Forget the spin, we’ve ceded our sovereignty

THE political implications of this bailout are stark.

Brian Cowen hasattempted in recent days to portray as nonsense suggestions that we have lost our economic sovereignty. The spin the Government is putting on it is that we have been pooling our sovereignty with our partners in the EU for a long time.

But when we pooled areas of our sovereignty, we chose to do so. We are getting no choice in this bailout. We are applying to a lender of last resort for the cash that will keep the country going, and the lender is supplying the cash but attaching strict terms and conditions.

Mr Cowen admitted as much in his press conference at Government Buildings.

“The surveillance and performance mechanisms when you sign agreements with these institutions are quite explicit, and there will be quarterly reviews, and we have to make sure that we are doing what we say we’re doing,” he said.

Not only that, but the next government will not be able to change the plan without first obtaining the agreement of the EU and IMF. In other words, what they say goes.

Additionally, in order to ensure such a problem doesn’t occur again in Ireland, the EU and IMF want new systems ofoversight introduced.

The first is a Fiscal Responsibility Law, under which the Government of the day will set out its medium-term spending plans. There will be binding “ceilings” on the amount that can be spent in each area.

This law couldn’t have come with a more humiliating title for the current Government, as it implies that the EU and IMF believe it to have been fiscally irresponsible up to now.

The lenders have also demanded that a “budgetary advisory council” be established. This body will provide an independent assessment of the Government’s budgetary position and forecasts. In other words, if the Government produces wildly optimistic or misleading growth projections, there will be a trusted independent organisation on hand to call its bluff.

The main opposition parties, Fine Gael and Labour, who are expected to form the next government, won’t have much quibble with the new law or budgetary council, as they had been calling to varying degrees for such oversight measures for years.

But they will have a problem with other terms in the agreement. For instance, the EU and IMF have insisted that any “additional unplanned revenues must be allocated to debt reduction”.

In other words, if the economy performs better than expected in the next few years, and tax revenues exceed expectations, the Government will have to use that extra money to pay off debt before it can restore or improve public services. If proof were needed that this country has ceded economic sovereignty, it’s right there.