Why Ireland should default on the loan sharks now

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The so called rescue loan being negotiated by the ECB is really a jacking up of the interest rate Ireland is paying on its debt from the ECB base rate of 1% to a more profitable rate of 5% or more. If we submit to this deflationary programme of structural adjustment being pushed by the IMF our shrinking economy will never generate enough to pay off these debts. The only way out is to push for a default.

Can't pay, won't pay - Default now!

So here we are. The country is bankrupt and the receivers from the European Central Bank (ECB) are here to dictate economic policy for the next four or more years, regardless of the results of the next election. So if we can't change any of that by voting for any of the political parties, what can we do?

First we need to understand the realities of our situation. During the boom years foreign investors like German and UK banks lent large sums of money into the growing property bubble here. Since that bubble has burst, large losses have been made on the crazy prices charged for land and property now worth next to nothing. Like the loanshark who doesn't care that the car bought with the money you borrowed has been stolen and burnt out, those same investors now want all of their money back... with interest.

In the last days it has been announced that not only members of the Eurozone will be contributing to the ECB/IMF brokered loan, but both the UK and Sweden want to get in on the action as well. OK, we know that UK banks have a lot of money invested in Irish banks (to the tune of £140 billion) but why on earth is Sweden wanting to get in on the act? An English Tory back-bencher let the cat out of the bag on Monday when he mischieviously asked the chancellor if he could reassure parliament that the UK would be getting a rate of interest a good deal higher on its loan to Ireland, than it had to pay to borrow the money lent. George Osbourne sputtered, aghast at the back-bencher's indiscretion, that Britain was not planning "to make a buck" on the loan. Weak protests aside, that is exactly what is going on and why Sweden, for example, is ready to throw in 10 billion kronor to get a piece of the action, even though it has no real exposure to our banks.

What the rescue loan currently being negotiated by the ECB actually is, is a jacking up of the interest rate Ireland is paying the on its debt from the ECB base rate of 1% to a more profitable rate of 5% or more. This is like the loanshark who, once he has you in his grip, starts increasing the repayments. But once the debt and the usury get to a level that means you can never hope to repay in full, there's only one solution. To stand up to the bloodsuckers and resist their bullying and refuse to pay. This is the situation that Ireland is in now in relation to these enormous debts to German, UK and other European banks, along with international financial predators like Goldman Sachs ("No show without the squid" as one blogger wryly commented). If we submit to the deflationary programme of structural adjustment being pushed by the IMF (cuts to dole, minimum wage, more VAT and income tax on low earners) our shrinking economy will never generate enough to pay off these debts. The only way out is to push for a default.

But surely default is the worst outcome? Not if default is inevitable in the long run, anyway. Then the choice becomes one between default now and default later. Of those two options, the sooner we default the less damage will be done to the real economy. Imagine we allow the country to be stretched on the rack for four to six years first. The death of a thousand cuts would mean bringing up the next generation without any access to the further education they need to work in a modern economy. That would be compounded by the loss, through emigration, of those people who already had skills and education. Together with the decay of the health service, housing stock, a plague of unemployment and addiction and the reappearance of diseases of the poor, such as TB and cholera. Within a few short years, all that has been built up to transform this country from the underdevelopment of the 1950s to a modern economy would be undone. The longer we try to avoid the inevitable default on this unpayable debt, the closer we will get to this nightmare scenario.

It's not like no-one has ever done this before. Countries defaulting on their debt has happened throughout recent history. In 1994 Mexico defaulted, in 1998 Russia defaulted and, most recently, in 2002 Argentina defaulted. None of these defaults occured without an accompanying impact of turmoil and strife. Yet each of these countries today has recovered and is the better for having broken with an impossible debt.

Let's be clear. This is not an easy option. But if there were still easy options available, we wouldn't be where we are now. Neither is this an option we can take in an individual, atomised way, like changing the channel on the TV within the safety of our own homes. Capitalism is no more tolerant of non-payers than your average loanshark. But the ability of either to exert force on us, depends on them picking us off one by one. In order to resist we have to build a collective movement for non-payment, that supports each other with solidarity. This will take time and effort but we've done this before in relation to the Water Charges and the Bin Tax. We've done it before and we can do it again.

Today the doomed Fianna Fail government's 4 year plan announces a new so-called "Site Value Tax" on every household. This is a demand for money for these international investors who want to make us pay for their losses incurred while gambling in the Irish property developers casino. We should start building a mass campaign for non-payment and for default with the first step of binning this new tax. As we build this movement we can take on the issues of negative-equity mortgages and all the other mechanisms being used to suck the life out of the population. And raise the old banner once more - Can't pay, won't pay!

WORDS: Paul B.

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