Bitter Irish resentment, anger and suspicion over the bailout process and yesterday’s austerity budget may be just the beginning of the coming political backlash in Europe.
According to the Irish police (the Gardaí), about 50,000 people turned out in Dublin on November 27 to protest against the implications of the Eurozone bailout of Ireland. Organisers put the turnout at twice that figure. The following day, and as though the Dublin protests hadn’t happened, European leaders agreed the terms of an Irish bailout.
But, as the smiles broadened and the flashbulbs popped around the customary hand-shaking and back-slapping in Brussels, it may have been all too easy to forget that the man or woman in the street – be he or she Irish or Greek, French or German – sees the whole financial crisis and rescue very differently from their elected leaders.
This little-noted dichotomy – the opening of a Eurozone-wide schism between governing and governed – may be the real price of the bailout process, even if the process achieves its stated aims (which is improbable).
The anger that erupted in Ireland last weekend is more likely than not to spread to other European countries. A policy of keeping the euro afloat via rolling bailouts effectively amounts to protecting the system and the banks by imposing the entire debt burden onto governments and, via them, on to their electorates.
Ultimately, the euro project will be doomed to failure for so long as the Eurozone tries to combine a single currency with a multiplicity of national budgetary processes. Europe needs to create a central budget system, analogous to the way in which the budgets of the American States are subservient to the Washington budget process, and the budgets of Wales, Scotland and Northern Ireland are similarly set within a common framework decided in Westminster.
Meanwhile, the very least that the next Dublin government needs to do is to appoint an independent commission to investigate and report on the excesses of the ‘Celtic Tiger’ fiasco. This, and the imposition of rigid lending rules, can alone reassure bond markets whilst providing the angry Irish electorate with some of the answers that they are surely entitled to demand.
Dr Tim Morgan is global head of research at Tullett Prebon. This is an edited version of a Tullett Prebon Strategy Note
