Ireland’s budget leak to Germany brings home some harsh realities

The Guardian, Nov.  18, 2011

Loss of sovereignty may be an abstract notion, but this week Irish people were confronted with what it means in reality. Revelations that draft proposals for the Irish December budget had been circulated in a German parliamentary committee were met with horror in Ireland. It has since emerged that they were sent to every finance minister in the EU.

Members of Irish opposition parties have been in uproar at the fact that parliamentarians in Berlin were privy to vital information, such as a proposed 2% hike in VAT. Meanwhile they and other elected members of the Dáil would have to wait with the rest of the population until budget day, 6 December, to learn where exactly the axe was to fall.

Although the government insisted that the plans seen in Berlin were not final, the Irish minister for finance, Michael Noonan, confirmed on Friday that he would indeed be proposing to the government that they increase the top rate of VAT by 2% to 23%. It is one of a number of measures the government says it will have to take to raise €1bn (£856m) in additional taxation as part of total spending cuts and tax increases of €3.8bn.

The broad outline of the annual budget is usually known in advance, but the exact details are not revealed by the finance minister until budget day. The Irish people have, however, already been told that they face a string of harsh austerity budgets over the coming years. So, it will come as little surprise that more pain is to come.

What is galling is that the details of their own economic future are doing the rounds of Europe, before being made public back home. On Friday an EU commission official, stating that it was “regrettable” that the documents were leaked in this way, confirmed that the document was in fact sent to all 27 finance ministers.

The fact that the budget plans were found in the Bundestag is most likely due to the fact that its finance committee has to be included in any decision-making on the bailouts, according to a recent ruling by the country’s constitutional court. In other countries such a paper would never have left the finance ministry, but in Berlin all the 41 committee members were privy to the information.

The reality is that Ireland ceded control over its own finances when it was forced to tap the bailout funds late last year. When the troika of the IMF, ECB and EU rode into town on those dark and dismal days last November there was much talk of the loss of sovereignty. For many something wrested from the British less than a century ago had been squandered due to the chronic mishandling of a banking crisis that was in turn caused by the reckless investment in property development.

It is perhaps only now that the reality is sinking in of just what that actually means. No move by the Irish government is made without the approval of its new troika paymasters and every three months a team of officials comes to Dublin to look over the books.

And with Ireland due to avail itself of the next tranche of bailout funds, the people bankrolling the country want to see that the harsh medicine is being applied correctly. And of course, the country providing the bulk of those funds is Germany, which is taking on an increasingly dominant role in the crisis.

The worry for peripheral countries like Ireland should be not so much that Berlin is in charge, but the vision that Germany has for the rest of Europe. The severe austerity measures that Ireland, Greece and Portugal are enduring are very much in keeping with Germany’s vision of how to solve the crisis. Its approach to its own fiscal situation, of tightening belts, slashing budget deficits and living within one’s means is now supposed to be exported to the rest of Europe. The fact that all those high-spending Europeans compensated for the failure to stimulate domestic demand in Germany is rarely touched upon.

In fact, chancellor Angela Merkel wants to see a greater supervision of budgets to make sure that other EU countries are emulating this cautious approach. That, of course, would likely require a revision of the treaties, something that constitutionally would require a referendum in Ireland. The Irish taoiseach, Enda Kenny, on his trip to Berlin on Wednesday already warned that such a move would be “challenging”.

Berlin may be calling the shots when it comes to the bailouts, but it may find that it cannot control the whims of an increasingly angry Irish electorate, one that even during the good times rejected both the Nice and Lisbon treaties on the first go.

Originally published on The Guardian’s Comment Is Free site:

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