Tuesday, 8 May 2012

A referendum on political tactics

When the Fiscal Stability Treaty was agreed back in January (PDF), despite being short and to the point, it was hard to assess. First of all, the treaty is already 90% EU law, the European Parliament having passed the “six-pack” Barroso mentioned in his State of the Union speech – you can find the legislation here. The budgetary requirements have also caused a political storm in Belgium and been one of the causes (or the excuse for, on the part of the PVV) the collapse of the Dutch government.

However, though the treaty changes little in legal terms, it’s not something that could simply be voted against to force another renegotiation, as only 12 states need to ratify it before it comes into force. In addition, in the treaty for the European Stability Mechanism (PDF), it stipulates that only countries that have ratified the FST will have access to its funds for a bail-out. Despite the six-pack legislation not being subject to much debate in Ireland, the debate has so far centred around the big question of how Ireland secures its funding. The current bail-out arrangement lasts until 2013 when Ireland is supposed to return to the markets. Though there is widespread acceptance that the current austerity policy (essentially, the last 5 years) is not enough and that there should ideally be an investment and growth policy, the bail out loans cover the budget deficit for the Irish state, and without it Ireland would have to default, leading to harsher, more sudden cuts.

So far the No side has failed to come up with an alternative to the question: where would the money come from if we need a second bail out? It seems perverse, since the government line is that we won’t need one since Ireland is “on track”, but since the No side is based on the fact that the current bail-out programme won’t solve anything, it is not a question that can be ignored. One solution put forward by the No side is that Ireland could veto the ESM treaty – though this would be difficult since it can only be vetoed by states amounting to 10% of the subscriptions, of which Ireland makes up under 2%. All the political parties involved have trouble articulating a vision on Europe, and on making alliances to achieve their vision. This may partially be a result of the referendum process in Ireland and treaty structure of the EU as past referendums could block a treaty and force a renegotiation. This is not the case here, and though the quality of the debate is much higher than before (there have been no strange claims along the lines of abortion or conscription), the lack of an alternative vision is palpable. It means that the Irish government has an unimaginative and poor European policy, but in this case it helps the Yes side since the No campaign cannot rely on the “back to the drawing board” vote in the same way anymore.

But now there’s a Socialist in the Élysée talking about growth and leading the charge against austerity in Europe. The promise of Hollande to renegotiate the FST has already played a part in the campaign so far. For the No side this is the sign that a No vote would really count in the European debate on austerity. So far the messages from Hollande have been quite mixed, and there might not be a renegotiation of the FST per se:

“Hollande says he agrees with all existing provisions in the fiscal treaty, including tight limits on budget deficits and public debts.


Informal contacts have been taking place between Hollande’s camp and the authorities in Berlin, Frankfurt and Dublin, and despite Hollande’s public insistence on renegotiation, all signs suggest the ground is being prepared for a compromise.

Two of Hollande’s senior aides – policy director Michel Sapin and Europe adviser Catherine Trautmann – have indicated to The Irish Times that they may be open to a “growth pact” in the form of a protocol or a separate legal text, a fix that would leave the fiscal treaty as it stands.”

Would a No vote help bury the austerity policy, or would it leave Ireland unnecessarily politically exposed while an extra treaty is put together – or new proposals are made within the EU legislative system? With only a month left before the vote there will be no alternative treaty before the vote, so it will be down to what tactics seem most credible. Ireland will listening closely to what the Élysée says in the next few weeks.

UPDATE: Van Rompuy has called a summit for the 23rd of May, so the outcome could impact on an Irish referendum - especially if any growth pact is tied to the Fiscal Stability Treaty.

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