Category: Asset 4Editorial

Old world, old deal

May 23, 2012

By Staff Reporter

There was something especially apropos about the New Deal. It was, for one thing, applied to the New World, that part of it called the United States.

Back in Europe, the epicenter of what geography-oriented historians refer to as the “Old World,” the deal being applied right now in the face of collapsing economies looks nothing at all like FDR’s grand scheme. So call in an “Old Deal” if you wish.

And old and older it’s looking by the day.

The austerity regime being applied as economic medicine to countries lately beset by post boom stress disorder – Ireland being one of them of course – does not appear to be working and while a turnaround is expected to occur at some point in the future, critics argue that it will take place at an economic level that is simply beyond what people are prepared to tolerate, or indeed should be required

to tolerate.

This, of course, leads to dark hints

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about political extremism and a return

to the kind of Europe that political and economic union was supposed to banish

for all time.

The debate, as it now stands, just a week before Irish voters go to the polls to decide on whether or not the Republic should sign up to the fiscal compact treaty, is inhabiting a turbulent and ever changing space between austerity on one side, and growth on the other.

Thus far, it has been Germany that has been the engine behind austerity. The Germans have been relatively sensible in recent years. They see some of the European Union neighbors, the Greeks to the fore, as being anything but sensible and in need of tough economic love, this being in the form of bailouts with stringent conditions attached.

Though they have been sensible, the Germans have been criticized in many quarters for sticking too closely to the austerity end of the equation, while ignoring the necessity of growth as a spur for economic revival.

Before the G8 gathering in Camp David last week, the New York Times, in an editorial, urged President Obama and the other G8 members to press Chancellor Angela Merkel of Germany to commit to a euro-zone growth package.

This was no time to mince words, the Times opined. Merkel’s one-size-fits-all austerity program had been a failure, pushing heavily indebted countries deeper into recession, making it even harder for them to pay off their debts. It was also putting the already-weak recovery in the United States at risk, and was, in addition, fueling instability and extremism in Europe.

However people think about the German-led attempt to restore EU economic prosperity, it for sure doesn’t look much like the Marshall Plan, the aid program that was applied to a devastated Europe, not least Germany, after world War II.

The German approach is closely reflected in the treaty that Irish voters will decide to either endorse or reject. Yet the backdrop to the treaty itself is changing virtually by the day. There have been calls, most noticeable from the new French president, to amend the treaty to include policies that would be aimed at growth, in other words pumping up the deflated economies with payment to follow later when, presumably, the revived economies will have money in the kitty to actually pay.

President Francois Hollande has, in this regard, made it clear that France will not ratify the fiscal treaty as it is currently written. He has demanded plans for jobs and growth to be written into the text.

Taoiseach Enda Kenny insists that the Irish government is pro-growth, even as it supports the more restrictive policies enshrined in the fiscal compact treaty.

Kenny has stuck to his guns with regard to supporting the treaty as is, and holding the referendum on the day selected, May 31, which he announced on February 29.

Quite a bit has changed since February 29, and some will be wondering why the Irish government didn’t hold back on the referendum for a little longer so as to see which way the political winds ultimately blow the economic ones.

But the course has been set and Irish voters will deliver their verdict as scheduled. The only problem is that nobody can give a guarantee that the course won’t be changed on June 1.

As thing stand, it looks like Irish voters will back the treaty, thus bringing Ireland in line with 25 of the 27 EU nations that are endorsing it, or at least a form of it.

We will be watching and waiting with interest.


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