After Portugal, what next?

The EU’s bailout fund should not make billions from member states’ misery.

EU leaders have just agreed a treaty change to create a permanent European Stability Mechanism to protect the eurozone – a European Monetary Fund in all but name.

The details about the fund, its lending capacity and the way it will work in practice are hazy, though leaked documents from the European Council indicate that it will have a range of financial instruments at its disposal. Given that the banks of just three EU countries – Britain, France and Germany – are exposed to over €1trn of government debt, were a country like Italy or Spain to face a Greek- or Irish-style crisis, it is questionable whether the fund would be sufficient.

The new mechanism will not help Portugal if, following the collapse of the Socialist government orchestrated by the opposition Conservatives, the country has to seek an EU bailout. But we can safely assume that should Portugal or other countries face the economic abyss, as Greece and Ireland did in 2010 (and still face), they will not be charged such punitive interest rates.

At last week's summit the Greek government was given a 1 per cent cut in the interest it will have to pay back. It will pay back its €130bn loan at just over 4 per cent, and be given seven years to pay back its debts.

Ireland was not treated so kindly. After being forced to take a €80bn loan at 6 per cent last December, the new Fine Gael/Labour government, which was elected with a mandate to renegotiate the terms of the loan, was offered a 1 per cent cut. Quite rightly, the new Taoiseach, Enda Kenny, told the summit, dominated by Germany and France, where to stick their offer.

Sub-prime cuts

What the likes of Germany and France have not grasped is that the crises in Greece and Ireland are fundamentally different. Greece faced economic meltdown when the incoming Socialist government found that its predecessors had cooked the books on an impressive scale.

The country's budget deficit was over 12 per cent – not the 3.7 per cent announced by the previous government. Market speculation, combined with the fact that Greek productivity had declined by 50 per cent compared to Germany in a decade, and a system which allowed massive tax evasion, brought the country to its knees.

Ireland's case is different. Like Britain and the US, its housing market boomed and then suddenly burst when the sub-prime crisis hit, and its banks needed huge taxpayer bailouts to stay afloat. Unlike Britain and the US, the biggest Irish banks – Anglo-Irish and Ulster Bank – were still too broke to function. A second vast taxpayer bailout and a disastrous austerity budget (George Osborne, take note) pushed Ireland's deficit to a whopping 32 per cent of GDP.

However, unlike Greece, Ireland never asked for a bailout. It was strong-armed into accepting one. The truth is that it would be economically logical for Ireland to have allowed its banks to default. Many banks would have lost billions – RBS would have lost £40bn, and Deutsche Bank a similar sum – but Irish taxpayers would not have been saddled with paying back €80bn at a 6 per cent interest rate. As it stands, it may well take a generation for the Irish to recover.

There's profit to be made . . .

It is outrageous that, in their dealings with the Irish, EU countries have behaved like the investment banks for which they blamed the financial crisis. For example, the UK Treasury stands to rake in £475m from its £7bn loan to the Irish, and it is far from the worst offender.

If the euro is to survive, this "beggar thy neighbour" approach will have to stop. If not, the stark reality is that the gap between rich and poor nations in the eurozone will get wider and the single currency will collapse. European economic and monetary union cannot survive if its member states seek to make huge profits from another's misery.

The reality is that, while the Fianna Fail government allowed an unsustainable housing boom and reckless investments by its financial sector, Ireland is not solely to blame for the mess it finds itself in. A right-wing "Franco-German" alliance may be dictating austerity cuts and claiming that the crisis must lead to radical pension and wage reform, but it needs to learn a few home truths.

For example, were Spain to go bust, the French and German governments would have to make huge bailouts of their banks. Besides, by keeping wage levels artificially low to stifle domestic consumption, Germany has helped preserve its already vast trade surplus while also preventing other EU countries from exporting their way out of difficulty.

So Ireland, embattled as it may be, has a stronger hand than you might think. So might Portugal and others. If its demand for a loan at reasonable rates is rejected, Ireland could turn around and allow Anglo-Irish, which the new government intends to liquidate anyway, to default.

That would be the move of last resort, but it would at last challenge the arrogance and complacency of the "Franco-German" alliance, which ignores the debt exposure of its own financial sector, and has the temerity to try to impose its will on the rest of Europe.

Ben Fox is political adviser to the Socialist and Democrat group in the European Parliament.

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How Donald Trump is slouching towards the Republican nomination

There was supposed to be a ceiling above which Trump’s popular support could not climb.

In America, you can judge a crowd by its merchandise. Outside the Connecticut Convention Centre in Hartford, frail old men and brawny moms are selling “your Trump 45 football jerseys”, “your hats”, “your campaign buttons”. But the hottest item is a T-shirt bearing the slogan “Hillary sucks . . . but not like Monica!” and, on the back: “Trump that bitch!” Inside, beyond the checkpoint manned by the Transportation Security Administration and the secret service (“Good!” the man next to me says, when he sees the agents), is a family whose three kids, two of them girls, are wearing the Monica shirt.

Other people are content with the shirts they arrived in (“Waterboarding – baptising terrorists with freedom” and “If you don’t BLEED red, white and blue, take your bitch ass home!”). There are 80 chairs penned off for the elderly but everyone else is standing: guys in motorcycle and military gear, their arms folded; aspiring deal-makers, suited, on cellphones; giggling high-school fatsos, dressed fresh from the couch, grabbing M&M’s and Doritos from the movie-theatre-style concession stands. So many baseball hats; deep, bellicose chants of “Build the wall!” and “USA!”. (And, to the same rhythm, “Don-ald J!”)

A grizzled man in camouflage pants and combat boots, whose T-shirt – “Connecticut Militia III%” – confirms him as a member of the “patriot” movement, is talking to a zealous young girl in a short skirt, who came in dancing to “Uptown Girl”.

“Yeah, we were there for Operation American Spring,” he says. “Louis Farrakhan’s rally of hate . . .”

“And you’re a veteran?” she asks. “Thank you so much!”

Three hours will pass. A retired US marine will take the rostrum to growl, “God bless America – hoo-rah!”; “Uptown Girl” will play many more times (much like his speeches, Donald J’s playlist consists of a few items, repeated endlessly), before Trump finally looms in and asks the crowd: “Is this the greatest place on Earth?”

There was supposed to be a ceiling above which Trump’s popular support could not climb. Only a minority within a minority of Americans, it was assumed, could possibly be stupid enough to think a Trump presidency was a good idea. He won New Hampshire and South Carolina with over 30 per cent of the Republican vote, then took almost 46 per cent in Nevada. When he cleaned up on Super Tuesday in March, he was just shy of 50 per cent in Massachusetts; a week later, he took 47 per cent of the votes in Mississippi.

His rivals, who are useless individually, were meant to co-operate with each other and the national party to deny him the nomination. But Trump won four out of the five key states being contested on “Super-Duper Tuesday” on 15 March. Then, as talk turned to persuading and co-opting his delegates behind the scenes, Trump won New York with 60 per cent.

Now, the campaign is trying to present Trump as more “presidential”. According to his new manager, Paul Manafort, this requires him to appear in “more formal settings” – without, of course, diluting “the unique magic of Trump”. But whether or not he can resist denouncing the GOP and the “corrupt” primary system, and alluding to violence if he is baulked at at the convention, the new Trump will be much the same as the old.

Back in Hartford: “The Republicans wanna play cute with us, right? If I don’t make it, you’re gonna have millions of people that don’t vote for a Republican. They’re not gonna vote at all,” says Trump. “Hopefully that’s all, OK? Hopefully that’s all, but they’re very, very angry.”

This anger, which can supposedly be turned on anyone who gets in the way, has mainly been vented, so far, on the protesters who disrupt Trump’s rallies. “We’re not gonna be the dummies that lose all of our jobs now. We’re gonna be the smart ones. Oh, do you have one over there? There’s one of the dummies . . .”

There is a frenzied fluttering of Trump placards, off to his right. “Get ’em out! . . . Don’t hurt ’em – see how nice I am? . . . They really impede freedom of speech and it’s a disgrace. But the good news is, folks, it won’t be long. We’re just not taking it and it won’t be long.”

It is their removal by police, at Trump’s ostentatious behest, that causes the disruption, rather than the scarcely audible protesters. He seems to realise this, suddenly: “We should just let ’em . . . I’ll talk right over them, there’s no problem!” But it’s impossible to leave the protesters where they are, because it would not be safe. His crowd is too vicious.

Exit Trump, after exactly half an hour, inclusive of the many interruptions. His people seem uplifted but, out on the street, they are ambushed by a large counter-demonstration, with a booming drum and warlike banners and standards (“Black Lives Matter”; an image of the Virgin of Guadalupe, holding aloft Trump’s severed head). Here is the rest of the world, the real American world: young people, beautiful people, more female than male, every shade of skin colour. “F*** Donald Trump!” they chant.

After a horrified split-second, the Trump crowd, massively more numerous, rallies with “USA!” and – perplexingly, since one of the main themes of the speech it has just heard was the lack of jobs in Connecticut – “Get a job!” The two sides then mingle, unobstructed by police. Slanging matches break out that seem in every instance to humiliate the Trump supporter. “Go to college!” one demands. “Man, I am in college, I’m doin’ lovely!”

There is no violence, only this: some black boys are dancing, with liquid moves, to the sound of the drum. Four young Trump guys counter by stripping to their waists and jouncing around madly, their skin greenish-yellow under the street lights, screaming about the building of the wall. There was no alcohol inside; they’re drunk on whatever it is – the elixir of fascism, the unique magic of Trump. It’s a hyper but not at all happy drunk.

As with every other moment of the Trump campaign so far, it would have been merely some grade of the cringeworthy – the embarrassing, the revolting, the pitiful – were Trump not slouching closer and closer, with each of these moments, to his nomination. 

This article first appeared in the 28 April 2016 issue of the New Statesman, The new fascism