Max McGuinness on the cabinet's psychodrama
So Biffo and Brian Lenihan are going through a hard time in their relationship. It's gotten so bad that the Taoiseach has stormed out of the government house and gone to...Japan. Each month when the credit card statements arrive, a flaming row erupts as Brian, ashen-faced, contemplates the billions that his partner has frittered away on extravagances like pro-government independent TDs, management consultants, medical cards, and make-up artists.
"For Christ's sake," bawls Brian "you spend more money on slap than Mary Harney!" (see the Indo).
"You spend even more!" retorts a sobbing Biffo. "And how do you expect me to do you justice as a Beautiful Intelligent Filly From Offaly without a few tonnes of foundation? I'm a whole 18 months older than Barack Obama, don't you know?"
"Look, darling, it's gone a bit too far. Our overdraft is up to €13 billion and that's not even counting the €5 billion that's due this year on the car loan. It's time to make some hard choices. Either you cut back on the eyeliner or I'm cancelling next month's dinner-dance with your friends from SIPTU."
"But Brian, we could never...Imagine the shame, Brian! We'll have no social partners left! Oh the indignity! And no-one will ever vote for us againnnn........" (sobs)
"There, there, alright Biffo, snuckums, I'll tell you what. You can go ahead with the dinner-dance but there'd better be no Krug this year and to cover our costs, let's run a charity auction -- all proceeds due to the plain people of Ireland...and the international bond market, of course."
"But Brian, we simply must have the Krug! I knew I never should have left Charlie for you. Oh how we used to laugh! And Krug every single day of the week; we even used to bathe in the stuff. I foolishly took you for a toy boy but ever since we've been together you've taken all the joy out of my life."
But seriously folks. Biffo, though probably for the wrong reasons, has a point. Further savage cuts to public spending and indeed to the public sector wage bill will only deepen the recession in a vicious circle reminiscent of the 1930s. Civil servants may not deserve it but if we reduce public sector salaries now, the effect will be to take more money out of the economy and accelerate the already vertiginous contraction (which could end up being over 5 per cent in real terms this year). As an editorial in yesterday's Financial Times points out: "Ireland's low public debt and sound currency give it room to borrow through the recession." The hard choices, it says, will come later: "Current levels of government spending should fall, or ministers will be forced to raise taxes [...] In the long run, its commitment not to raise the 12.5 per cent corporate tax rate may prove to be unsustainable."
Rather than plunging our economy until a genuine depression and deflationary spiral, the government should outline today how they will bring the public finances back into balance in four or five years time with big extra taxes on income and profits and a prolonged public sector pay pause post-2011/12. This could reassure the bond market, which has begun to demand a significant premium on Irish government borrowing of 1.72 per cent over German bunds. This kind of spread is nothing like what we had to deal with in the 1980s thanks to the cushion now provided by the Euro. But the threat by Standard & Poors to remove our AAA credit rating should be taken very seriously.
We might be able to get out of this mess if the government began to rebalance our tax system as part of a sustainable, long-term plan rather than resorting to damaging, ad hoc cuts.
Alas, I fear the developing psychodrama between the two Brians means that they won't be the only ones who end up in tears.
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