During the crisis, I traced the evolution of the Irish economy. It was clear that the nation took a very big hit in the downturn – between 2007 and 2010 the economy shrunk by 15 per cent. Evidence also makes it clear that before the crisis, the narrative about the so-called Celtic Tiger miracle ignored the fact that a substantial portion of the growth was captured by foreign interests such are the taxation arrangements that attract foreign companies. Ireland also benefitted substantially from the growth in China and the US, and then the UK, all products of extended fiscal deficits. More recently, the impacts of the global tax structures and accounting nuances have significantly distorted the growth estimates for Ireland. In that context, to avoid becoming a laughing stock, the Irish Central Statistics Office (CSO) initiated a review of its national accounts framework and have now started to produce modified estimates of Gross National Income and some of the affected expenditure aggregates (Gross Fixed Capital Formation), which provide a very different picture indeed. While the official data suggests that the Irish economy grew by 39.7 per cent between 2007 and 2016, once the modifications were made to eliminate the distortions arising from these extraordinary global capital shifts, the Modified Gross National Income measure showed growth of only 12.2 per cent. In fact, the Irish economy in total is only 68 per cent the size that the GDP data would suggest – around a third smaller. Further, the modified Gross National Income series has barely grown since the crisis indicating that the Irish population has not received much in return for the hardships the austerity has inflicted upon them.

This blog continues the discussion from yesterday’s blog – The EMU reform ruse – Part 1 – where I consider the reform proposals put forward by German academic Fritz Sharpf, which have been held out by Europhile Leftists as the progressive way out of the disaster that the Eurozone has become. Yesterday, I considered his first proposal – to continue with the enforced structural convergence to the Northern model – the current orthodoxy in Brussels. Like Sharpf I agree that the agenda outlined in the 2015 The Five President’s Report: Completing Europe’s Economic and Monetary Union would just continue the disaster and would intensify the political and social instability that will eventually force a breakup of the monetary union. Sharpf’s second proposal is that the EMU dichotomise into a Northern hard currency bloc while the Southern states (and others less inclined to follow the German export-led, domestic-demand suppression growth model) reestablish their own currencies and peg them to the euro with ECB support. While it is an interesting proposal and certainly more adventurous than the plethora of proposals that just tinker at the edges (for example, European unemployment insurance schemes, Blue Bond proposals and the like), it remains deeply flawed. While it is assumed that the Northern bloc would comprise core European nations such as Germany and France, it is not clear that either would prosper under the new arrangement. France and Germany were never been able to maintain stable currencies prior to the EMU. Further, the ‘exit’ proposal ties the poorer nations into a vexed fixed exchange rate arrangement, which would always compromise their domestic policy freedom, just as it did under the earlier versions of the Snake or the European Exchange Rate Mechanism (ERM). Far better to just break the whole show up and let the nations go free with floating exchange rates.

A recent twitter exchange with some Europhiles who believe that it is better to wait for some, as yet unspecified, incremental reform process for the Eurozone rather than precipitate exit and the restoration of currency sovereignty was summed up for me by one of the tweets from Andrew Watt. In trying to defend the abandonment of sovereignty and make a case for continuing with the so-called reform dialogue, he wrote (October 27, 2017): “Unemployment in “periphery” was v hi before €. Fell rapidly. Then rose sharply, has now fallen somewhat. So picture very mixed.” I found that a deeply offensive claim to make and responded: “It is not a mixed picture at all. Youth unemployment has never been as high. Greek unemployment was never > 12%. Now > 20% indefinitely.” I also attached a graph (see over). I think this little exchange captures the essence of the delusion among many in the Left that we document in our new book – Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World (Pluto Books, 2017). The Europhiles maintain a blind faith in what they claim to be a reform process, which when carried through will reduce some of the acknowledged shortcomings (I would say disastrously terminal design flaws). They don’t put any time dimension on this ‘process’ but claim it is an on-going dialogue and we should sit tight and wait for it to deliver. Apparently waiting for ‘pigs to fly’ is a better strategy than dealing with the basic problems that this failed system has created. I think otherwise. The human disaster that the Eurozone has created impacts daily on peoples’ lives. It is entrenching long-term costs where a whole generation of Europeans has been denied the chance to work. That will reverberate for the rest of their lives and create dysfunctional outcomes no matter what ‘reforms’ are introduced. The damage is already done and remedies are desperately needed now. The so-called ‘reforms’ to date have been pathetic (think: banking union) and do not redress the flawed design. And to put a finer point on it: Germany will never allow sufficient changes to be made to render the EMU a functioning and effective federation. The Europhile Left is deluded if it thinks otherwise.