COMMITTEE:A MINISTER yesterday painted a dramatic picture of living standards in Ireland regressing to the 1950s in the doomsday scenario of a euro collapse.
Minister of State for Europe Lucinda Creighton said the collapse of the common currency would result in the automatic end of the bailout deal with the troika; an immediate funding crisis; cuts of a further 50 per cent in public sector pay; rampant interest rates; a flight of capital; a brain drain; and the drying up of all foreign investment in the country.
Ms Creighton told the Oireachtas Committee on European Affairs such a scenario would put the State back 50 years and bring living standards below those of the recessions of the 1980s.
“You are not going back to the 1980s. You are probably going back to the 1950s or the 1960s.”
She was responding to questions by Sinn Féin’s Pádraig Mac Lochlainn and Labour TD Colm Keaveney about what would happen if the euro collapsed.
Initially, when asked whether the Government had a contingency plan for a collapse, Ms Creighton said it did not have printing presses “printing up worthless punts for the State right now”.
But when asked later, she described her view of what would happen. “The implications are very grave. We would have an immediate funding problem in relation to the €18 billion difference [between spending and revenue]. If the euro collapses then the bailout collapses.”
She said that within a week the State would not be able to fund its activities, including paying teachers and gardaí.
Interest rates would also shoot back up. She reminded the meeting that when devaluation took place in the early 1990s, interest rates shot up to 17 or 18 per cent. Capital flight would also take place rapidly.
Another impact would be a dramatic reduction in wages affecting people from all walks of life. “There would be wage reductions of 50 per cent for the public service.”
Earlier Ms Creighton had claimed Mr Mac Lochlainn was “scaremongering” when he said that increased fiscal union would make general elections in Ireland pointless.
Following Ms Creighton’s comments, he remarked: “You were accusing me of scaremongering.”
