Sunday, 24 July 2011

The Cloyne Report: Some Key Issues and Lessons

The protection, and nurturing, of children is fundamental to the integrity of any country. The Cloyne Report has set-out catastrophic deficiencies in upholding this imperative within that Diocese. It has generated an anguished response within, and outside of, the Church. However, the interests of children require an informed and even-handed national debate on the Report. David Quinn, in an article in the Irish Independent, highlights the lack of balance to date– and he is absolutely right. No political Party has a mandate to highjack balanced and even-handed debate on an issue of such sensitivity; one in which the good faith of all, not excluding the Pope, should be the starting point.  

Need for Balance

The need for balance is very clear in reflecting on events in the UK, our nearest neighbour, in the week in which the Cloyne Report was published. The News of the World/News Corp. debacle has generated a crisis that threatened to engulf not alone the media, but the government and even the police. This debacle is all about a lack of responsibility and a collapse of Trust. But it would be wholly wrong to say that there are not politicians or journalists or police of unimpeachable integrity.  Of course there are. Here in Ireland, it is right to require of the most passionate critic of the ‘Cloyne Syndrome’ the same even-handed approach that might be expected in addressing institutional failures in all other fields of Civil Society.

In the case of the Church, such an approach begins and ends with Christ.  His Church was founded on very fallible individuals. One of the twelve betrayed Him; one denied Him. They foolishly contended for power and influence ‘at his right hand’: they presumed to ‘draw down fire’ on those whom they believed to oppose his teaching. They sought to exclude those who were not followers but who spoke well of Jesus; they sought to hold back the children from Him.

In all these things, He instructed them by His words -and even more by example- how to see things differently. He sent the Holy Spirit to confer the doctrinal infallibility that has preserved the Church from error- but not personal or institutional failings.  There must be a reason why He chose such a frail and fallible bunch. Perhaps because every generation since then sees in the Church a mirror image- good and bad- of itself and the need to continually look to Him.

 Still this Church He founded, for all its frailties, has animated Human history over the last 2,000 years. It has lit up Irish history and since the time of St.Columbanus in the sixth century (acknowledged by Robert Schuman as one of the giants who shaped European history)
At its best, it is a Church rooted in the humility which Our Blessed Lady exemplified – ‘Humility with fierce resolve’, in the words of a celebrated Harvard Business Review article on Leadership; the heart of what true Leadership is, whether in the Church , in Business --and also in Politics.

‘Judge Not’...

Christ warned His followers against judging others. In judging the institutional church, with all of its failings, the State leaves itself wide open to being judged in relation to its own duty of care down the years.
The case has been made that the State, too, has failed in its duty of care to children and, indeed, that the Church’s guidelines are even more rigorous than those of the State. Maybe so; but that is no reason for the Church to delay fundamental reforms to rebuild Trust.
 But what this does do is to reinforce the argument that neither Church nor State should claim a monopoly of that most treacherous of all locations – the ‘high moral ground’.
 If, in fact, we really believe that it is the interests of the child that matter most, then both Church and State need to come together, through gritted teeth if necessary, to learn the lessons of their respective failings and, more important, to share their own distinctive values, experiences and insights, in the protection and nurturing of our children. A culture of antagonism or expediency or legalism should have no place in such an important dialogue.

Fundamental Issues

In the wake of the Cloyne debacle, there are a number of fundamental issues which the Church should focus.
  • It should acknowledge its institutional failings as a cross that it must carry and, at the same time,  commit itself to renewal building on all that it has done( much of it unacknowledged); that is what each of us are required to do in our own lives.

  • The issue of mandatory reporting has been addressed by the Church. Over and above such reporting in the normal course of events, there has also been  talk of legislation which would, in effect, seek to set-aside the absolute seal of sacramental confession in the case of individuals confessing to the abuse of children. Such legislation would simply deter those guilty of a heinous sin, and a crime, from reconciling themselves with God. It would also fatally undermine the integrity of sacrament which is the beating heart of Christ’s redemptive mission. There is also an underlying presumption in the belief that it is alright for us to seek forgiveness for our particular sins, but that Christ’s mercy is not to be extending to every single person who seeks, with real intent and purpose, to transform their lives. Some, foolishly, may seek a kind of confrontation on this issue. Others may be led to believe that legislating for mandatory reporting of such sins and crimes, actually confessed to a Priest in the confessional, will resolve this most difficult of societal problems. It won’t. For Catholics, the Church stands, or falls, by its conviction that, until we draw our last breath, forgiveness and reconciliation is open to us. In our history, many priests have faced execution to uphold this conviction.

  • The Church should seek, so far as possible, to remove itself from a culture of Power. The British philosopher Alistair McIntyre, on a visit to Ireland a few years ago, spoke of how we see more clearly ‘from the margins’. This is because the centre is always contended by those seeking ‘power’. It is enough that members of the Church seek, as best they can, to have Christ at the centre of their lives – and to understand that Christ Himself lived, and healed, and was crucified, ‘at the margins’.
  • There are compelling reasons to simplify the Church’s ecclesiastical structures. Some years ago, Professor Vincent Twomey SVD argued persuasively for the need of an overhaul in the whole diocesan structure in Ireland. Such an overall would make it easier to ensure more effective leadership and oversight, as well as the implementation of ‘best practice’ in those areas of social responsibility that are at the heart of the Church’s ministry of witness.

  • At a yet deeper level, the Church needs to move away from the whole definition of its institutional identity as ‘Hierarchy’. This is one of those words, like ‘Human Resources’, that speak to the values of this world and not of the Gospel. The Church is about ‘Service’ and responsibility, not ‘Hierarchy’- a term which, to be fair, does not do justice to the vocation actually lived out by Bishops, and by religious congregations.
  • The Church in Ireland needs desperately to embrace its own intrinsic goodness. The Christian faith has shaped Ireland’s history and, also, that of Europe. It is that same faith that animates many voluntary Communities and organisation within parishes and across the country and which provide irreplaceable support to the whole of society at a time of national crisis. In addressing its failings, the Church needs more than ever to be conscious of this intrinsic goodness, which transcends such institutional failings.
  • The Church needs to continue to reach out to, and learn from, the very best in other faith traditions. The invitation in 1997 extended by Pope John Paul II to all faith traditions to meet and pray at Assisi was an inflection point.. At one level, the Church could learn from the way that crises and institutional failings are dealt with in other faith traditions.
  • But there is an equally important reason. Over and above justified criticisms of its institutional failings, there is vein of hostility to the Church that reflects secularism wholly intolerant of the transcendent of the human Person.
The Catholic Church happens to loom largest in its sights, but there should be little doubt that this secular fundamentalism would, given the opportunity, set aside the values and all that is best in every faith tradition. There is enormous reassurance for Christians in the Jewish understanding of the faithfulness of the Covenant of G-d with His people. The pervasive importance of prayer within Islam reinforces the importance of a mind-set that is in danger of being lost sight of.

Across the whole Judaic and Islamic tradition, the reverence for life and for family and for the exercise of care for those of our brothers and sisters, call us to a unity whose importance could not be overstated at a time when Ireland faces into headwinds that threaten to diminish us as a people. 

Wednesday, 20 July 2011

Please Sir -May We Have Our Currency Back?

Four Austerity Budgets and a punitive and damaging bail-out have reduced Ireland’s sovereign debt to junk status. How many businesses have to fail? How far do house prices have to fall? How many talented people have to emigrate? How much misery has to be inflicted on families........ before the message gets through?. Our attempts to salvage credibility and stability has been inimical to the cultivation of both. It’s not working; it’s over. Ireland needs a new start.

 We really should have started on a different trajectory 2 years ago, the case was argued in these pages on several occasions. But it’s never too late to do the right thing. The Eurozone is now being held together by collective denial, stubbornness and hubris. The spread of this, though, to other structurally vulnerable countries – most recently Italy – was entirely foreseeable.  The Eurozone has thrown everything at this, especially since Spring 2010. If it was going to work it would be long-evident and reflected in the financial markets.
Instead, the key measures are all pointing toward a major default event – firstly (but not exclusively) the cost of borrowing, which is determined by whether or not the markets believe that what is being proposed by the Eurozone is credible, has risen beyond our capacity to secure it. Secondly, the costs of borrowing when compared with the costs for Germany and thirdly, the costs of securing against prospective default. All of these point to a complete lack credibility – the markets simply do not believe that the Eurozone in its present form is viable nor do they believe that the policies currently being followed in Ireland are sustainable.
The response of the Eurozone finance minsters at their meeting last week was an exercise in denial and futility. The communiqué did not deliver and the post-meeting ‘chatter’ was met with a near unprecedented fall in key market data. What was even worse was the response by the EU council to the downgrading of Portuguese debt and to Moody’s downgrading of Ireland’s sovereign debt to junk status. It was shoot the messenger time. Indeed it showed an extraordinary lack of realism about what is and what has been happening to the Eurozone. The Eurzone finance council commitment to ‘look at’ the interest rate burden being carried by Ireland, and at such a cost, is bewilderingly, almost callously, under-stated.

The new financing facility may be strengthened – and it comes in to effect in 2013! All of this simply highlights the fact that they are out of their depth. The gap between the problems facing the Eurozone and their ability and willingness to surmount those problems is now too large. The Eurozone is fragmenting between a ‘Deutsche Eurozone’ and a peripheral zone made up of countries such as Italy, whose budgetary profile and financial system are highly vulnerable.
In the face of denial, the situation is getting progressively worse – a de facto default has finally been accepted in the case of Greece but it won’t stop there and the negative forces being generated by a complete inability to get to grips with the scale of the problem has exposed a possibly catastrophic cognitive dissonance in the minds of the EU power brokers and respective governments while also revealing enormous vulnerability in the banking systems Europe and the US to a seismic shock within the Eurozone.

The Eurozone has run out of options. What is now being pushed is a new system of ‘economic governance’. This is a euphemism for ‘political union’ by the back door. There are attempts to drive this through without a referendum in Ireland and also through the German constitutional courts. It is unlikely to succeed. Great damage has been – and is being – done to solidarity across European countries  through what the Polish finance ministers called the ‘breathtaking short-termism’ of the Eurozone. The impartiality of the IMF, too, has been damaged by being dragooned into an ideologically driven adjustment process.  All of this is happening in the context of the US’s inability to contain its own funding crisis. Debt levels in the US now exceeds 14 trillion, taking existing and prospective liabilities into account, the US is essentially insolvent. It would take at least a decade of budget surpluses to get it back on trajectory.
Meanwhile in Ireland mainstream thinking still clutches to the idea that if we keep the head down, attend enough meetings, support enough Eurozone initiatives and attend enough photo ops with EU power brokers that it will be all right. It won’t.  Look around, see how far we have fallen in the last 5 years and ask where this kind of thinking has taken us.
So, to re-state the argument spelled out in these pages so many times: Ireland needs to leave the Eurozone before it is forced into another reactive debacle and with no place to go. That is what the financial markets data is telling us. It simply makes no sense to base the upcoming 2012 budget on the redundant data, projections and mindset of all recent budgets and the bail out agreement. We need to leave the Eurozone and must have a budget in 2012 that is simple and focused on growing the economy.
If we can change our thinking, if we can achieve solidarity across business and communities, if we focus on our strengths, then we can achieve the kind of credibility and certainty that the financial markets are looking for and provide a surer foundation for growth. We will also have demonstrated that we are capable of courage and a capacity to take our future in our own hands.
The future of Ireland – unless are willing to change – is not just taking place in the boardrooms of the EU Commission, it is being played out in the streets of Athens at present.  We in Ireland know all about the consequences of political instability; it would be the worst of all possible worlds led to us being impelled down that same road. The threat of economic contagion has already manifested itself in the most brutal form, the threat of political and social contagion is all too real as well.

Tuesday, 5 July 2011

Budget 2012 – Are we heading in the Same Direction as Greece?

Ireland is facing into the pre-Budget season. The 2012 Budget will determine, for good or ill, the future of modern Ireland. In this context, the decision by EU Finance Council Ministers to release a further tranche of €12 billion to Greece to avoid the first Eurozone default in coming months, and the circumstances in which that decision was made, raises important questions.

The first is whether a second Bailout will resolve the underlying problems of the Greek economy and put it on a path to solvency and sustainability. The answer to that is in the measures imposed by the Bailout on the Greek economy (See Box).

Look at these measures and ask how any economy, much less one that is broken-backed, could possibly grow its way back to solvency under such a burden. Ireland’s Budget for next year is being drafted within our particular Bailout. All of the data clearly point to the fact that the Irish economy has suffered enormous and needless damage as a result of the terms and conditions and timescale of the Bailout.

The second question relates to the implications for Irish budgetary policy if a Greek default has merely been deferred, not avoided. The answer is, of course, that a default by Greece will take us with it – if we choose to wait until decisions are taken out of our own hands. We have, through fear and some strange impulse to be ‘nice’ to a wilfully obtuse Eurozone orthodoxy, almost run out of road – that is why next year’s Budget will be a defining event. It’s not about being nice it’s about being right.

The third and most important question is whether Ireland can avoid the political instability so graphically reflected in the Athens riots. This is just the start of the process and it begs the question of what will happen when the terms of the second Bailout are actually implemented. The riots are the result of self-created problems; something which we in Ireland know all about. But they are also  the consequences of a policy of denial and deferral, of hesitancy  and deep divisions, on the part of the major Eurozone countries and the ‘Eurozone authorities’ continually  kicking the can down the road in the hope that ‘something will turn up’. The history of the post-2008 crisis suggests that it won’t.

Those rioting on the streets of Athens are not extremist, though their very real fears are all too vulnerable to being exploited by extremists. Instead, the opposition to the Bailout agreements is primarily driven by the alienation from glacial nihilism of the Eurozone and the policies being pursued by the core countries and by the ECB.

It is only prudent to ask whether, in looking at the Athens riots, we are not also  looking at Ireland some little time down the road – and whether persistence with Eurozone membership, and the same Bailout orthodoxy that has brought Greece to the brink of default, will not leave Ireland exposed to the self-same threat of ‘political contagion’.

The Polish Finance Minister, and incoming President of the Finance Council, recently accused the Eurozone of ‘breathtaking short-sightedness’; he is well qualified to make that point. The issue is how Ireland has allowed itself to acquiesce in this policy and political myopia and whether, or not, we have the courage to read the signs of the times and to develop a Plan B. The 2012 Budget now being prepared will provide the answer.

Budgetary starting point

The Program for Government is based on the assumption that the framework for achieving sustainability, set-out in the EU/ECB-IMF Bailout, is conceptually sound, realistic and achievable by 2015. This is not the case. In truth, the Bailout actually stands between what the Government aspires to do- and what it is permitted to do by the Troika

The economic forecasts on which the Bailout is based are increasingly redundant. Growth is lower, unemployment (including concealed unemployment) is higher, and therefore, the capacity of the economy to service its growing debt burden is being continually eroded. Also, the debt burden itself has worsened compared both to official data and are a million miles from converging on the ‘Stability’ and ‘Growth’ targets by 2015.

Interest rates in the Eurozone have increased over the last year and, in the face of inflationary forecasts, can only increase. These developments are impacting on mortgages and homes – particularly those in negative equity – as well as on businesses. These developments in turn, undermine the budgetary forecasts in the Bailout agreements.

The labour market has deteriorated further over the last year. Long-term unemployment, in particular, has emerged as a significant challenge because of the recession-inducing pressures of the Bailout terms and conditions and timescale.

Ireland remains locked-out of the capital markets and the data suggests that, on unchanged policies, this is likely to continue through the medium-term.
Ireland is further away than ever from achieving the current deficit and debt targets – the so-called “Stability” and “Growth” targets on which the Bailout and whole Eurozone orthodoxy is based.

What all of this shows is that the post 2008 Budgets enacted in Ireland didn’t work. Irelands economy has become emaciated, its public finances hopelessly compromised. The Bailout further reinforced this negativity. Ireland’s economy, institutions and mind-set need reform. But necessary and painful reforms can best be achieved within the context of an economy that is growing. More borrowings on punitive terms from our ‘Partners’ won’t solve Ireland’s problems.

Meanwhile in Greece...

Two points are notable about the Bailouts in Greece. The first is the assumption that it will work (in a measurably more difficult environment), even though the first Bailout didn’t work. Instead of contributing to sustainability, the probability of a Greek default, in one form or another, is now close to 100%.

Ireland and Greece, each in their own particular way, screwed up. The political system in Greece is coming to terms with this reality. What has brought the population of Greece on to the streets – and it will get worse – is the perception that the Eurozone is imposing a punitive adjustment that has not, and cannot, contribute to recovery and sustainability but, instead, is undermining the capacity of Greece to move onto a sustainable growth path towards national solvency. Look at Box One and it will be clear just why they believe this to be the case.

The second point relates to the frenetic attempts by France and Germany to protect their financial institutions in the face of the overwhelming opposition to the Bailout by the Greek public- and the very real possibility of a default. The ‘voluntary’ rolling over maturing Greek debt by these institutions, albeit in a highly opaque form, was all about protecting banks with exposures to the debt of peripheral countries from default.

The punitive costs of Irelands Bailout mean that we are effectively subsidising the costs of such protection. In other words, the ‘voluntary’ rollover by French and German financial institutions, ostensibly to prevent a Greek default, is really all about protecting the financial institutions of major countries from the consequences of such a default. Yet when the Irish government made a robust case for some similar form of relief earlier this year in the interests of the wider Eurozone, their request was turned-down flat by these same countries.

Ireland cannot change what is unfolding in Greece. Nor, it is now clear, can we influence the policies and mind-set that are taking the Eurozone to the brink. In these circumstances, there is a clear and present danger for Ireland in slip-streaming behind these policies and this mind-set. We know that – but there is an enormous reluctance to acknowledge -and act on – this reality.

The forthcoming Budget can play to the strengths of the economy – but not within the Eurozone. A Budget framed within the Eurozone and benchmarked to the Bailout will impel Ireland down the cul de sac within which Greece is now trapped.

The Bailout arrangements are suffocating growth and recovery in Ireland. This is clear from the data. Developments in Greece confirm the fact that Bailouts do not deliver macroeconomic stabilisation and the kind of recovery that is necessary to move towards a sustainable debt position.

However, unless there is a fundamental change in Government thinking, the forthcoming Budget will be based on the terms and conditions and timescale of a flawed and oppressive Bailout- and on remaining within a Eurozone that is demonstrably fracturing and is likely to finally collapse by 2013.It is based on the delusion that the ‘Stability’ and ‘Growth’ targets can be achieved by 2015. They cannot, and attempting to do so through yet another recession-inducing Budget will only worsen the underlying problems and further delay recovery.

Attempting to push through budgetary measures based on the Bailout template risks evoking a political reaction in Ireland similar to what is unfolding in Greece. Then all the lights will go out and Ireland will find itself impelled to do what it should have done two years ago: namely, leave a Eurozone that is failing and re-build within the wider European Union.

We are not talking only about lives of increasing desperation across the country; we are talking about the preservation of our democratic institutions and of political stability and social solidarity.

Selected Measures of the Second Greek Bailout Program

  • Education spending will be cut by closing or merging 1,976 schools.
  • Defence spending will be cut by €200m in 2012, and by €333m each year from 2013 to 2015.
  • Health spending will be cut by €310m this year and a further €1.81bn in 2012-2015.
  • Public investment will be cut by €850m this year.
  • Subsidies for local government will be reduced.
  • Social security will be cut by €1.09bn this year, €1.28bn in 2012, €1.03bn in 2013, €1.01bn in 2014 and €700m in 2015.
  • There will be more means-testing and some benefits will be cut.
  • The statutory retirement age will be raised to 65, 40 years of work will be needed for a full pension and benefits will be linked more closely to lifetime contributions.
  • Taxes will increase by €2.32bn this year, with additional taxes of €3.38bn in 2012, €152m in 2013 and €699m in 2014.
  • A ‘Solidarity Levy’ of between 1% and 5% of income will be levied on households to raise €1.38bn.
  • The tax-free threshold for income tax will be lowered from €12,000 to €8,000.
  • There will be higher property taxes
  • VAT rates are to rise: the 19% rate will increase to 23%, and the 11% rate to 13%, while the 5.5% rate will increase to 6.5%.
  • The VAT rate for restaurants and bars will rise to 23% from 13%.
  • Excise taxes on fuel, cigarettes and alcohol will rise by one third.
  • Special levies on profitable firms, high-value properties and people with high incomes will be introduced.
  • Nominal public sector wages will be cut by 15%.
  • Wages of employees of state-owned enterprises will be cut by 30% and there will be a cap on wages and bonuses.
  • All temporary contracts for public sector workers will be terminated.
  • Only one in 10 civil servants retiring this year will be replaced and only one in 5 in coming years.
  • The public sector wage bill will be cut by €770m in 2011, €600m in 2012, €448m in 2013, €300m in 2014 and €71m in 2015.

  • The government is required to raise €50bn from privatisations by 2015, including:
  • Selling stakes this year in the lender Hellenic Postbank, port operators Piraeus Port and Thessaloniki Port as well as Thessaloniki Water. One has already been sold to Chinese investors.
  • The Government is required to sell 10% of Hellenic Telecom to Deutsche Telekom for about €400m.
  • Next year, the government is required to sell stakes in Athens Water, refiner Hellenic Petroleum, electricity utility PPC, lender ATE bank as well as ports, airports, motorway concessions, state land and mining rights.
  • The Government is required to undertake  further sales to raise €7bn in 2013, €13bn in 2014 and €15bn in 2015.