I’ve been away out of the country for a while and out of touch with the referendum debate raging in Ireland concerning the Fiscal Stability Treaty. So a seminar in Trinity College Dublin on the topic led by a lawyer, an economist and a sociologist seemed like a good way to get back into the topic. The speakers were:
- Dr. Gavin Barrett, School of Law, University College Dublin (Voting YES)
- Prof. Terrence McDonough, School of Business & Economics, National University of Ireland, Galway (Voting NO)
- Trinity’s Head of School of Social Sciences and Philosophy, Prof. James Wickham (my old Sociology Prof. voting DON’T Know).
Dr. Barrett’s main points were that there is very little in the Treaty that is not already contained in previous Treaties and Council decisions, and that the Treaty, through the establishment of the ESM, provides Ireland with an insurance policy in case we needed further funding after the current Troika led “bail-out” expires at the end of 2013. Ireland needs to roll-over c. €18 Billion of debt in 2014 alone, and may not be able to achieve that funding on the sovereign debt markets or from the IMF in the absence of ECB/European Commission goodwill and support.
In a subsequent question I noted that many Irish voters might regard external restraints on Government borrowing as a good thing in itself given the experience of two Fianna Fail led administrations in the late 1970’s and from the late 1990’s onwards, which effectively bought their way to power on the promise of tax reductions and public expenditure increases at a time when the economy was already growing rapidly. The resulting booms led to rather painful busts which Irish voters will not wish to see repeated.
So why all the fuss, and why is there a real possibility the Treaty will be rejected?
James Wickham argued that the Treaty debate needed to be understood in the context of a much broader debate about the future of Europe and that there was huge popular unease that the Treaty was part of a process whereby the European ideals which people had bought into were being systematically undermined. He characterised those ideals as consisting of:
- Relatively egalitarian income distributions and attitudes which approved of more equality rather than less
- The concept of social citizenship which entitled people to high standards of public education, health care, and income support, and which was not dependent on the goodwill of philanthropists
- The concept of economic citizenship which entitled people to a host of rights (and obligations) in the workplace, and
- A concept of the state as the backbone of society which guarantees a public space and not as an intrinsically evil imposition as it is characterised by Reaganite neo-conservatives in the USA.
He noted that, historically, the EU had had a role in both demolishing such state guaranteed rights by breaking down national barriers and in creating new rights and obligations to protect people from the effects of the single market. However, increasingly, the EU was seen as exposing people to the full rigours of globalisation without providing corresponding social protections as the member nation states had previously done. Effectively, the Treaty was part of a process by which the EU was undermining its own existence by devouring the social compact on which it was based. The European welfare state is not a luxury item we can no longer afford, but the whole basis of our social solidarity built up at a time of great adversity and austerity.
Terrence McDonough noted the Keynesian “paradox of thrift” whereby what is good for the Swabian housewife isn’t necessarily what is good for the economy as a whole. Thus a number of economies all banding together to introduce austerity policies at the same time may simply exacerbate the crisis for all. Austerity policies may appease “the markets” in the short term, but may often simply undermine the confidence of markets in the growth potential and thus credit worthiness of the self-same economies.
Ireland, he argued, had enormous bargaining power because a default by Ireland would be unthinkable and enormously damaging for the Eurozone as a whole. There simply was no solution to the Eurozone crisis which did not include:
- Eurobonds
- ECB funding of sovereign deficits (that came within agreed criteria)
- A mechanism for restructuring unsustainable sovereign debts
- Taxes to finance EU budgets which effectively transferred resources from well off to less well off regions
- Policies to address trade imbalances
In the absence of such policies the Euro is doomed in any case and any belief that Ireland can be saved by future ESM bail-outs is likely to be delusionary when those funds are also required for Italy, Portugal and Spain.
I noted in a follow up question that there was an emerging debate within Europe with regard to the Fiscal Stability Treaty as evidenced by the election of François Hollande, the outcome of the Greek and Nordrhein-Westfalen elections, and the failure of Merkel to obtain a parliamentary majority for her own signature proposal. The question of another “bail-out” for Ireland doesn’t arise until the end of the current Troika programme in 2014 and it simply doesn’t make sense for Ireland to vote yes to a proposal without knowing what addition “growth” proposals may be added to it in subsequent negotiations. We could vote NO now and reconsider the proposal if and when a fuller growth and stability pact had been agreed.
This question evoked divergent responses from the panel: Gavin Barrett evinced that our NO votes on Nice and Lisbon had been extremely damaging in terms of our standing in Europe and another NO vote could have serious consequences for confidence and foreign direct investment in Ireland in the meantime. Terrence McDonough noted that the current Government’s strategy of being nice to Europe had resulted in no tangible gains whatsoever, and that doors had been slammed in Finance Minister Michael Noonan’s face every time he tried to raise the Anglo Irish promissory note issue.
James Wickham noted that the European Project is often likened to riding a bicycle and that our prior practice of saying NO on occasion may no longer be tenable. The wheels are too close to coming off the project as a whole and we shouldn’t expect a positive outcome if we add more fuel to the flames.
Overall there was a sense that the European project is in crisis as never before and that Ireland has very little influence on the outcome, one way or the other. Encouragingly, there are the beginnings of a European debate cast in European terms and a rejection of crude national stereotypes of nasty Germans or lazy Greeks. There is great anger, but it is directed at bankers rather than at the Germans or the Greeks. There is also great fear at the unknown consequences of a Treaty rejection especially if that furthers the break-up of the Euro and the EU. The Irish electorate may have to balance that anger and that fear when coming to a decision.
