NO MORE BAIL-OUTS

DEMAND A
REFERENDUM ON
THE IMF-EU DEAL
Campaign factsheet written by Sinead Kennedy
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Despite all the election talk of ‘burden sharing’ and even ‘burning the bondholders’ the Fine
Gael-Labour government has now committed itself to following the exact same strategy as
Fianna Fáil by pouring billions into the banks. Minister for Finance Michael Noonan stood in
the Dail on Thursday March 31 and baldly stated: “I want to be clear for the benefit of our
people and for market participants, that we are committed to the EU-IMF programme”.
As a result a further €24 billion will be poured to toxic Irish banks, on top of the €46 billion
already committed. One reason for this scandalous state of affairs is that December’s IMF-
EU deal insists that the banks are recapitalised. The primary purpose of the IMF-EU deal is
to save the European bankers who lent out hundreds of billions to Irish banks. They are
terrified that the collapse of the Irish banking sector could have a contagion effect on
European banks and lead to a collapse of the entire Eurozone system.
Yet if Fine Gael and Labour are permitted to continue with this failed policy of nationalising
private debts Ireland will be destroyed for decades to come. The majority of Irish people
are opposed to this EU-IMF deal but have been denied any real say. It is time we say:
“Enough is Enough” and demand a referendum on this corrupt IMF-EU deal.

the IMF (what is know as a ‘Memorandum of

WHO IS THE IMF?
The IMF, or the International Monetary Fund, was one
of a number of organisations set up at the Bretton
Woods conference in 1944. Known as the worlds ‘lender
of last resort’, the ‘fund’ was originally mandated with
smoothing out ‘balance of payments’ problems in order
to facilitate a steady transition to post-war capitalism.
During the ‘long boom’ (1945-73) the IMF played a
rather marginal role within the global economic order –
but the revival of neoliberalism and the Latin American
‘debt crisis’ set the scene for a much more active role
after 1980.
Understanding’). Southern countries throughout the
1980s and 1990s were required to ‘open up’ their
economies in order to receive foreign currency from
selling exports. Neoliberal economists argue that this
‘export led growth’ is the best way to drag a country out
of poverty. In reality these countries were quite simply
decimated, as a deluge of foreign imports radically
undercut their ability to compete. Governments were
forced to put interest payments ahead of the needs of
the population, while market-based pricing forces
people to pay for vital services (such as water and
essential foodstuffs) that were previously free.

In the late 1970’s a crisis emerged for many countries in

the developing world as increases in interests rates,
declining terms of trade and an overreliance on western THE IMF IN ACTION
loans left them dangerously close to declaring
According to UNICEF over 500,000 children under the
bankruptcy. In 1982 Mexico defaulted on its loans, and
age of five die each year in developing countries as a
fearing that this problem might escalate, the United
direct result of IMF polices – and a the lack of
States along with the EU, forced debtor countries to
democratic accountability means that even when these
accept IMF ‘loans’ in order to meet their obligations to
structural adjustments fail to alleviate poverty, and they
the Western banks.
inevitably do, there is absolutely no way of holding the
The IMF works on the basis of ‘one dollar one vote’ and ‘fund’ to account.
so the conditions attached to any loans are largely
Consider Mali, for example. Mali is one of the poorest
decided by the Western powers. For example, the US
countries in the world where 90 per cent of the
has a veto on all decisions with 16.5 percent of the vote
population live on less than $2 per day. As part of its
whereas the total combined share of the ‘least
lending conditions, the IMF demanded the privatisation
developed countries’ is a mere 4.1 percent.
of the electricity sector and the liberalisation and
Countries go to the IMF as a last resort when their privatisation of the cotton sector. As a result Mali’s
payments exceed their income. However, in order to electricity became the most expensive in the region and
qualify for a loan they must agree to implement certain only limited additional coverage was achieved. The
specified policies agreed between the government and
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result of the liberalisation of the cotton markets was a
20 per cent drop in cotton prices for 3 million Malian
farmers. An unpublished report by the World Bank
claimed that this policy would result in a 4.6 percent
increase in poverty. When the Malian government
refused to comply they blocked $72 million of
assistance.
Until recently this form of economic warfare has been
reserved for living in the Global South. However, the
current economic crisis has seen the IMF stepping in to
bailout capital in more developed parts of the global
system. For example, in Latvia, the IMF recently gave
€7.5 billion in loans, the majority of which went to pay
off European banks (primarily Swedish in Latvia’s case) -
the price for the Latvian people included a 30 percent
cut in public sector pay; a 30 percent reduction in
pensions; the closing down of 19 out of total of 59
hospitals and
a cut of 9 percent of GDP in public spending. This exact
same process is now also taking place in Ireland, Greece
and possibly soon, Portugal.
WHY DOES IRELAND NEED A
BAILOUT FROM THE IMF?
Ireland during the Celtic Tiger years was the poster-child
of globalised, deregulated, neoliberal capitalism as
multinational corporations flocked to take advantage of
its low corporation tax rates. A policy of light-touch
financial regulation saw the banking sector finance a
monstrous housing bubble. Then the bubble burst. The
collapse of the construction industry sent the economy
into a tailspin, while plunging home prices left many
people owing more than their houses were worth. Now
Ireland is, per capita, the most indebted country in the
EU, with a deficit of 32 percent.
The government’s first crisis strategy was to guarantee
the deposits of the banks and ensure that no bank,
however toxic, went the way of Lehman Brothers. It
guaranteed a huge €440 billion worth of bank debt and
embarked on the now notorious bailout of Anglo Irish
bank (the world’s expensive banking rescue). The
priority was to save the banks no matter what the cost.
To fund this massive bailout and to keep the markets
sweet, the government responded with package after
package of draconian cuts, attacking social welfare,
health and education budgets. Yet despite the cuts,
dubbed "masochistic" by the Financial Times, Ireland's
economy has stagnated and its debt is still growing.
The strategy became unstuck when last November the
government announced what was suppose to be the
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final figure for the bank bailouts; €46 billion. Terrified
that this would have a knock on effect on other banks in
Europe, the European Central Bank (ECB) started
pouring in money to shore up the system. They knew
that Irish banks had borrowed €224 billion from British
banks and €204 billion from German banks and were
terrified that a default would cause their collapse.
In October 2010, the ECB were forced to put a further
€11 billion into Irish banks to compensate for money
taken out by the Irish rich. In total, they have pumped
€90 billion into Irish banks and have turned a blind eye
to the fact that the Irish Central Bank added another
€20 billion. Eventually the ECB had to acknowledge that
a staggering one fifth of its total funding to European
banks had gone into dodgy Irish banks and that the
prospect of getting their money back relied on
mortgage repayments on vastly over-valued property.
To save their own skins, they insisted that Ireland take
out another €85 billion loan package from the IMF/EU
to help Irish banks pay back money to the ECB and to
protect the international bondholders. In March 2011
stress tests on the banks the revealed that the losses in
Irish banks were even greater than anticipated and a
further €24 billion will be required. This takes the total
cost of bailing out Ireland’s toxic banking system to a
staggering €70 billion. The interests rates on these loans
are expected to top €9 billion per year by 2013. In
return for this loan, Irish workers are expected to accept
another eye-wateringly painful budget cut of €6-€7
billion this year through tax increase and attacks on
social welfare, health and education.
WHAT DOES IRELAND’S EU-
IMF LOAN AGREEMENT
INVOLVE?
In December last year the government along with the
IMF/EU published a ‘Memorandum of Understanding’
outlining the conditions for the €85 billion loan package.
The loan agreement locks Ireland into a very specific
neo-liberal economic model dominated by policies that
will impose immense pain on working people,
communities and the poorest and most vulnerable
sections of society by focusing on expenditure cuts,
rather than on job creation or economic stimulus. It
gives huge powers to these unelected and
unaccountable lenders in terms of economic decision
making and commits the government to a total of €15
billion in cuts by 2013. The agreement also emphasises
the need for a “business friendly environment”,
“vigorous action to remove remaining restrictions on
trade and competition” and a strong emphasis on
private sector involvement in for example the electricity
and gas sectors. Here are some of the key points:
 No funds can to be drawn down until Budget
2011 is passed.
 Draft budgets for 2012 and 2013 are indicated
and include further cuts and tax increases of up
to €3.6 billion for Budget 2012 and €3.1 billion
for Budget 2013.
 The agreement calls for the introduction of a
property tax by 2012.
 The government must provide weekly, monthly
and quarterly updates to the ECB, EU and IMF.
 The IMF/EU must be consulted on any new
policies introduced that are not consistent with
the agreement.
 Water charges will be introduced in 2012 or
2013, by which time metering is to have been
installed across the State.
 The agreement also advocates the privatisation
of water by demanding that responsibility for
water will be transferred from local authorities
to a new water utility.
 The memorandum says the Government will
adopt measures in Budget 2012 to generate
HOW MUCH MONEY IS
INVOLVED?
The EU/IMF loan agreement involves €45 billion from
the European Union, €22.5 billion from the IMF and
bilateral loans from the UK, Sweden and Denmark.
However, in order to qualify for the fund the Irish
Government must contribute €17.5 billion. This will
involve €12.5 billion from the National Pension Reserve
Fund and €5 billion from cash reserves.
The National Pension Reserve Fund was set up in 2001
as a ‘sovereign wealth fund’ to cater for the future
needs of the population. Its 2003 report put it clearly:
“The Objective of the National Pensions Reserve Funds
is to meet as much as possible the costs of social
Get active in the Campaign for a Referendum
Contact Richard Boyd Barrett TD
Richard.boydbarrett@oireachtas.ie Tel: (01)6183449
Leaflet produced by Richard Boyd Barrett TD
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welfare and public service pension from 2025 onwards.”
The report noted that by 2030 there would be only two
working people for every pensioner compared to five
today, so a fund was required to seek “optimal total
financial returns” to pay for future pensions. This fund
will be completely dismantled.
The estimated average interest rate of the loans is a
punitive 5.83 per cent per year. This means the Ireland’s
national debt interests repayments will rise to a
projected €9 billion per annum by 2013.
IS THERE AN ALTERNATIVE?
On the one hand the IMF is sometimes represented as a
neutral arbiter, stepping in to weed out cronyism,
corruption and to rejuvenate the economy. This could
not be further from the truth; their real agenda is to
ensure that working people pay for the economic crisis.
On the other hand the IMF and its policies are often
seen to be irresistible. However there have been
examples of resistance. For example, Argentina, a
country that had been used as a ‘free-market
experiment’ by its political leaders and the IMF stood up
to the IMF and its creditors and defaulted on its debts in
2001.The people of Greece have shown magnificent
resistance to the EU/IMF policies been forced upon
them.
Last year the people of Iceland demanded the right to
have a referendum on the IMF deal that was being
forced upon them. They won, and a massive 93 percent
of the people rejected the deal in a referendum in
March 2010. We need to learn from the people of
Iceland and Greece and hold our rulers to account and
let them know that we will not pay the gambling debts
of bankers and speculators.
 We need a referendum on the IMF-EU bailout so
that it can be democratically rejected.
 We must end the absurd state guarantee to repay
unsecured bank debts. These debts were run-up by
wealthy Irish and European speculators and we
have no responsibility to pay for them.