Tomorrow morning, I will vote Yes in the Referendum.
This is for two main reasons, that the fiscal limits make sense for countries to adopt in the context of a single currency, and that we almost certainly will need funding from an international fund, and that the European Stability Mechanism provides the best opportunity for this.
With a transnational currency, there have to be certain constraints on government deficits to prevent contagion from one country to another. These constraints do not mandate further austerity.
In the short term, we are in a program managed by the Troika of the European Commission, the European Central Bank (ECB) and the International Monetary Fund (IMF). They are lending us money to fund our government’s current inability to borrow on international markets. The restrictions on the government’s spending, mandating a combination of spending cuts and tax increases, are from the Troika, rather than any requirements of our euro membership. As things are, the state spends much more than it takes in, a gap that will have to be filled, but in a managed way in the hope of ensuring stability.
Balanced budgets in the long run are not the same thing as austerity. A balanced budget, or rather a deficit limit in this case, is about limiting the difference between the state’s income and expenditure. These concepts are explained in this video, produced two nights ago by friends of mine.
Governments can maintain both balanced budgets and relatively high levels of public spending, if they make that political choice. The Nordic countries have for years maintained both.
This Treaty was not designed with the Irish case in particular in mind. It was more focused on the case of Greece, which did overspend. So I accept the case of those who say that it would not have prevented the excessive spending here in the 2000s. That is not a reason to vote No. We need a currency that’s viable, and that means ensuring that a country like Greece could not put others at risk through its spending decisions.
I would like to see rules put in place to prevent governments within the euro area insuring debtors, rather than just depositors. What happened in September 2008 should not have happened, and the banks should not have been allowed to expect for that to have been on the table. But justified anger at this decision, and at the manner in which the European Central Bank is slow to reduce the amount to be repaid is not a good enough reason to reject this treaty.
We have no reason to expect that there would be a better deal on banking debt on offer before the end of the year on offer if we vote No. The very fact that it can come into force with 12 countries means that it was set up in a manner which allowed countries to opt out.
We will probably need funding. The best way to be sure of that is to vote for the Treaty. There is no way it could be easier or cheaper to get funding, whether from the IMF or if in some manner by a late entry to the ESM, than by passing this Treaty now. To quote from the preamble to the Stability Treaty,
STRESSING the importance of the Treaty establishing the European Stability Mechanism as an element of the global strategy to strengthen the economic and monetary union and POINTING OUT that the granting of financial assistance in the framework of new programmes under the European Stability Mechanism will be conditional, as of 1 March 2013, on the ratification of this Treaty by the Contracting Party concerned…
A post yesterday I read yesterday outlined the options we’d have for funding were we to vote No. None of them are appealing.
Even if we don’t need a second bail-out, to reject the mechanism by which we could receive one would send a signal of uncertainty to the markets. It is for these reasons that a survey of economists by Indecon showed that 90% believe that it is on balance in Ireland’s best interest to vote Yes. Similarly, in a survey by Dublin Chamber, 86% of business people are voting Yes.
I do not believe that we could vote No without risking social and political unrest. I read today sincere articles written by those I know from left-wing and from libertarian perspectives who would argue a No vote is needed to force fundamental restructuring. Perhaps they’re right. But as I look across the political situation in various European countries, I don’t want to see what might happen politically if an immediate adjustment to our budget had to take place.
So I am voting Yes as a small element in managing a recovery, and hopefully a new way of politics both domestically and in Europe.
We must campaign against the democratic deficit and waste of taxpayers’ money in European institutions. We must push against crony capitalism, and reassess how government should spend its money.
But we can do this and support the Treaty. So I will be voting Yes.
Published in The Irish Times, 29 May 2012
A chara, – Seán L’Estrange (May 28th) voices concern about the wording of the amendment. He will be reassured to know that the wording is no different to the form that has routinely been used to allow the State to ratify European treaties. In 1972, we voted to insert a new Article 29.4.3°, “The State may become a member of the European Coal and Steel Community (established by Treaty signed at Paris on the 18th day of April, 1951), the European Economic Community (established by Treaty signed at Rome on the 25th day of March, 1957) and the European Atomic Energy Community (established by Treaty signed at Rome on the 25th day of March, 1957). No provision of this Constitution invalidates laws enacted, acts done or measures adopted by the State necessitated by the obligations of membership of the Communities or prevents laws enacted, acts done or measures adopted by the Communities, or institutions thereof, from having the force of law in the State.”
On Thursday, we are being asked to ratify only the treaty agreed on March 2nd of this year. Any further changes which would conflict with our Constitution would have to be put to the people, as was done seven times between 1972 and this year’s referendum, on each occasion with a similar form of words. – Is mise,
Bray, Co Wicklow.
This morning, Denis Donovan, a former Deputy Director at the IMF, clearly stated his view that without signing up to the agreements outlined under the Stability Treaty, the IMF would not fund us if we needed more money:
The IMF has made it pretty clear throughout this euro debt crisis that they only go in in partnership with Europe. That’s because they don’t want to put their money at risk…The IMF is very worried about getting repaid, it’s a big concern. If the Europeans are not willing to take the risk to lend to Ireland, there’s no way, in my view, that the IMF will be able to do it.
This corroborates and goes even further than the view of Karl Whelan, an economist from UCD, and a favourite of Sinn Féin, who when considering the possibility of emergency funding from the IMF only, wrote “What is clear, however, is that any programme approved would provide Ireland with far less funds than a second EU-IMF programme. This will mean more austerity not less”.
So there we have it. If we opt out of this Treaty, and if we need emergency funding, our chances of getting IMF are between non-existent or one that’s much harsher than what we’re currently experiencing.
And as to Gerry Adams’s suggestion on The Week in Politics last night that we could avail of funding from the European Stability Mechanism (ESM) without signing up to this Treaty. If we were Johnny-come-latelys to this the Stability Mechanism, they would equally be in no humour to be generous about terms. There’s nothing in this Treaty in terms of budgetary constraints that could be avoided if we needed emergency funding after this.
The only honest view on funding on the No side that I’ve encountered is that of Cormac Lucey. Writing in Business and Finance, he bases his argument on the very basis that voting No will mean that we will not have access to the ESM, “Allowing Ireland access to the ESM cookie jar from 2014 onwards would only give the public sector another excuse to delay its long-overdue adjustment to reality.” A fiscal hawk like Lucey would like us to get a harsh budgetary adjustment over and done with in one foul sweep, without any loans from outside to ease the process.
This is what those ton the left have to answer. If it is austerity they are campaigning against, why are they advocating a position that will make austerity much more likely?
It may be the land of Voltaire, Benjamin Constant and Fréderic Bastiat, but it is rare that a liberal today can hope for much from the politics of modern France. In this case, in terms of who I hope to win the French presidential election, the first round tomorrow, I am considering negatives as much as positives. In 2007, I thought Nicolas Sarkozy, who represents Union for a Popular Movement (UMP), the largest centre-right party in France, would bring the economic reforms France needed. He delivered on some of this program, such as raising the retirement age from 60 to 62, but he has otherwise been disappointing.
One of the dangers in times of recession is a rise in nativism. This manifests itself in a retreat to the nation at the political level. In economic terms, this is protectionism and a preference for produce of the country. But for any country to be competitive, it must be willing to compete in a global world. If French people are not buying enough French products, it is a signal that they must adjust either their quality or price. Firms seek to grow, and they can only expect foreign markets to be even less forgiving than those of their compatriots. This principle does apply at a European Union level, where President Nicolas Sarkozy wants a “But European Act”, but more so yet at a national level, where he would seek such a measure in lieu of European protectionism.
One focus of the Fine Gael Ard Fheis, taking place in the National Convention Centre today and tomorrow, will have to be the upcoming referendum on the Fiscal Stability Treaty, a relatively short agreement between 25 of 27 EU countries. If we want this country to remain part of the mainstream of decisions on the euro, we will have to vote Yes. Because it only requires 12 member states to ratify it to come into effect, there is no possibility of voting No once to get better terms in a second vote. This was possible with Nice between 2001 and 2002 and with Lisbon between 2008 and 2009 as these needed the support of all then 15 and 27 member states to pass.
It is not a perfect treaty in that it is not comprehensive. As one designed to prevent the fiscal difficulties countries have found themselves in, I had hoped that it would address banking, which was where Ireland most particularly suffered, rather than a focus on public debt and deficit which was where Greece and Italy got into trouble. Specifically, I had hoped for a constitutional bar or limits on future guarantees by governments of investment debt.
But the Treaty does make sense. These are terms that should have been in place from 1992 with Maastricht, and in effect from 1999 with the introduction of the euro. Fiscal supervision is a naturally important part of a monetary union. The Irish people could certainly benefit from measures reqiring balanced budgets. It is not about imposing austerity, but about putting in places mechanisms to prevent a requirement for future austerity. It is a way of saying Never Again to fiscal imprudence. It is distinct from our fiscal program under the troika of the EC/ECB/IMF and those terms will not be affected by this Treaty. There is in fact very little that’s new in it.
We will also need to support this Treaty to gain access to the European Stability Mechanism, i.e. if we needed a further bailout. I don’t think we will need that. But if there were only a five percent chance that we would need to access this fund, we would surely not want to cut off that option for ourselves.
Though not a vote on our membership of the euro, it is a vote on the nature of that membership. If we vote No, we will be very clearly outside the mainstream of decision-making on our own currency.
This is not a partisan matter for me, one that I’m supporting because of my membership of Fine Gael. If anything, the reverse is in some part the case. I campaigned for the Lisbon Treaty in both 2008 and 2009, and it was after the second campaign that one of those I worked with in the offices of Ireland for Europe and Generation Yes, who is now President of Young Fine Gael, particularly encouraged me to get involved in Fine Gael. This will be the first European Treaty referendum fought with Fine Gael in government and we will have to launch a serious and focused campaign, fought on the merits of the compact itself. It will not be good enough to complain if other issues are brought into the debate. It will be up to the Yes side, in all parties and civic society groups, to steer the debate in the way that addresses the issue at stake.
So I look forward to a good campaign on this.
Nigel Farage, United Kingdom Independence Party MEP, used the occasion of the first visit of Herman Van Rompuy, the new President of the European Council, to let him know exactly what he thinks of him, going as far as to call Belgium a non-country.
Leave aside the fact that Mr Farage undermines his argument by his lack of basic courtesy, given President Van Rompuy’s standing, his power and influence cannot be seen to be overbearing in the way suggested. As I have written before, someone like Herman Van Rompuy is the best person for the job for those who worry about the encroaching power of the European Union. Given a choice between Mr Van Rompuy and someone with greater presence, surely Mr Farage should rather fear the alternative.
Personally, I think we’d be better off having someone whom President Obama would naturally think to meet at summits. Or else, damn the lack of words in French vocabulary, rename Mr Van Rompuy’s position Chair of the European Council, which is all it really is, so that José Manuel Barroso, President of the European Commission, is the clear occupant of the top role, rather than the multiplicity and confusion we have now.
During the Lisbon Treaty campaign, Declan Ganley made a big deal of the fact that it created the positions of the unelected President of Europe and the unelected Foreign Minister. I’ve critiqued this in another forum, and now with the appointment yesterday, we see that there was too much truth to my rebuttal.
The position is not, of course, that of President of Europe, but President of the European Council. The role has no executive power, and serves only to act as a chairman at the meetings of the European Council, the forum at which the 27 heads of the government of EU countries meet and decide the policy of the Union. Valéry Giscard d’Éstaing said that the best way to describe it was with the English word chairman, but in French, every such role ends up being called président. It wouldn’t make sense for it to be popularly elected under such circumstances. And no country I know of elects its Foreign Minister directly, so no one could expect that to be the case with our new High Representative for Foreign Affairs and Security Policy.
But even if the role is to be no more than a chairman, I would still like to be inspired. I wish there had been a little more truth to Declan Ganley’s claims. European leaders had allowed the role to be built up in people’s minds, that it would be someone who could stand on the world stage and meet Barack Obama, Hu Jintao or Vladimir Putin. José Manuel Barroso, the President of the European Commission, currently serves something of that role, as when he took part in the G20 meetings. But he is really the head of Europe’s civil services, while the President of the European Council can said to speak for the respective heads of government.
That was all they wanted him to do, apparently. That he would represent accurately the various positions of the 27 leaders. Tony Blair was never really a runner as a candidate; his early standing as favourite was merely because the clear anyone-but-Blair candidate had yet to emerge. But it was not just his unpopularity even among his own Party of European Socialists that hurt Blair, it was that they wanted nothing like him. They wanted someone who would not hurt the profiles of the big hitters in Europe. Personally, I wouldn’t have minded Tony Blair, but his general unpopularity would have made him an unwise choice.
President-elect Herman Van Rompuy is perfect for those who fear the overarching Europe, who worry about the powers wielded by the unelected Eurocrats. We were told to worry because the role of President isn’t well-defined, beyond chairing meetings of the Council. No one expects him to do more than that. But is this what we went to all this trouble for?
Added to this was the even more uninspiring choice for High Representative, Commissioner for Trade Catherine Ashton, a British life peer who has never held elected office. Holding onto the possibility of Blair for President, while all knew it would never happen, was a clever way for Gordon Brown to get leverage, and might serve as a way to show the Conservatives that they can get something out of Europe. But according to reports, she wasn’t even the top Briton discussed for the job, with David Miliband, the foreign secretary, Peter Mandelson, the business secretary, Geoff Hoon, former defence secretary, ahead of her. I wonder if the US State Department had a greater file on her than what they found on Wikipedia. While she insists she was the best person for the job, it’s probably more true that she got it because David Miliband would like to be leader of the Labour Party this time next year.
One thing particularly discouraging about President-elect Van Rompuy is his reason five years ago for dismissing the admission of Turkey into the EU, appealing to Christianity, and Turkey being an Islamic country. This is not helpful, either in encouraging Turkey to modernize, or in integrating the many Muslims living within the European Union. Nor is it a justification which I, as an atheist, particularly think is helpful.