Food for thought over treaty

There’s a joke going the rounds at the moment that undecided Fiscal Stability Treaty referendum voters may enjoy.

Pythagoras’ theorem has 24 words. The Lord’s Prayer has 66 words. Archimedes’ Principle has 67 words. The 10 Commandments has 179 words. The Gettysburg address has 286 words. The US Declaration of Independence has 1,300 words. the US Constitution with all 27 amendments has 7,818 words. The EU regulation on the sale of cabbage has 26,911 words.

Voters who fall asleep early on when perusing the referendum literature may appreciate that one. The treaty’s complexity and long-windedness is just one reason why voters may trust their emotions rather than make a rational decision — and why both yes and no supporters have endless ammunition for argument and counter-argument.

It’s an emotional and complex issue, but a few hard facts stand out.

Ireland cannot block the treaty; it will take effect when 12 of the 17 eurozone members ratify it.

But only countries that ratify it will have access to the eurozone’s permanent bail-out fund, the European Stability Mechanism (ESM).

It is distinctly possible that Ireland will need ESM funds later this year.

Saddled with huge debts, our country has successfully implemented €25bn in savings since our economic crisis began in 2008, and the Irish economy has stabilised after three years of contraction, with the European Commission forecasting a GDP rise of 0.5% this year. Quarterly targets in our bailout programme have been met.

Consumer confidence has increased slightly in each of the past four months, for the first time since 2007. Consumer spending is forecast to return to growth next year, employment and incomes have also stabilised.

But we will need to borrow new funds to run the country in late 2013, and we may need the ESM if we can’t return to sovereign debt markets.

On the sovereign debt markets, Irish borrowing rates recently exceeded 7% for the first time in months, making our planned return to international bond markets more difficult. The rising rate is due to uncertainty in Greece and Spain, and the rising likelihood of a Greek exit from the euro.

If Irish voters reject the treaty, how do we keep the country going if we cannot borrow from the markets (too expensive) or from the ESM? This fear that rejecting the treaty will cut Ireland off from EU finance, with possible consequences such as a run on banks, or leaving the euro, seems to be edging the vote outcome, instead of anger about economic hardships — justified and intense though that anger may be.

There are other emotions swirling about also.

Such as hope that a no vote would force EU leaders to ease the painful austerity policies they demanded in order to rapidly shrink sovereign debt.

Such as self-consciousness about the foreign direct investors whose companies bolster the Irish economy, and what they might think about Ireland’s relationship with the EU.

Such as the resentment now common in Greece that they are governed from Brussels (or Germany), and that their own people could do better.

At the other end of the spectrum are our young farmers. They have made clear their faith in EU management of our finances, with Macra president Alan Jagoe saying their national council endorses a Yes vote to help strengthen the adherence to balanced eurozone budgets.

With farmers doing relatively well in recent years, the anger about economic hardships is less of a factor as they go to the polls. So they have most to gain from stability — and all the main political leaders agree that farmers will do better if Ireland can come to the upcoming negotiations on EU funding for farmers after voting yes.

The country’s leading agribusinesses have also recommended a yes vote.

Even before the treaty vote, a cut in EU funding for farmers in current EU budget talks was on the cards. Farmers would do well to save their No vote until a bad agriculture deal for the next six years may be put in front of them. Meanwhile, the more unstable the outlook for the EU, the more agriculture spending may be endangered. And a stable currency base is vital for farmers who plan to borrow and expand in the next few years.

Literally bankrolled by Brussels for 40 years, farmers are more used to the reams of regulations which flow from the EU, than the average voter trying to stay awake while reading their stability treaty leaflets. And it seems, on balance, farmers like what they read, with their leaders all recommending a yes.


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