Treaty Agreement: January 30

Information on the Treaty agreed last night by 25 EU member states is available here. Somewhat remarkably, given that draft texts have been circulating for weeks, there is no version of the agreed text.  Anyone out there have a link?

I’d note that the materials released all point to the need to implement the structural deficit rule at “constitutional or equivalent level” while the Independent reports that “preferably constitutional” is in the final draft.

If indeed it turns out that we need a referendum, this is a pretty bad start.

Update: The EU Council have finally released the text here. Anyway, “preferably constitutional” has been retained, which begs the question as to what van Rompuy and his officials were up to with their statements about “constitutional or equivalent level”.

186 replies on “Treaty Agreement: January 30”

The Guardian quotes Merkel as saying:

“The debt brakes will be binding and valid forever…Never will you be able to change them through a parliamentary majority.”

I am presuming that this is just meaningless spin for her domestic audience, but without sight of the text, and without being a lawyer, who knows. If it were true you would have to have a referendum I would have thought.

The announcement of an agreement but absence of availability of said agreement suggests either a scramble to actually finalise bits of it by officials after hours or news cycle management. If Angela can make the assertions she has and the news cycle is more ore less over before the actual texts are read and understood and discussed in the media and then critics respond, then the effect is that the swing vote just takes on board the headlines.

Politicians are generally, to use Tony Ben’s lexicon ‘weathercocks’ rather than ‘signposts’. They are blowing with the easily marketable austerity wind at least in public whilst pandering to grubby powerful lobbies behind the scenes. After a decade maybe, they will blow with the Keynesian wind. If the ‘treaty’ pours superglue into the hinges, what will the politicians do when the wind changes?

@De Roiste:

Jesus wept! You would be dopey in the extreme to believe political exhortations at this juncture. But this stuff: needs v-careful analysis, and even more careful commentary. The second word in the piece should activate your bullshit klaxtons – assuming they have been armed.

What is totally missing in the piece – since its as comfortable as a briar up your fundament, is that borrowing to pay for day-to-day spending HAS to stop, sooner, not later.

If that does not happen, then some of the scenarios sketched WILL occur. Just which ones, and when, is a contested item.

@ All

The most likely reason for the failure to circulate a text is the need to have authentic versions in all the languages in which the treaty will be valid cf. Article 16.

It is unlikely that there will be any earth-shaking changes from the most recent leaked version (courtesy of La Stampa).

http://www.lastampa.it/_web/tmplframe/default.asp?indirizzo=http://www.lastampa.it/_web/download/pdf/Fiscal_27.01.2011.pdf

The key issue for Italy is, of course, the changed wording in relation to the structural deficit and, indeed, for other less enthusiastic countries participating (by my count, 24 of the 25).

Article 8 has also been revamped in order to guarantee compatibility with the existing treaties.

No other country, apart from Ireland, is even debating the possibility of holding a referendum. When one reads the text, one can understand why. The countries signing up to it are simply accepting to commit themselves subject to binding arbitration – in this instance by the ECJ under an existing, never used, but quite clear legal base (Article 273 TFEU) – as is the case with many international treaties. There is no suggestion of interfering with the sovereign rights of participating countries. (The hurried retreat by Merkel from a position advanced by her own party in relation to having a budgetary “overseer” appointed for Greece should be evidence enough, if evidence is needed, of the unacceptability of any transfer of competences except in the context of an EU treaty revision).

The position of the parties is now, it seems, as reported by the IT today.

http://www.irishtimes.com/newspaper/world/2012/0131/1224311004451.html

Well if this is the extent of it, then it’s hard to disagree with it.

Despite attempts in some quarters to brand this as a program for decades of austerity, it seems to merely recognise reality -that you should not run deficits heedlessly.

I still think we should leave the Euro, but I’m all in favour of a court enforced fiscal balancing rule.

I think this is the phrase that would cause most debate ‘ to develop ever-closer coordination of economic policies within the euro area’. Are we moving inexorably towards a Federal Europe and if so when will common taxes be implemented.

@ All

The Indo has pretty good Q & A in the matter.

http://www.independent.ie/business/irish/q-and-a-the-new-eu-fiscal-agreement-3004053.html

The contortions of our esteemed political leaders trying to sniff which way the popular political wind is blowing is a sight to behold.

Cameron is quoted as putting himself and the UK in the same position as the Skibereen Eagle.

“There are a number of legal concerns about this treaty. That’s why I reserved the UK position on it. We will only take action if our national interests are threatened. We will be watching like a hawk.”

What a celebration there would be were the commentariat in the other island talk us into the same position.

@ David G

This is an entirely innocuous phrase, the key word being “coordination” which, by definition, cannot imply any transfer of competences cf. Article 5.1 of the TFEU in relation to ‘Categories and Areas of Union Competence’ which uses the same word.

This is very odd. I can’t find a final version of the agreed text either.

The only people in Ireland who can probably give you an answer on this is probably Roinn an Taoisigh (or maybe the Attorney General but I doubt it’s actually reached his desk yet as it’s unlikely they’re serious about considering a referendum so no hurry in the AG’s office then lads – take your time).

http://www.taoiseach.gov.ie/eng/Contact_Us/

Unfortunately, I am too busy at the moment to pursue.

Those in favour of the ‘Compact’ should not view Prof Michael Hudson speaking to Lauren Lyster (youtube) yesterday:

http://www.youtube.com/watch?feature=player_embedded&v=oJUr64yPztI

@DOCM “The countries signing up to it are simply accepting to commit themselves subject to binding arbitration ”

to commit themselves to what? Lol

To financial vulture funds that have gorged on Greek debt buying it at 30% and want taxpayers to make it good at 100% ??

To binding assurance bondholders will be paid first before the remains are given out to taxpayer schools and hospitals.

To making sure all losses through the international financial system will instead be born by all EMU bank depositors/taxpayers.

To making sure Anglo through ELA will get its ¢30 bn; again making good losses of gambling through vulture capitalism.

To making sure ‘poor taxpayers’ get landed with the bill for sovereign losses due to incompetent decision making; not the rich who will be sheltered from any such taxes.

To making sure the elite in Greece will be financed in order to buy French arms, missiles, jets; perhaps to defend against a military takeover in Greece when the electorate become unhappy with their burden?

To making sure privatisation of public resources and asset stripping will be part of an agenda forced upon signees who can’t pay because the electorate cannot endure further cuts?

Which one of us comes from Tir na NÓg 😉

I was always a sceptical sod of all power centres – but these developments are more sinister then even my mildest imaginings.
All this will implode in on itself with devastating socio – poltical consequences ……………. and why ?
So the local petty elite in each country can hold onto a artificially strong but brittle currency.
They are being played by a sinister power that will scour the remaining Shires that have not been scoured already.
The power dynamics in each of the peripheral states are very different then when Iceland collapsed and nearly everybody lost because of the Krona.
The fools the fools – they don’t know how well they are being played.

The cowardice of the population is the most shocking aspect of this – what does it take ?
But the European Union has always been about consolidation through slow disintegration of all previous nation state structures & indeed the social fabric.
The jig-saw is almost in place.

The lack of even one paternalistic bone withen the rotten heart of Ireland is shocking to me although I accept I have been far too naive in my belief systems.
I just see Doom.

What about article 14? Any views?

“This Treaty shall be ratified by the Contracting Parties in accordance with their respective constitutional requirements.”

@ All

The key sentence is as follows;

“The rules mentioned under paragraph 1 shall take effect in the national law of the Contracting Parties at the latest one year after the entry into force of this Treaty through provisions of binding force and permanent character, preferably constitutional, or otherwise guaranteed to be
fully respected and adhered to throughout the national budgetary processes”.

The interpretation put on it by Van Rompuy and his staff seems justified.

The only remaining issue that was really in dispute – between France and Poland – was that of how to associate non-euro countries with the operation of the new treaty. A convoluted wording now covers the situation (Article 12.3).

“The Heads of State or Government of the Contracting Parties, other than those whose currency is the euro, who have ratified this Treaty shall participate in discussions of Euro Summit meetings concerning competitiveness for the Contracting Parties, the modification of the global architecture of the euro area and the fundamental rules that will apply to it in the future, as well as, when appropriate and at least once a year, in discussions on specific issues of implementation of this Treaty on Stability, Coordination and Governance in the Economic and Monetary Union”.

This wording should also be very helpful to the UK.

A little noticed or discussed article is Article 13.

“As foreseen in Title II of Protocol (No 1) on the role of national Parliaments in the European Union annexed to the European Union Treaties, the European Parliament and the national Parliaments of the Contracting Parties will together determine the organisation and promotion of a conference of representatives of the relevant committees of the national Parliaments and representatives of the relevant committees of the European Parliament in order to discuss budgetary policies and other issues covered by this Treaty”.

This could be the nucleus of a major institutional improvement in the working of the EU.

“constitutional or equivalent level” – means for Ireland and other members with constitutions an amendment to the constitution. Other members such as the UK which don’t have constitutions will presumably need enact laws which would require referenda to change, rather than the whims of legislators.

Or at least, that’s my interpretation.

Re “relevant committees of the European Parliament in order to discuss budgetary relevant committees of …”

Oh no, more bellyfeel good bureaucratic, talk shop nonsense pandering to the herd mentality and false sense of participation..

Show me the money, what has all the talking got Ireland so far; they will ensure its all yap, yap with any powers that threaten the banking protectorate…

More government jet rides to attend useless discussions paid for at taxpayer expense 🙂

I suppose rubbling their noses in it this gives them some feelings of self importance and grandeur as they hobnob with the ‘elite’…

Wow, heads of state are allowed to attend discussions 🙂

Re “This could be the nucleus of a major institutional improvement in the working of the EU.” …in Tir Na NÓG

@Kevin O’Rourke

“The debt brakes will be binding and valid forever…Never will you be able to change them through a parliamentary majority.”

I am presuming that this is just meaningless spin for her domestic audience,

History teaches us that we should be very wary of thinking that words spoken or written by German Chancellors are mere meaningless utterances.

Without seeing the details, the touted rules make me uneasy.

One of the few things I remember from college, well more precisely, one of the few things I recall from course material was from a statistics class on robust process design and Taguchi. In essence the idea was to test and design a process (industrial/manufacturing) to minimise defects. A robust process would lead to fewer batches failing quality control.

Germany is a leader in industry. Therefore it seems reasonable to infer that they closely follow rules/procedures and systems with excellent results. I drive a German car and the next car I buy will probably be German (unless there’s some sort of PIIG boycott of their goods). Unfortunately systems and processes are most successful when human involvement is low or where the vast majority of people comply with the system.

Depending too much on ‘systems’ or assuming they are correct should not be applied to a wide array of activities. For example, Wall St bankers flogged plenty of subprime crap and CDOs to many German banks. The smartly attired Wall St guys demonstrated fancy models and most importantly the debts were stamped ‘AAA’. Being brought up in a society that has reaped the rewards of relying on systems, it’s not hard to see why regional German banks bought into the system the Wall St bankers were selling. Another example of a weakness in German banks is their system to derive a ‘sustainable’ property value or lending value (Beleihungswert) for mortgage loans. It’s quite a complicated mish-mash of lookup tables applied to various attributes of the property. It’s quite impressive having a german banker take you through it and has served the Pfandbrief (asset backed bonds) market quite well (though it’s important to point out that only the first 60% of the lending value can be assigned to the Pfandbrief). However this long-term sustainable lending value is a lot of effort for pretty useless output. From what I have seen, recoveries are about half the sustainable value where loans go to loss. But no worries, trust the system.

If faith in systems becomes too ingrained, it can blind you. If a system is flawed, you need to recognise it. A ‘more of the same’ is wrong if the system is limited (/wrong) in its scope. This seems to be what Merkel is forcing though. Will austerity protect the value of the euro? Will the value of the euro increase when the eurozone states embark on a decade of low/negative growth? Alternatively would a QE balm increase growth prospects and support the value of the euro? I’d prefer that latter; which should buy time to redesign/replace current systems and correct misfiring economies.

It’s hard to understand why the ez political leaders are signing up to current proposals. Perhaps it’s the need to be seen to do something quickly. Not that I’m against closer ties or driving through certain austerity programmes. What I do fear is signing up to a system where rules beat commonsense. Don’t assume flexibility when it seems the logical thing to do; not in the neue merkelander.

@Jagdip,
My understanding is that the UK has a consitution. While it is often described as unwritten, my understanding is that it is spread out over a number of documents, mostly enacted by parliament. It can therefore be changed by Act of Parliament. The only difference between this and the situation in many other European countries where the power to enact constitutional change rests with the legislature is that there is no requirement for a supermajority to enact changes.

@ Karl Whelan

“If indeed it turns out that we need a referendum, this is a pretty bad start.”

Could you expand on why you think a referendum would be a bad start.

Also, I think you made some intriguing comments on an earlier draft suggesting that this compact would ultimately destroy the sovereign bond market. Is this still the case?

@ Jagdip Singh

Just being picky – the UK is saying that it has not signed this. Therefore it doesn’t have to do anything.

@ All

One point.

Article 8 says:

“The European Commission is invited to present in due time to the Contracting Parties a report on the provisions adopted by each of them in compliance with Article 3(2). … Where a Contracting Party considers, independently of the Commission’s report, that another Contracting Party has failed to comply with Article 3 (2), it may also bring the matter to the Court of Justice. In both cases, the judgment of the Court of Justice shall be binding on the parties in the procedure, which shall take the necessary measures to comply with the judgment within a period to be decided by the Court.”

And article 3 (2) says:

“The rules mentioned under paragraph 1 shall take effect in the national law of the Contracting Parties at the latest one year after the entry into force of this Treaty through provisions of binding force and permanent character, preferably constitutional, or otherwise guaranteed to be fully respected and adhered to throughout the national budgetary processes. The Contracting Parties shall put in place at national level the correction mechanism mentioned in paragraph 1.e) on the basis of common principles to be proposed by the European Commission, concerning in particular the nature, the size and the time-frame of the corrective action to be undertaken, also in the case of exceptional circumstances, and the role and independence of the institutions responsible at national level for monitoring the observance of the rules. This mechanism shall fully respect the prerogatives of national Parliaments.”

Item (1)

Does this mean that say, Portugal (for the laugh) could bring Ireland to court to insist that these rules go in a constitutional level.

Item (2)

Germany’s public debt to GDP just over 80% I think. Does the above envisage that say, Greece, could take the Germans to court if they are not closing it with sufficient vigour? One wonders what kind of letter would appear in the post in Athens if such were the case.

@Angela Merkel

The debt brakes will be binding and valid forever…Never will you be able to change them through a parliamentary majority.

Though the fiscal compact principally serves as red meat for Merkel’s domestic constuinuency I would have thought the lesson of the last ten years was that smaller states end up having to comply even with idiotic laws.

This is not a good outcome, the single mandate of the ECB was a simialrly bad law that served Germany well, the fiscal compact is an equivalent proposition in terms of economic wrong headedness. If we agree to it we really have made Keynesian stimulus illegal, but only in Ireland…..

@Joseph Ryan

“History teaches us that we should be very wary of thinking that words spoken or written by German Chancellors are mere meaningless utterances.”

Right on Joseph, Germans say what they mean and mean what they say. Germans tend to do their duty and do not waste time and effort casting around for the easy way out. In Ireland we are masters of the “main chance” whether it be illegal, quasi legal or simply in bad taste, low corporate taxes, no regulation, turn a blind eye to corporate wrong doing are examples. Anything but a uniform code of conduct that cannot be undermined.

A good example would be people drawing the dole going to the Canary Islands for 2 weeks. In Ireland there is a big hullabaloo in Germany you are entitled to a vacation when you are unemployed. Sometimes it is our parish pump cat lick morality that does us in. Actually, the thinking in Germany is unemployed people have children and spouses and the whole family should not suffer privation. There are a lot of things I admire in Germany and that is just one of them.

@ Brian

On Article 14, this is a faily standrad phrase and does not really add anything as it must be assumed that every state will act to ratify an international agreement in accordance with its constitutional requirements. What other way would it act? This does not, however, imply that it has to change its constitution.

Breaking news (Guardian):

“Henry McDonald, our correspondent in Dublin, reports that Ireland’s prime minister (sic) will recommend to the Cabinet in Dublin later today that the intergovernmental treaty hammered out in Brussels should be sent to the Irish Attorney General.

The Republic’s chief law officer will decide if the latest EU treaty impacts on Ireland’s sovreignty and if so, would require the Irish people to endorse the latest EU treaty in another referendum.

Henry explains:

Enda Kenny stressed in Brussels last night that the country’s Attorney General would be under no time pressure to reach a conclusion on the treaty’s constitutionality. But opposition parties led by Sinn Fein have vowed to pressurize the Fine Gael/Labour government to put the new EU fiscal arrangements to the Irish people.

Sinn Fein’s Padraigh Mac Lochlainn said: “For Ireland the intergovernmental treaty means a serious loss of sovereignty, a longer period of austerity and the continued bailing out of banks.”

In addition any Irish citizen has a constitutional right to challenge the validity of EU treaties and it is highly llikely that if the current government decides not to hold a plebescite an individual will take a case to the Republic’s High Court on the issue.

The prospect therefore looms of the Irish being in the uneasy position once again of holding the future of the EU in their hands. ”

Er, how can we be in that position (future of the EU in our hands) if it only requires a fairly small number of countries – 9 was it? – to ratify this to make it stick and not all countries need to for it to come into effect (is my understanding).

Anyway, I will offer odds of 6/4 on that the AG doesn’t recommend a referendum. I wonder what President MDH thinks of it?

It would be helpful if the participants to this thread stated if they were for or against signing this pact (irrespectively of the constitutional means chosen to adopt it).
In case they are against and it is adopted by the rest of Europe ,what do they think will happen and what they propose to do?

@ Gavin Kostick

Neither option that you indicate is as wide of the mark as one might imagine and Merkel and her advisers must be well aware of this. They sum up the core political concept underpinning the entire exercise viz. mutual peer pressure to ensure budgetary discipline. (An equivalent example is the convention that exists in the US that individual states must balance their budgets).

I though they had removed the ability for one member to take another to the European Court of Justice according to Derek Scally’s piece in the Irish Times this morning.

http://www.irishtimes.com/newspaper/world/2012/0131/1224311004463.html

“The agreed treaty text empowers the European Commission to establish that a signatory state has not implemented adequate debt brake procedures, but does not, as demanded by Berlin, permit it to file a case at the European Court of Justice.

Instead leaders have agreed to find a new procedure by March to allow one member state take an action against another.”

But the ECJ references still apear to be in there

It’s funny to hear the Govt-appointed Labour AG being talked about as if she is not a member of our 17-member Cabinet (along with the Chief Whip and 15 ministers including An Taoiseach)!

@BeeCeeTee, I think you’re wrong. Sorry this is the closest to hand. http://en.wikipedia.org/wiki/Constitution_of_the_United_Kingdom Many countries have a single document called “the Constitution”. Others have laws and precedent, but some laws need referenda to change, others can be changed by the whims of legislators.

@Gavin, indeed the UK isn’t (presently) going to sign up, but I used the UK as a familiar example

@ Gavin

“Could you expand on why you think a referendum would be a bad start.”

That’s not what I was saying. My point was it’s a bad start to a public debate about this issue when the European powers-that-be didn’t even bother to be clear about whether a constitutional or equivalent procedure was required or not.

“Also, I think you made some intriguing comments on an earlier draft suggesting that this compact would ultimately destroy the sovereign bond market. Is this still the case?”

I don’t think I used the phrase destroy — that was McCarthy. But a long-run average deficit ratio of 1% combined with a nominal GDP growth rate of, say, 4% will lead to a long-run debt-GDP ratio of about 25%. And 1% is the maximum allowable cyclically-adjusted average. So the market for these bonds won’t be destroyed but will be very small.

@ Rob S

A careful reading of the entire Article 8 would suggest that there is no contradiction. A clear distinction is drawn between the Commission’s role as the provider of the basic facts with regard to compliance but only a euro area member state (or states) can take a case before the ECJ. Indeed, in the event that any state disagrees with a favourable assessment of the Commission, it can still act. Some debate and negotiation on the procedural steps may well remain.

@OC,
As you ask:

1) I’m against signing the pact.

2) If we don’t sign the pact, I expect a lot of huffing and puffing and threats to cut off funding for government and banks. What I expect to actually happen is real pressure to cut the government deficit faster.

3) I think our government is cutting back far too slowly. I think it should take advantage of having someone else to blame, and do what it should be doing anyway.

4) If the actual response is more severe, we should choose from a menu of options such as: legislating to give bank deposits seniority over all other forms of funding; unilaterally extending bond maturities; legislating to convert senior bank bonds, and liabilities to the ECB, to equity; cancelling public debt and similar instruments given to the banks …

Given that it is “ludicrous” – to use the words of Michael Noonan – to suggest we might need a second bailout in 2013 and it’s not even worth planning for such an eventuality, surely any suggestion that access to ESM funds be tied to acceptance of the pact is academic – after last week’s “huge success” of the return to the bond markets, the NTMA issuing short term debt during the forthcoming summer ahead of our return to the longer term markets at the start of next year, shure why would we feel obligated at all to sign up? In fact wouldn’t signing up be a sign of a lack of confidence?

Shure even if we do need a second bailout – a “ludicrous” proposition to be sure – couldn’t we have a referendum then, and only then?

All of this pro and anti treaty talk brings me back to the 1920s. Maybe the anti treaty people this time could instead of the Four Courts move a bit further down the river and occupy the IFSC . The place could be bombed by the pro treaty crowd. Afterwards the political system could reform again into pro and anti treaty. There would follow 4 decades of stagnation ……

@ Karl Whelan

Thanks for the reply. I’m glad I asked as I had misinterpreted your initial post.

@ DOCM

Whilst I understand your point about peer pressure I agree more with @Shay’s “smaller states end up having to comply even with idiotic laws.”

Referendums are useful for purely domestic important considerations such as water/sewage management with simple yes/no, private/public answers. Extremely important issues such as remaining in or leaving the EZ or EU are too nuanced to be left to people who are prone to acting on whim. We treat politics as if it was the local GAA drinking society and the results are sitting in the Dail. It is clear that we trust this government no more than we did the last one. We do trust them to produce the usual goodies but not when it comes to serious business. Any government that agrees to bail out banks, bondholders and all and does not have a depositor insurance plan enshrined in law proves that they are inept. The succeeding gov’t is proving to be equeally inept. Are people gathering in halls every week to discuss what can be done to clean house at the next election. Correct me if I am wrong but I do see neither hide nor hair of any such activity.

We know we cannot trust the gov’t to do the right thing and we are entitled to let them know that. But we also must realise that Ireland and its insistence on referendums is looked upon as being unproductive and frivolous abroad. It reflects badly on us as a people that we cannot elect a government that we trust. We have produced the greatest politicians and civil servants, with judgement and vision in the world, abroad. At home we are failing miserably.

“binding and valid forever”

I prefer “when the facts change, I change my mind”.

Go back 40 years. What has endured ? Liverpool can’t even win the League now.

The notion of permanence in a world that is so volatile is naive. And with climate change around the corner it’s nuts. The whole economic system is built on sand.

Seafoid,

I suggest the Anglo building as a HQ for Mary Lou and the anti-treaty forces. I would volunteer to man the howitzer for the morning, although I am not sure what side I am on. Perhaps I could decide after having a go of the gun.

Hopefully, Enda would not drive in an open top car through West Cork. Who would you suggest as a latterday Sonny O’Neill?

Cutting the deficit is a non issue. In or out of the euro, this will be done. As for stagnation, the treaty is a vote for stagnation. I don’t see any burden sharing for Ireland, quite the opposite.

@seafoid

Yeah, lets look at bad treaties. Here’s an Andrew Jackson disaster, “Trail of Tears”

So, bad treaties can be made!

http://www.allthingscherokee.com/articles_culture_events_020201.html

The only benefit the Compact will confer on the EMU is it will hasten the Euro’s demise. Its a proposal for a new Europe built on the notion of a reservation policed by Germany.

First there are the ‘financial police’; pretty soon expect to see other police including military police. There are no proposals for distribution of wealth, or wealth creation; other than financial hari kari to ensure against default.

Even the FED through the FOMC has mechanisms for wealth distribution and management of financial rectitude.

There is nothing in the ‘Compact’ except a charter for usury:

Definition of USURY

1
archaic : interest
2
: the lending of money with an interest charge for its use; especially : the lending of money at exorbitant interest rates
3
:an unconscionable or exorbitant rate or amount of interest; specifically : interest in excess of a legal rate charged to a borrower for the use of money.

http://www.merriam-webster.com/dictionary/usury

The ‘compact’ amounts to the setting aside of democratic safeguards in favour of usury laws to make sure the Bundestag and EMU banks will not backstop EMU losses; but that European taxpayers will.

This is a form of financial tyranny: a socialism for the banks that is a mockery of free capitalism.

All you gotta do is look at the bailout meted out to Ireland to see that the flimsy ‘Compact’ is nothing more than an IOU written to the banks to ensure the lenders get the required compliance to ensure they get their money back.

There is nothing there to ensure the upgrading of a badly designed EZ other than making a MESS bigger.

@ Overseas commentator

It would be helpful if the participants to this thread stated if they were for or against signing this pact (irrespectively of the constitutional means chosen to adopt it).

Any agreement by 25 countries will never be perfect and some disenters will always find reasons to oppose despite the fact that monumental mismanagement of the Irish economy twice in a generation irretrievably destroyed the lives of tens of thousands of fellow citizens.

Beyond economics, EU presuure is needed to to get Ireland to comply with clean water standards and the development of a waste management system to avoid contamination from landfills.

Unfortunately, external pressure is needed in a system of limited accountability where the buck stops nowhere.

It was reported today that Austria’s unemploynet rate in Dec was 4.1%

The benefits of a well run economy can be seen in many areas of life.

Ireland and Greece are the only ‘old’ EU-15 member states (pre-2004 enlargement) without incineration facilities for municipal waste. Among the old member states, landfill rates in 2008 were highest in Greece (81 %), Portugal (62 %), Ireland (62 %) and Spain (52%). In Austria where there are 9 municipal incinerators, the landfill share decreased from 28 % in 2003 to 1% in 2009.

Pressure from the troika may update the 19th century era legal cartels and so on.

Sigh.

I suppose this issue will clog the blog here for the foreseeable future. The teenage scribblers at The Economist, for once, seem to have a balanced view:
http://www.economist.com/blogs/charlemagne/2012/01/eu-summit

It quotes Mario Monti as describing this as a ‘decorative songbird’.

Would it be too much to ask people to stand back, count to 10 and see this for what it is? An attempt by Chancellor Merkel to re-connect with her cranky and, previously, seriously deceived voters so that she can secure their consent to pony up the dosh that will be required for the ESM to function effectively, to, possibly, address some further burden-sharing and to begin to address the underlying current account imbalances. It also serves to encourage governments in the recalcitrant PIIGS to start taking structural reforms seriously as the principal antidote to this enforced austerity. That penny, of course, hasn’t dropped yet in Ireland.

But she needs to start putting something reasonably substantial on the table as a quid pro quo for the other 24 consenting to this bit of political theatre.

@ Paul Hunt

It is in the UK’s interest to dismiss the fiscal pact and to try to camouflage the isolated position in which Cameron has placed the UK for which he has rightly been attacked by Miliband. (It may be noted that the phrase “like a hawk” was omitted from the Cameron quotation).

Monti,equally, wishes to play down its import for domestic political reasons.

In fact, the pact is of very considerable significance. It reflects a view deeply held in Germany that wealth must be found in the real productive sector and not through the machinations of the financial markets. Events have conspired to show the inherent strength of this view.

Reference is made above to destruction of the government bond markets or, at least, to a considerable reduction in their size. The question that is not addressed, however, is whether this is a good or a bad thing. My answer would be that it cannot be other than beneficial and would help end the process of one generation stealing the wealth of future generations.

cf. in this context the very interesting link posted by seafóid to the Monthly Review, especially the closing paragraphs.

http://monthlyreview.org/2012/01/01/the-center-will-not-hold

@ Paul Hunt

Re “That penny, of course, hasn’t dropped yet in Ireland.”

The austerity penny has dropped. Perhaps it hasn’t for the 1%.

We shouldn’t be afraid of referenda. However, there should be a full debate on all issues; the last referendum was a communication disaster meaning the banks escape invigilation and investigation by a government finance committee. But I believe there are 11 policemen in Ireland leading investigation into Anglo and the puzzle of the ¢30 bn.

Only 10 you ask? Give them a chance. They’ve had to go to court at least 10 times so far to extend the term of the investigation. With that amount of money involved, it could take 30 yrs to get to the bottom of it. That’s not taking into account the shredders!

Hopefully more information on the issues involved will be given to people.

This could be a good opportunity similar to the second vote on Lisbon to get the people behind a better burden sharing deal for Ireland, one that voters might in fact vote for in a follow up referendum.

Perhaps this will also be an opportunity to hold to account the government on what this government has actually achieved since coming to office on the management of Ireland’s debt.

I would not hold my breath. The ‘Compact’ is little more than a ball of smoke in efforts to solve the real financial crisis in Europe.

@seafóid

I was just looking at the EU unemployment charts (and other indicators) and the overriding picture is one of Germany doing very nicely thank you – e.g unemployment is actually falling there – while (nearly) everyone else is just tanking/going in the other direction.

Can’t help but wonder if this won’t eventually cause a backlash against Germany e’re long. I suspect it’s already started in some parts of the periphery.

@Paul H

You are under-reacting.

It is one thing to have people who don’t understand the markets or economics in charge of states for a few years. It is another to have one particular batch of them effectively remove a significant portion of the means of future politicians correcting duff policies.

We had this before in miniature in the Stability and Growth pact, aka ‘The Stupidity Pact’.

I think what you should be pushing for is for the blog’s contributors to take a bigger interest in other things too, not instead of.

@DOCM,

I agree it is a statement of intent (beyond the precise fiscal conditions) that is very significant. For a long time I have been convinced that Chancellor Merkel is determined to bring the financial sector to heel so that it acts as the hand-maiden of productive enterprise. But it is a validation and confirmation of what German voters (and those in other aligned nations) wish to hear.

And I have no problem with a shrunken sovereign bond market. It would be far better that bond market participants were begging governments to issue paper than for governments to be begging them to buy it. It also creates an opportunity for efficient financing of public infrastructure off the government balance sheet to compensate for the redcued supply of government paper.

But it is for the other member-states, in particular the PIIGS, the recognise this intent and to manage their affairs accordingly.

What I fear is that, should it come to a referendum in Ireland and in the asence of an effective parliament, it will be about everything directly unrelated – the performance of the government and its pursuit of deficit reduction, a means to give two fingers to this perceived Germanic hegemony, anger at the legacy Anglo burden, a hubristic populist desire to assert ‘ourselves alone’, you name it – and no attention will be paid to what is really at issue.

Would the President referring a piece of legislation to the Supreme Court count as “equivalent level”? (Assuming the SC approve it…).

@ Paul Hunt

Re “And I have no problem with a shrunken sovereign bond market.”

Sorry, but the whole ECB programme is about low interest rates to support the bond market. If you want to shrink the bond market, just increase interest rates.

Re “It also creates an opportunity for efficient financing of public infrastructure off the government balance sheet to compensate for the reduced supply of government paper.”

Sorry, nope, it does the opposite. Government sovereign debt can’t get to market due to decreased money supply and lower bond margins.

Re “But it is for the other member-states, in particular the PIIGS, the recognise this intent and to manage their affairs accordingly.”

Nope, they re stuck and hobbled by the 3/60 ‘compact’ bindings and get hauled before the european court if they squeal.

Re “it will be about everything directly unrelated – the performance of the government and its pursuit of deficit reduction”

Nope, signing up to austerity to pay ¢30 bn of Anglo odious debt with money we are forced to borrow to do so, is not an unrelated matter.

Re “a hubristic populist desire to assert ‘ourselves alone’”
Nope, people own calculators as well.

They may not be as stupid as politicians think they are; or as stupid as some of our politicians 🙂

@ Paul Hunt

If we end up with a referendum on this treaty, when no other country sees the need for such a step, we will have distinguished ourselves once again, as in the case of the Lisbon Treaty. Given the stance adopted by the main opposition party, nothing can be ruled out.

I have some understanding for the attitude of politicians but the insouciance of other opinion formers leaves me totally flummoxed.

Some other sobering reading from today’s press releases.

http://www.centralbank.ie/polstats/stats/cmab/Documents/2011m12_ie_monthly_statistics.pdf

@Colm Brazel
Any referendum will be interpreted as a referendum for or against Ireland staying in the Eurozone ,by the Irish voters as well as the rest of Europe.
I think you are mistaken to believe that any concessions on matters that are not part of the treaty can be obtained by menacing to vote “no” . The world today is very different from what it was at the time of the second referendum on the Lisbon treaty,there will be many governments willing to oblige if any of the PIIGS wants to leave.

Cannot see anything in that Compact that we should not want anyway. It would help to put a Stop to the Politicians here vying for our votes with our money/taxes at election time. Why do we need a Referendum to put in place good Sovereign Governance ??

Only the Stickies and assorted Nutters in the Media and the Universities who think they know more than the man in the street wiil be against the controls therein.

There are two key questions:

1) Does the treaty involve transferring further powers to EU institutions?

On the basis of Article 7, the answer is yes. This requires the government to commit to support decisions, proposals and recommendations made by the EU Commission for any country in deficit. The wording doesn’t limit the scope of these decisions to numerical “envelope” targets, so this means that detailed and specific policy measures could be proposed, which the government commits to support.

2) Does the treaty make economic sense?

Let’s look at the trajectory for the current 3% GGD rule (from the Fiscal Advisory Council report) for the years 2011 – 2015

10.0 -> 8.6 -> 7.2 -> 4.7 -> 2.8

A bit optimistic perhaps, but there’s a clearly defined finish line we’re due to cross in 2015.

Now look at the trajectory for the structural deficit for the same years

8.3 -> 8.1 -> 7.7 -> 5.9 -> 4.6

The new finish line is 0.5% and we’re nowhere close. So presumably this means accelerating the austerity measures even more to meet the new targets. Of course this won’t work – the IMF for example recommend against further austerity measures.

So why enshrine in a “permanent” manner something which gives unspecified and potentially unbounded control to the EU Commission over national budget policy measures, and which does not make economic sense?

The problem is not that an appropriate balanced budget rule is a bad idea. The problem is that the fiscal compact treaty goes much too far, and is too crude and unbalanced.

And if the treaty is rejected by Ireland? Then existing rules still apply. An appropriate and better balanced budget rule should still be implemented, that provides for counter-cyclical measures at national level (unless and until they are provided at EU level). Expenditure should be broken down into different categories, with spending to pay for overly high public sector pay and pensions in one bucket, and expenditure on skills training for the unemployed in another, for example (i.e. current vs investment). Different limits should apply to these different categories. Also any new rules should be introduced in tandem with new rules on preventing and resolving private credit bubbles.

@Overseas Commentator

Re “there will be many governments willing to oblige if any of the PIIGS wants to leave.”

Yep, I’m sure of that as well. Iceland got more help from China than anywhere else; we need serious reflection involving David Cameron and sterling as well.

I reckon it will be similar to the lead we gave on the ‘no smoking ban’. Portugal, Italy, Ireland, Greece and Spain could perhaps help each other as well.

Then there are the emerging African nations; BRIC we could do a lot of business with. But we need to pump more into education. Perhaps our FDI multinationals could help more.

Time we took the country back from property and banking interests and made efforts to create a productive economy;
an economy that doesn’t depend on handouts.

Here’s some fun doom and gloom videos for cassandras eg
Dorc of Cork 12:31 🙂

Short term interest kept close to zero

http://www.youtube.com/watch?v=yipV_pK6HXw&feature=related

Market sentiment

http://www.youtube.com/watch?v=UC31Oudc5Bg

laughing while you sink:

http://www.youtube.com/watch?v=NOzR3UAyXao&feature=related

how the financial markets work

http://www.youtube.com/watch?feature=endscreen&NR=1&v=M_3T-Af57Pg

Aside, the Compact is a pathetic little document given the time/effort the politicos put into it. Don’t be fooled though, its just the beginning, a lure em in venus fly trap:-)|

I guess the comfortable burrows and good food provided by the EZ Watership Down (Richard Adams) proved just too
good to be true. The ‘Compact’ shows offenders will be shot on sight !

Don’t like it? It’s Time to go 🙂

@ Bryan G

You are misreading the import of Article 7. It refers to the existing treaty based excessive deficit procedure and is a commitment, in effect, by the participating countries not to oppose the view of the Commission. It does not add or subtract anything with regard to the existing powers of the Commission.

On your second point, regard must be had to the new and much more flexible wording as now agreed.

On your last point, we do not have to ratify the treaty. But doing so is a condition of access to the ESM. Maybe not being able to do so might be a suitable additional discipline!

“And if the treaty is rejected by Ireland? Then existing rules still apply. ”

Legally self evident.Politically totally unrealistic unless you believe that Ireland can go back to the market at the end of 2013.
What do you think will happen to interest rates on Ireland sovereign debt if you do not ratify the treaty?

@ Overseas Commentator

“What do you think will happen to interest rates on Ireland sovereign debt if you do not ratify the treaty?”

Good question. Basically you follow the lead of Olafur Grimsson and many others who’ve had to follow this path.

The bottomline is debt restructuring based on ability to repay; what can’t be repaid won’t be paid.

It will be tough but not much tougher than the trip on the Titanic proposed for us now down in the hold.

We won’t be the first to do this. We’ve plenty to learn from Greece.

@DOCM

You are misreading the import of Article 7. It refers to the existing treaty based excessive deficit procedure and is a commitment, in effect, by the participating countries not to oppose the view of the Commission. It does not add or subtract anything with regard to the existing powers of the Commission.

I disagree. The Commission already has powers to make proposals and recommendations – what is new here is that the governments commit to support those proposals and recommendations. This changes the role of the Commission, giving it close to executive powers.

On your second point, regard must be had to the new and much more flexible wording as now agreed.

What new flexible wording is this? I don’t agree that the “lower limit” wording on the structural deficit target substantially changes anything. They have managed to tie themselves up in knots on the wording, using “balance” and “deficit” (which reverses the sign) in the same sentence, and it is not very clear what the meaning of “lower”, “higher”, “exceeds”, “maximum” etc. is (e.g. whether it applies to the balance, as calculated by a given value of the deficit, or applies to the deficit). I’m open to being persuaded otherwise, but would be surprised if Germany agreed to relaxing the targets.

On your last point, we do not have to ratify the treaty. But doing so is a condition of access to the ESM. Maybe not being able to do so might be a suitable additional discipline!

Agree here. Time to end Croke Park and implement some real reforms. What matters most is how the decision will look in 10 years time, not 10 months time. Signing up to become a regional operations centre for centrally dictated (and frequently bad) economic policies won’t be seen as such a good idea. Better to take some more turbulence in the short-term.

@ Overseas Commentator
If Ireland rejects this stupid treaty, leaves the Euro, and gets itself a moderately intelligent central bank, I would expect its 10Y bond yields to fall to 3% or less.

That is what usually happens when budget deficits merely offset the deleveraging of the private sector.

As in Japan. As in the UK. As in the US.

@ Bryan G

You are overlooking the second sentence of Article 7.

“This obligation shall not apply where it is established among the Contracting Parties whose currency is the euro that a qualified majority of them, calculated by analogy with the relevant provisions of the European Union Treaties without taking into account the position of the Contracting Party concerned, is opposed to the decision proposed or recommended.”

On your second point, I would consider “tie themselves up in knots” as a good description of increased flexibility.

To sum up. there is less to this than meets the eye. The major change is that the treaty shifts the burden of proof from the others to the “erring” member state with, of course, the exception stipulated in the second sentence of Article 7 i.e. the larger Member States that can most easily put together the necessary qualified majority (which is very unlikely to ever include Italy).

@Overseas commentator

The strongest argument in favour of the treaty is that it will be needed to access the ESM. However the need to return to the markets in 2014 is likely to be pushed back at least a year thanks to the LTRO being used to switch out 2014 bonds. At that point a primary surplus may be achievable, which then changes the equation. ESM interest rates are likely to be significantly higher than the current EFSF zero-margin rates, so the difference between the ESM and market rates may also not be that great. I see no benefit to pro-actively signing up to the treaty in advance of a “force majeure” event.

@DOCM

I’m not overlooking the second part of Article 7. That’s just reverse QMV. It means that a decision of the Commission takes effect, unless a QMV majority (which would in practice require France and Germany) opposes it.

Curious the Irish negotiators have been silent on the detail of their input ‘Compact’. Did they put forward something like this to be part of the ‘Compact’ ?

I’ve come up with the following musing 🙂

”

TITLE VI GENERAL AND FINAL PROVISIONS Article 14

Should there not be also:

TITLE VII

AMENDMENTS AND BURDEN SHARING

1. This Treaty shall be ratified by the Contracting Parties in accordance with their respective legal requirements. It will include a burden sharing structured agreement between contracting parties, the ECB and government of Ireland. A sum of ¢34 bn through ELA and promissory repayment mechanisms will be set to null and void. Instead this debt will be collateralised through the EFSF and later through the ESM to ensure the citizens of Ireland are not held legally responsible for the debt of Anglo and associated banks.

2. This Treaty shall further include clauses and amendments to be agreed as part of an overall restructuring agreement for Ireland’s debt based on ability to repay.

These clauses and agreements on burden sharing will be put to the Irish people in a referendum; the support for these amendments and clauses requiring possible further burden sharing will include a decision to leave the euro currency if such conditionality is not accepted and such burden sharing losses are freely accepted by all parties to the agreement. ”

Ok, so I doubt the supplicant vassals had any input to the ‘Compact’ 🙂

@PR Guy
From your link…
“”The troika doesn’t appear to be willing to accept any concessions whatsoever on reducing the minimum wage and scrapping bonuses,” said the government aide. “No political party is willing to move either, saying wage cuts are a red line they are simply not going to cross. You tell me how this is going to be resolved. We have no idea and we’re very worried.”

That really says it all.

Btw, I noted that Brit officials were briefing that Merkel had said privately that Greece would default…looks like it could be accurate.

Doubt Irish negotiators had much input to the ‘Compact’; little if no information coming out from them. Doubt they had much say, not that they wished for any.

Perhaps they should have had an amendment such as the following added to it, your own musings could include extras also?

”
TITLE VI GENERAL AND FINAL PROVISIONS Article 14

Should there not be also:

TITLE VII

AMENDMENTS AND BURDEN SHARING

1. This Treaty shall be ratified by the Contracting Parties in accordance with their respective legal requirements. It will include a burden sharing structured agreement between contracting parties, the ECB and government of Ireland. A sum of ¢34 bn through ELA and promissory repayment mechanisms will be set to null and void. Instead this debt will be collateralised through the EFSF and later through the ESM to ensure the citizens of Ireland are not held legally responsible for the debt of Anglo and associated banks.

2. This Treaty shall further include clauses and amendments to be agreed as part of an overall restructuring agreement for Ireland’s debt based on ability to repay. These clauses and agreements on burden sharing will be put to the Irish people in a referendum; the support for these amendments and clauses requiring possible further burden sharing will include a decision to leave the euro currency if such conditionality is not accepted and such burden sharing losses are not to be freely accepted by all parties to the agreement. “

@Bryan G

“The strongest argument in favour of the treaty is that it will be needed to access the ESM. However the need to return to the markets in 2014 is likely to be pushed back at least a year thanks to the LTRO being used to switch out 2014 bonds. At that point a primary surplus may be achievable, which then changes the equation.”

Achievable with the forces of Croke Park ranged against?

Prepare not to be amazed as the Public Sector unions and banking lobby reunite to keep the ‘bailouts’ coming.

@ All

FYI

http://go.bloomberg.com/euro-crisis/2012/01/31/portugal-bears-brunt-of-greek-contagion/

One must look forward with bated breath to see what our national broadcaster makes of the situation on Prime Time this evening.

A point worth recalling is that the existing Greek bailout is pre-EFSF and based on a series of bilateral contributions (including that of Ireland, if I am not mistaken) and the rates are punitive. Coupled with the refusal of the ECB to contemplate taking a loss on its bond purchases, this hardly makes for a rosy future for Ireland enmeshed in a totally unnecessary referendum contretemps.

@DOCM

So you agree that Article 7 is a transfer of powers, since the Commission can make proposals that must be supported by the Irish government, unless France and Germany say otherwise?

Forgive me, but didn’t our entire problem build up while we remained within the deficit guidelines? I acknowledge during that time we created structural fiscal problems which we need to sort out, but the fact remains that the financial crisis is still fundamentally one created by the private sector both through banking and personal debt.
So why is this being presented as a solution?

If I could be sure that the treaty was totally meaningless and would have no effect whatsoever, I would be happy to vote for it. Since I can’t be sure of that, I’m afraid I’ll have to vote against it. A vote for the fiscal compact is a vote for financial and political instability. It would be the purest irresponsiblity to vote for it.

Oh and for the record – until I’m persuaded otherwise (and I’m always open to persuasion by learned rational arguments) I’d be voting against.

Issues:

1. Cost of my vote: debt write-down.
2. Sick of messing with the constitution under threat and then left with a mess
3. Still annoyed that the UK’s veto turned out not to be a veto. I bought into the “but we’ll have a veto” argument for previous treaties.

Why do governments have to reform and the financial industry is still sailing on?

Let them sort out the private sector before we start messing with the constitution.

@sarah

Because Keynesianism is a) more difficult to explain, and b) abused to the point of appearing bogus, by organised and powerful interests to defend what non-economists can plainly see is ludicrous.

@grumpy

Achievable with the forces of Croke Park ranged against?

Prepare not to be amazed as the Public Sector unions and banking lobby reunite to keep the ‘bailouts’ coming.

You are right. In my view while Croke Park remains then there’s no point even trying to struggle against excessively centralized EU control.

@ Bryan G

You have to differentiate between transfer of a competence and the decision-making procedure with regard to the exercise of that competence. Competences are transferred to the EU qua organisation not individual institutions within it. Euro area countries that are parties to this treaty are, effectively, binding themselves to act in a particular way and not to repeat the exercise of driving a couch and four through the Stability and Growth Pact as happened in 2005. There is an out clause, which nominally effectively covers the situation of France and Germany, but they would need the support of other countries which is unlikely to be forthcoming.

In short, the capacity of the larger Member States to frustrate a competence which the Commission already has is being removed.

@ Srah Carey

What you would really need in the treaty is a clause that would prevent anyone in the Government under pain of death from answering the phone when Trichet or some other blackguard calls threatening blue murder if the markets open on the Monday while a local bank is being shorted to death.

@ Sarah Carey

We stayed within the deficit guidelines by ignoring the fact that dramatic increases in public expenditure were being funded by ephemeral receipts from a housing bubble and consumer boom financed by irresponsible foreign borrowing (and lending).

Control over this situation was in the hands of the Irish government of the time which it failed to exercise.

There is no mystery to it.

@DOCM

Yes- I understand that. But my question is: is there anything in this treaty that would have prevented that? If it simply prohibits breaching deficit guidelines, the same problem could arise again?
Confession – when I try to read the treaty I get a bit dizzy. Am relying on others to do the heavy lifting here for me.

@ Sarah Carey

Yes. See my reply to Brian G above and the elements in the Six-Pack .

It must be borne in mind that both Sarkozy and Merkel have the same sensitivities vis-a-vis their parliaments as we or any other participating country have. France and Germany broke the SGP but there was a failure across other fronts which are corrected in the Six-Pack (and further Commission proposals on the table and in preparation).

Casting the Commission in the role of bogeyman is a common error which overlooks the fact that Ireland (i) has a Commissioner with feet under the table (ii) that it is a collegiate body i.e. it decides by simple majority and (iii) is treaty bound to promote “the general interest of the Union”.

As to the Prime Time coverage this evening; what can one say! Up to the usual standard of the national broadcaster.

DOCM,
Yours is a partial anslysis of the boom. It would have been hard to control credit without control of price or the ability to control access. Both were beyond the control of the Irish authorities to a large extent. Trichet and his incompetent German sidekicks Stark and Weber kept rates too low for the periphery- Italy apart.

@DOCM

Ok, forgive me if I am slow on this. Your “yes” = yes, the treaty could potentially prevent a repeat of the crisis?

e.g Article 7 means that if we had a repeat of the situation – was it in 2002/3? – where the commission expressed a diplomatically worded concern that our budget decisions were over stimulating the economy – and I think I recall were told to buzz off and how dare they stick their noses in – by the then government – that under this treaty we’d HAVE to listen to them and change the budget accordingly. So it’s not JUST about keeping to deficit guidelines, but a deeper analysis of the effects of budgets?

@DOCM

I think you are mixing up competencies, which necessarily involve decision making, and target setting. The treaty gives new competencies to the Commission, since they can now make specific policy recommendations that the government has agreed in advance to support. The process by which the agreed targets are to be met has changed.

If the Article did not give any new powers to the Commission it wouldn’t be there. If the Article were intended to be restricted to target setting, it would have words like “or equivalent measures to be implemented by the Member State to achieve the same fiscal targets”, but these words are not there. The intent of the Article is to give the Commission powers over how the targets are to be met.

@ Sarah Carey

Sarah,

You illustrate why a referendum on an issue like this should be avoided if possible.

You appear to have a partial narrative of what happened in the past and one can only wonder about the reaction of a typical voter watching a shouting match on TV with the German banks being blamed for our woes and a NO vote presented as a means of getting debt forgiveness.

The responsibility for the Irish bust can be overwhelmingly attributed to the governments of the period and the people who voted for them.

All the EMU countries that have been badly hit by the recession have been misgoverned for decades; have endemic corruption and lack accountable systems. EVERYONE

A country with a small indigenous export base of about €12bn had not found a magic formula for an everlasting boom; its leader was the biggest cheerleader of the property bubble and prudence in using public funds would have run against the grain and culture.

There is a supporting cast of bankers, ECB etc but when the governor of the Irish Central Bank was issuing a series of pleading letters to banks in the late 1990s to restrain lending, the Government hugely expanded the property tax incentive system and halved the capital gains tax rate.

The Bank of Spain forced its big banks to increase provisioning and since the bust it’s regionally controlled cajas are the firms that have mainly been in trouble.

I rang the Irish Central Bank during the bubble to check if data was kept on 5 and 10 year interest-only mortgages, which were the fuel of the buy-to-let boom. The answer was negative.

The EMU deficit rules were of course inadequate but several other indicators were flashing red. It was a classic petro-economy.

Despite a surge in population, there was no growth in the tradebale sectors supported by enterprise agencies from 2000; more than 5,000 jobs were added in 2001-2007 and 400,000 elsewhere: construction, health, education, distribution, business services.

IDA Ireland disclosed this week via a response to a Dáil question that 10,000 jobs have been lost in the FDI sector since 2007 – – so jobs levels are back in the 1990s and people can blather about sovereignty, but like the 800 Sky jobs announced yesterday, jobs from foreign firms are required to support a first world lifestyle – – static real American wages since 1969 shows what’s ahead for Europe.

Investing €10bn at least annually in overseas commercial property with less than €200m going into venture capital tells its own story as did the sale by AIB of part of its HQ in 2006 to an overindebted Seán Dunne. Paying €412m for a former dump site in Ringsend was also rational.

The lack of interest in reform compared with the focus on Germany is ridiculous. The EU25 will not be a dictatorship and pedants can analyse any aspect of the treaty to support some existing prejudice.

Seriously thinking about what a credible jobs strategy should contain wouldn’t be half the fun.

As I said earlier, even on water quality we need external pressure to get our act together.

Our modern state began in irrationality but we should get inspiration from a 31-year old who had the wisdom to see the value of compromise and understand realpolitik. He had got his hands dirty compared with his older aloof rival who profited from the subsequent mayhem.

@Sarah Carey

Ireland wasn’t even close to breaching the SGP deficit limits in the years 2000-2007, and in fact was in surplus most of the time. Article 7 only applies to countries that are in breach of the SGP criteria, and thus it would have had absolutely no impact.

These were the years when Bini-Smaghi and others were holding Ireland up as a template for other less enlightened laggards to follow, and as proof that everything was working well.

Three years after the crisis has hit, there has been no substantive debate in the EU on how to deal with private credit bubbles. It isn’t even on the agenda.

We hardly need to spend much time on Ireland: shambolic governance/regulatory system and a property regime that makes land scarce in a country that is 4% urbanised.

Spain?

Maybe Finland?

Maybe not; we don’t appear too eager to learn from well-run countries or ones that reformed after economic busts.

Bini-Smaghi arrived on the scene in mid-2005 — the cat was well out of the bag by then.

@Michael Hennigan Well said. Given the restriction on ESM access for countries that don’t ratify I can’t see the powers that be offering debt forgiveness as a trade-off for us ratifying this. The stick is there so why expect a carrot?

We have a legitimate gripe about the cost of our bank bailout, a lot of the costs of which belong to us because we were the primary beneficiary of people being able to get their cash out of the bank in the morning, we elected the governments which allowed those banks get out of control to begin with, and because our Government granted the guarantee, but the ECB almost certainly increased the costs to us and ways to redress this should be sought.

But to link this to the pointless fiscal compact? This is how to guarantee failure. The German’s want the fiscal compact to negate what was done to the SGP (in a large part, by them). Most Irish people would actually be happier if our Government were complying with that compact in the medium term, I don’t think many of us are happy with the current budgetary balance or debt pile. Yet we’ll reject rules which we actually think would be a good idea (even if they wouldn’t have prevented the crisis) out of spite?

One other point to note is that posters on this thread seem to assume that every constitution in the world can only be changed by referendum. As I recall we’re actually in a minority on this, most written constitutions can be changed by e.g. a super majority in the legislative branch which would be the case in Germany or the US (plus a super majority of States) or even by a simple majority e.g. in the Netherlands. I can’t remember which pot France falls into but they certainly don’t need a referendum, it is only an option for them.

Enshrining rules in constitutions doesn’t mean the same thing for all peoples, and we’re actually the only ones in the Eurozone for whom it probably does mean permanence. The fact that it would bind our legislature alone is what is problematic “An old man turned 98, won the lottery…”

@Michael

Well, be fair.

During the boom I was consistent in expressing horror at issues like:
– dependence on windfall/consumer taxes over income taxes
– blowing money on benchmarking instead of reform
– voting FF who simply bought votes every time instead of reforming the system
– reducing income taxes to a point where people thought public services could be magically paid for with little cost to them
– running the country on the basis of consensus between FF, civil service and the unions.

So, I won’t accept now, that my understanding is partial.

As for water, I specifically recall outraging listeners in Galway in 2007 when I said they had voted for shite, by making FnFers top the poll despite the fact that the Corrib water supply continued to be infected by bacteria which was literally poisoning them, due to the refusal (through simple inertia as far as I could see) to upgrade the infrastructure.

So yes, it’s going to take us 10 years to fix the problems left behind by that disastrous period.

HOWEVER: that position does not exclude the following two facts:

1. the private sector has work to do, and it in unfair to expect the general public to “take its medicine” in the form of severe cutbacks without a corresponding “medicine taking’ by the banks i.e. some bondholder burning. The pain HAS to cut both ways.

2. What I am trying to establish in my questions in this thread and what Bryan G is saying I am correct (but still just waiting clarification from DOCM) is
– why is this treaty being presented as a solution to the “problem” of the EU debt crisis when the “problem” was created during a time when we never breached the SGP?
We could end up having a referendum (which could well be defeated because of the anger over the lack of private sector reform) for something that would never have prevented the problem in the first place.

Just to clarify previous post the changing of the wording to not enshrine the debt brake in the constitution simply levels the playing field for Ireland. Since the Netherlands could both introduce and subsequently remove a debt brake with a simple majority of the legislature, since a German government could do the same with a strong majority in the legislature, it would be manifestly unfair to ask Ireland to introduce a rule which we couldn’t remove under the same terms.

I don’t see this as a sop to preventing an Irish referendum, I see it as basic fairness not asking Ireland to go further than everyone else because of the actual permanent nature of the Bunreacht relative to most European constitutions.

Had they managed to get it into an EU treaty it would be binding on all Governments and would be permanent in which case we should have a referendum. But Cameron stopped that happening so now it pretends to bind all equally feebly. It is only fair that it doesn’t bind Ireland more than others which allowing us use an Act of the Oireachtas achieves.

@Michael Hennigan

Preventing private credit bubbles in the EZ cannot be done at the national level alone. The Irish government added fuel to the fire with its tax policies but the primary cause of the bubble was excess leverage, and the financial structures and incentives that produced it. You need to tackle monetary policy, EU-wide regulatory policy, and national regulatory policy in parallel to achieve the desired effect.

If you are trying to curb excess late-night cider drinking in parks by the youth of the nation, then you need to control the price (monetary policy), use restrictions on sale and consumption (regulatory policy), avoid allowing tax deductions for every bottle of Linden Village consumed (tax policy), and avoid having the political leaders of the day extolling the virtues of late-night cider drinking in parks at every opportunity (moral suasion).

However this is the discussion that is not taking place.

@ Sarah Carey

I didn’t seek to tar you with a big brush — I was reacting to the point about voting no.

This fiscal compact is not the solution to the crisis but it’s one aspect of a solution.

Der Spiegel reports that thee are discussions with the IMF on expanding the rescue fund to up to €1.5trn.

There was some bond burning but flogging a dead horse will not change the ECB’s position on seniors at present.

All the solutions are not in Franfurt or Brussels and a rejection of the treaty following an abusive campaign does not seem clever.

Clive Crook on Bloomberg:

While Europe’s governments struggle to contain their debt meltdown, a big part of what’s gone wrong is easy to forget.

Through force of repetition, starting not just with this emergency but before the single-currency experiment even began, calls for “structural reform” in the European Union have become an empty incantation. It’s worth pausing to understand just how badly parts of the EU still need it.

http://www.bloomberg.com/news/2012-02-01/why-europe-really-must-pursue-structural-reform-clive-crook.html

@Aisling

🙂 🙂 love the diagram

@Michael

I acknowledge that right now I’m going through the process of working through instinct (screw Frankfurt) to intellect. This is what the electorate will have to do too if it comes to a referendum (and I’m very attracted to Aisling’s point that we are in fact better off without it being in the constitution in the first place – and indeed I made the point at the outset that putting something this fundamental in the constitution in the first place is a bad idea).

But you know there is a big political problem here and if I can’t be convinced then who can? I have ardently advocated Yes to all the EU referendums and consistently made the point you make, that anything that emanated from there was good for Ireland, particularly on civil rights, social and environmental law. And I’m sorry – but while acknowledging completely the part we played in in our own downfall it is indisputable that we are being forced to pay unfairly for the EU debt crisis.

Many will argue that this is not the real issue of the treaty – but politically we can either trust the Big Two to treat us fairly, or to exploit us to their own ends. For example you referred earlier to the Commission.
We were always assured that the commission was an important element in the balance of powers within the EU – equal status for all countries, irrespective of size and as you say, our own commissioner with their legs under the table.
But the experience of the last few years as seen the commission pushed to one side while Merkozy drives their agenda.
I always took comfort from the promise of a veto. But the UK experience shows that a “Veto” is political suicide and life continues on for the other irrespective.
In other words, the “safeguards” we were promised have proved to be useless.
In a nutshell, I have lost faith.

If the treaty can be passed by legislation, which can then be overturned easily in the future, I could live with that. (Even though experience now shows that even if we WANT to do something, we can be intimidated out of it) But putting it in the constitution? No.

Re my 9:15 above:

No chance slipping in the following clauses at the end of this:

2. This Treaty shall further include clauses and amendments to be agreed as part of an overall restructuring agreement for Ireland’s debt based on ability to repay.

2.i Ireland…
shall have the right enshrined in this Treaty
to determine its own Corporate Tax rate.

2.ii Ireland…
shall have the unilateral right of abrogation
from any further EZ treaties imposing a Financial
Tax or any other tax, that does not already
have Irish constitutional and legislative force in the
Republic of Ireland, on citizens of the Irish
Republic.

Do you think the above might get past the Bundesrat ?

“The upper house of the parliament, the Bundesrat [federal council] cannot be dissolved, represents the states (Länder), and receives all government draft legislation before the Bundestag. Its approval is required for most laws.”

If it did, might even get the approval of the Bundestag itself?

You don’t think so?

” The Bundesrat already discussed something like that. You heard it was said the Irish parliament were a useless, bunch of greedy wasters and the Irish people, as recently acknowledged by their PM, the same? ”

Lol, says it all in discussion above when it reaches the level of what will Germany accept; as opposed to what a currency needs to survive and prosper. Its been said, ‘There are two ways to conquer and enslave a nation. One is by sword. The other is by debt.’

The ‘Compact’ amounts to being conquered both by debt and the sword 🙂 Perhaps its also a case of fools rushing in where angels fear to thread !

@ Sarah Carey

“If it simply prohibits breaching deficit guidelines, the same problem could arise again?”

This is a way I’m thinking about it based on Frank Barry’s presentation.

Let’s say the, umm, turnip industry is big across Europe. All countries grow turnips. Now, for geographic, cultural, variational, local incentive resons, etc, some countries are more reliant for their income than others on turnips. The turnip industry is relatively larger and smaller in various countries.

Let’s say, for a start, one little country is heavily reliant on turnips.

Now a great big blight unexpectedly destroys the turnip crop across Europe.

What happens is, in the little country there is an econmic catastrophe, and the government has to spend more (people losing jobs in the turnip industry) and has less income (less people working to tax, and less tax from the industry). The country breaches the guidelines.

Other countries, where turnips are relitively less important, soldier on (or indeed, through virtues of stored turnips can hide their losses).

At this point the little country claims under Article 3 (3) that this is exceptional, and provided they get back on track on the medium term, they should not be penalised.

This is where things get a bit murky for me. At this point, I think the Commission can come in and say, well ‘fair enough’, or maybe it might say, ‘look, we all have a turnip industry and the fact that your economy is unbalanced means we’re not treating this as exceptional, so it’s austerity for you for your foolishnes on relying on turnips.’ This can then go to court. It is also possible that another country can attempt, on its own, to bring a country in breach to court (though you have to follow a string of references through the treaty).

Now let’s say the turnip industry is very big in a big country, but small elsewhere but the same thing happens.

This time it is the big country in breach and all the little ones are fine.

The big country claims exceptional circumstances.

An added wrinkle is that if a little country goes under, in terms of the total economy of Europe, there is a bit of a ‘so what’ or indeed ‘what are you going to do about it’ factor. This time, there is not so much of a ‘so what’ as all the economies of Europe might go under if the big one does. There is more collective interest in saving the big economy.

So it is now much harder to imagine the Comission sticking the big country with a fine under the system. Also, if a little country says, hang on that’s quite unfair – you were foolish to rely so much on turnips, we’re taking you to court – the big country is in a much better place to say, absolutely do that – and then it looks through its other advantages and talks to its friends, as to what it is going to do about it – quite possibly outside this agreement.

The recent past shows plenty of examples of big countries (or other actors), pursuing their interests quite outside the frameworks on offer.

This is why I gree with ‘@Shay’s “smaller states end up having to comply even with idiotic laws.”’

http://www.ucd.ie/geary/newsevents/ieconf/

@ Bryan G

Article 7 refers to “an excessive deficit procedure” which can only mean that specified in Article 126 TFEU and, ipso facto, confines the Commission to the role it has under that article. Were the situation otherwise, it would be a breach of the provisions of the treaties. The article is designed to deal with the procedural problem in Article 126.6 where the Council must decide by qualified majority “after an overall assessment whether an excessive deficit exists”. It binds the contracting parties, in a formal deal agreed outside the treaties, to act in a particular way in the exercise of their discretion as to how they will vote in the Council. Full stop.

@ Sarah Carey

” – why is this treaty being presented as a solution to the “problem” of the EU debt crisis when the “problem” was created during a time when we never breached the SGP?”

With all due respect, whether Ireland did or did not breach the SGP was not a major factor in the crisis affecting the euro nor in the forces driving the adoption of this treaty. The treaty is designed to ensure that the SGP is not breached in the future by the bigger players that form the core of the Euro Area viz. Germany, France and Italy or, rather, that they return to an attempt to at least try to respect it..

The lack of oversight that prevented the EU from stopping the Irish, and other governments, from running into trouble is being corrected, in an initial way, in the Six-Pack, five out of the six measures having been adopted by way of the legal instrument of Regulation which do not require any transposition measures. In other words, they became effectively part of Irish law automatically and did not require that the members of the Dáil be awoken from their slumbers.

@ Aisling

Your understanding of the procedure for constitutional amendment in the Netherlands is incorrect. It would require a general election (cf. Wikipedia entry). In any case, I saw a press report that at least ten countries had problems with the proposal that the debt brake be inserted in their constitutions. Note also Article 3.2 “This mechanism shall be defined at national level, on the basis of commonly agreed principles. It shall include the obligation of the Contracting Parties to present a programme to correct the deviations over a period of time. It shall fully respect responsibilities of national Parliaments”. Incidentally, Italy already has a debt brake in its constitution. Ireland cannot be cast in the role of isolated victim, I regret to say, in this particular instance.

@ All

By the way, I see that the Governor of the Central Bank has identified clearly the elephant in the corner of the room and the simple arithmetic that can be applied to reducing costs in the public service and the choices open to the government in the matter.

And one can also note the high degree of national responsibility being demonstrated by the leader(s) of the Opposition.

This will continue as long as there continues to be a general refusal to face up to the reality of the situation in which the country finds itself.

@ Sarah

“Aisling’s point that we are in fact better off without it being in the constitution in the first place ..”

This is simply a matter of legal necessity. If ‘Compact’ is a violation of constitutional rights as laid down in the constitution, it will have no legal force whatsoever unless either a) the constitution is changed to provide for it or b) the ‘Compact’ is changed so that it does not violate the constitution.

In the case of b) it appears to me removing the force of its imperative so that it is not in violation of our constitution renders the ‘Compact’ entirely useless. We’ve already signed up to the Stability and Growth pact. What it does is show to all who really carries the whip in the EZ. That is what we should really worry about.

I don’t wish to compare our situation to General Douglas MacArthur who signed the formal surrender of Japanese forces on the USS Missouri, 2 September 1945; us being the Japanese in ‘The Compact’.

But we’re getting there !

@DOCM

“With all due respect, whether Ireland did or did not breach the SGP was not a major factor in the crisis affecting the euro nor in the forces driving the adoption of this treaty. ”

Exactly my point!

But Merkel appears to be selling this to the Germans as precisely the opposite.

So it’s not a question really of being for or against this treaty, but why have it at all? This is what I am trying to get at.

Is it simply a german political solution (as per Aisling’s link)

It’s technically actually irrelevant but if it makes the Germans feel better about ponying up to the EFSF/ESM, then sure pass it. Is that what she’s doing?

@ Gavin Kostick

I like your turnip anology, but you miss an important consideration.

Consider the case when the little country needs investment in breach of guidelines to supply other countries with turnips because of a turnip blight dramatically hitting turnip production; the little country doesn’t have blight.

Turnip producers in other countries where production is down 40% have a windfall with rising prices for their turnips.

Do you think those producers in other countries are not going to object to any wavers to allow the small country invest to up its production?

They would be turkeys waiting for Xmas if they did 🙂

I especially like your example because it exposes the true nature of where the EZ is going. Its turning into EUSSR, a set of states built on socialism for the banks, led by Germany; economically skewed both it terms of its means of production, its industrial and commercial base subject to the financial industry heading in the direction of the USSR.

@ DOCM

Re “And one can also note the high degree of national responsibility being demonstrated by the leader(s) of the Opposition.”

May I just note the high degree of irresponsibility of our government in regard to the ‘Compact’ and its record of negotiation re ‘debt brake’ / lack of burden sharing

Serious objections to the Treaty are emerging from the opposition on the Treaty. I should point out I am not a member of any political party.

Ashling,

good point. So if we proceed to have a plebiscite on this treaty it will be the first time the electorate has been asked to vote to accept or reject a standard piece of legislation. Is that a good precedent?

Do we then move on to voting on the Budget, on dogs and hares etc. AMybe we could skip the formality of opening polling stations, appointing returning officers and counters and just do it on Liveline.

@ DOCM 11:21

“Casting the Commission in the role of bogeyman is a common error which overlooks the fact that Ireland (i) has a Commissioner with feet under the table (ii) that it is a collegiate body i.e. it decides by simple majority and (iii) is treaty bound to promote “the general interest of the Union”.

Wow, you sure wear rose tinted glasses.

Mmmmmm, let’s see where the above got us…

Let’s just say it didn’t work out very well and just leave it at that.

We wont talk about the PIIGS’s who didn’t get the message.

Quite apart from the minutiae of the treaty text (which are relevant, but not immediately relevant, because all governments will have to demonstrate fiscal discipline for the immediate future under pressure from bond market investors – regardless of how they use legislative or constitutional means to impose fiscal discipline), there are two key points at issues here. The first is being addressed by some commenters, but the second, which is linked to the first, is not being addressed.

The first, as DOCM, has pointed out, is that this is a statement of intent by Germany about the future economic organisation of the EU and its strategic positioning globally. It is also an attempt to regain the previously abused trust of German (and other ‘creditor nation’) voters. this last is related to the resolution of the current crisis only to the extent that some measure of democratic legitimacy must be secured in the core EZ to provide the basis for democratic consent to further actions to resolve the crisis.

The second point, which is almost, but not entirely, exclusively related to Ireland, is that a majority of the Irish people appear unwilling – and for good reasons – to allow an almost totally supine legislature fully under the control of government to make decisions on issues of this nature. Voters in many other member-states may not be entirely content with the extent to which the parliaments they have elected assert their primacy over government, but, in most cases, their parliaments perform adequately.

In Ireland, certainly since the ratification of the 1937 Constitution, most voters seem content to elect TDs who elect a government and to treat them as constituency advocates and mini-onbudspersons, while using every popular vote that arises between general elections to exercise direct restraint on government. They seem unwilling to sanction or empower TDs to perfrom this role between general election. I have pointed out previously that this is a crude, inefficient and an often ineffective means of exercising restraint over government – as the outcomes of some popular votes may not be precisely what a majority of voters intended (or may not even be in their longer term interests).

And most voters will jealously guard their right – and demand opportunities – to use popular votes between general elections in this manner. Irrespective of the matter at issue, many voters will use this as an opportunity to give an over-mighty government a bloody nose – and the opposition factions will exploit this.

This is precisely what is happening in this instance. It is both encouraging and depressing. It is encouraging that a majority of voters seem determined to exercise their ultimate authority; this is to the eternal credit of the Irish people and it is wonderful to behold. But it is depressing that politicians have consistently failed to engage with their voters to secure their consent to empower and resource their TDs to exercise restraint on governments between general elections.

In this instance it seems that public pressure will force an unnecesary referendum. The only possible way the Government might be able to resist this pressure is to commit to allowing the Oireachtas to exercise sufficient restraint over it. But the spell that the exercise of almost absolute power casts is almost impossible to break – and time is too short to do anything that might influence the public mood.

And so we will probably have a referendum and it will be decided on everything other than the matter at issue. All democratic systems require a certain amount of hypocrisy, bullshit and low-level corruption is they are to function. The challenge is to avoid these three dominating the process. I can only hope that Irish voters will allow Chancellor Merkel to indulge in the limited amount of hypocrisy and bullshit she needs to convince her voters to consent to ehat is required to resolve this crisis.

They, more than voters in any other member-state, should recognise that there has to be a licence for a limited amount of these, but not too much, since governance in Ireland during the last decade was dominated by all three – and that this continues to be the case to a lesser extent.

@ Sarah Carey

Recall all the gab about ‘democratic deficits’ and the elite making decisions without having regard to their publics in 2008?

Well, we have got what some loudly asked for. Besides it would be naive to think that there is no political dimension when its Germany has to provide the funds. So Germans expect to see more than voluntary rules.

Membership of the EU since 1973 has been a big benefit to a once poor country and uniquely, existing members in each enlargement accepted poorer countries to membership.

Eaten bread is soon forgotten and in almost 40 years, we have not paid one net cent to the cost of running the EU.

In a disaster of our own making, we have been bailed out and our banks have got a €100bn in funding.

As with Greece, nobody forced us to join the euro and of course there are pluses and minuses – – there are over 30,000 working in financial firms involved in exporting.

People say that all the banks should have been let go bust and private investors after a while (?) would purchase bonds again.

We are the developed country that is more dependent on US firms than any other according to the US Commerce Dept; we have about 140,000 employed in indigenous firms.

The latter have survived 4 years of a brutal recession and have incurred debt losses from thousands of collapsed firms.

The last we’ll need is a NO vote and speculation overseas of quitting the euro.

As with Greece today, foreign suppliers to Irish firms would demand cash in advance.

It’s time we got a grip on ourselves; as I said before: we would be Albania without foreign firms.

We feel outraged about Frankfurt but we have been lambs with so many rip-offs from the public treasury. It’s as if it’s a national sport.

People, innocent victims of a failed unjust society, are killing themselves with desperation while others who have never had to take a serious risk in their lives, are walking away with big bonanzas.

Yes to outrage and yes to commonsense.

@ Colm Brazel

“Serious objections to the Treaty are emerging from the opposition on the Treaty.”

“Opposition oppose government” shock…? SF have been against almost every treaty for the last 20 years. FF are seeking to find a purpose, and as a Eurosceptic party it may turn out to be. This will go before Supreme Court no matter what, simply a case of whether the government refers it, the President does, or someone takes an independent case. Not quite sure why everyone is getting so worked up about what the AG thinks.

@Michael

SO just to be clear:

You believe that it is fair and right that we should pay every cent back to the bank bondholders and we have no right to ask for any deal?

Leo is not alone…..
“On the challenge facing the Government in any referendum, the official said it was “perfectly well” known that the answer the public gave would not be the answer to the question posed. “So it is nothing to do with democracy.”. From IT article today quoting an EU official.

Interesting. Of course the people are eejits…that’s why they didn’t allow a Greek referendum.

To those who say that the deal is a necessary sop to the German electorate to allow the money spigot to be loosened, I say that’s a bloody good reason to vote it down. As a country, we have been very slow to deal with the aftermath of the bubble, and have made some utterly stupid and destructive choices in the actions we have taken.

We can blame the politicians of our main political parties for this, and I do, but it is not their fault alone. It is also the fault of the Troika, and its components, who have financed the insanity and stood firmly in the way of reversing some of the stupidest, most damaging choices.

Voting down the deal seems to be the only way to force hard decisions about public spending, and to precipitate the crisis that is needed to force the restructuring of the State’s liabilities so as to prevent public debt from strangling the Irish economy for the next 20 years. That’s why I’ll be voting against if given the chance.

Sarah,
Burning the bank bondholders is in the realm of Monty Python’s dead parrot. Rejigging the terms of the PN is now the major objective. If it is not done then the Troika may have a problem in that we would be on the cusp of debt sustainability.
You are correct on the point that we should not put this in the constitution. An act of the Oireachteas would suffice. Then wehn it is revealed to be a stupid and unworkable treaty, it can be changed by another act.

@ Sarah Carey

I wish I could understand your point but it continues to escape me. It is quite clear that the crisis is not entirely attributable to the breaching of the SGP by the major players. However, in the eyes of the German government now in power (and, incidentally, the departed President of the European Central Bank) it was, and remains, the major consideration. The fiscal pact treaty addresses this particular problem. But action is also being taken on other fronts within the existing treaties.

Every effort must be made not to view the crisis soley through the distorting lens of the debate in Ireland which, I regret to say, is the very opposite of mature.

Apart from the simple equation in relation to cutting the cost of the public sector, voters are also refusing to face up to the question; where did the money go? They stop at the point at which it was borrowed because they cannot bring themsleves to look around them to see those who emerged with great benefit, and continue to do so, from the pyramid scheme that the Irish economy became. They want the taxpayers in Germany to foot the bill instead. (Punchestown is doing very well and new car registrations in the Irish motor “industry” are up).

@ Aisling 8:06am

Brief comment on the possible reductio ad absurdum implied by your point here:

” Given the restriction on ESM access for countries that don’t ratify I can’t see the powers that be offering debt forgiveness as a trade-off for us ratifying this. The stick is there so why expect a carrot?”

I’ve argued the stickiness of the Compact. In so doing, I’ve been pointing out the absurdity of the ‘Compact’ in terms of its austerity driven agenda; with the carrot of ‘burden sharing’.

The only carrot is entry to ESM whose terms according to Spiegel now are:

http://www.spiegel.de/international/europe/0,1518,812565,00.html

¢1.5 trillion firewall made up of :

“The proposal would see the current temporary bailout fund, the European Financial Stability Facility (EFSF), combined with, rather than replaced by, the permanent European Stability Mechanism (ESM). The third €500 billion chunk would be provided by the IMF. In return, euro-zone countries have already agreed to €150 billion in bilateral credit for the fund. The other €350 billion would come from across the world from countries such as Brazil and the UK. The US, however, would not participate — even though Geithner himself said in Davos that only an extremely large firewall would ensure financial security.”

The important bit is the last par above link:

But Lagarde is hoping that the super-fund will never need to be used once it is in place, especially as the European Central Bank should be waiting in the wings to provide more liquidity into the financial sector.

The above fund will backstop the bailout to Ireland. Its important to note the lack of burden sharing and commitment not to burn senior debt by ECB; also the current ELA programme for Ireland.

So, I’m taking the view the EZ will force Ireland to pay back every penny it owes. In order to do so, only basic life support will be given to this country.

Your definition of what basic life support probably differs with that of EZ ‘partners’ eg Croatia.

So think of Ireland in terms of small Baltic countries like Hungary and Poland. Like us, austerity is not going to return competitiveness; it will lead to brutal austerity measures. They will not have flexible exchange rates to help them restore competitiveness. Neither will we.

Think of massive emigration exceeding Spain’s 22% as our public service is decimated. Wealth will be sucked out of the middle class upward to the banking and financial sector.

A small footprint labour/employment wise will contribute CT until this tax is changed with another edict from the Bundestag. The wealth of the nation, its assets, its taxes will be pillaged over the coming decades to pay for the IBRC ¢30 bn.

Three more years with ¢3bn each year should be enough to drive democracy out of this country for good.
Further plebiscites will ensure our constitution already proving a hindrance will be dispensed with.

We need debt write down of approx ¢50 bn. The ‘compact’
does not even contain empty promises regarding the burden sharing requirement; instead, its a pact to ensure that if we ask for burden sharing, it will not be given.

Its a pact to make sure the banks get their money back!

@ Michael Hennigan

Without mentioning what a divisive and totally unncessary referendum will do to the shaky confidence in the Irish banking system cf. report from Irish CB linked to above.

You could not make it up!

“Without mentioning what a divisive and totally unnecessary referendum”

The only divisiveness there is has been created by the FG/LB coalition sent to clean up the mess; get the people’s money back from bondholders.

Their betrayal of the Irish people in the ‘Compact’ is only surpassed by the total mess they’ve made in negotiating rubbish that could be written on the back of a handkerchief and best used to blow your nose in 🙂

But our politicos are good at getting conned by the banks, by the ECB, by NAMA…nothing new there 🙂

@Cet. Par.,

The unnamed EU official quoted is correct. This has nothing to do with democracy – in terms of a properly functioning parliamentary democracy. But, for Ireland, it has everything thing to do with the lack of a properly functioning parliamentary democracy. That is the gist of my 10:42am above.

Tull is right. Any properly functioning parliament, exercising the ultimate authority of its voters, would look at this proposed treaty, see it for what it is and deal with it accordingly.

@Sarah,

The ducks have to be got in to line. Chancellor Merkel reassuring her voters is a key duck that’s not in line at the moment and has to be. There is a sequencing here of which most people seem to be unaware. Some relief on the Anglo legacy will come, but it will have to be part of a much larger rule-changing settlement – and the consent of German and other ‘creditor nation’ voters will be required. The EU is governed by the rule of law democratically enacted.

The fact that the rules applied under existing laws were not very clever and that their interpretation in Ireland’s case has been, and continues to be, damaging is a major problem, but Ireland using a referendum ‘no’ to force the pace on this would be totally counter-productive.

Irish people should just sigh and consent to this piece of hypocrisy and bullshit to allow this duck to be got in line – and ideally let the Oireachtas do it.

The fact that the rules can be changed at the drop of a hat in Ireland when some special interest or other has problem by a government ramming the necessary legislation through a supine Oireachtas seems to be leading many people to believe that the EU should use the same approach now that Ireland has a problem. It can’t and, quite rightly, it won’t.

It’s just taking longer than we would like, because the trust of too many voters was abused. But no sustainable resolution of this crisis will be achieved unless this trust is regained. This treaty is a slightly grubby means of achieving this. Let it pass.

@Paul Hunt
That is quite an extraordinary statement. I suppose the eejits were thinking of septic tanks when they voted on marriage, abortion etc.
It is interesting that the IMF are today acknowledging that they got it wrong in Greece and have driven the country into total despair and dysfunction.
I accept your take on parliamentary democracy, however, it just doesn’t work here and the only option available seems to be to let the eejits decide.

Paul,

I obviously do not know what the advice of the AG will be but I presume our Govt said to the partners in the EU, this is the form that the treaty must take to allow the Dail to enact it into law without a referendum. The partners seem to have designed it in a form to meet that test.
Now one hope it will be understood that the President may send the bill to the SC to judge its constitutionality and we cannot know what they will say.

But I am guessing it will be passed into law after due process in the Dail. PErhaps then you might see fit to pass a little praise.

That said, we are still left with a pretty daft and unworkable piece of negotiation. There is zero chance of France run by a socialist nutter meeting the 0.5% structural deficit target. It has run a budget surplus under all goverments one year in the last 35. But if it gets us to the point where we begin to work through crisis resolution then it might have some merit. IF however, it is just the latest episode in an increasing German attempt at hegemony…well we know where that ends up.

@ Colm Brazel

“So think of Ireland in terms of small Baltic countries like Hungary and Poland. Like us, austerity is not going to return competitiveness; it will lead to brutal austerity measures. They will not have flexible exchange rates to help them restore competitiveness.”

Eh, what? Poland is neither small, Baltic or undergoing austerity/recession. Both of them have free floating exchange rates, the Forint has been hammered recently. Sure you’re not thinking of someone else? Think, then type, think, then type…

“Think of massive emigration exceeding Spain’s 22% as our public service is decimated”

Eh, 22% emigration? If you meant unemployment, it still wouldnt really make sense – you’d need to add 250k to the live register. Seriously confusing post…

This compact is referred to by many as a treaty.

Can anyone with legal knowledge affirm its status as an EU treaty.?
I thought all members had to sign off before its classified as a treaty.

If its not a treaty has anyone researched the possibility it could be in conflict with the provisions in previous treaties?

Following on ,if we reject any referendum does this mean we just revert to being governed by everything up to the Lisbon treaty?

I would think this to be important because I do not understand how the EU commission can impose budgetary sanctions on Ireland if this is not an EU treaty.

Sloppily written piece on the Article 27 option. They cannot force a referendum. They can request that the President forces one.

EB,

Maths is clearly not the strong suit of this eclectic bunch. They might just get 0ne third of the Dail if FF join them. However as the govt has a majority in the Seanad they will be short.
They would be much better trying to persuade Prez Higgins to refer bill to the SC or take an action themselves. MAybe if the threw their 20k per capita “leadership allowance” into the pot they could get a good SC.

@ Tull

is the Seanad majority “locked”? They’re not all quite as much political animals as the lot in the Dail. Its 31-29 so you’d only need a couple of waverers or voting on “principal”.

@DOCM

What I’m trying to do is:

1. Understand what’s in the Treaty and how it effects our ability to make decisions in the future
2. Understand if what’s in it, solves the problems that brought us to this pass.
3. If it doesn’t perform (2) and has potential issues regarding our sovereignty under (1) then I don’t think it’s worth putting it in the constitution.

However, based on this highly fruitful if at times frustrating chat 🙂 I think I have arrived at the following understanding

– the problems are being solved from a number of different directions, of which this is one
– this treaty is potentially meaningless really
– so if a referendum is NOT required that’s GOOD because
a) we don’t put something stupid in the constitution
and
b) it has a strong possibility of being defeated on “extraneous issues” as Leo says by people like me who are resentful of how we got bullied by the Big Two.
c) defeating it would create a huge problem as it would limit our access to the various funds

So let’s pass some legislation, keep the Germans onside, because unfortunately we need their money and their consent, and continue the diplomatic campaign to get a better deal on the “private sector voluntary contribution” to the cost of bailing out the banks.

In parallel, sort out our structural fiscal problems, which we created ourselves, separate to the banking crisis.

As for the politics, let SF and FF play their little game, but I would suggest the Government recommends a referral to the Supreme Court irrespective of Whelan’s advice and keep our fingers crossed that a referendum is not necessary.
If the worst comes to the worst, and we need a referendum, then the government will have one hell of a job doing what you have tried to do here – persuade voters that the Treaty’s implications are pretty benign and voting yes is in our best interest and with limited negative effects for future sovereign decisions.

OR

Gavin is right with his turnip story, and we could sign ourselves into another crisis in 20 years when the turnip blight strikes and we’re not allowed breach the deficit to save ourselves.

@ Sarah Carey

SO just to be clear: You believe that it is fair and right that we should pay every cent back to the bank bondholders and we have no right to ask for any deal?

Fair and right?

Where would I stop?

People who recklessly misgoverned the country with huge collateral damage and providing huge severance deals for themselves is hardly fair; the man who was in charge of benchmarking leaving in his 50s with over a €700k jackpot and a pension of €140k pa; the former financial regulator and so on..farmers getting 23% of the national roads programme — over €4bn.

I don’t think its fair that Ireland has collected more than €40bn from the EU (mainly paid by Germans) and has yet to make a net contribution in 40 years.

As regards bondholders, I assume you’re talking about seniors.
It would be preferable not to have to pay; when there was a window of opportunity in the months after the Lehman collapse, we GUARANTEED all bank debt for 2 years.

During that period the ECB became more firm in opposing burning seniors because of contagion. Then last month it drew a line on bail-ins with Greece because of rocketing yields.

The banks at least get cheap funding; we have no support from other countries to put pressure on the ECB to change its stance.

The country is bankrupt and has not much credibility to dictate terms.

Is it fair that private sector workers with pensions that are generally much less attractive than the unfunded public sector penions, should take a hit from bond-burning?

@Tull,

I’m not as slow as you might think to ‘see fit to pass praise’, but I’m sure you too recognise that the posturing and hypocrisy on all sides, both in Ireland and at the EU level, is sickening and that this does not bode well for a sensible outcome. In addition, the SC might be smarting, or might be perceived as smarting, from the people’s comprehensive rejection of their desire to have privilged access to the public purse. Put’s them in an interesting spot.

@Mr. Bond,

I presume the ‘principal’ to which you refer is the balance of the PNs outstanding, and not any democratic ‘principle’.

Be careful what you wish for…
A referendum is all bad:
Here goes:
1 The yes vote – Irish people have endorsed the Euro, austerity and the German supremacy
2: the no vote leading to 2:a the revote, or 2:b threatened expulsion and the revote or 2:c expulsion and (because it’s self inflicted no debt write-down)

So be glad that this can pass. Defeating Europe requires a different strategy. It’s a time to wait in the long grass and pick our moment to strike for freedom – this is not it!

@Seán:
“This compact is referred to by many as a treaty. Can anyone with legal knowledge affirm its status as an EU treaty.? I thought all members had to sign off before its classified as a treaty.”

The document’s title tells the story quite will – Treaty on Stability Coordination and Governance in the Economic and Monetary Union. It is intended to be a treaty.

Political agreement was reached this week on the text. For it to come into force two more steps are needed: it must firstly be signed by the countries concerned and then it must be ratified by them.

The target dates for these steps are March 1/2, 2012 for signing and all the various ratification measures are to be completed by end 2012 so that the treaty can come into force on 1 January next. The treaty needs a minimum of 12 countries to ratify it in order to come into effect.

It is not an EU treaty, but it is an unusual animal in that it draws on various EU institutions in order to operate. There is also a commitment in the text binding countries to incorporate the substance of the treaty into the EU legal framework within five years at most.

@ Sean

You have a good point there in your last comment. It was clearly the most difficult issue for the legal eagles to deal with. However, they appear to have succeeded in doing so in Article 8 especially its final paragraph.

“8.3 This Article constitutes a special agreement between the Contracting Parties within the meaning of Article 273 of the Treaty on the Functioning of the European Union”.

The Commission is doing the leg work but all the decisions remain with the members countries that are party to this “special agreement”. The leg work is but an extension of the work it is entitled to undertake in any case under the treaties and it would be difficult to win a case against it on the grounds of what it is undertaking to facilitate the parties to the agreement goes beyond its remit. It is “invited to present in due time” its contribution, thus underlining that it remains entirely independent.

@ BEB

The initiative with regard to Article 27 may serve a very useful purpose, although probably not that intended by its promoter. It first assumes, correctly, that the government will go the legislative route with regard to implementing the debt brake provisions and the legislation itself will provide a solid platform for discussion.

Of course, a case may also be taken before the Supreme Court under Article 26.

Not to mention a case in relation to the treaty itself (which would inevitably drag in the treaty establishing the ESM).

The possibilities for the country to tie itself in political knots, while losing sight of what is going in the world around it, are endless! The Lisbon experience shows that we enjoy our moment in the sun. On this occasion, however, it will not last very long as the awful truth finally dawns; we are entirely free to shoot ourselves in the foot! And there will be no second try.

@Aisling
“Yet we’ll reject rules which we actually think would be a good idea (even if they wouldn’t have prevented the crisis) out of spite?”

Very good point. It would not be right to vote no out of spite.

I have an idea if there has to be a referendum.

Why not have a second referendum on the same day in order to legislate to implement policy that would have prevented the property bubble?
Implementing the Kelly report. Perhaps Ronan Lyons idea on a site valuation tax. Setting a mortgage loan to earnings ratio at a reasonable level (2-3 times earnings). Then we could satisfy Sarah and others that this referendum or legislation is for our benefit and would prevent us from harming ourselves in the future.

Wanting to link it to a debt right down is not politically realistic.

Lets just do it because it is a smart thing to do.

@DOCM

The article is designed to deal with the procedural problem in Article 126.6…

You are completely missing the point of Article 7 – it has nothing to do with determining whether or not an excessive deficit exists (126(6)). It has to do with new obligations on Member States after it has been determined that an excessive deficit exists.

Under the Lisbon treaty a Member State had an obligation to correct the deficit, but did not have an obligation to implement the specific proposals and recommendations made by the Commission (under 126(7)) and Council (under 126(9)).

With the Fiscal Compact treaty a Member State now “commits to support” these recommendations. The original wording was “undertake to support”, but this was changed
to emphasize that it should be a legally binding commitment.

@ Bryan G

We are now going round in circles. That is exactly my point! It is the Member States – or rather the contracting parties to this treaty – that have undertaken the obligation in question which they are entirely free to do.

Your opening point was;

“1) Does the treaty involve transferring further powers to EU institutions?

On the basis of Article 7, the answer is yes. This requires the government to commit to support decisions, proposals and recommendations made by the EU Commission for any country in deficit. The wording doesn’t limit the scope of these decisions to numerical “envelope” targets, so this means that detailed and specific policy measures could be proposed, which the government commits to support”.

The answer to your question is still no. Competences, in the terms that they are defined in the treaties, cannot be transferred to the institutions, they can only be transferred to to the EU qua organisation which has legal personality (Article 47 TEU). The powers of the institutions – not the same thing – are defined within the various categories of competences transferred as set out in Articles 2 to 6 to the TFEU. No change has been made to these articles.

Cf. my reply to Sean above on the issue where real ambiguity arises as to the role of the Commission.

@ Paul Hunt

“Irish people should just sigh and consent to this piece of hypocrisy and bullshit to allow this duck to be got in line – and ideally let the Oireachtas do it.”

I have great respect for your views, so I had a good think about this, and I say: No. I would not sign this treaty.

I say no for the following reasons.

(a) This treaty is bad economics, and as such will shove future suffering onto the people of Europe. Signing things that we don’t believe in has got ‘us’ on many levels into trouble. Let’s stop doing it.

(b) It is corrosive to the body politic to say; please say yes to this wrong thing as this wrong will ultimately make a right.

(c) (do I contradict myself, then I contradict myself) If one is playing realpolitik, then one shouldn’t go around signing things without being clear as to what will follow. As of now, there are no eurobonds, increased ESM or equivalent on offer as a consequence of signing this.

If we’re moving in Europe to the point of finally giving the markets what they want – access to the pockets of the German taxpayer ((c) Eureka) – it does not mean that Ireland should do what the current German government wishes.

@ All

Meanwhile, back in the real world, a very good rundown of the Irish situation by Reuters!

http://uk.reuters.com/article/2012/02/01/uk-ireland-debt-idUKTRE81018520120201

How (i) to get the economy to stop contracting and (ii) house prices to stop falling are indeed the key questions. One of the answers has surely to be for the government to stop faffing about in relation to the required budgetary and reform measures.

Another must surely be for the government to get across to the population the general contours of the financial situation in which the country finds itself. Of course, this assumes that it has grasped them itself, an assumption, on present evidence, that is open to question.

The implications of a needless and divisive referendum campaign on the country’s capacity to extricate itself from the hole in which the previous government placed it might also be better explained.

@DOCM

You appear in your second paragraph to persist in advocating the thoroughly discredited idea that raising taxes and cutting expenditure somehow increases economic confidence and leads to growth. It does not.

I think the population is by this stage well aware of the fact that Ireland’s fiscal position is not going to recover until there’s strong economic growth in Europe. Furthermore, it should be obvious to the meanest intellect that the proposed fiscal compact will, should it have any effect, retard economic growth. It’s bad for Europe, and thus bad for Ireland.

@Gavin K,

I can see the validity of the case you are advancing, but needs must and this is a ‘hold one’s nose’ situation. And I’m not proposing this approach lightly. But the centre-right hegemony in Europe will not last indefinitely. All the more reason to leave this to the Oireachtas. In the same way that Germany was among the first to breach the conditions of the S&GP I am reasonably confident they will chafe at the restrictions this new device will impose long before Ireland will. Ireland is a regional economy in a much larger economic entity. It’s time to come to terms with this.

I also believe that there is a need to reduce state reliance on the sovereign bond market considerably in the longer term, by reducing the issue and rolling over of sovereign bonds and the development of instruments of similar tenor to finance infrastructure and utility assets in which they could safely invest.

I might have missed it but nobody seems to have mentioned the gas field in Leitrim
How is it linked? Because it will have much bigger implications for this country than this fiscal pact. Well have to do something along the pact’s lines anyway but energy independence changes the game in terms of default.
I think some people are more interested in sounding clever and rehashing the same “aren’t the Irish terrible” argument than looking at the true power positions here.
Real politik is really simple – you fight for everything you can get and give nothing away.

So FF hand Irish taxpayers over to the banks.

FG/LB hand Irish taxpayers and their banks over to the Bundestag.

Its a reminder of the Vichy Regime in France.

I suppose we can’t look forward to any Allied invasion of June 1944 to escape.

How about we just give the keys back to Downing St; or perhaps a New Deal as in a new 51st State of the US.

I’m guessing either would manage us better than the turkey christmas of austerity ‘our partners’ have in store for us:-)

All collaborators will of course enjoy first class treatment as usual. Nod, nod, wink, wink.

Fire up the government jet and they’re off for technical discussions about technical discussions for another round of discussions.

Meanwhile kids learn in cold prefabs with roofs letting in water and leaking cold. The latest public, private partnership, Greyhound bin collection, seems to be generating plenty of complaints with unemptied bins littering the streets.

But I guess we can ignore that lot.

You couldn’t make it up. Lol.

@DOCM

If a Member State agrees ex-ante to be bound by the decisions of a third-party, then it is effectively conferring powers on that third party. For example if the State agreed ex-ante to be bound by the recommendations of the Fiscal Advisory Council, then that body would become a “Fiscal Authority”, and would have extra powers.

So rephrasing my question in the light of Article 47

1) Does the treaty involve transferring powers to a foreign legal entity?

I would answer yes, and as a result this should trigger the need for a referendum in order for the government to be able to ratify the treaty.

I am still unclear on whether your position is

(a) The treaty does not transfer powers to a foreign legal entity

or

(b) The treaty does transfer powers to a foreign legal entity, but that this transfer (either because of the nature of the powers, or the nature of the foreign legal entity or otherwise) does not trigger the need for a referendum in order for the government to ratify the treaty.

@DOCM

“The implications of a needless and divisive referendum campaign on the country’s capacity to extricate itself from the hole in which the previous government placed it might also be better explained.”

The present government have dug an even bigger hole than that created by the last one. Some feat that !

Socialism for the banks does not include the democratic will of the people for this government then ?

Better to keep everyone in the dark rather than explain their Good Deal !

The competences:
http://ec.europa.eu/ireland/about_the_eu/competences/index_en.htm

The EU claims exclusive competence for economic policy but:
“c) No Competences Whatsoever
Among those areas that remain the sole responsibility of the nation state are the syllabuses of schools, national citizenship, housing and the funding of public television (RTE, TG4 only), the welfare state, hospitals and the health service, corporate tax rates and any policy that requires large commitments of public money.”

@ Bryan G

A “foreign legal entity”? I thought we were members of the European Union! I am quitting the field on this particular discussion.

@ Kevin Walsh

“You appear in your second paragraph to persist in advocating the thoroughly discredited idea that raising taxes and cutting expenditure somehow increases economic confidence and leads to growth. It does not”.

Where did you get that idea? I am talking about structural reform and the elimination of the deficit by bringing to an end rent-seeking activity which is by this stage so glaringly obvious that the generality of the population cannot avoid waking up to it. By that I mean sectors of the population which are taking an unearned share of a diminished cake; these mainly includes politicians, the upper middle and senior ranks of the public service (including universities), the various so-called sheltered sectors where monopolistic practices still abound and, finally, unjustified and no longer affordable levels of social expenditure generally defined to include unfunded public sector pensions.

Draconian steps to correct these anomalies would, in my opinion, dramatically reverse the fortunes of the country. I am not holding my breath, however.

@ Jesper

The link that you give is no recommendation for the offices of the Commission in Dublin. The material even refers to the aborted European Constitution as a reference? It needs urgent updating and correction.

@DOCM,

its the European Commission website. If you found something to be incorrect there, maybe you should ask them to update?

Unsurprisingly I am fully behind @Gavin Kostick on his rejection of the new treaty but his first point bears repetition (This is, after all, a blog about economics).

(a) This treaty is bad economics, and as such will shove future suffering onto the people of Europe. Signing things that we don’t believe in has got ‘us’ on many levels into trouble. Let’s stop doing it.

Fighting neoliberalism begins at home.

@Paul Hunt

The first, as DOCM, has pointed out, is that this is a statement of intent by Germany about the future economic organisation of the EU and its strategic positioning globally.

I do not share Mr Hunt’s admiration for the currently dominant German political narrative. In a time of supposedly great economic success the number of Germans living under the poverty line has increased by a third:

http://www.dw-world.de/dw/article/0,,5259373,00.html

Understand that the German CDU/CSU vision for Europe does not relate to the reduction of poverty, the pursuit of scientific knowledge or the quality of human life in general. These are not an idealistic bunch and their vision for Europe is a depressing and awful one, and the further you get from Berlin the more depressing it will be.

The ducks have to be got in to line. Chancellor Merkel reassuring her voters is a key duck that’s not in line at the moment and has to be. There is a sequencing here of which most people seem to be unaware.

To which I cough “bullshit”.

Again and again Merkel has made clear that her number one priority is the interests (some might say prejudices) of her political constituency in Germany. The fairy tale that having proven the primacy of German domestic politics over both the much mourned community method and elementary economics she will then do an about turn and come over all New Deal is, putting it kindly, without supporting evidence. Why would she? She is a neoliberal after all.

Roll on a referendum.

@DOCM

A “foreign legal entity”? I thought we were members of the European Union!

From the point of view of adherence to the constitution, what matters is whether the powers are retained by the State or transferred outside it. It doesn’t matter which outside body it is.

I am quitting the field on this particular discussion.

Fair enough – you seem determined to insist that Article 7 involves no transfer of powers or competencies, when the fact of its inclusion in the first place, and what the wording says, suggests otherwise.

@DOCM

I fail to see the connection between that and this. You could stop the pay of the entire public service and you would not eliminate the deficit (but you would crash the economy). Moreover, it’s clear where the real problem lies: with the way our tax laws allow pension contributions to be used to defer paying an unlimited amount of tax for an unlimited period. Beside that, the outrageous amounts paid to people at the top of the public service ladder are an irrelevance.

What I said above about the strongest argument in favour of the treaty being the fact that it would allow access to the ESM, appears not in fact to be relevant.

Here’s what Enda Kenny said today:

Nothing in this treaty impacts on the fact that we are in a programme until the end of 2013. In the event that a country like Ireland were to require further external funding, it will be made available to it, as signed off on by the Heads of Government on Monday.

and

it is clear that nothing in this treaty affects the fact Ireland is in a programme until the end of 2013. This supersedes all of the discussions in so far as the intergovernmental treaty is concerned. This was endorsed again by the conclusions of Monday’s meeting where the Heads of Government specifically referred to the fact that a country leaving a programme will continue to receive funding so long as it measures up to the conditions for which it signed on

So there has been an agreement that the decision to continue funding a programme country until it regains market access, made last July and reaffirmed at every Council meeting since then, takes precedence over any fiscal compact treaty considerations. Whether this is done by extending the life of the EFSF, or grandfathering in access to the ESM doesn’t matter.

There’s even less incentive now to approve a totally unbalanced treaty which combines bad economics with the granting of overly broad authority to the EU Commission.

@ Kevin Walsh

“Moreover, it’s clear where the real problem lies: with the way our tax laws allow pension contributions to be used to defer paying an unlimited amount of tax for an unlimited period.”

Aside from the rather obvious upside to people planning for their retirement at a time when we’re living longer and longer, can you put a figure on just how much this costs us each year? I imagine its somewhat less than the “unlimited” terminology you used.

Courtesy of a poster at Crooked Timber a video from Dr. Heiner Flassbeck, a former deputy secretary in the German Ministry of Finance during the Social Democrat/Green coalition.

http://www.youtube.com/watch?v=TFKzAAd_1W8

The basic upshot of the speech is that in the context of monetary union Germany’s deflationary economic policy since the instigation of the Eurozone has been damaging the rest of Europe while simultaneously not giving German workers their share of the rewards for increased productivity.

The talk is about twenty minutes long and worth watching to the end.

@Bond

I couldn’t say how much it’s costing us, but it’s surely perverse that the people with the greatest income can arrange to pay the least income tax. And what I meant by unlimited is that there is no limit to how much of your income you can render untaxable by putting it into a pension fund.

@Kevin

Are you sure? I thought there were caps in place now?

Also, the income does get taxed on the way out, when you draw it down as a pension. The period isn’t unlimited, unless you wait until you are dead, and then taxes are paid on the inheritance.
I thought the theory was that you didn’t get taxed twice – ie put post-taxed income into a pension only to have it taxed again when you draw on it.

Death and taxes….?

@DOCM

I believe I understand the basis for the disconnect on interpretation of Article 7. The text does not say to which party the proposals and recommendations are addressed (with the consequence that that party has an obligation to support those proposals). There are two options:

(1) they are addressed to the Member State that is in breach of the deficit (my interpretation above, and this would be a significant change)

(2) they are addressed to the EU Council (as part of the Excessive Deficit Procedure) which in turn presents them to the Member State that is breach of the deficit. In this interpretation the commitment to support the proposals just refers to this intermediary role in bringing them to the offending member State, and not to implement those proposals (this would not be a significant change)

I have read another commentary that also assumes (1), but (2) is also a possible interpretation. Like other parts of the treaty, it really needs a whole set of explanatory notes to indicate what is actually meant.

Perhaps something was lost in the translation from the original German?

@ Kevin Walsh

you claim its our “real problem”, but you don’t know how much it actually costs us? And as Sarah said, isn’t there (a) caps in place now that limit this to a (still very high) couple of million and (b) the income on the far side is taxable? You would appear to be massively, perhaps unlimitedly so, overstating the problem.

@Jesper 8:08

c) No Competences Whatsoever
Among those areas that remain the sole responsibility of the nation state are the syllabuses of schools, national citizenship, housing and the funding of public television (RTE, TG4 only), the welfare state, hospitals and the health service, corporate tax rates and any policy that requires large commitments of public money.”

Firstly, thanks for the link. It was an exercise in nostalgia for me to read through eg the following and note the creepy, creeping erosion of national sovereignty tot he point the government are now fighting a rearguard action against CT and FTT.

You can see the inevitable thrust forward to closer fiscal and political union meaning further erosion of national sovereignty; it seems this wont happen immediately. Nah, this will only come about following austerity and beggarment of the Irish people driving civil unrest following the current lot made safe on their pensions and living abroad. Then we’ll have a technocrat appointed, Mario Draghi Murphy, and ousting of any remaining Papandreou McCarthy’s.

Meanwhile I had a good laugh at your quote:

” c) No Competences Whatsoever
Among those areas that remain the sole responsibility of the nation state are the syllabuses of schools, national citizenship, housing and the funding of public television (RTE, TG4 only), the welfare state, hospitals and the health service, corporate tax rates and any policy that requires large commitments of public money. ”

Mmmmm, the ECB through the Troika are pouring over the accounts of every sector of the public service with a slash hook. So they give us the budget, we decide the number of teachers to employ. 🙂

The middle man there is a bit of a wasteful expenditure though, isn’t it ? I mean do we need that number of TD’s on those salaries and expenses. The Dáil is a bit of an expensive waste and probably a cause of civil unrest ? Irony knows no bounds in that link.

Who would have imagined so soon the encroachment of the fiscal ‘Compact’ on budgetary sovereignty in the drive to closer fiscal and economic union with the Bundestag ?

“Another five years on at Nice Treaty negotiations in 2002, it was foreseen that an enlarged EU of 20 or more members could cause problems for streamlined decision-making and arriving at concrete decisions on policies where usually complete agreement (unanimity) between ministers was required. To ease decision-making in the Council of the EU, a number of policy areas had their rules changed, so that a majority vote rather than a unanimous vote of agreement between European ministers could move the policy process along.

All areas that are not specifically mentioned in EU treaties (Maastricht 1992, Amsterdam 1997, Constitution signed in 2004) are off-limits for the Commission, and remain the responsibility of the individual countries. For the current Irish government, it is particularly important to retain ultimate national control over the corporate tax rates that draw in foreign investment, and the state’s tradition of military neutrality. These are considered as Ireland’s affairs and no common EU legislation on these areas is sought. Any moves in that direction have been rebuffed by the Irish government.”

For a good laugh:

http://ec.europa.eu/ireland/about_the_eu/competences/index_en.htm

Re 10:31

UPdate,

TV3 player, if you run the above, you appear to get a censored version of the show with the interesting parts following 11 mins into the show truncated and cut out completely….perhaps someone has an explanation?

@Colm Brazel

“So FF hand Irish taxpayers over to the banks.

FG/LB hand Irish taxpayers and their banks over to the Bundestag.

Its a reminder of the Vichy Regime in France. ”

+1 . Is it really a badge of honour that we have not had the PM replaced as in Greece and Itlay? Is it the ultimate insult to Enda Kenny that he is less of an obstacle to the Troika than Berlusconi, who would sell his grandmother for a night with a weather girl.

I wondered at the time if were there darker forces trying to keep Richard Bruton from the leadership of FG. And we have never found out why Labour had to substitute Burton with Howlin, a fourth or fifth choice at best.
Quislings , not out of conviction, but out of sheer stupidity.

@Colm Brazel,

yep, the information on the Commission website is quite a blast from the past 🙂

I like this bit:
“For the first time, the Constitution treaty of 2004 ratified by 17 states, rejected by 2 and with an unknown future, set out the competences of the EU. ”

The treaty was rejected but still had an unknown future? If something is rejected, then surely that would mean that its future is certain or?

& economic policy? What falls under economic policy? Taxation? Government spending? If neither falls under economic policy then I’m not so sure that economists are needed in matters related to taxation or government spending.

Seems like treaties are never about anything new, they are always just clarifications/extensions about what was previously agreed. If that was true, then there wouldn’t be a need for new treaties but….

@Michael Hennegan wrote: “I don’t think its fair that Ireland has collected more than €40bn from the EU (mainly paid by Germans) and has yet to make a net contribution in 40 years.”

analyst Karen Devine of DCU is one of many who suggests that the fish removed from Irish waters since the early nineteen seventies, matches a lot of those EU funds, there are other contributions also, direct and indirect, such as exporting live cattle instead of fully processing them here, closing greencore:

http://www.rte.ie/news/2011/0704/fishing.html

http://online.wsj.com/article/SB10001424052702304259304576373723413283488.html?mod=WSJEurope_hpp_MIDDLETopStories

“On the expenditure side the big headache, predictably, was the cost of servicing the swollen national debt. Interest payments in January were €769m.
In a statement, the Finance Department said the figures were broadly consistent with expectations.
The exchequer deficit in January was €394m, this compares to €483m in January of last year.”

So if we didn’t have interest payments would we be in surplus? Possibly dumb question.
What are the sanctions for default in the pact?

@ Joe Noonan

And greatly improved it is in relation to the two key issues (i) private sector involvement and (ii) seniority of ESM loans (now dealt with in the recitals rather than the operative Article 12). These changes represent a major retreat by Germany from the extreme stance adopted when the initial text was agreed in July last year.

@ Bryan G

The statement by the Taoiseach does not alter the basic situation; any country not signing up to the fiscal pact will not have access to the ESM.

This copper fastened by recital 5 of the ESM Treaty

“On 9 December 2011 the Heads of State or Government of the Member States whose currency is the euro agreed to move towards a stronger economic union including a new fiscal compact and strengthened economic policy coordination to be implemented through an international agreement, the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union (“TSCG”). The TSCG will help develop a closer coordination within the euro area with a view to ensuring a lasting, sound and robust management of public finances and thus addresses one of the main sources of financial instability. This Treaty and the TSCG are complementary in fostering fiscal responsibility and solidarity within the economic and monetary union. It is acknowledged and agreed that the granting of financial assistance in the framework of new programmes under the ESM will be conditional, as of 1 March 2013, on the ratification of the TSCG by the ESM Member concerned and, upon expiration of the transposition period referred to in Article 3(2) TSCG on compliance with the requirements of that article”.

The statement by the European Council to which the Taoiseach referred had little or nothing to with Ireland but everything to do with Greece. It told the markets that, whatever about Greece, the Euro Area was not going to fail in supporting Portugal and Ireland who, at least, are not trying to play a game of chicken with it (as some would wish Ireland to do).

It may also be noted that the ECJ will also play the same role under Article 273 TFEU under both treaties.

Bit of a game-changer:
If you don’t ratify the pact you don’t get bail-out money …….(here’s the good bit) …and you default and bring down the German banks.
I’m changing my mind – think a no vote in a referendum is just whats needed now.

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