Papers at “Learning from the Crisis” Conference?

In “Learning from the Crisis” US based MMT economists from the University of Missouri, Kansas Dr. Randall Wray, Dr. Stephanie Kelton and Roosevelt Scholar, Marshall Auerback will present and debate Modern Monetary Theory and the Job Guarantee Programme with participants and fellow presenters Richard Douthwaite and David Korowicz from Feasta; The Foundation for Sustainability, and Prof Gerry Hughes from TCD Pension Policy Research Group, Sinéad Pentony and Tom McDonnell from TASC and Michael Taft from Unite Trade Union.
The conference is free and open to anyone whose mind is also open.
Email Alex at TASC to book your place : aklemm@tascnet.ie

Other economic commentators have framed possible responses to Ireland’s debt crisis in very narrow terms, advocating either a rigorous adherence to austerity programmes or unilateral default on our debt.

Those who promote austerity however have not been fully honest about the risks of this approach. They include the possibility that the Irish economy could enter into a spiral of deflation, economic stagnation and experience a sharp increase in overall levels of unemployment. Given the fragile state of the global economy, these negative trends could prove very difficult to reverse.

Those who support a unilateral default on our debts and taking a chance with the international money markets are being less than honest about the economic and financial difficulties that Ireland will face in such circumstances.

Michael Casey’s helpful contribution to this debate has been to remind us of the unique position of central banks which he points out can “create new money by the stroke of a pen”. Casey proposes that the Irish Central Bank should be permitted to print new money and lend it to the cash-strapped Government in order to relieve current pressure on it. This sets him apart from many other economic commentators who appear to view governments as almost completely dependent on private bond markets to access critical money supplies.

Casey points out that over the years, the Central Bank has occasionally lent money to the government of the day to part-finance its fiscal deficit, and that the central banks of other countries have engaged in similar action. He envisages circumstances in which the Central Bank might lend €3 billion a year, for example, to the Government over the next four years, on a strictly emergency basis. He argues that this would prevent recession becoming entrenched, reduce unemployment and emigration, avoid punitive interest charges and protect the most vulnerable in our society.

While Casey concedes that printing money might cause price inflation later on, he questions whether that would be such a bad thing, given Ireland’s present circumstances. He suggests that it might encourage consumer spending and would also inflate away some of the real burden of our present debt. He reminds us that other countries have done this in extreme situations.

Given Casey’s impeccable economic credentials as former chief economist with the Central Bank and board member of the International Monetary Fund, surely his proposal should be given serious consideration by national and European policy-makers?

Casey is not alone in advocating a more flexible approach on the part of central banks to monetary policy. A pioneering community of economists in the University of Missouri, Kansas have elaborated a new macroeconomic model known as Modern Monetary Theory, which challenges some of the basic assumptions of conventional monetary theory. It advocates a more activist role for governments and central banks in overall economic development and the promotion of full employment.

These economists will be amongst the keynote speakers at a conference in Croke Park on May 9th entitled “Lessons from the Crisis : Money, Taxes and Saving in a Changing World” co-hosted by Tasc (Think Tank for Action on Social Change) and Smart Taxes (Fiscal Policy for Sustainability network). Richard Douthwaite, an Irish economist who has written about the possibilities for the European Central Bank to use its monetary policy to engage in ‘deficit easing’ in order to tackle the debt crisis in the Eurozone, will be another speaker at the conference. Those interested in attending can register at contact@tascnet.ie.

Yours etc

Deirdre de Burca

It is unfortunate that my colleague, the Minister of Sate, Deputy Sargent, has left the Chamber, because I wanted to pay him tribute. His tenure as the Minister of State with responsibility for food and horticulture in the Department of Agriculture, Fisheries and Food has been important and timely. It is clear that, in terms of agriculture generally and in the agrifood sector, we need a new vision of how to adapt agriculture to face new and serious challenges. We need new thinking. Some of us are stuck on the same treadmill. I listened to the calls by some Senators. On the one hand, they tell us not to do anything about climate change, such as implementing a carbon tax, and, on the other hand, they ask the Government to stop the flooding and recognise the latter’s appalling impact on farmers and so on. We must realise that we need to tackle the root causes of these problems. We cannot continue to throw money away in an attempt to convince ourselves that the old model of farming can continue and that we will somehow get over everything. We need to introduce new thinking into the sector, which I would argue has been achieved by my colleague, the Minister of State. In the little over two years that he has spent in the Department, he has put in place and is in the process of putting in place new structures, schemes and so on to encourage the agricultural sector to make the transition to a more sustainable model of farming, which will be essential. He has committed himself publicly and in the programme for Government to the growth and development of the organics sector.

Many of the mainstream political parties still view organic agriculture as being a niche area, an add-on to conventional farming. Much of the major international research highlights the fact that it is a central and growing area of food production and consumption across the world. A food island like Ireland could exploit many commercial opportunities, giving it a head start in developing itself as a location committed to organic farming. In the programme for Government, which was agreed a little over two years ago, we set a target of converting a minimum of 5% of acreage to organic farmland by 2012. I am happy to say that, despite many of the challenges facing the new sector, we have converted approximately 1.25% of farmland to organic and the rate of interest being expressed by those signing up to the main organic farming scheme is encouraging. There is every reason to believe that, by the end of the Government’s term, we will have reached what was an ambitious target for a new sector.

The organic food production and processing sector is one of the few areas showing steady growth in Ireland and in the countries to which we send most of our conventional produce. Ireland is uniquely suited to organic farming, as we are a food producing island and have a famous clean, green image. The European public in particular has grown concerned about the impact of intensive farming on biodiversity and the environment. At the same time, farmers’ incomes are coming under pressure from cheap imports. Farmers are also under relentless pressure from retail multiples to accept less for their produce. This is an issue we must address. There is an increase in the concentration of power in the hands of a few large supermarket chains. It is not peculiar to Ireland; it is an international phenomenon which has fundamentally changed the balance of market negotiating power in the food chain. It is a factor, although not the only one, contributing to the declining share of prices received by farmers.

The Minister of State is very clear that competition alone cannot act as the sole mechanism to maintain efficient markets. The careful and sensitive use of market management measures can help to maintain balance in the market, where appropriate. The use of such mechanisms can assist in the provision of fair returns for producers. The Minister of State believes there is a need at EU level to give urgent thought to ensuring markets function well and unfair practices are prevented. Because the agrifood industry is hugely important to Ireland and the European Union, the Union must safeguard its production base to meet future demand for food, feed and bioenergy. Retailers must strike a reasonable balance between granting value for customers and giving it to suppliers and producers. A balance between all stakeholders, including suppliers, producers, retailers and consumers, may be difficult to achieve but the Minister of State and the Government are committed to working towards achieving these mechanisms at EU level.

As intensive conventional farming becomes less profitable and farmers look for alternative ways to make their enterprises pay, they must consider alternatives such as organic farming. They also need to look at conventional outlets because of the pressure exerted by the larger retail multiples. They will have to look at alternative channels, including selling their produce directly to consumers in farmers’ markets and farm shops and through co-operatives and distribution systems independent of supermarket control. In addition, farming must become more diversified, producing more varieties of food but also fuel, building and clothing materials. I refer to the fledgling hemp industry which appears to hold out great promise for farmers. Hemp is an extremely versatile material that can be used in food products, building and clothing materials and so on. Teagasc has done a certain amount of research in this regard. It is innovative and a move we should consider more closely and support.

I again pay tribute to the Minister of State for the work he has done in many areas. He has supported farmers’ markets and helped to ensure local authorities support and provide the facilities such markets need. He mentioned the growth in demand for organic food. The Irish organic retail market was estimated to be worth €104 million in 2008, compared to €66 million in 2006 and €38 million in 2003. There was annual growth of 40% in 2007 and 2008 which compares very favourably with the figures for previous years.

There are several issues I would like to discuss, one being the threat to organic agriculture posed by genetic modification and GMOs. However, I do not have time to go into that matter in great detail, suffice it to say the Minister of State has introduced a voluntary labelling scheme. I agree with Senator Phelan that country of origin labelling is important. The Minister of State has championed this issue at EU level within the Council of Ministers, as well as at national level. It is very important that people know where their produce originates. When the pigmeat crisis happened, the issue of provenance became very important. The Minister of State intends to continue to lobby at EU level to ensure country of origin labelling is introduced but among EU member states we are supposed only by Italy.

I, again, welcome the attempts made to promote organic produce by the Minister of State. We must look in a new way at how we can make farming livelihoods more sustainable. In this regard, it appears the organic sector holds great potential for farmers.

The Minister and others have mentioned the Middle East peace process. I share the same frustration as others. We seem to be saying the same things about the Middle East peace process and the situation in Gaza in meeting after meeting. Does the Minister believe the conclusions to be adopted by the Council at this meeting will change in any way or will there be any shift in the position of the EU? There appears to be virtual paralysis at the moment and unless the EU injects a new dynamic into the diplomatic process, it looks as if we shall see this continue. To what extent does he believe that there is a willingness on the part of the EU to separate itself somewhat from the position of the US and inject a new dynamic into the Middle East peace process? Does the Minister agree that the lifting of the blockade on Gaza should be the priority, particularly given that this is absolutely necessary if there is to be any type of social and economic reconstruction following the attack by Israel on Gaza last December?

I have raised the issue with the Minister before about the free trade agreement that is being negotiated by the EU with Colombia. I am very concerned that the free trade negotiations appear to be continuing. I recommend that the Minister should scrutinise the document produced recently by the Irish Congress of Trade Unions, Trading Away Human Rights, as regards why the EU-Colombia free trade agreement is a step in the wrong direction. A very important point made by this document is the fact that the free trade agreements that were being negotiated by the US, Canada and Norway with Colombia have effectively been suspended because of human rights concerns. The EU seems to be the only block that is pursuing this free trade agreement and destroying what appears to be an international consensus on the issue of the importance of Colombia demonstrating that it is living up to its human rights and trade union obligations.

This committee will be discussing the new scrutiny role of national parliaments under the responsibilities and powers we have assumed under the Lisbon treaty. What are the Minister’s views in this regard and has his Department any ideas as regards how we might strengthen the European dimension of the business of both Houses of the Oireachtas? We are at an important point. This committee is looking at how it can play its part, as is the Joint Committee on European Scrutiny, in strengthening the European dimension, but this is about much more than the role of the two European committees and I hope the Minister will elaborate on his ideas in this regard.

The Irish Green Party has found itself in Government for the first time during a very interesting but extraordinarily challenging period. Little did we realise when we optimistically negotiated the 2007-2012 Programme for Government with our coalition partners that we were about to face into the worst global, and domestic economic recession since the 1930’s. It was always our intention to have a substantial green component in the new Programme for Government. We negotiated that programme before the concept of a “Green New Deal” began to be promoted in political debate across the European Union, particularly in the run-up to the European and local elections in June 2009. Following those elections, and given the rapid deterioration in Ireland ’s economic circumstances since the government was formed, the Green Party negotiated a mid-term “Renewed Programme for Government” with our partners in November 2009. This renewed programme included a strengthened ‘green’ component as part of the Irish Government’s response to the economic and labour market challenges facing this country.

Economic and financial challenges

Indeed Ireland is currently experiencing a range of significant economic and financial challenges that require immediate and radical action. In addition to the obvious need to get our public finances in order, the Irish Government must identify new economic sectors that will stimulate growth, job creation and new sources of revenue for the Exchequer. In this respect, the Green New Deal could provide the both the policy framework and the necessary stimulus to promote economic recovery in this country.  And the challenges facing the Irish economy should not be underestimated. It is currently forecast to contract by 7.75% (GNP by 8%) in 2009. A further contraction is anticipated for 2010, albeit not to the same extent as this year. The sharp contraction reflects both the correction in the house-building sector and the deterioration in the external environment. The unemployment rate is currently at 12.5% – its highest level since the mid 1990s. Conditions in the labour market remain poor with labour-intensive areas such as construction and the retail sector taking the brunt of the adjustment. A return to a more sustainable pace of expansion based on export-led growth is expected in the medium term. This recovery however is dependent upon an improvement in the global economy and on implementing suitable domestic policies that position the Irish economy to take advantage of any such global recovery. For this reason, a genuine European-wide co-ordination of Member State’s economic and financial policies in support of a Green New Deal paradigm will be very important in assisting Ireland to ensure that its own domestic ‘green’ economic policies will act as a strong driver of recovery and growth in this country, and also to ensure that the European Union is in a leadership position internationally in relation to green enterprise and green technology.

Government Strategy for Economic Recovery

So where does the Green New Deal fit into the broad strategy of the Irish Government in relation to economic recovery? That government strategy includes stabilising and restoring sustainability to the public finances with an expected deficit of below the 3 per cent of GDP in line with the Stability and Growth Pact threshold by the end 2013 (or 2014 as the EU Commission has recently proposed); ensuring the economy’s flexibility and resilience through the adjustment of asset prices, wage levels and prices to the new circumstances; planning to continue to invest well in excess of the EU average in Ireland’s stock of productive infrastructure in order to enhance competitiveness ; maintaining Ireland’s relatively low burden of tax on business and investing in education at all levels in order to ensure Irish workers have the skills demanded by high-technology firms.

Developing Green Enterprise

Central to the Irish Government’s medium-term framework for economic development “Building Ireland’s Smart Economy- a Framework for Sustainable Economic Renewal”- is the vision of Ireland as an Innovation Island . Opportunities for the development of green enterprise are central to this vision, recognising the need to move to a low-carbon economy. A number of initiatives are underway to identify and deliver further action. These initiatives include the establishment of an Innovation Task Force and a High Level Action Group on Green Enterprise. Other areas of focus include using public procurement as a demand-side driver of innovation to provide easier access to SMEs and innovative companies to public procurement tendering. Research and Development has also been identified as a major engine of growth for the Irish economy. A new national strategy for higher education has been launched with the aim of providing a vision and a set of policy objectives in this sector over the coming 20 years. The EU research agenda complements our national priorities with an emphasis on moving new discoveries from the research stage to the marketplace. It is anticipated that gross expenditure in Ireland on R&D should increase to 2.5% by 2013.
Unlocking the business potential of SMEs

The 2008 Global Entrepeneur Monitor (G.E.M.) Report for Ireland confirms that Ireland is at heart an entrepreneurial nation and to the fore in Europe in both the rate of early stage entrepreneurial activity, and in the rate of established entrepeneurs amongst the adult population. Against this background of a high level of entrepreneurial activity, SMEs remain very much at the centre of the Irish Government’s Enterprise policy. The Government has introduced a number of supports for the SME sector : the establishment of an Enterprise Stabilisation Fund with assistance from the EU’s Temporary Framework on State Aid to assist companies to grow internationally ; a 100 million Environmental and Clean Energy Innovation  Fund  and a further 15 million each to new or existing seed capital funds. The recommendations of the Procurement Innovation Group are also being implemented through a new initiative that should increase SME’s access to public procurement tenders.

Smart Telecommunications Technology

The ‘Technology Action to Support the Smart Economy’ report was launched by the Department of Energy and Communications in July 2009. Consistent with the need to move to a low-carbon economy, the report places particular emphasis on low energy models for communications networks and infrastructure. The actions identified in the report include implementing an Exemplar Smart Communications Network ; Energy Efficient Data Centres and Cloud Computing; International Content Services Centre and Smart Electricity Networks.

Green Enterprise Opportunities

The High Level Action Group on Green Enterprise, which is a key driver for the development of green enterprise in Ireland , was established in 2009. This group is to build on work carried out as part of a previous study on enterprise opportunities in the environmental goods and services sector. This study identified those areas which were considered to have the greatest potential: Renewable Energies, efficient energy use and management, including eco-construction, waste management, recovery and recycling, water and wastewater treatment and environmental consultancy and services. In addition to this the Department of Enterprise Trade and Employment has led an Enterprise Opportunities sub-group of the Electric Vehicles group, which has examined how to exploit the opportunities for Irish business associated with electric vehicles.
Green Technology Support Scheme

Enterprise Ireland administers the Green Tech Support Scheme that was launched in 2008. The new scheme builds on the existing environmentally superior products and environmental management systems supports. The Scheme allows clients to apply for a more extensive range of supports in the area of : Implementing Environmental standards, Environmentally Superior Products, Measuring Carbon Footprint and Applying for Eco-labels. Implementation of the EU’s Eco-design for Energy-Using Products (EUP) Directive is now underway.

Renewable Energy.

The current Programme for Government sets out ambitious targets for increasing the use of renewable energy and dramatically improving energy efficiency across all sectors of the economy. The most important recent advance has been the finalisation of the EU Renewable Energy Directive. This Directive sets challenging targets for the overall penetration of renewables into energy use in 2020 (16% in Ireland ’s case) but also sets a target for renewable energy in transport of 10% that applies to all Member States. The Renewable Energy sector is expected to provide considerable new business and job-creation opportunities over the coming years. Ocean energy has the potential to provide an important source of alternative energy in Ireland , and to allow this country to become a leader in the field. A major programme of activity grants and supports to develop ocean energy in Ireland in its development stage was launched in January 2008 to support the development, piloting demonstration and testing phases. This will include a world class state-of-the-art National Ocean Energy facility based in one of our universities, the development of a grid-connected wave energy test site in the West of Ireland, grants under the Ocean Energy Prototype Fund and a new feed-in tariff under the REFIT scheme for Wave Energy.

The National Energy Efficiency Action Plan

The Irish Government is committed to achieving 20% energy savings across the economy by 2020. As part of this energy efficiency drive the Government has also committed to achieving a 33% energy saving across our public sector institutions by 2020. Ireland published its National Energy Efficiency Action Plan (NEEAP) in May 2009. The Action Plan sets out 90 actions that Government is already taking or will take in the period to 2020 to achieve the energy efficiency targets while reducing our CO2 emissions by approximately 5.7 million tonnes. The savings identified in the Action plan represent approximately 1.6 billion euros in avoided energy costs for the economy in 2020.

National Insulation Programme for Economic Recovery

In February 2009 Ireland launched its National Insulation Programme for Economic Recovery. The programme involves a three-pronged approach to addressing the legacy of older housing with poor energy efficiency standards. The Programme has the potential to contribute to the creation to the creation of 4,000 direct and indirect jobs thus contributing to the Government’s priority objective of maintaining and creating employment through the implementation of the Green New Deal.

Conclusion

Due to limits on space, this article has not done full justice to the scope of the Irish Government’s implementation of its ‘Green New Deal’, part of its broader strategy to promote economic recovery in this country. In particular the article has said nothing about the government’s commitment to introduce a carbon tax for the first time in the 2009 budget, and or the political agreement that has been reached to introduce domestic water charges and land-based taxes in the medium term. Instead this article has attempted to sketch the broad outlines of the Irish Green New Deal, a programme that owes much of its existence, and its innovative character, to the presence of the Green Party in Government in Ireland. Certainly much more could be done to popularise the concept of a “Green New Deal” in both our national political discourse, and at a European level. While the Irish public is aware that green enterprise and green technology will form an important part of our programme of national economic recovery, what is lacking is an understanding of the overarching policy framework or paradigm within which the significant transition to a low carbon economy needs to occur. The Irish Green Party attempted to package the various policy initiatives we were introducing in Government as part of a “Green New Deal” during the local and European election campaigns in June 2009. However, while business generally, and particularly small businesses, were very responsive to the idea, it failed to gain popular currency. The failure of the Irish public to fully comprehend what a Green New Deal represents was not helped by the fact that a co-ordinated EU-wide Green New Deal has not been fully adopted or promoted by the main EU institutions.

This is despite the fact that the implementation of a Green New Deal makes most sense at EU level, notwithstanding the obvious political challenges in reaching agreement on a genuinely European-wide financial stimulus package. Much greater economies of scale apply at EU level in relation to the development of new and essential ‘green’ transport and energy infrastructure. The provision of green, environment-related services across Europe will be greatly facilitated by the full implementation of the EU Services Directive in December of this year, and will create significant business opportunities for any Member State in which the environmental services sector is already well developed. Considerable opportunities also exist to develop EU-wide vocational training programmes and accreditation systems for green-collar jobs. As it stands, Ireland, along with other Member States, is implementing its own version of the Green New Deal at national level, but without the economies of scale, financial efficiencies and pooling of expertise that could be delivered under a genuinely European-wide approach. This is unfortunate. It is to be hoped that the lobbying efforts of the Green Group in the European Parliament will result in the mobilisation of political will at the level of the EU Commission, the Council of Ministers and the Parliament that will result in the Green New Deal being fully adopted and promoted by the European Union.as the official policy framework within which the economic recovery of its Member States is pursued.