The government has finally admitted that they have a long term solution to the financial crisis, and have revealed it in all its glory.
During the boom years, prices soared and wages did their best to keep up with them. Ireland became an uncompetitive country.
This was no great problem to the Irish, as high wages meant we were able to pay high prices. However, when it came to overseas trade, it was a different story. Prices here were astronomical to someone who wasn’t on an Irish wage. Irish goods were too expensive to buy.
One simple tried and tested solution is to revalue the currency to bring our cost levels on a par with everyone else. That option is no longer open to us though since we joined the Euro.
The government strategy is quite simple.
First of all, you do not encourage the banks to lend to business. Starved of their cash flow, business start going to the wall, or at best, start cutting wages. This of course leads to massive unemployment, which is now increasing at 3,000 a week.
Next, you let the unemployed stew, and do fuck all to alleviate the situation.
Finally you feck off for three months holiday and let the situation simmer.
What will happen, of course is that employers are going to drop their wages, knowing that the fear of unemployment will ensure meek compliance. Also, the unemployed will eventually accept any wages to get off the dole queues.
This will work, and wages will drop across the board. From that point of view, Ireland should become competitive once more.
However [and it’s a big ‘however’], the government seem to have overlooked a small point or two.
They are assuming that prices will drop at the same rate as wages. Hah! How many business owners are going to see the drop in wages and salaries as a nice way to increase the profit margins? A lot.
They are also assuming that if there are price cuts that they will be across the board.
If there is an average drop in income of [say] 10%, then prices also have to drop across the board by 10%, otherwise I can see a future of endless disputes.
So there you have it.
Not only are the government not doing anything to stop unemployment, they are actually encouraging it.
And what else are they doing?
They are helping themselves to three months holidays on full pay, in the middle of the biggest crisis this country has ever faced.