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The Celtic Tiger is in danger of becoming extinct

There were angry exchanges at Holyrood yesterday over the implications for Scotland of the meltdown in the Irish economy, as another massive banking bail-out in Dublin brought a fresh wave of austerity measures.

Labour leader Iain Gray ridiculed Alex Salmond’s past claims about the arc of prosperity and claimed that in an independent Scotland our two biggest banks would have gone and the economy would have collapsed.

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His attack was based on the latest news from Dublin where the central bank announced that the cost of bailing out the nationalised Anglo Irish Bank (AIB) could reach a worst-case scenario of more than €34 billion, more than £29bn.

The Irish Government announced that it was now taking majority control of AIB and pumping billions more into two smaller banks, driving the deficit to record levels and requiring more austerity measures.

Finance Minister Brian Lenihan said the latest figures were “horrendous but manageable,” and promised there would be no default on the banks’ massive debt.

He said Ireland’s deficit this year was likely to pass 30% of gross domestic product to account for the unexpectedly high bill to save the three banks, which also include Irish Nationwide.

With approaching £10bn of extra state funding now heading to the banks, and European Union rules requiring the spending to be added to the annual deficit, Ireland’s 2010 deficit could reach 32%, which would be a post-war high in Europe.

Mr Lenihan said Ireland must accept an even more severe 2011 budget than previously signalled. The Irish have already imposed three emergency budgets since 2008 that have raised taxes and cut wages, and the budget on December 7 was already expected to involve billions in cuts.

All of this prompted Iain Gray to mock the First Minister’s former approval of the “Celtic Tiger” and the rest of the “arc of prosperity”.

He said: “Scotland’s banking sector is ten times the size of Ireland’s. The Royal Bank of Scotland alone had a balance sheet 15 times the size of the Scottish economy.

“Alex Salmond just does not get it. Everyone in Scotland knows that in a separate Scotland our two biggest banks would have gone and with them all the jobs, all the savings, all the pensions, all the mortgages and all the salaries.

“Today is one of these clear mornings when you feel like you can see for miles. So where does the First Minister now look for his arc of prosperity today? Australia? New Zealand, The Basque country? Iceland, or Ireland?

“Everyone knows we would have tipped over the edge on which Ireland teeters today. Alex Salmond is the last man in Scotland not to realise that his obsession with independence is, daft, deluded, deranged and downright dangerous.”

But the SNP leader told him: “The capital injection into the Scottish banks is now making a paper profit for the UK Treasury,” adding that he preferred to look to events in Norway.

“One thing of course that particularly impressed me as I visited Norway was the £200bn oil fund that that country has accumulated by having access to its own natural resources,” he said.

Mr Gray asked if that meant the First Minister was now advocating nationalisation of the oil companies, but Mr Salmond replied: “The Norwegian oil fund was built up from revenues from oil, not just from the Norwegian state oil company, but from all the major oil companies exploiting oil in the Norwegian sector.”

Patrick Harvie of the Greens asked the First Minister to back a moratorium on deep-sea drilling off Shetland in the wake of the Deepwater Horizon disaster, but Mr Salmond declined, saying: “There are significant differences between the regime, in terms of safety, that applies in the waters around Scotland and in the Gulf of Mexico.”

 

Ailing banks swallow up state support

IN December 2009, the Irish Government announced €4bn of spending cuts, equivalent to around one tenth of current expenditure.

Public servants were forced to take pay cuts of at least 5%, and social welfare was reduced across the board.

Child benefits were cut by €16 per month, and €960m was wiped from public investment plans.

A carbon tax has been introduced, with companies paying €15 for every tonne of CO2, and income tax bands have been adjusted.

The ailing banking sector has eaten up billions of euros in state support, already amounting to the equivalent of nearly one third of total GDP.

The Irish economy has now shrunk by almost a quarter since the GNP hit a high of €40bn back in 2007.

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