It is interesting that the big news of yesterday made so little news. The CSO revealed that the economy fell back into recession in the latter half of 2012 but you will have to look hard to find much reporting on that. Maybe it’s because this inconvenient fact cuts across the official narrative. And while there was growth in three out of four quarters in 2010 and 2011, there was only one quarter of growth in 2012. That, too, didn’t get much coverage. That, too, may be inconvenient.
So what does this tell us about Croke Park 2? It tells us that it is irrational to cut wages and, so, spending power with an economy falling back into recession. Consumer spending and domestic demand has been stagnating for the last three years.
The domestic economy has flat-lined, suffering under a weight of austerity measures. This year alone there is the impact of the PRSI cuts, the property tax along with cuts in Child Benefit, investment and public sector employment – which will reduce disposable incomes further. Now the Government is proposing to cut the incomes of nearly 300,000 workers. Would anyone be surprised to see this stagnation continuing?
Of course, the Government is not just going after public sector wages. The Minister for Finance recently called for the wages in the covered banks to be cut by between 6 and 10 percent. This is in spite of the fact that the recent Mercer Report revealed that 40 percent of all banking staff earn average wages of €31,000 and less. Cutting wages – in the public, private or voluntary sectors – can only lengthen this stagnation.
The Minister for Public Expenditure and Reform has already admitted that Croke Park 2 could cut economic growth by up €800 million. Economist Michael Burke argues it could be much worse. This will hit consumer spending hard. Private sector workers in those sectors reliant upon consumer spending (that is, most workers and businesses) will, in turn, get hit by falling turnover which will result in another round of pay cuts and job losses.
Croke Park 2 represents another twist in the continuing downward spiral. And to do so when the economy has fallen back into recession is, quite simply, madness.