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Should we really vote ‘Yes’ to the Stability Treaty?

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According to the latest national opinion poll in the Sunday Times, up to half the electorate doesn’t understand what the Stability Treaty, on which we are being asked to vote in a few weeks time , is about.  The opinion polls suggest that about 30 % of the electorate are committed to a ‘Yes’ vote,  slightly ahead of the number who will definitely vote ‘No’, with up to 40% still undecided as to which way they will cast their ballot when it comes to it. The committed ‘Yes’ vote should sound alarm bells for the government and pro-treaty activists: at this pre-campaign stage it would need to be a lot higher to guarantee a positive result. The government parties thus have a lot to do to convince a majority of the electorate that a ‘Yes’ to this Treaty, now positively renamed the ‘Stability Treaty’, is in the national interest and our own personal interests as well.

It doesn’t help, of course, that junior Minister for Europe, Lucinda Creighton, on RTE’s ‘This Week’ programme on Sunday is apparently the only person in the country who is unaware that Ireland is in recession. However, Fine Gael’s appointment of Simon Coveney, Minister for Agriculture and Fisheries, as its Director of Elections for the referendum looks inspired. A born conciliator, Coveney is justifiably well regarded. He has shown himself  competent in his own portfolio. He is invariably courteous, genial and level- headed in his contributions to public debate. Most particularly, he can mobilise the all important farm vote to stick with the ‘Yes’ side.

Labour’s choice to lead the campaign, Joan Burton, Minister for Social Protection, brings many positive attributes to the task as well. Joan is a doughty and relentless campaigner, who doesn’t give up. She has fashioned herself as a celebrity figure in her own right. She is well respected and liked by women voters  - another crucial constituency in the campaign – and universally feted by the female press, in circumstances in which such media support for the Treaty is vital. Recently, she has been lionised by the Sunday Independent – another important media constituency in this referendum –  most likely due to her advice to her government colleagues to effectively shun any contact with personalities, such as Denis O’Brien, whose received unfavourable mention in the Moriarty and Mahon Tribunal reports.  That she has previously also come across as having little interest in the EU and, if anything, harbouring euro-sceptic inclinations, may also prove all to the good, since it only adds to her authenticity.  But within government, she has shown herself as divisive, more a ‘Minister for the Opposition’ than a collegiate member of the executive, which undoubtedly goes down well with Labour’s newbie backbenchers even if it occasionally causes consternation among her Ministerial colleagues and public confusion elsewhere.

Fianna Fail is also in favour of a ‘Yes’ vote, and is the only party that, thus far, has suffered a political casualty with the sacking of Deputy Leader Eamon O’Cuiv and his demotion to the back benches for raising doubts about the wisdom of his party’s stance. But if the referendum is lost, it will be the Government that will be badly wounded, possibly fatally in the medium term.

So what is it, exactly, we’re being asked to vote on? And why are so many members of the public confused about what’s involved in the Stablity Treaty?

There’s plenty of information available about the facts of the Treaty itself and interpretations as to its meaning. The Oireachtas Committee on EU Affairs has played host to economic  experts, members of the government, and a variety of interest groups and social commentators over the past three months. Anyone interested in reading submissions to the Committee should follow this link: http://www.oireachtas.ie/parliament/oireachtasbusiness/committees_list/eu-affairs/presentations/

The specific contents of the Stability Treaty have been variously summarised as ‘much ado about nothing’. The Fiscal Compact, Fiscal Treaty, now Stability Treaty, is basically an add on to the ‘Six Pack’ of measures to which all EU member states are already signed up. The Stability Treaty simply seeks to ensure that governments will enshrine in their basic law the revised rules of the Stability and Growth Pact, restricting their debt/GDP ratio to 60% and structural government deficit  to 0.5%. The carrot is if all eurozone governments sign up to this formula, then stability within the eurozone will be assured over the long term. The stick is that if individual governments fall by the wayside, they will be subject to penalties and will cede control of their national finances to the European Court of Justice and the EU Commission.

Twenty five of the 27 member states have indicated they will sign up to this formula – Britain and the Czech government being the exceptions. This is an intergovernmental treaty, not an EU treaty. It only needs twelve member states to become operational in January next year. So a succession of ‘no’ votes by a number of member states, including Ireland, makes no difference and cannot stop it going ahead.

That’s in theory anyway. In practice, the cracks are already beginning to appear. If the Treaty causes trouble in the remaining triple ‘A’ rated EU states, on which the beleageured member states, like Ireland, rely for export markets and continuing financial support, the Treaty itself may contain the seeds of further eurozone crises in the not too distant future.

The trouble with the formula for structural deficit and debt /GDP ratios as defined in the Treaty is that, as TCD economist Brian Lucey explained to the Oireachtas Committee, even well- run states like Holland and Austria, will be forced into fiscal contraction policy measures. This has already generated a political crisis in Holland. If Francois Hollande is elected French President in two weeks time he has promised he will seek to renegotiate this Treaty. The fact that Spain is generally believed to be on a knife edge of needing a bailout, others argue, with all that implies, make this inadequate and one-sided austerity package obsolete even before it comes into effect.

And that appears to be the problem as far as most international commentators, especially economists, are concerned: this Treaty is all about enforcing austerity but without any complementary plan to build growth in the eurozone. Professor Terence McDonough of NUIG labels the Treaty as a “dangerous experiment”, which will “undermine confidence” in Ireland as opposed to rebuilding the confidence that will be needed for Ireland to re-enter the bond markets at the end of the current ‘bailout’. UNITE economist, Michael Taft, points out that the whole notion of a structural deficit is hypothetical and the Treaty is “absurd”. Ask ten economists how to calculate the structural deficit, he says, and you will get twenty different methodologies and forty different answers.

UCD Law Professor, Gerry Whyte, regards the wording of the referendum that we are being asked to put into our Constitution as flawed. In his view, it is too general and should be accompanied by a Bill, so that legislation related to it would be impervious to any further constitutional challenge.

Those in favour of a ‘Yes’- such as the Chambers of Commerce – lay particular emphasis on Ireland’s reputation abroad and maintaining good relationships with the EU as key reasons for supporting the Treaty. For TCD economics professor and perhaps the foremost authority in this area, Philip Lane, the Treaty is just one step in an overall package of fiscal reforms within the EU which must come about in the fullness of time. In short, on balance, we’re better off agreeing to it than rejecting it.

Worst of all, there’s a gun to our head. The pro side point out that Ireland will not have access to  European Stability Mechanism (ESM) funding, in the event we cannot return to the markets when Ireland emerges from the current IMF/EU programme,  if we vote ‘No’. The clause in the Treaty that cuts off access to ESM funding to any country not signed up to the Stability Treaty is thus the strongest argument in favour of a ‘Yes’ vote.  It’s a negative arguments, but it plainly implies that Ireland has no other viable choice except to vote ‘Yes’.

Meanwhile, MANDATE trade union is advising its 45,000 members , mainly in the badly hit retail and catering sectors, to vote “No”. UNITE similarly, and the biggest trade union, SIPTU, makes its support conditional on the government  committing to a 10bn euro growth and investment programme rather than the ersatz jobs stimulus  programme on which the Government recently awarded itself a ‘96%’ approval mark and which increasingly feels like a bad joke.

So to its opponents, this Stability Treaty will simply enshrine the politics of austerity within our constitution. It creates an austerity trap from which generations to come will struggle to escape. To its proponents, it’s about a sensible and logical step towards stabilising the euro currency. It’s about not locking ourselves out of  access to further support funding from Europe should we need it (as appears increasingly likely despite government rhetoric to the contrary) after 2015. It’s about our ‘place in Europe’ and preserving good relations with the EU, which has, after all, bailed us out once already.

Almost universally, Irish and international economists, whether advocating a pragmatic ‘yes’ or a definite ‘no’, are agreed on one point: this is a badly constructed Treaty with loads of inherent flaws and contradictions that on its own, either does nothing much for, or may even damage, future economic growth in the eurozone.

To my mind, that raises a further issue that hasn’t attracted much commentary thus far. We have ‘previous’ on  inserting flawed clauses into our Constitution. Invariably, it turns out that it’s not a clever idea that causes no end of trouble down the line. If, as so many experts suggest, this Stability Treaty is inherently flawed and practically defunct even before the ink has properly dried on it, then should we really copperfasten it in Irish Constitutional law?

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5 Responses to “Should we really vote ‘Yes’ to the Stability Treaty?”

  1. # Comment by EddieL Apr 23rd, 2012 11:04

    Here are some reasons for voting “YES”:
    - Jobs, like the Nice and Lisbon treaties provided.
    - Jobs, Like the Nice and Lisbon treaties failed to provide.
    - It won’t make any difference. They will go ahead without us.
    - It will make a difference. If we vote NO we won’t get the goodies the EU are trying to give us.
    - We need it to pay our public servants like the nurses, guards etc according to Alan Shatter.
    - We don’t need it to pay our public servants.
    - We will lose out popularity in Europe and we won’t win the Eurovision any more.
    - We have’t won the Eurovision for a long time anyway and a NO vote won’t change this.
    - A YES vote will change our geographical position and put us “at the heart of Europe”.
    - A NO vote won’t change our geographical position.
    - All the main political parties are for it as usual.
    - None of the main parties are against it.
    - Ignorance is no excuse for voting NO.
    - Ignorance is a good reason for voting YES.
    Any more?
    Veronica: I agree with your last 2 paragraphs.

  2. # Comment by Denis Cooper Apr 23rd, 2012 18:04

    There seems to be an assumption that if Ireland fails to ratify this Stability/Austerity Treaty then it will be cut off from all sources of external assistance should the need arise.

    But Ireland is a paid-up member of the IMF, and under the IMF Articles of Agreement Ireland’s right to request and receive IMF support cannot be made conditional upon its ratification of another treaty such as this.

    Has there been any precedent anywhere in the world where the IMF has demanded that a country must put a balanced budget rule into its national constitution as a pre-condition for receiving crisis assistance?

  3. # Comment by Veronica Apr 23rd, 2012 22:04

    @Dennis,

    Well the answer to your question is ‘no’, so far as I know. Yet some economists here, far more learned on these matters than the likes of me, suggest the IMF would have difficulty in supporting a loan request from Ireland if Ireland was ineligible to receive EU assistance through the ESM because we had voted ‘no’ to the treaty and thereby excluded ourselves. I think there will be all sorts of arguments and disputes between the ‘yes’ and ‘no’ factions around this particular issue. But the jig may be up on the whole austerity thing anyway following the collapse of the Dutch government earlier today over fiscal retrenchment proposals in its budget. Funnily enough, it was the extreme right party in the Dutch government that walked out over the proposed budget cutbacks; whereas here it is the left wing parties and the trades unions who are opposed to the austerity framework. The markets, predictably,have thrown their toys out of the pram. Then again, maybe it’s time the peoples of Europe stood up to the markets, since our governments seem unwilling or unable to tell these marketeers to grow up and adopt less of the knee jerk response and more of something approaching an intelligent perspective, and tell them where they get off? The notion that the whole of the EU, including countries like Holland, whose economies are functioning well, should impose austerity that will limit their growth prospects and thereby make it even harder for debt ridden countries like ours to work our way out of our difficulties, is insane.

    @ Eddie,

    Maybe it’s time to start a ‘spot the lies’ thread to cover the fibs and deliberate mistruths that we’re likely be told by both sides in the course of the so-called ‘Treaty debate’ to come?

  4. # Comment by EddieL Apr 24th, 2012 10:04

    Veronica:
    Yes indeed. I notice that the the Irish Times ran “A History of of Ireland in 100 Insults” recently, and in an article today Fintan O’Toole writes that Labour “policy is a pantomime horse operated by drunks moving in two directions at once”.
    So maybe we could have something like “Irish politics in a 100 (or maybe a 1000) contradictions”

  5. # Comment by sweeterjan May 26th, 2012 07:05

    peoples of Europe stood up to the markets, since our governments seem unwilling or unable to http://www.ceinturesfr.com/ceinture-dsquared-c-15.html tell these marketeers to grow up and adopt less of the knee jerk response and more of something approaching an intelligent perspective, and tell them where they get off? The notion that the whole of the EU, including countries like Holland, whose economies are functioning well, should impose austerity that will limit their growth prospects and thereby make it even harder for debt ridden countries like ours to work our way out of our difficulties, is insane.

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