Eurozone crisis - Deals likely to cloud vote on EU treaty

Events seem to be conspiring to make even more difficult the already challenging task of having the Constitution amended to incorporate the European fiscal compact treaty.

Last week, Greece, blamed by many for the eurozone’s currency crisis, managed to reduce its mountain of debt by over €100bn by swapping privately held bonds for new, longer maturity paper with less than half the nominal value. The EU and the IMF have provided €110bn to the Greek economy and agreed an additional, second bailout fund of €130bn.

Why not us, wondered many Irish voices.

On Monday, eurozone finance ministers grilled Spain over its budget deficit, which is set to break fiscal compact treaty rules this year. Spain had agreed to cut its deficit to 4.4% of GDP but later said 5.8% was the best they could do as their economy had more or less collapsed. Even though the ink was hardly dry on the deal before its limits were broken, it is hard to be very critical of Spain, where unemployment stands at a frightening 23.3%, almost one-in-four, of the workforce.

Nevertheless, rules must mean something and the chairman of eurozone finance ministers, Jean-Claude Juncker, expects compact targets to be achieved by Spain just next year. This will be more than challenging for an economy in recession and will mean a changed,more difficult reality for a huge number of Spaniards.

Be that as it may, why not similar flexibility for us, those same Irish voices might reasonably ask again.

There is, too, the unacceptable spectre of some member states being obliged to pay a financial transaction tax while others refuse to impose the levy. This would greatly disadvantage some countries while giving others a considerable advantage. This fast-lane/slow-lane legislation would especially help Britain in steering business through London’s financial services centre; hence David Cameron’s line in the sand. It seems logical that this tax, if it is to be imposed at all, should apply across all member states or not at all. It may even be self-destructive for the EU to impose it if it makes the bloc less competitive than other world forces.

As if that was not enough, Finance Minister Michael Noonan was right when he warned that any deal to restructure Ireland’s bank debt was unlikely before the €3.1bn Anglo Irish Bank payment falls due later this month. Commissioner Olli Rehn confirmed that view yesterday afternoon when he insisted all debts must be paid when due.

Negotiations to revise the recapitalisation programme of the imploded Anglo Irish Bank and Irish Nationwide with expensive promissory notes are ongoing, as are discussions on how loss-making tracker mortgages might be dealt with.

Whether these talks end in perfect symmetry — announcing new, less draconian arrangements for Ireland before the vote is held — remains to be seen, but it is certain that this is a long-game referendum or not.

It remains to be seen, too, whether that realisation and the patience it requires is strong enough not to impede the ratification of the compact. But, most of all, it remains to be seen if our EU colleagues feel the same sense of urgency on these matters as those who would see the compact ratified do.