While governments across the world were hailing an "impending recovery" featuring a "return to economic growth", the year 2009 closed with the havoc generated by speculators betting massively on the Greek government going bust. Instead of the heralded "recovery", the very same financial mechanisms which had triggered the crisis in the first place, were at work again, this time to keep it going, if not to make it worse, not just by causing chaos on financial markets but also by threatening state finances!

But almost at the same time, the crisis was also raising its head elsewhere - in Ireland, where the banking system was beginning to reveal yet more faults, eventually prompting Brian Cowen's Fianna Fail government to announce, by the end of March, another state bailout of the banks.

These developments were all the more of a shock in Ireland. It seemed as if history was repeating itself all over again, with almost exactly the same scenario. Back in 2008, on "Black Monday" 29th September, Anglo Irish Bank's shares had suddenly collapsed by 46%, in the wake of the collapse of US bank Lehman Brothers. The next day, this had prompted the government to embark on the largest exercise in state intervention ever seen in Irish history, in order to bail out the banking system and, as Cowen had claimed, "save" the country's economy. Likewise, this time round, it was the 20% fall of Allied Irish Banks' shares on 29th March, which prompted the government to announce a new bailout the next day, which may require twice as much public funds as the previous one!

Except that this time, unlike in 2008, the need for this new bailout cannot be blamed on anything similar to the worldwide shockwave caused by the collapse of Lehman Brothers. Nor is it just a case of wild private profiteering, at least not without the government colluding with it. After all, isn't Anglo Irish Bank, the worst offender among the big Irish banks, state-owned, this time round? And what about Cowen's boasting, over the past year, of having tightened the noose of regulation around the banks' necks to ensure that taxpayers would get "value for money" on the 2008 bailout? Could it be, therefore, that the Irish economy is sliding into the "double-dip" recession that a small number of experts have been warning against for some time? And therefore contrary to the politicians' promises the sacrifices imposed on the working population and the jobless will after all , not deliver any improvements for them?

This question is especially burning for the Irish working class as this new government raid on public funds on behalf of big business comes at a time when workers have just been hit, on January 1st, by a new wave of austerity measures, contained in last December's budget, following two other series of attacks in October 2008 and March 2009. These attacks against the jobs, conditions and standard of living of the working class were all carried out under the pretext that they were necessary prerequisites for a future "recovery", using the worn out slogan "we're all in it together". However, in the light of this new stage of the crisis and of the way in which the politicians and their capitalist masters are planning to address it, it is clear that the greed of big business, whetted by Cowen's bailouts, has turned into a black hole which threatens the very livelihoods of the working class.

Hangover from the "Celtic Tiger" days

The situation of the Irish working class today has a lot to do with the particular kind of parasitism of the country's tiny - but very affluent - capitalist class.

The Irish domestic market being too small to satisfy the appetite of Irish capital, from the late 1970s onwards, it sought to use the country's position in the EU to attract foreign investment into the country and take its cut of the resulting profits.

Irish wages were already low and were kept low through a policy of national binding agreements which the Irish trade union leaders proved willing to sign up to, within a "Social Partnership" framework which was "sold" to foreign investors as a guarantee of social peace. The level of corporation tax was kept below that of all other EU countries, while investors were presented with tax-free inducement programmes and ready-to-use industrial estates.

This policy produced the so-called "Celtic Tiger" phenomenon which, between the late 1980s and the 2000 "dotcom crash", resulted in an annual rate of economic growth comparable to that of the so-called "Asian Tigers", such as South Korea and Taiwan. This growth did not benefit the population in the same way as it did Irish capital, of course. In the long term, most of the foreign companies which did remain in Ireland proved to be high-tech companies, which were primarily attracted by tax incentives and a direct access to the European market. The workforce they employed was mostly skilled and not very large. So even though these companies accounted for 50% of manufacturing production by the mid-1990s, they did not help to reduce significantly the country's chronic underemployment, nor to increase the standard of living of the working class as a whole.

All this came to an end in 2000, when high-tech investment dried up following the "dotcom" crash, while foreign manufacturing companies began to cut jobs, close factories or even withdraw altogether from Ireland. However, the parasitism of Irish capital was still able to expand in another direction - highly speculative finance.

Already, during the 1990s, an International Financial Services Centre had been set up in Dublin, offering financial companies all the modern facilities they could expect in London or New York, but at a much lower cost and with a far more benevolent tax and regulatory system (among other advantages, corporation tax was already, and remains today, at 12.5%). So much so that, by 1997, Dublin had become Britain's largest offshore fund management centre, with 600 speculative funds managing total assets equivalent to half of Ireland's entire GDP!

So, while Irish workers were being thrown on the junk pile as a result of the "dotcom crash", the Irish bourgeoisie was already well-prepared for a career move from high-tech manufacturing to high-risk, sophisticated financial engineering. Not only did Dublin retain its financial activity, but this activity increased exponentially over the following years.

This financial explosion was partly a by-product of a worldwide phenomenon - the huge flow of floating capital which, having left the sphere of stock market speculation after the crash, went on to seek new ways of making a quick buck. But it was also partly due to the specific circumstances of Ireland.

Indeed, when the predecessor of the eurozone was formed, in the late 1990s, interest rates across all member countries were progressively aligned. In Ireland, where the level of interest rates and inflation had been comparatively high before, this process resulted in interest rates falling far more than the rate of inflation. So much so that, for most of the ten years preceding the present crisis, real interest rates (i.e. once inflation was deducted) were negative in Ireland. As a result, the cost of borrowing in Ireland became one of the lowest in the industrialised world, provided the money borrowed was invested locally. Given the additional advantage of Ireland's particularly lenient tax and regulatory regimes, this promised huge pickings for investors, in direct proportion to the amounts borrowed - at least, as long as the Irish economy was capable of providing substantial returns on their investment.

The large foreign deposits which had already settled in Ireland for tax purposes primed the borrowing expansion. Speculative funds registered in one of the numerous tax havens located in the backwaters of the imperialist countries moved in, setting up legitimate investment vehicles through the local banking system, without having to pay even the country's low tax on financial profits. Once this process was set in motion, the demand for more capital attracted more foreign inflows and Ireland's financial merry-go-round got off to a fresh start.

This was the basis on which the Irish property and financial bubble began to develop in 2000, even before it did in the US or in Britain. This phenomenon and the mechanisms behind it were similar to what was about to happen, over the following years, in most industrialised countries. Only, in Ireland, the mass of capital involved was much larger than in any other industrialised country compared to the size of the local economy. Being proportionally much more inflated, this speculative bubble was bound to be much more lethal, should it ever come to bursting point.

In the end, instead of the bright, high-tech future with well-paid, highly skilled jobs that the "Celtic Tiger" era was supposed to deliver for the Irish population, it gave birth to a massively parasitic economy which relied entirely on the fiction of ever increasing property prices and an ever increasing market of buyers willing and able to pay for whatever was offered to them by the crazy fantasies of property developers.

The property bubble cripples the financial system

For the best part of the decade before the present crisis, the real state of the Irish economy was concealed by this ever-inflating property bubble financed by a proportionate credit bubble.

The banking system channelled cash into the property market from both ends - towards buyers and developers. This created a self-feeding mechanism: the flow of cash which was made available to borrowers artificially boosted the demand for properties - which was already high due to the country's chronic housing shortage; this demand caused property prices to rise, which, in turn, created a bigger demand for cash from buyers, while developers borrowed even more, in an attempt to anticipate a rising demand with new builds which they would be able to sell at an even higher price. So, over the decade up to 2007, the average house price was multiplied by 3.5 times in Ireland, compared to 3 times in Britain and 2.2 in the USA. Ireland's housing inflation was in fact the worst among all OECD countries.

At one end of the property market, developers and builders were given access to unlimited amounts of cash at low interest rates, resulting in a crazy wave of blind construction projects, which took no account of the nature or volume of the demand for properties. Commercial buildings and shopping centres were developed and fitted long before any buyer or tenant had expressed any interest. Large-scale upmarket housing projects were built without anyone knowing whether there would be buyers. This frantic drive to cash in on the property bubble was reflected in an unprecedented boom in the construction industry, whose workforce increased by 55% between 2001 and 2007, by which time, it employed almost as many workers as all the production industries put together!

At the same time, at the other end of the property market, property buyers were flooded with new, increasingly sophisticated "mortgage products", with few strings attached or questions asked. So much so that, during the five years before the crisis broke out, the volume of new mortgages written each year, increased by an average 25%.

Lending conditions for house buyers were designed to look very advantageous. Not that the banks offered low mortgage rates, though. Instead, they took a big slice of the cake for themselves, despite their own ability to borrow on the cheap - which certainly accounts for the enormous profits they made during that decade.

As the ratio of house prices to disposable incomes was increasing to unprecedented levels (reaching over 200% by 2006 in Ireland, the 2nd highest level among industrialised countries, behind Denmark and just ahead of Britain), lenders found all sorts of tricks to hook in borrowers even more tightly and keep the property market going. For instance, average mortgage "loan to value" ratios increased year after year. So much so that, by 2006, 2/3 of first time buyers were able to borrow more than 90% of the value of the house they were buying and half of them borrowed more than 100%. Likewise, mortgage lengths were progressively increased, with the proportion of mortgages having a maturity longer than 30 years rising from 10 to 35% over the decade, while 50-year mortgages for non-commercial properties appeared for the first time in the country's history.

As a result of this mortgage explosion, personal debt rocketed, from just under 100% of GDP by the end of the 1990s, to 128% in 2002 and 215% in 2007 - with a 20% annual average increase between 2002 and 2007.

The banking system thrived on this speculative bubble. Over the period 2000-2007, the overall size of the banks' balance sheet was multiplied 6 times - and almost 12 times, in the case of Anglo-Irish Bank, which the biggest involvement in large-scale developments. The banks' exposure went beyond Ireland alone. Although, unlike their British counterparts, the Irish banks did not get substantially involved in gambling on the US housing market, they got their claws into the British property bubble through their subsidiaries on the other side of the Irish Channel and in Northern Ireland. Conversely, British giants such as the now defunct HBOS became big players in high-risk commercial projects in Ireland.

The credit bubble became so large that the banks' huge foreign deposits were far from sufficient to keep pumping credit into the speculative bubble. Their reliance on short-term borrowing on the euro zone money market to balance their books doubled to 40%. This turned the Irish banking system into a sort of gigantic version of Northern Rock, over-exposed to risky lending and over-exposed to the ups and downs of the international money market.

One of the consequences of the "soft touch" financial regulation in force in Ireland was that it was something of a free-for-all, at every level. In 2004, for instance, 200 cases of "overcharging" by financial institutions were identified by the financial regulator, but none of the culprits was charged or even fined: they were simply told to hand back the money they had effectively stolen. Moreover, the regulator refused to publish the names of the institutions concerned, claiming that this would go against "public interest"!

What was true of small financial misdemeanours is even more true of much bigger ones. In 2005, for instance, a US Securities and Exchange Commission investigation of a huge speculative deal involving two of the world's largest insurance companies - the now defunct AIG and General Re Corporation (part of the business empire of billionaire Warren Buffett) - exposed Dublin's role in the shadowy world of international insurance. A New York Timesreport revealed that 56 multinational insurance companies had set up shop in Dublin's insurance hub and that these local branches, between them, received €14bn a year in insurance premiums and managed assets worth €45bn. In fact, Dublin seemed to be on its way to overtaking Bermuda as one of the world's big insurers because, as this paper pointed out, Ireland had become "the wild west of European finance."Of course, this was even more the case when it came to the speculative activities involved in the property bubble. By 2007, according to the Financial Times the lending portfolios of the three largest Irish banks (Allied Irish Banks, Bank of Ireland and Anglo Irish Bank) were dominated by loans to big speculative property developments (respectively 60%, 71% and 80% of their loans in value). What was true of the big banks was just as true of the big building societies, regardless of the fact that their main field of activity should have remained, according to their own rules, with home buyers. For instance, Irish Nationwide, the country's largest building society, had lent 80% of its household deposits to a small number of big property developers. Moreover these loans to big developers were intertwined in highly suspicious ways. For instance, one widespread, but highly questionable trick involved using the same development (or rather its future profits) as collateral for different loans with different banking institutions - even though such practices should have been stopped by regulators as they exposed the banking system to a domino effect should a developer default on even just one of its loans.

But then, while many commentators warned against the increasing danger of a harsh landing, Irish politicians and regulators had other priorities. While in other countries the phrase "too big to fail" became commonly applied to the big banks, meaning that the state would intervene should the banking system be threatened with bankruptcy, in Ireland the local version of this phrase was "too connected to fail" - which referred to the general corruption of the system and, more specifically, to the close relationship between many politicians, particularly in the ruling Fianna Fail party, and the real estate tycoons who were making a killing out of this crazy speculation.

The bubble bursts: the first bailout

The whole property market and credit system was a castle of cards whose stability was premised on a continuous rise in property prices. In fact the operation of the whole Irish economy had become based on this same premise.

However, the real income of most of the population had not increased as a result of the boom. Jobs had been created in areas like construction, retail, services and in the public sector. But the wages they paid were not all that great in most cases, especially given the country's high cost of living. Besides they had to replace the many jobs lost in the manufacturing industry of the "Celtic Tiger" years.

Leaving aside the construction boom, the only factor which ensured the expansion of the economy was the rise in domestic consumption which, in turn, depended almost entirely on the rise in property prices. Home owners increased their purchasing power by remortgaging their homes or taking a second mortgage - something that they could only do as long as the market price of their homes was increasing.

In mid-2006, however, property prices reached a peak, even before this happened in any of the major countries. They stagnated during the rest of the year and then began to fall from the beginning of 2007. At first, in so far as foreign money markets remained willing to lend to the Irish banking system, credit continued to flow, although mortgages became more difficult to obtain. But falling property prices led to property developers cancelling new projects and, in September 2007, the construction industry began to lay off workers. By April 2008, 39,000 jobs had disappeared in the industry, general consumption had started to slide down and the retail industry was closing shops and cutting jobs. By that time, Irish banks were having to pay increasing premiums to borrow on the euro money markets. They had increased interest rates on all loans and remortgaging had dried up, thereby reducing the purchasing power of the population as well as the demand for houses. But the worst was still to come.

The collapse of US giant Lehman Brothers, on 15 September 2008, signalled the beginning of a downward slide for Irish bank and real estate shares. On September 29th, only days after regulators had assured the public of the solidity of the country's banking system, Irish shares experienced their biggest fall in 25 years. During that day alone, the shares of Anglo Irish Bank lost 46% of their value. The next day, finance minister Brian Lenihan stepped in with a banking bailout: all accounts and debt held by the country's six largest banking institutions were to be guaranteed by the state; capital injections would be provided to these banks if and when this was deemed necessary.

But this first announcement proved just too little to stop the banking system from seizing up. Within two weeks, faced with the risk of a wave of panic withdrawals by foreign depositors, Lenihan extended the state's guarantee to all Irish-based banking lending and borrowing. This prompted an immediate inflow of foreign funds, particularly from British institutions and better-off depositors, due to the state guarantee on offer.

In proportion to the size of the country's economy, this was the largest bailout of any industrialised country. This blanket guarantee represented a potential liability of €500bn for the state, equivalent to more than 300% of GDP, even before any fresh cash was pumped into the system and without introducing any control over the dangerous tricks that the banks might try in order to speedup the offloading of their unrecoverable loans onto the taxpayer.

Writing in the Irish Times Morgan Kelly, a mainstream economist as well as long-standing critique of the credit frenzy, summarised the situation as follows "The reason that foreign banks started to shun Irish banks is that international investors have gradually become aware of the scale and recklessness of Irish bank lending to builders and property speculators. Irish banks are currently owed €110 billion by builders and developers. (..) As the property bubble has burst, it is looking increasingly unlikely that banks will get back more than a fraction of this. In particular, very little of the €25 billion lent to builders to construct the ghost estates and vacant apartment blocks that now blight the landscape will ever be seen again. Foreign banks know of these toxic loans - even if Irish banks are still trying to disguise them - and are frightened by them. That is why they stopped lending to our banks, and why the Government was panicked into taking their place. (..) Not only does the Government guarantee of bank borrowing fail to solve the underlying problem of bad loans; it faces the Irish taxpayer with a real risk of enormous losses. (..) The particular risk that the Government now faces is that Irish banks will package toxic loans as asset-backed securities. (..) Suppose that you are a bank that has lent €100 million each to 10 developers who are having problems meeting their repayments. What you do is bundle the loans into one asset and sell it, with Brian Lenihan's signature on the bottom, on financial markets for €1 billion. When the borrowers default, the taxpayer will be left taking up the tab.

The fact that this bailout had not resolved the banks' problems was exposed very quickly, when the slide in banking shares fail to stop. Three months later, Brian Lenihan finally resorted to the option he had always wanted to avoid - the part-nationalisation of the country's three largest banks through a massive injection of funds. Anglo Irish Bank was nationalised while the state took a 25% share in Allied Irish Banks and 16% in Bank of Ireland.

In this last case, possibly as a sop to Gordon Brown's dislike for open state control (since Bank of Ireland was and still is, for the time being, the Post Office's main partner in providing financial "products" to its British customers), the National Pension Reserve Fund, which is supposed to provide for a predicted large increase in state pension payments from 2025, made the 16% injection into Bank of Ireland. Never mind what this will cost to pensioners in 15 years time!

The consequences of this bailout for the Irish state's finance were almost immediate. Within three months of the announcement, the interest rate that the government had to pay to refinance its ballooning public debt on the international money market had increased by 3 percentage points - the largest increase by very far across the euro zone. This was to justify the long series of austerity measures which followed, designed to make the working class majority of the population to foot the bill for the speculative frenzy of the thin layer of bankers and property speculators who, being "too connected to fail", had been bailed out by the government.

The state turns against the working class

Bailout or not, by the summer of 2008, the Irish economy was officially declared to be in recession. Jobs were being be cut left, right and centre. In the first six months of 2008, redundancies increased by 27% compared to the same period in 2007 and the claimant count increased by 31%. Countless working class households were getting into arrears on their mortgages and often their utility bills. At this point, the government announced an emergency budget to reduce the government's growing deficit.

This budget, finally adopted in October 2008, included a vast array of cuts. 41 state bodies were to be abolished or privatised. A whole series of programmes were to be abolished - like that of a new cervical cancer vaccination programme costing only €10 million or 0.07% of the HSE's (the Irish NHS) budget, a minute droplet in the ocean of the public deficit!

The announcement that the existing automatic entitlement to a Medical Card (which gives access to almost totally free medical care) would be withdrawn from the over-70s, caused a scandal even among Fianna Fail's backbenchers. On 22nd October, an unprecedented protest outside the Dublin parliament brought together 15,000 pensioners from all over the country, some of whom were carrying angry placards saying: "Just shoot us, it would be quicker". Likewise Lenihan's decision to slap a €600 increase onto the university registration fee brought thousands of students in the streets.

But politically, the most important announcement in this budget was that a 1 to 2% levy was to be imposed on all gross wages and welfare entitlements, including the very lowest. This unilateral announcement was a slap in the face for the union leaders who had just negotiated another "Social Partnership" deal in which they had made substantial concessions to Lenihan.

Originally, the government had tried to cancel the 2.5% general wage increase which had been planned ages before, to come in at the end of the year. But this would have left union leaders with nothing to sell to their members. Eventually, the government and IBEC (the Irish CBI) "conceded": they agreed to a 6% pay increase, but to be phased over 21 months, with wages to be frozen during the first 11 months! Apparently the leaders of the ICTU (the Irish equivalent of the British TUC) felt this would be "saleable" and signed up to it.

But what about the additional 1%-2% levy to be slapped on all wages? It was not that the union leaders were against it in principle, but now they had to "sell" what amounted to a nominal wage cut to their members for the next 11 months, without anything in return - which was quite another thing! There was some bickering among union leaders about the level above which the levy should be allowed. But they stopped short of demanding, for instance, that businesses and the wealthy should be heavily taxed for a bailout of which they were, after all, the main beneficiaries! In the end, union leaders claimed victory when Lenihan "conceded" to exempt earnings below the annual national minimum wage from the levy. At the time Lenihan boasted proudly that this would exempt 36% of the workforce, which probably says it all about real wage levels! But this union "victory" still left the working class to pay for the bailout, with a significant section having to pay the levy and all employed workers taking an addition real pay cut from the wage freeze.

However, this was only the beginning of the anti-working class attacks. 2009 began with the almost simultaneous announcement that US electronic giant, Dell, Ireland's largest high-tech manufacturing employer, was to cut 1,900 jobs or 2/3 of the workforce at its main production plant in Limerick (on which 10,000 local jobs depend), and that the symbol of Ireland's traditional industry, Waterford Wedgewood was to go into receivership and close its last crystal factory. At the same time, union leaders were returning to the negotiating table to revise the previously agreed deal, following demands for more austerity by the government.

This time Lenihan was demanding a 10% wage cut across the public sector. When this was turned down by the unions, the government produced an alternative - a pension levy amounting to an average 5-6% wage cut, the deferral of planned pay increases (including a 3.5% increase due in September) and a 25% cut on all non-wage payments, such as travel expenses - which, for most public employees, was hardly better than the original proposal. Lenihan then added that should his proposals be refused, he would declare an end to the "Social Partnership" framework.

This last threat set the union machineries into motion. Because it was not as if they objected to some form of cuts, anyway. For instance, in the run-up to these talks, Jack O'Connor, general secretary of SIPTU, the largest public sector union, had stressed that unions "have a responsibility to play our part (in the austerity drive). Along the same lines, another public sector union leader, Dan Murphy, had endorsed the worn out threat of Ireland being forced to turn to the IMF, that some pro-government commentators were already using to try to cow public sector workers into submission. No, the only thing union leaders really objected to was that Lenihan should even consider implementing cuts without their explicit endorsement.

As a result, the union machineries launched a programme of action, formally against the wage cuts but, above all, against the government's threat to dump the "Social Partnership" framework. This culminated, on 21st February 2009, in a 120,000-strong march called by the ICTU in Dublin (something which was unheard of, in a town of 1.6 million!). The next step was meant to be a series of ballots for industrial action across the public sector leading to staggered strikes and to a 24-hour anti-cuts strike, for both the public and private sector, scheduled for 30th March 2009. But Lenihan did not take any chances. He rushed legislation through the Irish Parliament to bring the pension levy in from March 1st. Having done this, Lenihan proposed to resume the suspended talks - and the unions leaders proved more than willing to oblige. In the process, the programme of action and the national 24-hour strike were put on the backburner. Only one thing mattered for the union leaders - that they carried on "talking", whatever the cost for workers!

A further turn of the screw

As it turned out, the measures which had been forced down workers' throats were only for starters.

In fact, the government was not particularly secretive regarding its agenda. An official report published in July outlined a programme of "public sector transformation" aimed at achieving €5.3bn worth of expenditure cuts. Its main proposals included cutting wages together with 17,000 jobs across the public sector (about 6% of the total, mostly in education and the Health Service), cutting welfare payments and increasing the number and level of charges paid by households for public services (like, among other things, the generalisation of water charges).

By September, even though it had not yet been officially endorsed as government policy, the impact of this agenda could already be felt, for instance in community services (those providing help to poor families and the unemployed, for instance) which were finding that their funding had suddenly dried up. This resulted in numerous protests called locally, from October, by SIPTU branches. This first wave of protest reached its highest point on 3rd November 2009, with co-ordinated marches against the austerity drive organised in the main towns, which were joined by an estimated 150,000. Then, on 6 November, the ICTU launched its official "Get Up, Stand Up" campaign against the threatened cuts in the public sector. It was launched with a national day of action with tens of thousands attending lunchtime rallies. The next step was to be a one day national strike on 24th November.

In this process, the union leaders were primarily trying to avoid a repetition of the humiliation they had been subjected to back in March. By making a demonstration of their strength in the run-up to the 2009 "Social Partnership" round of pay talks and to the December budget, which was due to follow, they were probably hoping that, this time, the government would not take the risk of pulling another fast one behind the backs of the unions' negotiators, thereby making them appear redundant to workers.

But this did not mean that the union machineries were any more determined to resist the cuts than they had been at the beginning of the year. In fact, on 24th November, just as the ICTU's one-day national strike was closing down all public services across Ireland, Peter McLoone, the head of the ICTU negotiating team and leader of IMPACT, one of the public sector unions, was explaining that it would be "necessary to agree to temporary cuts in the public sector wage bill, that the July report on "public sector transformation" could serve as a basis for a negotiation and that "it would be possible to agree an alternative that will achieve the savings the government requires. On the same day, SIPTU general secretary Jack O'Connor, gave even more of an insight into what the union leaders were willing to concede, when he had the nerve to state that "the boom has disproportionally increased pay and pay costs here against competitor countries! What more could Lenihan have found to say to support his case for cuts?

In order to demonstrate their "goodwill" in the course of the talks, the union leaders actually called off another one-day national strike which had been planned for December. They came up with their own alternative to the government's cost-cutting agenda. To avoid more wages cuts, they offered a compulsory unpaid leave scheme (equivalent to a 7% wage cut on average) and agreed in principle to negotiations based on the "public sector transformation" report, to be held in 2011. Lenihan had almost everything he wanted, but not quite: the public sector wage bill would have been reduced, but not the wages themselves, thereby depriving his government of a powerful lever to weigh down on the wages of the working class as a whole. Besides, at a time when he was aiming at cowing workers into submission, there was no advantage in it for Lenihan to appear to be going along with the union leaders' agenda. On the contrary, he had every reason to make it clear that he was calling the shots - albeit in the full knowledge that, of course, he could always rely on the union machineries to police workers into obedience if necessary.

So, on 4th December, the talks between the ICTU and the government collapsed, not because the ICTU walked out, but because the government did! Less than a week later, Lenihan announced the cuts he had kept up his sleeve all along, as part of its December budget. Public sector wages were to be cut by 5 to 10%. Unemployment benefit were to be cut as well, by up to 50% in the case of those aged 20-21. Overall, all welfare benefits were to be cut by an average 4.1%. Prescription charges were to be increased by 50% per item, etc..

Logically, this should have spelt the end of the "Social Partnership" framework for the foreseeable future. But it did not. Over the next two months, the union leaders sulked ostentatiously in protest against Lenihan's unilateral imposition of these cuts. As they had done before the December talks, they organised some protests - or rather, they allowed their local branches to organise local protests, without giving workers a chance to measure the extent of the discontent across Ireland. But as soon as the government winked in their direction, the union leaders rushed back to the negotiating table, this time, for talks on "public sector transformation" based on last July's report.

The resulting document includes all the cuts outlined in the July report, although the exact number of jobs to be cut is not specified. But it also includes some additions. For instance, it provides that "no cost-increasing claims (..) for improvement of pay or conditions (..) will be made or processed, meaning that any pay increase until 2014 (when the deal comes to an end) will have to be self-financing through job cuts. In the meantime, the pay cuts and levies introduced so far will remain. In addition, the deal introduces the notion that any public sector worker can be redeployed anywhere else in the public sector, temporarily or permanently (any risk of cops being redeployed as teachers' assistants in primary schools??). New entrants in the public sector are to get worse pension provisions. Etc..

For the time being, this deal is still in the process of being voted upon by the different public sector unions. A few have rejected it. But given the blatant refusal of the unions to organise a credible fight back or even to be seen opposing the government's attempts at getting the working class to pay for the crisis, it would take a grassroots explosion of anger, capable of blowing away the straightjacket of the union machineries, for Lenihan's plans to be derailed.

Towards another slump?

At the time of writing, the most recent figures available show that Ireland has seen one of the largest falls in GDP among the industrialised countries (12.7% over the past 2 years). The stock of homes remaining empty despite being available for sale or rent, is now equivalent to the entire production of houses in 2007-2008. Overall, since their 2006 peak, average house prices have dropped by 35%. But the price of land for real estate development is estimated to have fallen by as much as 80% and, in some areas, far more. Government income has dropped by nearly 30% since the beginning of 2009 and its deficit is expected to reach 13% of GDP this year. In economic terms, this is a catastrophe which has no equivalent in Irish history since the 19th century.

This is reflected in the social situation. Due to the wage cuts, Ireland is one of the few countries in which nominal average wages have fallen. Consumer spending has dropped by almost 10% since 2008. The rate of unemployment is officially close to 14%. But this figure conceals the fact that emigration has resumed on a large scale, with nearly 100,000 emigrating over the past 15 months.

And it is against this backdrop that the Irish banking system is now revealing more deep cracks. A series of announcements, phased in over the first two months of this year, exposed the colossal extent of the losses that the country's five largest banking institutions had been hiding in their vaults since the implosion of the Irish property bubble.

Allied Irish Banks got the ball rolling by announcing its first losses ever - €2.65bn for 2009. Yet, as the bank's published accounts revealed, these losses only took into account about one seventh of the €23bn unrecoverable loans it still admits to having on its books. This was followed by the revelation that far more unrecoverable loans were hiding in the Irish banking system. The nationalised Anglo Irish Bank turned out to be, once again, the worst offender, with about €38bn, followed by Bank of Ireland, with €12bn, and the country's two largest building societies (Irish Nationwide and Educational Building Society) with €10bn between them. Altogether this meant that these five banks were hoarding the equivalent of nearly half of the country's GDP in toxic loans, which will have to be written off at some point.

Even then, these were only the estimates volunteered by the banks, within the framework of the government's on-going bailout of the banking system. Official experts had been working hard to try to make these figures "politically sustainable", at a time when the working class is being told to tighten its belt by more and more notches. But whether these estimates reflect the real losses (and mad profiteering) of the banking system, any more than past similar disclosures, remains an open question.

In any case, from the beginning of March 2010, banking shares began to face a speculative run. The 20% fall in Allied Irish Banks' shares on 29 March prompted the government to launch another bailout, this time on a much larger scale. A state-owned body, the National Asset Management Agency, is to buy back €82bn worth of unrecoverable loans from these banks, for which the state will pay €52bn, based on a valuation dating back to November last year. By a cynical twist, it was calculated that this choice of valuation date, rather than using the current market value of these loans, amounted to a €1.5bn handout to the banks - equivalent to the total income provided by the public sector pension levy! Meaning that public sector workers are effectively lining the coffers of the bankers with their wages! However, the role of NAMA is not just to bail out the banks themselves, it is also to bail out the real estate tycoons who borrowed these funds and now consider that it is the role of the state, and therefore of the working class majority of the population, to pay the bill for them.

In addition, the state is to inject a total of €22bn into the five banks. As a result, in addition to Anglo Irish which is already nationalised, the government will end up being the de facto majority owner of the four other banks, without any more real control over their operations than it has over those of Anglo Irish, and without any guarantee that more toxic assets will not emerge out of their vaults at some point in the future. To all intents and purposes, this means that the Irish state is already in suspended bankruptcy, suspended, no doubt because a formal bankruptcy would imply unpredictable consequences for the British and US banking systems. Unlike Greece, Ireland cannot be allowed to be seen failing - for the time being, but for how long can this situation be sustained?

Such is the capitalist black hole for which the Irish working class is now supposed to pay an exorbitant price, with its jobs, wages, public services and conditions of living. So far, it has been trapped and paralysed in its resistance against the attacks of the capitalist class by the "Social Partnership" policy of the union bureaucracy. But an explosion of anger caused by one austerity measure too far, could begin to reverse the situation. Maybe a "Celtic Tiger" will revive after all, but this time one with strong proletarian claws - to free itself from the parasitism of capital and the straightjacket of the union machineries.