Speech | What we can learn from Greece

It is welcome that there has been a move towards a significant write-down of the debts the Greek people are being asked to repay, said Stephen Donnelly during the recent debate on the Euro Area Loan Facility.

It is true that serious structural reforms are needed in Greece and that the Greek Government needs to modernise several of its national institutions, particularly its tax collection service. It is also true that Greece has unsustainable practices in some sectors, including its low retirement age relative to that in other European countries. However, we must be cognisant of the extraordinary social pain the Greek people are being asked to endure to secure these write-downs. Every day we hear stories of pension funds being wiped out, hospitals being unable to afford life savings drugs and workers in the public and private sectors taking enormous pay cuts. I have heard that doctors are taking pay cuts of 80%.

It is clear that the Greek people are being asked to endure a level of austerity which no one else would accept. I do not believe we would accept it or that the German, French, Italian or Spanish people would accept it. In this context, we need to be aware of the arrogance and condescension in our tone when speaking about Greece. One often hears on radio that Greece is a dysfunctional society, that Greek people are lazy and will not work long hours and so on. I recently read a piece of research that the average working week in Greece was significantly longer than in Germany. I am sure other Deputies have, like me, noted the tone of arrogance and condescension of people in Ireland and across Europe when speaking about Greece. We need some humility in Ireland – we have made a lot of mistakes – and throughout Europe. Some of the commentary I have heard from senior European officials has been condescending. I note it comes from those same officials who are making mistakes year after year that are driving the European crisis from bad to worse. Consequently, a little humility would be in order for everyone. I will support this Bill because the Greek people need this significant write-down. However, I do not believe it will not be enough as it will reduce their debt from 160% to approximately 120% of GDP and, therefore, the Greek people will be back for a third write-down, this being their second major write-down.

This Parliament and the Irish people can learn from what is going on in Greece and can learn a thing or two from the Greek Government. Whenever I suggest in this Chamber that Ireland could learn a thing or two from Greece because, unlike Ireland, it has managed to secure write-downs and has managed to bring bondholders voluntarily to the table to take write-downs of between 70% and 75%, members of the Government throw their arms in the air and state that I want Ireland to be Greece, want the hospitals to be closed down and wish for riots in the streets. Of course I do not and it is nonsense to suggest that I or anyone else does. An analogy that occurs to me is that of a man who is sitting at home, having let himself get out of shape. He has put on a lot of weight and has not been exercising. He then looks out the window and sees his neighbour who is in even worse shape but who has decided to go out jogging. Sweat is pouring off the neighbour and he is in a great deal of pain but while he wishes he was not obliged to jog to get fit, he is doing it anyway. The man sitting at home thinks he could learn a thing or two from that guy and that perhaps he needs to go jogging, only for someone else to tell him that is ridiculous because he then would end up like his neighbour. That is how I consider the response given whenever I suggest there is something we could learn from Greece. The response is Ireland could not possibly do so and that I want Ireland to become like Greece when, obviously, I do not.

There are some serious lessons Ireland can learn from Greece. One is that senior bondholders voluntarily will take write-downs of 75% in their bonds. Another is that other private sector investors will take massive write-downs in sovereign debt once they accept the ability of the country in question to pay them back the full amount of that debt is gone. If one applies this lesson to Ireland, I note that next year our debt will hit approximately 120% of GDP. Depending on who one believes, unsustainable national debt kicks in somewhere between 90% and 120% of GDP. The argument with Greece is easier as its debt is at 160% of GDP and no one is suggesting the Greeks ever will be able to pay down that quantum of debt without having their own currency, quantitative easing and so on. My assertion is that for Ireland, a debt level of 120% of GDP is unsustainable. It is right at the top end of what any commentator suggests can be done.

Ireland has paid back most of the senior bondholders. That argument has been fought and unfortunately it has been won by the bondholders and speculators. I accept no Deputy in this House wanted to pay back the full amount to the bondholders. When appearing on “The Frontline” television programme on Monday night, the Minister for Agriculture, Food and the Marine, Deputy Coveney, stated the Government made an explicit decision to pay the senior bondholders to try to get a massive write-down in respect of the promissory notes. I wish the Government well in this regard, as there is a huge amount to play for and I hope it succeeds. However, I keep hearing phrases from the Taoiseach and the Tánaiste to the effect that Ireland will pay its debts, is not seeking a write-down, has never sought a write-down and never will seek a write-down in its debt. This is a perpetuation of a mistake made by Fianna Fáil in the previous Government, when Ireland paid the bondholders month after month. The rationale people then were given was the Government was obliged to pay them or they would lock it out of the markets. However, exactly the opposite is true. They saw Ireland mounting up this debt, which consisted of other people’s debts, and locked us out of the markets. They decided not to lend Ireland any more money because it was trying to pay its own debt and everyone else’s debt and therefore they certainly were not going to lend any more money to it. My concern is the Government continues to do this.

When I hear the Taoiseach state that Ireland is not seeking and never will seek a write-down in the debt, there is a certain moral tone that states Ireland is a country that will pay its way. I understand that, as everyone wishes to do so and no one wishes to look for a write-down in the debt. However, this is not what the markets have been telling me. I spent two days in London last week when I spoke to venture capitalists, specialist investors and bond traders, who are the people who buy and sell sovereign debt. They told me they did not really care about the fiscal compact, as it did not make Ireland more or less attractive as a country to which to lend money. They really only care about the total quantum of Ireland’s debt and, because it stands at 120% of GDP, they will not lend Ireland any money. Furthermore, they were perplexed that they keep hearing from our senior team, that is, from the Taoiseach, the Tánaiste and the Minister for Finance, that under no circumstances will Ireland seek the one thing they, the people who actually buy and sell debt, believe we need. These words matter. When the Taoiseach and the Tánaiste state that under no circumstances will Ireland seek a write-down, it matters because it makes it more difficult for Ireland to get a write-down. When the Minister for Finance, Deputy Noonan, declared in the New York Stock Exchange that Ireland would not pay the senior Anglo Irish Bank bondholders all of their money, it mattered and the senior debt dropped dramatically on the markets immediately.

As for what Ireland can learn from our partners in Greece, we can learn that a pure austerity-based approach does not work. When one does not have one’s own currency, does not seek a write-down and enforces austerity while hoping for growth, it does not work. Economic history shows this does not work. Moreover, when one’s debt is unsustainable and one names it as being such, it matters and it brings people to the table. Furthermore, attempting to pay debts at a level of 120% of GDP will condemn Ireland to a decade or more of increasing economic and social pain. Earlier today, a Government Deputy mentioned that he did not want to see a return to the conditions that obtained in the 1980s. Unfortunately, that is precisely what is happening and the social indicators are moving backwards. I have learned from the Greek situation that there is nothing shameful about seeking a reduction in the debt. It is not immoral and is not selfish. It is prudent, is good economics and is good finance.

Ireland has paid in excess of €60 billion to a bunch of people to whom it did not owe the money and consequently, its debt will hit approximately €200 billion next year. I believe a €60 billion reduction in that debt probably would mean we still were in the markets and the troika would never have been here. There is a very strong argument for naming our debt as being unsustainable. There is an argument for learning from the Greeks by telling Europe and those in the private sector who hold Ireland’s debt that while we cannot manage 120%, we want to help them and will negotiate. Ireland should then try to get the debt down to a level at which the markets consider it to be low enough to again lend to this country at reasonable rates and then, we can begin to invest. While I believe we must cut the deficit as fast as we can, we must have real stimulus, which we are missing.

I support the Bill and will vote for it. I wish our colleagues in Greece the very best and call on the Government to learn a thing or two about what can happen if one changes the narrative in respect of getting a write-down.