Irish Examiner – Ivan Yates is totally correct in his summation here. We have to go along with the Germans for the moment. Anything else is crazy

Captain Kenny needs to steer us away from referendum iceberg

THE Government’s radar needs to be on amber alert. Up ahead lurks an
iceberg that could rip our Titanic below the waterline and sink
fragile hopes of economic recovery.

Ratification of the EU fiscal compact can become a most hazardous
enterprise. We only just scraped through on compliance with the Nice
and Lisbon Treaties at second attempts of plebiscites. With a
prevailing tailwind of domestic Euroscepticism, omens for public
endorsement are bleak.

The difference this time is that if all 17 eurozone states don’t sign
up, they will proceed anyway. If only 12 member countries ratify, the
inter-governmental deal proceeds, regardless of us. Unanimity is no
longer required. We would face the worst of all worlds.

Public sentiment is angry, full of blame and especially
anti-establishment. Red C tracking polls suggest considerable slippage
in government party support since the general election a year ago.
Fine Gael is down from 36% to 30%, with Labour reduced from 19% to
14%. A shallow “vote yes for jobs” will be derided. Increasing
perceptions abound of a German hegemony dictating to weaker
beleaguered states. False campaign rhetoric about burning bondholders
has evaporated, leaving promissory notes and bank rescue bills to be
picked up by impoverished taxpayers. Attempts to terrorise voters into
submission, through threats of economic exclusion, are unlikely to
yield a positive response — given that Irish households have already
lost €230bn in wealth destruction.

In the first instance, Cabinet awaits the verdict of Attorney General
Máire Whelan as to the constitutional necessity for a referendum. If
this EU treaty complies with existing law, as enshrined in Article
29.4, Oireachtas legislation will suffice. It could be argued as this
involves 25, rather than full 27 EU members, that it doesn’t carry
usual treaty obligations. The Supreme Court ruling of 1987 Crotty case
sets the bar at a low-level in terms of Article 5 of the Constitution
in relation to transferring sovereignty in economic and foreign policy
matters requiring a referendum. Our diplomats succeeded in diluting
German appetites for constitutional inclusion. This would have posed
not only Irish problems, but also in Poland, Austria, Denmark, Sweden
and Netherlands.

Despite official denials, EU bureaucrats in Brussels privately concede
that political pragmatism was at play to help the Irish sign. This
gain would be reversed if the AG recommends a vote. Expectation is
governmental determination to rely on legislation alone. This presents
President Michael D Higgins, with the option under article 26 to refer
the pact to the Supreme Court to appraise its constitutionality. The
ploy by the technical group to have a legislative referendum under
Article 27 is a non-runner. It requires prior rejection by the Senate,
a subsequent majority petition by half of the senators and 56 TD
signatories. Dream on lads.

Any litigant can challenge constitutionality through the High Court or
subsequent appeal. Learned justices will probably have the final say,
based on legalities. The politics of the situation are clear-cut. If
ever a green jersey agenda was appropriate, it’s now. This dilemma
only has downsides for Ireland. We are faced with a lose-lose
situation, if there is a ballot.

The fiscal compact is a product of German domestic politics. It won’t
resolve the eurozone crisis. The establishment of a “golden rule” of
fiscal discipline of a 0.5% structural deficit is light years away for
at least a handful of eurozone states. It represents a distant
prospect of a repeated sovereign insolvency beyond 2030. The debt/GDP
ratio of 60% ceiling is a remote reality. European Court of Justice
sanctions and fines amount to a slap on the wrist in monetary terms.
We are already committed to enactment of a Fiscal Responsibility Bill,
providing for these budgetary rules. However, there is one big
bazooka. Failure to ratify disqualifies a state from future draw-downs
from the European Stability Mechanism (ESM). Wow. That’s a game
changer for a nation that has to refinance €24 billion of sovereign
debt and liabilities in 2014, when the EFSF and present bailout
expires in 2013.

The plain truth? We can only return to money markets if our government
bond issues are underwritten by the ECB. The carry trades of a few
weeks ago represent an illusionary soft touch of profitability for
banks to obtain a 5% return on 1% ECB three-year finance. If we bungle
this ratification, we screw our chances of entitlement to more
institutional cash. A second extensive bailout is utterly predictable,
despite government guff. Those who advocate a referendum and rejection
of the treaty are leading us up a cul-de-sac. They threaten to remove
the only safety net for the public finances. Anger is not a viable
strategy. Debt restructuring on promissory notes won’t be achieved by
idle threats and vacuous vilification of our creditors. It’s time to
get real about signing up to this pact.

Fíanna Fáil advocates a referendum for its own sake. How daft is that.
When pressed to indicate whether they are in favour of a yes or no
position, they refuse to state a stance. Hinting at populism in
pursuit of a growing feeling of negativity towards the EU, they hope
to curry favour in polls. Dithering by Micheál Martin on a
presidential candidate was bad politics. Messing about with the
national interest evokes only cynicism. Copycat frolics of Sinn Féin
and United Left Alliance hardly represent viable tactics to reinvent
FF. If treaty rejection offered chances of compromising sovereign
creditors and orderly debt default, it might be alluring. It doesn’t.

A referendum represents a lose-lose scenario. If we approve the text
into our written constitution, we forsake future flexibility in
economic policy. This straitjacket is the outcome of Angela Merkel’s
internal electoral machinations. Who knows how unsuitable it may be
for Ireland Inc in decades ahead. A counter cyclical fiscal stimulus
may be required at some point after order is restored to our public
finances. Dáil legislation can always be amended if, for instance, we
were no longer part of the single currency. Enshrining this treaty as
a tablet of stone only serves to cement our current tragic
impoverishment in perpetuity. Having transferred and exported economic
sovereignty under Article 3, we may not be able to unscramble a
momentary necessity. “Permanent” is not a term that can apply to
high-level politics.

Currently we have to face that we are beggars, not choosers. The
cyclical nature of all aspects of life mean this is not a permanent
status. This Treaty on Stability, Co-ordination and Governance in the
Economic and Monetary Union doesn’t deal with the requirement for
Eurobonds or quantitative easing.

It doesn’t provide a path to sustainable debt repayments for
peripheral states through orderly defaults. It won’t solve the
emergency situation in Greece. It doesn’t reform EU structures or
remedy the escalating democratic deficit in Europe. It doesn’t provide
a foundation stone for a federation of EU states. It’s a fig leaf for
Germany to muddle through. Let’s avoid the claptrap of the Confusion
(Referendum) Commission — just enact the legislation and move on to

By Ivan Yates

Thursday, February 09, 2012