A German Social Democrat who has Ireland by the throat

Even the most vigilant among us would have had difficulty in imagining just how far Eurocrats like Jorg Asmussen are prepared to go in building a proto-European state, thoroughly drained of democracy

Member of Germany's Social Democratic Party and representative of the ECB
Tom Gallagher
On 16 April 2012 10:54

Europe is once more in the grip of arrogant technicians of power who believe they can engineer society, oblivious to history, culture, values and place. Prominent in their ranks is Jorg Asmussen, the young German representative on the European Central Bank. He has been at the heart of the operation to socialize the debts of the ailing financial sector in the core EU states.

It has been the only coherent policy to emerge from the ECB since the financial emergency began just over two years ago. Smaller and weaker states in the eurozone are being penalized for mistakes that were made at all levels of the eurozone. The priority is to protect the banks of France and Germany which spurred on the credit splurge and property boom in countries like Spain and Ireland in the 1990s.

The ECB has always insisted that when it forced a €85 billion loan on Ireland in November 2010, the aim was to prevent the country’s financial collapse and the social distress and dislocation that were sure to follow. Critics argued that it would have been better for toxic banks like Anglo, which had lost more than eight times its capital, to go bust and for Ireland to step outside the eurozone in order to be able to make the adjustments necessary for it to return to competitiveness.

As a member of the eurozone it cannot, like Iceland, devalue its currency or adjust its interest rates so as to promote growth. The one-size-fits-all policy shaping the eurozone is a classic utopian project, defying reality; and despite the emancipatory language, it benefits the best-placed members of the currency union.

Asmussen was in Ireland last week to supervise the steps that its citizens were taking to service a huge debt that was forced on them by bad political judgment in 2008 and an EU diktat in 2010. As a senior figure at the German finance ministry in 2010, he had been involved in drawing up the deal imposed on Ireland. Under it, the debts of private bondholders were to be met even though there was no provision in the Maastricht Treaty requiring it.

The loan was set at the usurious rate of 5.7 percent. A spokesperson for the European Commission said the ‘profit’ that the EU makes by lending to Ireland will be invested back into the EU budget and will be distributed to EU members at the end of each financial year.

A strategy of austerity without growth looks certain to plunge Ireland into depression conditions unless it is reversed. Ireland’s citizens face the prospect of setting aside, long into the future, a massive part of their state’s GDP to service a huge debt that was forced on them by bad political judgment in 2008 and an EU diktat in 2010. Foreign investment is bound to be discouraged, domestic business is certain to remain flat and the departure abroad of a large proportion of people often with valuable skills but who are unwilling to endure years of economic inactivity appears guaranteed.

On his Dublin visit, during an unguarded moment, Asmussen made a significant admission. He related that, ‘the main reasoning’ [behind the bail-out] was to ensure that no negative spillover effects would be created to other Irish banks or to banks in other European countries.’ In other words the imperative was to ring-fence the badly managed and over-extended banks in core Europe. It was the first time that a leading ECB official had been so candid.

In light of such an admission, it is not hard to view the bail-out as one in which it is Ireland coming to the rescue of the Franco-German pivot regulating the workings of the eurozone.

Perhaps Asmussen had become blasé because opinion polls showed that in a referendum on 31 May, a majority of Irish voters were prepared to back the EU’s Social compact which is meant to legitimise the centralisation of financial control across the eurozone. But there is mounting anger even in Ireland at the surrender of democratic control to faraway institutions that are responsible for decisions that have drastic impact on the livelihood of millions.

Searching into Jorg Asmussen’s background, it turns out, perhaps unexpectedly for some, that he is not a free market radical located on the political Right. On the contrary, he is a high-flying member of the SPD, Germany’s Social Democratic Party. Nor is he unique as anyone can soon see by a cursory glance of the last century of European history.

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