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Ireland : 36 Hours To Euro Meltdown

Tuesday, May 29, 2012 22:57

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UNLIKE ANY previous EU or EEC treaty the consequences of non-ratification – of a No vote – by Ireland of the fiscal treaty will fall entirely on Ireland. Unlike the Nice and Lisbon Treaties when Ireland, in voting No, held back treaty implementation in every member state, now, once 12 other states have ratified it, the treaty will come into force in the ratifying states, leaving laggards behind.

But the treaty’s peculiar nature – it is largely limited to the enshrining in treaty form of legally binding commitments already agreed by EU member states – means that Ireland will nevertheless be under an obligation to implement the vast majority of its provisions even if we vote No.

The necessity to package in treaty form such commitments, known as the “six pack” and “two pack” ,of which, was largely a political rather than a legal concession to placate Germany.

Subtract such pre-existing commitments from the treaty, and what are we left with? Substantially there would only be one direct consequence – a very substantial consequence – for Ireland of a No vote: the loss of the State’s ability to be considered for a second bailout from the new European Stability Mechanism (ESM).

In the short term, any vote to opt out of the ESM protective net is certain, economists argue, to make markets more nervous about Irish debt and to push up the cost of borrowing. With notional Irish borrowing costs on the open market still at an unsustainable level, this would delay the return of private investors and make a second bailout more likely. Rival Irish leaders traded insults and accused each other of lying to the public on Tuesday as a high-stakes vote on the European Union’s fiscal treaty neared.

Both sides sharpened their attacks on what was the last full day for politicians to speak to Irish television and radio before Thursday’s referendum on ratifying the treaty. Irish broadcasters impose a voluntary ban on discussing referendums the day before any vote.

Prime Minister Enda Kenny accused the Irish nationalist Sinn Fein party of lying about Ireland’s need to slash its annual deficits and keep its future options open for bailout loans from European Union partners. And Kenny defended his campaign-trail refusal to debate directly with Sinn Fein leader Gerry Adams.

“I am not going to be shoved around by Sinn Fein,” Kenny said. “I am not going to give a platform to somebody who I don’t regard as the leader of the opposition, to propagate what are blatant lies and hypocritical assertions.”

Adams countered that the government was trying to scare voters into believing that Ireland would “fall off the end of the world” if it shoots down the treaty. He insisted Ireland would be better off, and argued that an Irish “no” would force the entire 17-nation eurozone to rethink its austerity strategy.

Ireland is the only one of 25 nations putting the EU’s deficit-fighting agreement to a national vote. Results are expected Friday night.

Crucially, the treaty says rejection would block Ireland from tapping the EU’s future emergency loan fund when its existing bailout loans run out next year. Anti-treaty campaigners dismiss that as a bluff.

At the High Court in Dublin, a judge is currently hearing Sinn Féin’s legal challenge over statements made by the Referendum Commission in relation European Stability Mechanism bailout fund. The party has claimed that the Referendum Commission’s statements on Ireland’s chance of vetoing the ESM have tainted the referendum process. The court has dismissed the first part of Sinn Féin’s legal challenge but is hearing other parts of it this evening.

The Football Association of Ireland has waded into the referendum debate or rather is trying to stay out if, insisting it hasn’t come out in favour or against the Fiscal Compact treaty despite Sinn Féin posters which could indicate otherwise.

Meanwhile, voting has been taking place on the Mayo islands of Inishturk, Inishbiggle and Clare Island with almost 200 voters eligible to cast their vote on the three islands. Polls closed an hour ago but ballots will not be counted until Friday morning along with all the other ballots. Tomorrow, we can look forward to voting on four Galway islands.

If you’re utterly sick of referendum debates that have dominated TV and radio over the past few days then you will be pleased to know that a moratorium comes into effect tomorrow from 2pm. It means that broadcast media cannot utter a word about the referendum other than to say that they cannot utter a word about the referendum.

Speaking of broadcasters, Newstalk radio has found that 47 per cent of people who took part in its iPoll – which was run on the Newstalk app for iPad and iPhones – are in favour of a Yes vote in the referendum with 35 per cent opting for No. Eighteen per cent remain undecided, according to the poll. A series of polls during the past month’s campaign suggest that the government and pro-treaty voices should win. But analysts say the verdict could be swung either way by a large minority of people who say they haven’t made up their minds yet, but are angry at the government.

The treaty, signed by Kenny in February, commits all ratifying members to achieve budget deficits of less than 0.5 percent of economic output. Ireland last year posted an EU-leading 13.1 percent deficit and expects at least three more years of stern austerity just to get back below the EU’s existing deficit limit of 3 percent.

Anti-treaty campaigners argue that the tighter deficit rule would bind Ireland to even more years of austerity. They say Ireland instead should default on debts at five nationalized banks, the very scenario that Ireland has spent four years and tens of billions of euro to avoid.

Bank-bailout costs overpowered Ireland’s own fund-raising muscle in 2010 and forced the once-booming country to negotiate a €67.5 billion ($90 billion) loan package from the EU and International Monetary Fund. Those funds will run out by late 2013.

Kenny contended that Ireland’s already battered credit rating would face further downgrades if the public rejects the treaty. He said that would make it harder, if not impossible, for Ireland to resume borrowing normally on bond markets next year as it wants to do.

He and other party leaders accused Sinn Fein of exploiting an election-law loophole to gain a disproportionate share of media time.

As the only significant party campaigning against the treaty, Sinn Fein has seen its public profile and voter support surge in recent weeks to record opinion-poll high of 21 percent, making it the second-most popular party in the Republic of Ireland for the first time. Ireland’s referendum law requires both sides of an issue to receive equal time on TV and radio.

Sinn Fein also held its annual conference Saturday and Adams’ hour-long speech was shown live on Irish state television RTE. Because Adams spent four minutes specifically discussing his party’s opposition to the treaty, RTE gave Kenny a four-minute window Sunday to make his own live statement.

Micheal Martin, leader of the main opposition Fianna Fail party, unusually has supported the government side. He says Ireland cannot risk closing the door on a second bailout from EU funds, which would be far cheaper than what private creditors would provide.

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