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Dev’s revenge

Read more about: Economy, Fianna Fail, Oireachtas     Print This Post

As has been widely noted, the Constitution says –

The State shall not be bound by any international agreement involving a charge upon public funds unless the terms of the agreement shall have been approved by Dáil Éireann.

The current talking points supplied by the government’s ace legal department are that since the loan program is only a facility that doesn’t have to be used, it’s not a charge on public funds.  But as with the government position on bank bondholders, it’s really not hard to find contradictory information.  The agreement with the IMF — the ‘I’ in IMF standing for international — is under the Extended Fund Facility (EFF).  And like its companion Standby Arrangement (the one that Greece currently has), here’s the fee structure

resources committed under all EFFs are subject to a commitment fee levied at the beginning of each 12-month period on amounts that could be drawn in the period (15 basis points for amounts up to 200 percent of quota, 30 basis points on amounts between 200 and 1,000 percent of quota, and 60 basis points on amounts exceeding 1,000 percent of quota). These fees are refunded if the amounts are borrowed during the course of the relevant period.

In other words, money will be paid to the IMF regardless of whether the facility is used.  There is a charge on public funds.  The historical irony is that Eamon De Valera liked this clause because he had used the underlying legal principle to argue that the Free State wasn’t obliged to pay the land annuities.   His successors are now trying — with some very 3rd rate lawyering — to dodge around it.

UPDATE: Here’s the 1957 Act under which Ireland joined the IMF.  I can’t tell if the references to payments that the legislation allows under the Fund Articles of Agreement include the charges that the government would now have under the EFF.

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10 Responses to “Dev’s revenge”

  1. # Comment by EddieL Nov 30th, 2010 18:11

    I suppose the Constitution will be observed in this case like the Constitutional support for marriage to which we have been turning a blind eye for years. So there is a precedent for ignoring the Constitution.

  2. # Comment by Veronica Nov 30th, 2010 19:11

    P,

    Asked about this at leaders’ question, the Taoiseach referred to the full text of Article 29.5, specificallys part 3, which those demanding a Dail vote on the IMF/EU agreement tend to leave out when they quote the cosntitutional requirement:

    1° Every international agreement to which the State becomes a party shall be laid before Dáil Éireann.

    2° The State shall not be bound by any international agreement involving a charge upon public funds unless the terms of the agreement shall have been approved by Dáil Éireann.

    3° This section shall not apply to agreements or conventions of a technical and adminstrative character.

    He went on to develop an argument along the lines that transactions of the NTMA, which negotiates loans with the bond markets on the state’s behalf, are not subject to being laid before Dail Eireann for approval and that the same applies to this loan agreement with IMF/EU. (I’ve no diea if he’s right or wrong in this interpretation, by the way). He pointed out, further, that the Dail will have an opportunity to vote on the agreement when the first stage of its implmentation – the Budget – comes before them next week.

    Now if he’s wrong, and if all the weeping and wailing and gnashing of teeth, flights of rhetoric and emotion by the opposition leaders in teh Dail today about this national ‘sellout’ have any substance, one assumes they are already on their way to the High Court seeking a ruling on a constitutional action to prevent the government signing off on the loans agreement until it has been laid before Dail Eireann for approval. Or else already filing a joint motion of ‘no confidence’ in the government for failing to seek the Dail’s approval etc., for debate next week.

    If the Taoiseach’s interpretation of the status of the agreement is correct, (or more correct than their interpretation), then they’re wasting their time taking a constitutional action against the government. If they want to go the route of the no confidence or Dail motion mechanism, they’ll be asked, quite legitimately, where else do they propose to secure the funds to keep the state going when what’s in the coffers now is exhausted?

    Besides, it’s all academic, since they achieve much the same effect by voting against the budget. If they lose that vote, they can tell the electorate that they voted against the hairshirt budget and hope people are stupid enough to believe their solemn promises to change it all when they get into government. Win or lose on the budget or a confidence vote, however, whoever takes office after a messy general election in Arctic weather conditions now, or following a more orderly break up of the Dail in February, will implement the same budget to all intents and purposes as will come before the Dail next week. Otherwise the only logical first action of the new government would be to declare an immediate sovereign default with all the potentially catastrophic consequences that would entail for the lives of every citizen in this state. Now that would be a great start to four years in power, wouldn’t it just!

  3. # Comment by P O'Neill Nov 30th, 2010 19:11

    Veronica, the logic you set out is precisely what makes it an ideal issue for the Shinners! Note that as with DSW byelection, they are making the legal running and enjoying the possibilities that it could open up.

    Anyway, the game’s afoot so let’s see where it goes.

  4. # Comment by Veronica Nov 30th, 2010 19:11

    P,

    There’s a vast difference between what’s at stake here and delay in holding a by-election! The political risk to anyone contemplating such a legal move is huge, and that includes Sinn Fein. I expect it’s another one of those ‘red herring’ issues that will die away as quickly as it was raised. But I could be wrong. As you say, we’ll see.

  5. # Comment by Betty Nov 30th, 2010 22:11

    Has anyone referred to the irish version Bunreacht na hEireann — is there any ambiguity between the 2 , if there is the irish is the definitive one.

  6. # Comment by EddieL Dec 1st, 2010 11:12

    Veronica: I agree with you when you say it is academic. But it gives the impression the “opposition” are doing something.

  7. # Comment by Tomaltach Dec 2nd, 2010 08:12

    Betty,
    I see little difference between the Irish and English versions.

    All,

    The government line is that this is merely a ‘facility’ or an option. Nothing in it is binding and therefore it is not an international agreement as such. I can see the thinking behind that argument.

    But the decision to sign off on a memorandum of agreement with the other parties without question puts us onto a very definite path. It is in my view a huge decision. That is not at all the same thing as saying there were other easy options. Indeed the IMF route is in reality the only one available unless and until our European partners decide that some other possibility exists which poses no further risk to an already chaotic situation in regard to the euro.

    Even if technically this decision does not fall under the provisions of 29.5 of Bunreacht na hÉireann, it is, nonetheless, a momentus decision for the sovereign state to take. That being the case, in a functioning democracy, would it not be appropriate to put it before the Dáil?

    I strongly believe that our opposition parties and other members of Dáil Éireann are not willing to submit to facts regarding the reality of our sitaution and consequently that they would be prepared to defeat ratification of the deal in the Dáil without really and truly ascertaining whether it could be change or what the consequences would be.

  8. # Comment by Veronica Dec 2nd, 2010 10:12

    Tomaltach,

    I think it’s outrageous that an agreement of this magnitude and importance to the lives of everyone in the country is not subject to a vote in both houses of the Oireachtas, irrespective of whether one is legally or constitutionally required. Even if its effect is purely symbolic, a vote is desirable and appropriate in any country calling itself a democracy.

    A negative vote, of course, would not necessarily be binding on the government – it all depends on how it is framed. In the current political environment it would be impossible for the executive to continue with the budget and the Bills to give effect to it if such a vote were lost, without risking total oblivion of their respective parties in the forthcoming GE as well as civil disorder in the streets.

    For all their huffing and puffing, it’s hard to take the opposition seriously. Arguably, they do not WANT a vote. If it was put up to them, they would then have to abandon their infantile posturing on the package and come clean on what alternatives they propose. Those alternatives are stark – either immediate sovereign default and all that it entails, or renegotiation, which is not on anyway and which quite possibly, and almost inevitably, might result in an even more onerous set of conditions for access to finance than what’s currently proposed.

    Does any one among them seriously think the IMF and the EU – and countries like Denmark, Sweden and the UK – would be as forthcoming with their money if their initial offer was thrown back in their faces? Would ECOFIN so easily approve a second package for Ireland? Whatever about the Labour Party, Fine Gael cannot be that dense. As for sovereign default, there are several economists vociferously calling for this option. What they never address in their pristine analyses are the appalling social consequences and the wipe-out of public services that follow from it, nor the long term economic consequences for Ireland.

    Presumably the main reason the government is not offering a vote is because they know their own backbenchers, assessing their personal chances of political survival, would not support a government motion calling for approval of the deal. The government have obviously calculated that they have a reasonable chance of getting the budget through next week and they may be playing for time too – a disorderly break-up now is worse for their GE prospects than a more orderly dissolution of the Dail in late February.

    There are no heroes nor angels on any side of the politics of this.

  9. # Comment by John Mack Dec 3rd, 2010 20:12

    In cozy relationship based politics Constitutions exist to reverence, not observe.

  10. # Comment by John Mack Dec 3rd, 2010 21:12

    Where ti secure the money needed to operate the state? … By borrowing to pay off debts … or rejecting any payments for private bank debts, retaining tax revenue in Ireland, withdrawing from the Euro, and printing money?

    Printing money works better than enslavement to foreign banks.

    The Euro zone is going to break up anyway. After the banks have looted the public treasuries.

    Did Iceland die by rejecting onerous foreign bailouts, that is, debt slavery and dictation from foreign bankers? Its economy is working well on its own currency.

    The Icelanders love their freedom more than the timid Irish.

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