The European Central Bank Isn't Going to Save Us

Andy Storey

Andy Storey is a lecturer in political economy at University College Dublin and a board member of human rights group Action from Ireland (Afri).


Can the European Central Bank (ECB) act as an honest broker in the tracker-mortgage scandal? Fianna Fáil has suggested that it step in to oversee the response of the Irish banks and ensure that customers get the appropriate compensation.

There is a whiff of naiveté (at best) about this proposal. It was the ECB that insisted the Irish government redeem the creditors to the Irish banks in full through the so-called bail-out in 2010, hardly the act of an institution committed to the welfare of taxpayers or the citizenry as a whole.

As a condition of that “bail-out”, the ECB helped push for reductions in workers’ wages and trade unions’ collective bargaining rights, as they have elsewhere in Europe.

The ECB is perfectly prepared to wield a big stick – but typically against workers and governments, not banks. For example, in 2011 the ECB under President Mario Draghi sent a secret (subsequently leaked) memorandum to the Italian government calling for: “the full liberalisation of local public services … through large-scale privatisations.”

Where the ECB does lavish largesse, it tends to be to the benefit of the corporate sector, including already loaded Irish companies like Ryanair, which have been able to access cheap ECB loans in recent years.

Another EU institution – the European Commission – might seem a more plausible candidate to ride to the rescue and defend Irish consumers from the depredations of the banks. The commission did something like that earlier this year when it launched an investigation of Irish car insurers because it had “concerns that the companies involved may have engaged in anti-competitive practices in breach of EU antitrust rules that prohibit cartels and restrictive business practices and/or abuse of a dominant market position”.

There is a prima facie case that the Irish banks are also, at the very least, taking advantage of their dominant market position in a coordinated manner: Irish mortgage holders pay an average interest rate of 3.2 per cent, while the figure for the Eurozone as a whole is 1.9 per cent. Not surprisingly, the Irish institutions are significantly more profitable than most of their European counterparts.

But the Commission has treated banks a little bit differently to other sectors. In particular, the Commission, in 2008, greenlighted European governments to launch massive rescue and subsidy packages of their financial sectors, amounting ultimately to €4.5 trillion, the equivalent of over a third of EU economic output. Nor did this aid come with much in the way of strings attached – the financial sector right across the Continent has been subjected to relatively limited real reform despite the generosity it has availed of.

When it comes to workers’ wages and rights, the Commission, like the ECB, is perfectly prepared to put the boot in. To take just one example, a 2013 commission review accused Belgium and France of having excessive wage growth on the arbitrary basis that wage-suppressing Germany constituted the appropriate benchmark for comparison. Likewise, that review criticized supposed labour-market rigidities in France, despite that fact that labour productivity was actually higher in France than in Germany.

Back in 2008, Irish writer Colm Tóibín reacted to the defeat by referendum of the Lisbon Treaty in Ireland: “I support the European project … I voted for Lisbon, not because I wanted to follow the Irish political establishment but because I despise it and need protection from it.”

Calls for European intervention to police the Irish banks follow a similar logic – that Irish politicians and companies are not to be trusted, and so we need external agents to protect us against them. The reality is that the “European project” is not some benign cavalry riding to the rescue of besieged Irish people – it is usually part of the problem, not the solution.

There is plenty an Irish government could do to put manners on Irish banks. We should keep up the pressure to make sure they do so, not call forlornly for the fake salvation offered by the bugle call of the ECB.

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Andy Storey: Andy Storey is a lecturer in political economy at University College Dublin and a board member of human rights group Action from Ireland (Afri).

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