Fiscal compact turned into a political football

Some people give politics a bad name. I found it quite extraordinary to hear the Fianna Fáil leader in the Dáil on Tuesday arguing that the new EU fiscal compact should be put to a referendum. He expressed his trust in the people and belief that their views should be listened to.

This is quite incredible coming from a man whose party in government held a second referendum on the Lisbon Treaty because it didn’t like the first result.

It was also incredible to hear the leader of Sinn Féin having a go at Enda Kenny over his behaviour towards the French prime minister. Mr Adams himself has cosied up to a lot of dubious characters over the years.

One of the more positive aspects of what has happened in Ireland over the past year has been the progress made in restoring our tarnished international reputation.

Being photographed with the leader of one of Europe’s most influential countries will not harm Ireland in the minds of those who invest in the Irish economy.

However, what we witnessed again this week is what passes for political discourse in our parliament.

The EU fiscal compact is now being turned into a political football by the opposition. The treaty has been referred to the Attorney General who will decide if a constitutional referendum will be required to ratify it. If she deems this to be the case, then we will have no choice other than to hold a referendum. If she deems such a referendum is unnecessary, then it is hard to see what would be achieved by holding one.

It is intended that 12 out of the 17 eurozone member states would be sufficient to ratify the treaty. It appears this will be achieved easily enough. Consequently, unlike the case with the Lisbon Treaty, if Ireland were to reject it in a referendum, that would not be sufficient to prevent it from becoming enshrined in EU law. The big question then is where that would leave Ireland?

Presumably we could remain part of the euro area but would not have access to funding mechanisms and the like. Longer term, we couldn’t remain part of the euro if we do not sign up to the rules governing it.

Unlike in previous referenda, the European political system would not lose too much sleep if Ireland were to hold a referendum on this issue and reject it. Ireland would be placed in a type of limbo situation.

Those who are pressing for a referendum, even it is not legally required, should ask themselves what they would do if such a referendum were to be rejected.

It would ultimately place a serious question mark over Ireland’s continued participation in the single currency. If that is the choice of the people, fine, but they should be made aware of the possible consequences.

The treaty itself seeks to strengthen and give greater legislative power to the fiscal rules governing the euro area. Such rules in themselves will not be sufficient to ensure that the current crisis is solved or that it could not happen again, but it does represent another step on the torturous journey towards creating a sustainable monetary union.

In the immediate future the Greek default will have to be sorted out; the emergency fund will have to be strengthened considerably; banking regulation and supervision will have to be ramped up; and ultimately euro bonds will have to be created. Politically it is not possible to do all of that at once. It can only be achieved through small but significant steps, of which we got another this week.

Personally I have no love for the euro project and still believe we would have been better off outside the system provided we managed the economy in a prudent way.

Those who are playing politics with the treaty should think about the consequences of getting their way. It is a bit like a dog chasing a car — what would it do if it ever caught one?

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