Ireland would be locked out of the EU’s future permanent bailout fund if it fails to ratify the treaty.
The fund, known as the European Stability Mechanism (ESM), is due to come into effect from the middle of this year.
It will provide financial assistance to any EU state which requires a bailout in the future.
However, the treaty states that only those countries which ratify the treaty will be allowed to avail of the ESM: “The granting of assistance in the framework of new programmes under the European Stability Mechanism will be conditional, as of Mar 1, 2013, on the ratification of this treaty by the contracting party concerned.”
Both sides of the referendum debate are likely to use this as part of their campaigns.
The yes side is likely to play up fears of Ireland having nowhere to turn in the future if it fails to ratify the treaty. The no side is likely to point to this provision as another “bullying” tactic by Europe.
However, the provision will not affect Ireland’s existing bailout from the troika of EU, ECB, and IMF, which runs the end of 2013. Under that bailout, the troika is providing €67.5bn of loans (including bilateral loans from Britain, Sweden and Denmark) to keep Ireland afloat. The troika will continue to provide those loans, so long as Ireland meets the terms and conditions of the bailout programme.
The problem for Ireland will arise if it is unable to return to the money markets as expected when the bailout programme ends.
Should the markets still be charging exorbitant sums by then, most analysts believe the Government will have little choice but to seek a second bailout. The effects of a no vote in the fiscal compact treaty would then be felt, as Ireland would be unable to access the ESM.
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