Captain Kenny needs to steer us away from referendum iceberg
Ratification of the EU fiscal compact can become a most hazardous enterprise. We only just scraped through on compliance with the Nice and Lisbon Treaties at second attempts of plebiscites. With a prevailing tailwind of domestic Euroscepticism, omens for public endorsement are bleak.
The difference this time is that if all 17 eurozone states don’t sign up, they will proceed anyway. If only 12 member countries ratify, the inter-governmental deal proceeds, regardless of us. Unanimity is no longer required. We would face the worst of all worlds.
Public sentiment is angry, full of blame and especially anti-establishment. Red C tracking polls suggest considerable slippage in government party support since the general election a year ago. Fine Gael is down from 36% to 30%, with Labour reduced from 19% to 14%. A shallow “vote yes for jobs” will be derided. Increasing perceptions abound of a German hegemony dictating to weaker beleaguered states. False campaign rhetoric about burning bondholders has evaporated, leaving promissory notes and bank rescue bills to be picked up by impoverished taxpayers. Attempts to terrorise voters into submission, through threats of economic exclusion, are unlikely to yield a positive response — given that Irish households have already lost €230bn in wealth destruction.
In the first instance, Cabinet awaits the verdict of Attorney General Máire Whelan as to the constitutional necessity for a referendum. If this EU treaty complies with existing law, as enshrined in Article 29.4, Oireachtas legislation will suffice. It could be argued as this involves 25, rather than full 27 EU members, that it doesn’t carry usual treaty obligations. The Supreme Court ruling of 1987 Crotty case sets the bar at a low-level in terms of Article 5 of the Constitution in relation to transferring sovereignty in economic and foreign policy matters requiring a referendum. Our diplomats succeeded in diluting German appetites for constitutional inclusion. This would have posed not only Irish problems, but also in Poland, Austria, Denmark, Sweden and Netherlands.
Despite official denials, EU bureaucrats in Brussels privately concede that political pragmatism was at play to help the Irish sign. This gain would be reversed if the AG recommends a vote. Expectation is governmental determination to rely on legislation alone. This presents President Michael D Higgins, with the option under article 26 to refer the pact to the Supreme Court to appraise its constitutionality. The ploy by the technical group to have a legislative referendum under Article 27 is a non-runner. It requires prior rejection by the Senate, a subsequent majority petition by half of the senators and 56 TD signatories. Dream on lads.
Any litigant can challenge constitutionality through the High Court or subsequent appeal. Learned justices will probably have the final say, based on legalities. The politics of the situation are clear-cut. If ever a green jersey agenda was appropriate, it’s now. This dilemma only has downsides for Ireland. We are faced with a lose-lose situation, if there is a ballot.
The fiscal compact is a product of German domestic politics. It won’t resolve the eurozone crisis. The establishment of a “golden rule” of fiscal discipline of a 0.5% structural deficit is light years away for at least a handful of eurozone states. It represents a distant prospect of a repeated sovereign insolvency beyond 2030. The debt/GDP ratio of 60% ceiling is a remote reality. European Court of Justice sanctions and fines amount to a slap on the wrist in monetary terms. We are already committed to enactment of a Fiscal Responsibility Bill, providing for these budgetary rules. However, there is one big bazooka. Failure to ratify disqualifies a state from future draw-downs from the European Stability Mechanism (ESM). Wow. That’s a game changer for a nation that has to refinance €24 billion of sovereign debt and liabilities in 2014, when the EFSF and present bailout expires in 2013.
The plain truth? We can only return to money markets if our government bond issues are underwritten by the ECB. The carry trades of a few weeks ago represent an illusionary soft touch of profitability for banks to obtain a 5% return on 1% ECB three-year finance. If we bungle this ratification, we screw our chances of entitlement to more institutional cash. A second extensive bailout is utterly predictable, despite government guff. Those who advocate a referendum and rejection of the treaty are leading us up a cul-de-sac. They threaten to remove the only safety net for the public finances. Anger is not a viable strategy. Debt restructuring on promissory notes won’t be achieved by idle threats and vacuous vilification of our creditors. It’s time to get real about signing up to this pact.
Fíanna Fáil advocates a referendum for its own sake. How daft is that. When pressed to indicate whether they are in favour of a yes or no position, they refuse to state a stance. Hinting at populism in pursuit of a growing feeling of negativity towards the EU, they hope to curry favour in polls. Dithering by Micheál Martin on a presidential candidate was bad politics. Messing about with the national interest evokes only cynicism. Copycat frolics of Sinn Féin and United Left Alliance hardly represent viable tactics to reinvent FF. If treaty rejection offered chances of compromising sovereign creditors and orderly debt default, it might be alluring. It doesn’t.
A referendum represents a lose-lose scenario. If we approve the text into our written constitution, we forsake future flexibility in economic policy. This straitjacket is the outcome of Angela Merkel’s internal electoral machinations. Who knows how unsuitable it may be for Ireland Inc in decades ahead. A counter cyclical fiscal stimulus may be required at some point after order is restored to our public finances. Dáil legislation can always be amended if, for instance, we were no longer part of the single currency. Enshrining this treaty as a tablet of stone only serves to cement our current tragic impoverishment in perpetuity. Having transferred and exported economic sovereignty under Article 3, we may not be able to unscramble a momentary necessity. “Permanent” is not a term that can apply to high-level politics.
Currently we have to face that we are beggars, not choosers. The cyclical nature of all aspects of life mean this is not a permanent status. This Treaty on Stability, Co-ordination and Governance in the Economic and Monetary Union doesn’t deal with the requirement for Eurobonds or quantitative easing.
It doesn’t provide a path to sustainable debt repayments for peripheral states through orderly defaults. It won’t solve the emergency situation in Greece. It doesn’t reform EU structures or remedy the escalating democratic deficit in Europe. It doesn’t provide a foundation stone for a federation of EU states. It’s a fig leaf for Germany to muddle through. Let’s avoid the claptrap of the Confusion (Referendum) Commission — just enact the legislation and move on to revival.
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