In September 2008 members of the Irish government worked with senior Irish bankers and legal professionals to guarantee the debts of six key Irish banks. This decision has cost Irish taxpayers around €85,000 million. This number is hard to understand but it works out at roughly €20,000 for every person in the country or €40,000 for every person paying taxes. This money has to be found somewhere and here we look at the roots of the bailout, the political choices made by the Irish elites and the cost of the bailout for Irish people.
We constantly hear about the banking crisis but what was it and why should we care?
Brian - During the Irish Celtic Tiger the main Irish banks had access to lots of money from big European banks like Lloyds of London or Deutsche Bank in Germany. In total the six Irish banks borrowed around €450 billion (450,000 million) over the decade from 1998-2008. Alot of this money was lent into the Irish construction industry pushing up prices and making vast profits for Irish developers, Irish bankers and European bankers. In the years leading up to the crash the big three Irish banks; Anglo, AIB and Bank of Ireland made profits of over 1,000 million a year. Even then the big losers were the Irish people as they saw house prices and mortgages go up and up. Eventually Irish families could no longer pay and when this happened the Irish developers and bankers had a big problem. They could have lost everything but the Irish government stepped in to save them.
So the banking crisis is important because the banks got so big?
Brian - This is partly the reason but the real reason is that all of the debts of the banks were guaranteed by the Irish tax payer. When the profits were rolling in the people who owned the banks got to keep them and those that lent to the banks (called bond holders) also made vast profits. Under the rules of capitalism these people's put up the money and took the risk so it was supposedly fair that they would get bailed out. The flip side is that they should lose their money if the banks started to move from profit to loss, but instead of losing their money they got bailed out by the Irish tax payer. Each person paid back and continues to pay back thousands of euros. In total the bailout has cost €85 billion making it the most expensive bailout in history.
Who exactly are these bond holders?
Brian - Sometimes we are told that it is pensioners who have managed to save a little or families that have invested their nest eggs in the financial markets. Whilst there is some truth in this the vast bulk of the bond holders and either hedge funds attached to big global investment banks or these big banks themselves. A hedge fund is basically a vehicle designed by wealthy people to allow them to club their money together to bet on the stock markets. Many of them thought Ireland was a good bet and they were right because when the bet went bad they still got paid. You can find the full list of the big Anglo bond holders @ http://2.bp.blogspot.com/_HLD-3KNiebg/TLr-M1e2p-I/AAAAAAAAAAg/9gcaIADoGBw/s1600/ai-bondholders.gif but for most of us it is enough to know that global super companies like Goldman Sachs, the Rotschilds and French giants like Axa investment group are getting our hard earned cash instead of it going to ordinary people.
It is absolutely outrageous that ordinary workers and the poor should be made to pay the debts of the rich, but what exactly has been the human cost?
Brian - the short answer is devastation. This year alone around €8,000 million will go directly out of the country in payments to bond holders. Not all of this is directly bank bailout money but a lot of it is and the human costs are staggering. Currently around 1 million Irish people or 22% of the population are defined as living in consistent deprivation. This is up from 11% before the crisis. Children and the elderly are particularly affected with some figures suggesting that at least 20% 0f kids are going to school hungry on a regular basis and around 10% are spending the who day hungry. On top of this there have been savage cuts to our social and welfare services, meaning that poorer people and those hard pressed families on middle incomes are losing taxes and at the same time as their services get worse. The effects of this on peoples mental health have also been devastating. Numerous studies now show that around 400,000 people currently suffer from mental heath problems and as many as one in three will suffer a serious bout of depression within their life times. Not all of this is related to finance but a big part of it undoubtedly is.
Is there anything we can do to stop this?
Brian - The government always talk as if all of the money has been paid. In reality the money will continue to be paid for decades to come and so there is a chance to stop it. This means putting lots of anti austerity people into elected positions, but more than this it means getting involved in a popular political movement. The recent protest movement in the Ukraine had very little social motivation. It was mostly one group of rich people fighting to control the country against another group of rich people however it does show us the power of mass mobilissations on the streets. Seamus O' Boyle is running for people before profit in the upcoming local elections and I would urge everyone who wants a fairer more civilised republic where people's needs come first to vote for Seamus. Along side this we need people who want to get involved so if you think it is time for a more social Ireland get in touch.
If you would like some more information or would like to get involved click this link.