Defiance of the Merkozy dictatorship isn’t such a bad idea Ivan Yates in the Examiner – I agree with him

By Ivan Yates

Thursday, December 15, 2011

WHICH part of this deal did they think might appeal to us?

The outcome of the 15th consecutive EU summit to resolve the eurozone
crisis fails to meet any Irish requirement. The government is
sleepwalking towards a referendum defeat, unsustainable national debts
and ever diminishing economic sovereignty. The only discernible
strategy is the usual “make it up as we go along — hoping something
will turn up”. It’s increasingly apparent that our dependence on the
kindness of strangers is being met by Franco German self-interest that
disregards concerns of smaller European states. Yet, we give them a
blank cheque of compliance.

It seems Irish delegations suspend their critical faculties in
assessing consequences for us of EU pacts. The latest fiscal compact
set out financial disciplines for each of 17 eurozone countries. The
rules are clear: sovereign debt must be limited to 60% of GDP; annual
budget deficits cannot exceed 0.5% of GDP; if the public deficit
exceeds 3% of GDP there will be automatic penalties and sanctions.
Let’s do the simple mathematics. Our GDP stands at €170bn, while our
gross government debt is set to exceed €200bn by 2014. Our obligation,
under these rules, is to reduce the national debt to €102bn. Last
month the current budget deficit stood at €21.4bn, this must be cut to

No timetable was set out for any state, because these targets, in the
context of zero real growth, are utterly illusory. EU leaders and
technocrats have learned nothing from the Greek debt crisis, which
remains unresolved. Applying dissuasive penalties just doesn’t work.
That’s why they softened our bailout terms with reduced interest rates
and longer repayment periods. How could any analyst, let alone
merciless markets, attach currency credibility to such long-term
aspirational remedies? Ireland will be unable to adhere to these
criteria for at least a decade. It probably precludes future
meaningful public capital infrastructural development programmes.

The crux of the crisis remains the capacity of eurozone governments
and European banks to re-finance their operations in 2012. The summary
situation is: €1bn of sovereign bonds, with almost a third of this
required in Italy in the first half of the year; €640bn of rollover
finance for circa 90 banks. If private and institutional investors
require double-digit bond yields, the funding will be unsustainable.
The EFSF/ESM entire pot amounts to a maximum of €700bn — falling well
short of the potential firewall or backstop of almost €2 trillion. A
shortfall seems inevitable unless the ECB can step in to provide
emergency liquidity or Eurobonds. The most significant fallout from
Brussels bungling is the new fracture in UK/EU relations. Deepening
British euro scepticism has developed into outright conflict with
Nicholas Sarkozy. Why should the Brits give up the flexibility of
macro economic management they retain through the Bank of England and
Chancellor of the Exchequer for a currency they don’t belong to? This
chasm runs deeper than merely an exemption for the City of London from
the Tobin tax on financial transactions. David Cameron may be bête
noire of Europhiles, but probably has majority popular support at
home. Defiance of Merkozy dictatorship merits wider consideration.
Sarkozy resembles a sleazy serpent. Hopefully, he may not get

All previous EU treaties (Rome, Amsterdam, Maastricht, Nice, Lisbon)
operated under fundamental compromises that required ultimate
unanimity. Remember the “all or nothing” refrain on our second Lisbon
vote. A new precedent to embark on an inter-governmental agreement
weakens, and could defy, EU law and pillars. Von Rompuy, Barroso, Rehn
and entire commission have been marginalised by Franco German duopoly.
This undermines founding principles of equality and rights of smaller
states. 85% qualified majority rules also mean that the veto is now
exercised only by Germany, France or Italy. The big boys are using the
currency crisis to bully peripheral countries and bulldoze their way
through community institutions. Other leaders meekly acquiesce.

Ireland’s interests? This sequence of events could hardly be moving in
a more negative direction. Common language and geography (as
neighbours) between us and UK mean we are especially vulnerable to
UK/EU divergence. The IFSC and ISEQ in many respects are Dublin
satellites of a London hub. Deeper demarcation between our island
economies and administrations can only be to the detriment of Northern
Ireland and its economic prospects. Continental Europe can jettison
Britain. Ireland can’t, given our mutual trade dependence and exports
worth more than £1bn per month. Tourism, food industry and transport
networks are inextricably linked.

Our key competitive advantage lies with a lower corporation tax rate.
Multinationals spend €19bn here in wages, sub-supply services and
procurement — as well as €1.2bn in CPT. Direct and indirect employment
amounts to almost 240,000 jobs. Sarkozy won’t let go of this bone,
ever since Google came to Dublin. In pre-summit correspondence from
Merkel/Sarkozy to the EU president, they re-stated their requirement
for tax harmonisation. They don’t want us to have flexibility to
retain incentives to survive. The final communiqué still hankers after
fiscal “integration”. Like insurmountable Greek debt, it won’t go
away. A fleeting glimpse of the Shamrock was evident on the eve of the
summit. Enda Kenny requested agenda inclusion of Irish debt
restructuring (ie some relief on continuing to absorb full costs of
ECB bond redemption policies). Like a pimple on a buttock, this plea
was ignored. Despite being the best Germans in class and a role model
for bailout servitude, we’re told to keep taking the austerity

The German prescription for Ireland is now to apply to all of the EU.
They want an “Austerity Union” — less government spending and higher
taxes with no quantitative easing. Their monetary and
anti-inflationary policies are a recipe for prolonged stagnation,
without growth. This entraps us on a treadmill of deflation and

The Government heads towards another EU referendum. All academic and
other constitutional legal experts, who have proffered an opinion to
date, suggest there is no avoidance of a public vote. The 1987 Crotty
case and Supreme Court sentiment expressed therein imply the
Oireachtas doesn’t have the authority to relinquish or transfer
sovereignty. Articles 5, 6, 17, 21 and 28 are problematic. Procuring
the detailed EU text and consideration by the Attorney General are
only delaying tactics. The politics, as well as the legalities, of the
situation mean a plebiscite.

Sweden, Hungary, Finland, Denmark, Czech Republic and Netherlands may
yet encounter likely reservations. Government’s stance is based on
deference in the hope that we will be eventually looked after.
Negotiation cannot be predicated on the expectation of concessions. We
need to launch diplomatic initiatives of common causes amongst
eurozone states. There remains no legal provision for anyone to be
expelled from the euro.

Last week’s events were the latest culmination of the campaign to
re-elect Sarkozy. Preservation of France’s triple-A rating is
paramount. So, no private investor pain. A new EU treaty that provided
for Eurobonds and removed the legal constraints on the ECB might
procure a yes vote. Make-believe rubbish and denial deserves
rejection. It’s time for Kenny to relay realities of resistance.

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