The Fiscal Treaty in the Sunday Papers

@John
I’ll be astonished if you can find any statement by Paul Krugman suggesting that Keynesian deficit spending makes sense for an economy as small as Ireland’s. His prescription (which alas we can’t follow) would be devaluation.

I’d add that Colm McCarthy is leading his younger readers astray when he says that the early 1990s “period of austerity (sharply reducing deficits) lasted only a few years” without mentioning the crucial role that a devaluation played in that turnaround. The absence of that remedy will make a big difference.

Looking at all those faces staring out at me from the Indo rag its hard not to escape the conclusion of how truely inadequate the Irish “elite” really is.

Their only function in life is to farm international credit flows and turn it into Grot for themselves and their chums.

I want nothing more to do with this wretched european market state experiment – the only outcome of its “devleopment” was the creation of masses of Pond scum that blocked the light from this once not so bad country.

No Fear.

@John,
Of course Krugman is no fan of the cold-turkey approach. I’m not that eager for it myself. But I do think it’s time that Irish commentators started paying more attention to the possibility that the debt we are taking “for medicinal purposes only” is becoming addictive. I agree with Krugman most of the time, but when I listen to Irish politicians there are times when my inner Milton Friedman rises to the surface.

@rf
In a small open economy, fiscal stimulus boosts imports, thereby diluting the job-creating benefits. Back in the 1980s a younger Colm McCarthy used to joke that the Irish government was making valiant efforts to pull Europe out of recession.

I thought Colm McC article had many good points, but overall, it was poorly reasoned in many respects. Basically, its shortcomings may be reduced to two : debt write-down and ‘exiting the euro’.

Crucial point being overlooked is the question of debt write down. You are signing up to pay in full the ¢47 bn eg of PN’s for IBRC, no debt write down is the policy of the ECB and through them the troika. Effectively you are signing up to pay back odious debt which according to the latest IMF research papers with growth at .5% means we will be unable to pay this back as debt levels will become unsustainable. The question then becomes the rather ludicrous one of designing another bailout when the present one is failing, inefficient and unsustainable, this is to be the function of an second bailout under the ESM? Lets simplify all of this. We don’t need a second bailout. We need the current bailout to be redesigned to provide for debt writedown. So we got a straight forward Boolean choice; either they give us a debt writedown, or they don’t. If they don’t, we should leave the euro and negotiate unilateral debt write down based on Icelandic conditions of ability to repay. Let’s stop the austerity nonsense and end this false propaganda we do not require debt writedown. Why look for further bailouts to fund a programme that currently fails? This is only a ruse to make sure banks do not have to share in the loss and do have to join the austerity queue. Why mention as Joan Burton does the need for water wings, that on examination under the microscope, are anchors taking Ireland to Davy Jones’s locker

“This is a misunderstanding and it is timely to remind people that Ireland has been here before. At the end of the 1980s, the Irish debt ratio was well over 100 per cent and there were fears that the Government would lose the ability to finance itself. Budget cutbacks were introduced and the deficit fell sharply — a period of austerity.

I was rather surprised to see the following argument put forward:

” But the period of austerity (sharply reducing deficits) lasted only a few years and the 1990s saw small, but stable, deficits turning into small surpluses at the end of the decade. ….

When the economy begins to grow, even at modest rates, a low deficit is enough to get the debt ratio quickly on to a declining path. Ireland took care of the deficit and the debt ratio took care of itself.”

Unfortunately, for Colm McC, he is not comparing like for like. There are distinct differences between the era of stable and manageable deficits in 80’s, 90’s for Ireland and Irelands state of economic collapse as we struggle under the present programme from the Troika.

All differences boil down to the question of debt. Current and prevailing conditions of private debt added to the weight of external debt also fueled by rising costs of imports and low growth rates, mean Ireland, based on current IMF research is facing into a critical situation of debt levels rising to unsustainable levels. The 80’s and 90’s did not have our level of unsustainable private and external debt to hobble recovery.

We need to write down both public and private debt, rid ourselves of the NAMA manacle by liquidating property asap, remove growth brakes such as upward only rent reviews. We need new management teams from the business sector eg Michael O Leary, min for Tourism, to be the engine for growth, not perpetual decline.

Colm McC makes the excellent point here:

“Traditional investors in what were seen as low-yielding but safe European bonds have learned the expensive lesson that they face a material risk of default. They are also sore about the preferential status of bank bondholders, who have queue-jumped the lenders to governments at the insistence of European authorities. Some major world bond funds have announced that they will buy no more bonds from the peripheral eurozone countries, since they feel the game has been rigged retrospectively against them.”

The current response of policy makers at european level has been by the banks, of the banks, for the banks. The euro is pretty much finished as a currency because of the fracking of its design by banks and financial institutions. They have leveraged globally loose credit facilities fed by the Greenspan era of deregulation in the false belief the markets will take care of themselves. The problem is that lack of regulation has meant that markets will destroy the euro as markets take care of this and other design faults such as the inherent asset/liability differences between the core and the periphery pushing the self destruct button.

Ireland needs to press its eject button and leave the euro Zeppelin that has caught fire. We need to rejoin the sterling area, or PuntNUA seeking IMF support and the support of neighbours and friends, Canada, US, China, Russia.

The notion that we should stay in a poorly designed currency, presently crashing under the weight of a bailout that has failed, blackmailed by conditionality that we must endure the european court system for failure to pay odious debt, submit to the rules of a debt collection agency more interested in recovering debt than the protection of the right to sovereignty,
denied a fair bailout that has forced us to be lured by the promise of another bailout under ESM and refused to burden share with bondholder speculators, has turned the euro into a loan shark environment our economy needs to turn its back on.

Euro exit and debt write down will have this economy on its feet again in a short space of time. Voting ‘yes’ is a vote for ‘roast pig for supper’ with champagne for the banks 🙂

@Dork

“Its time we Finish this debt sentence don’t you think ?”

I do. I also agree with….

“Looking at all those faces staring out at me from the Indo rag its hard not to escape the conclusion of how truely inadequate the Irish “elite” really is.”

The INM are a joke, virtually all (present company excluded)that write for them are contemptible hacks, and Tony O Reilly is one of the most inept Plutocracts in recent (global) history. Might make a good column next Sunday…..

@Kevin

Okay,thanks

Both Colm and Cliff qualify their assessment of possible loss future funding….”But rejection could result in a sudden drying up of access to finance” and “But rejection could result in a sudden drying up of access to finance”, respectively.

Do they really think that France and Germany will destroy the euro by cutting off our funding given the lengths they have gone to to preserve Greece ( and the euro) .

The Referendum should be postponed pending developments in France .

Ceterisparibus

But perhaps developments over the last few years mean that cutting of funding wouldnt destroy the Euro?

http://www.project-syndicate.org/commentary/reversing-europe-s-renationalization

At the onset of the crisis, the eurozone’s breakup was inconceivable: the assets and liabilities denominated in the common currency were so intermingled that a breakup would cause an uncontrollable meltdown. But, as the crisis has progressed, the eurozone financial system has been progressively reoriented along national lines.

If this continues for a few more years, a eurozone breakup would become possible without a meltdown – the omelet could be unscrambled – but it would leave the creditor countries’ central banks holding large, difficult-to-enforce claims against the debtor countries’ central banks.

From the outset of the campaign, the Government should publicly state that it will take full account of the outcome to the referendum when contemplating ratification of the related European Stability Mechanism (ESM) treaty.

In the event of a “no” vote, Ireland would appear to be cut off from ESM funding because of a condition within the Fiscal Compact. Whilst Ireland doesn’t have a veto on the Fiscal Compact, the Government with the full support of the Dail must defer ratification of the critical ESM treaty over which Ireland would have a blocking vote if supported by other States who together contribute at least 8.5% of the ESM’s capital. This would force the EU and ECB to implement meaningful proposals to ease Ireland’s unfair and unsustainable bank debt burden which, to date, has been effectively ignored by them. Arguably, this could lead to a second referendum on the Fiscal Compact which might also lead to ratification of the ESM treaty.

In the event of a “yes” vote, the Government would be entitled to proceed with ratification of the ESM treaty as this would reflect the democratic will of the majority of voters.

This was Colms Austerity…. expressed as waste elsewhere.

At any given time the available money / energy must be spent wether you spend it on unleveraged base / fiscal money or credit Grot…. we spent it on credit grot.
88 to 93 was our first boom / bust post Basle fling.

New private cars registered
Y1988 : 61,188
Y1989 : 78,383
Y1990 : 83,420 (peak)
Y1991 : 68,533
Y1992 : 67,861
Y1993 : 60,792 (through)

Back in 1986 nearly everybody was driving 1 litre cars – so post 87 we reduced goverment expenditure and wasted it on 2 /3 litres.
Modern credit expansions are all about dragging oil from the future into today.
They do not create wealth , they destroy wealth (oil reserves)
We registered a increase in GDP during those years because consumption increased , core domestic wealth capacity did not increase.
We simply took wealth from the sands of Arabia and expressed it as a rise in GDP as import costs were low back then.

The 91 to 93 period was characterised by the first Gulf war mini oil shock and the subsequent EMU crisis.
Consumption rises slow until more oil / gas comes on line.

As for oil consumption in Irish private cars – well even during the mini boom of 1990 things were tame when compared to today.
And despite new lower growth car numbers growth in the early 90s oil consumption in private cars grew every year until the 2007 crisis.

Y1990 : 926KTOE
Y1991 : 981KTOE
Y1992 : 1012KTOE
Y1993 : 1054KTOE
Y1994 : 1114KTOE
Y1995 : 1176KTOE
Y1996 : 1259KTOE
Y1997 : 1348KTOE
Y1998 : 1421KTOE
Y1999 : 1504KTOE
Y2000 : 1562KTOE
Y2001 : 1642KTOE
Y2002 : 1697KTOE
Y2003 : 1746KTOE
Y2004 : 1817KTOE
Y2005 : 1891KTOE
Y2006 : 1977KTOE
Y2007 : 2070KTOE (PEAK OIL / CREDIT)
Y2008 : 2062KTOE
Y2009 : 1974KTOE
Y2010 : 1899KTOE

Colm wants to get back to creating credit hyperinflation so as to pay back external sov bond holders.
But the resourses are simply not available to waste on such clearly catostrophic polices.
Post 1987/88 the growth was a illusion….. it was a increase in waste production.

The last time I checked the $ was still the reserve currency and it is saying oil is $100 + dollars a barrel.
The brand spanking new motorways that Colm likes so much are White Elephants.
Artifacts of the post 1987 credit binge.

@John Mch

“@Kevin

You are right that Paul Krugman’s view of the possibility of stimulus policies in more nuanced (in terms of who has the room) than often portrayed. But I think you will agree that it is unlikely he would advocate an unnecessary “cold turkey” approach for any country.”

I suspect Paul Krugman would indeed not “advocate an unnecessary ‘cold turkey’ approach for any country”.

It is a fact that PK is in effect a part of the political scene in the US, having a role as intellectual point man for the anti-GOP / ‘all economic problems everywhere are caused by government – ban it, ban it, ban it!!!’ brigade – and so can’t say anything that could be used out of context against Keynesianism for the US. To the Tea Party, he is just as much as a political hack as Greenspan was one of the opposite persuasion.

If he wasn’t, then he just might be willing to “advocate a necessary ‘cold turkey’ approach for a country which has:

a) unassailable sheltered sectors which will continue to soak up IMF/EU official credit, and
b) “within the Euro, faces years of grinding deflation” meaning that a) will result in a ludicrously distorted economy / non-sheltered underclass / emigres, and
c) after making this sort of observation:

http://krugman.blogs.nytimes.com/2012/04/25/the-unbearable-slowness-of-internal-devaluation/

“What we see is that even in Ireland, which has made the most progress, wages have fallen only slightly. Since wages have risen in the rest of the euro area (that’s the bar labeled EA17), the actual internal devaluation is bigger — about 5 1/2 percent in Ireland’s case — but still only a fraction of what’s needed.

Oh, and Germany — which should be experiencing substantial internal revaluation, a rise in its relative costs — hasn’t.

You can argue that adjustment is happening here, but it’s painfully slow — and not remotely fast enough to avert catastrophe on the current course.”

Krugman has a wonderfully insightful take on US politics. I imagine that if he were Irish he would be scathing of the Irish political class and the transparent self-interest of various powerful lobby groups in the country. I think he would have lost patience long before now.

Just following up on Kevin O Donoghues point about devaluation as opposed to stimulus (and directed at anyone that knows, I don’t want to hassle Kevin)
It’s a basic, and probably ignorant, question but to devalue (depreciate?) a currency, doesn’t that entail printing money and pumping it into the economy? And if so how can that be removed from a stimulus? (From what I can gather devaluation occurs on a fixed exchange rate, depreciation on a floating one, so devaluation wouldn’t be available to us now, so we would have to depreciate by printing money rather than just changing the exchange rate? If that makes sense)

Currently the IMF are advocating European financial institutions eg EFSF take a debt for equity stake in Irish banks,

http://www.irishtimes.com/newspaper/breaking/2011/1220/breaking2.html

They know the game is up. We may get an announcement 7 days before the Referendum to nudge the Y along, some offer to enter into further ‘complex negotiations’. This won’t alter my own ‘No’ in favour of debt write down, devaluation and restoration of fiscal balance with lessons to be learned and applied from the experimental mashup that didn’t work for Ireland’s failed elite. If the Y’s win it looking for insurance from the euro, an ECB version of Quinn Insurance,(think about ) , this may be a pyrrhic victory only, as the Treaty will be altered by Hollande. Signing the Referendum Y means Ireland writes a blank cheque, business as usual. On the wider European stage, there are developments taking place that may sideline our concerns as the euro has far bigger problems to contend with in Spain. I forget who posted this link a short while ago(apologies) worth putting here again,

http://krugman.blogs.nytimes.com/2012/04/15/insane-in-spain/

” I’m really starting to think that we’re heading for a crackup of the whole system. “

@Colm
Below is what caused the “Insane in Spain”

http://www.independent.ie/opinion/letters/bubble-values-3034584.html

@ rf

You raise an interesting question about devaluation and stimulus.

I doubt if devaluation was ‘crucial’ as Kevin O’Donoghue claims.

Total exports of goods and services were 54% of GDP in 1987 and 71% in 1994. The change related to a big influx in FDI projects that were unrelated to currency changes.

As regards structural funds, receipts in 1991 more than offset the servicing of the national debt – – handy free money at the time.

@ Colm B

“Currently the IMF are advocating European financial institutions eg EFSF take a debt for equity stake in Irish banks”

I’ve called you up on this before – they are not advocating any “debt for equity” swap. This is a lie, bollx and bullsh1t. Stop making stuff up. They are advocating either a direct ordinary equity infusion or, more likely, a preference share equity infusion. There is no debt swap being suggested. Stop claiming there is. Even the article you link to notes that there is no debt write down being suggested.

@Michael H

The odds on a German exit through the attic really ought to be shortening somewhat.

@Micheal
They stopped returning the interest to the goverment about that time Micheal….. debt rather then money is therefore needed for growth….. as growth is expressed as a rise in the money / debt stock.
No rise in the money /debt stock = no growth.

France is in slightly better shape from a energy perspective then any other non oil producing country because of its wise fiscal investments of the 70s…. it is however experiencing tourism / goods shocks from the rest of the more exposed periphery.
Irish Dorks won’t be spending any money down in the South of France this year.
All these euro economies are too integrated making any redundencey from outside shocks far less effective.

@Ceter
“To obtain coal the Germans borrow against the accounts of their trading partners” – Steve from Virgina

When or if we eject you will find Germany in a energy pit….. it needs to export to afford those massive imports or import to afford those exports …….(its a circular argument)
Unlike our Pharmaceutical products these exports are very energy input senstive.

We are essentially exporting our capital to Germany so that they can make cars and we can buy them….. forming a entropy loop – however this leads to a decline of collective wealth over time.
They are now trying to export high value items to Asia as demand collapses in Europe and lower value cars are made elsewhere but their enterprises are Industrial dead ends.

Once we & others pull out of this currency union Germany will be exposed….as all high value mercantile countries are during depressions .. we should have done this Yesterday.

The European car Industry is bigger then the American car industry — its terminal fate and refusal of goverments to dump this loss maker is throwing the entire European continent into destitution.

If voting No means that our legislators have to face the prospect (sooner, rather than later) of significant changes in their unfettered, unsustainable and irresponsible spending of the taxpayers money, then I shall vote No!

The world will not stop if the overspending has to stop. Probably would mean that many of the current clowns would not be re-elected – and that we cannot have!

Any comparisons with previous debt/deficit experiences are invalid.

Regarding CMcC’s article, two important points that would detract from the argument made are simply ignored.

1) There is a political agreement in place at EU Council level since last July that Ireland will continue to receive official funding provided it meets programme targets (bailout & EDP) until market access is regained. It has been stated in the Dail on multiple occasions that this prior agreement takes precedence over the Fiscal treaty. These statements were made before a referendum was deemed to be necessary – the government have since gone very quiet on this matter, since it undercuts one of the main arguments for a “yes” vote, yet the statements were very clear. What would the funding vehicle be? It would likely be the EFSF, which now runs in parallel to the ESM until July 2013. There would be a full year after a “no” vote to make arrangements to implement the political agreement. The EFSF has a much wider range of instruments at its disposal now other than simply providing loans. Some form of credit line or co-insurance of Irish debt are possible options. After all, agreements must be kept – isn’t that how things are supposed to work in the EU?

2) Ireland will be running a primary surplus in 2014, the first year after the current bailout ends, according to the Irish government, IMF and EU estimates. So current and capital spending would be covered from tax and other revenues. However debt repayments would not be. If Ireland defaulted, this would directly impact other EU countries, via write-downs in banks, insurance companies etc, and more generally this action would drive spreads wide again, putting funding stresses on other weaker countries. The alternative to this is to ensure that costs are instead borne by Irish taxpayers, and that the problem is contained within one country, by continuing to fund Ireland with loans to ensure that all creditors are paid. A disorderly default will simply not be allowed to happen.

In addition, as has already been pointed out by wow above, the Fiscal treaty is primarily a political instrument, not an economic one. This is clear from many recent German comments (e.g. Schauble) which are along the lines of “we’ve done everything that needs to be done – the diagnosis has been made and the remedy has been provided – this is accepted by 25 countries – now get with the program”. It is intended to draw a line under how far Germany will move, and is used by itself as an argument against other proposals (e.g. direct EFSF recapitalization of banks). Hollande is not playing along however, and his views are gathering momentum. Since the treaty is primarily a political instrument, that is the field of play that is important. A “no” vote would add to this political momentum for a more balanced approach to be taken at EU level. A “yes” vote will be used by Germany as a reason not to move any further – “Look – the Irish people agree with our diagnosis and prescription; this validates the approach we have been taking all along – just implement what has been agreed and everything will be fine”.

Michael Hennigan

What are your own views on a stimulus? (If it was possible of course) Could it be directly invested in a national works program (infrastructure spending etc) a national investment bank lending directly to struggling businesses and possible private debt relief?
I understand that with our political system this would be rife with waste, corruption, cronyism and possibly unconstitutional/illegal, but FDR managed it, although his successes are exaggerated now of course, in a political culture every bit as corrupt as ours.

Grumpy

That was more a longwinded way on my part of wondering how we devalued in the 80s/90s. Was it primarily through printing money or one of the mechanisms you mentioned?

In general the default setting of ‘realism’ when speaking about international politics is apt. Realism is a throwback to the IR ‘paradigm wars’ of the 80s/90s and has little relevance today. Most of what has passed for solutions the past 4 years seems to be coming from the same context.

It’s about time we began to seriously look at our institutions, as Paul Hunt has consistently been saying.

http://whynationsfail.com/

We’ve had four years to change the record but have instead decided to put the 80s greatest hits on repeat. And it’s got us nowhere. (And that’s generous, we’ve quite obviously gone a good deal backwards)

Ambrose has an interesting article out tonight …

“Hollande’s ‘Growth Bloc’ spells end of German hegemony in Europe
For two years Germany has had its way in Europe, treating historic nations much as Bismarck treated Bavaria – sovereign only in name.”

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/9234926/Hollandes-Growth-Bloc-spells-end-of-German-hegemony-in-Europe.html

Turning corners…an alternative perspective…
“David Cameron today warned the eurozone’s debt crisis was not even halfway through as he blamed the continent for Britain’s double-dip recession.

The Prime Minister said economies struggling across the channel, which receive 40% of all UK exports, were harming the UK’s prosperity.

He said: “I don’t think we are anywhere near halfway through it because what’s happening in the eurozone is a massive tension between the single currency that countries are finding very difficult to adapt to.

“It’s going to be a very long and painful process in the eurozone as they work out do they want a single currency with a single economic policy and all the things that go with it, or are they going to have something quite different?”

Read more: http://www.irishexaminer.com/breakingnews/business/cameron-eurozone-crisis-not-over-yet-549487.html#ixzz1tTHMuXbb

@ Ceyerisparibus

He would say that, wouldn’t he!

@ All

If this Le Monde article is to be believed, the penny has dropped with Merkel that she cannot stall until the the European Council at the end of June. An emergency earlier meeting is seemingly envisaged. Who will be in attendance remains the open question. (The Irish Sunday media will have to find some other hare to chase while awaiting for the outcome of the French vote).

http://www.lemonde.fr/economie/article/2012/04/29/la-commission-europeenne-planche-sur-un-plan-de-relance_1692841_3234.html

Here is a link to Frankfurter Allgemeine Zeitung (Frankfurt General Newspaper) on a series Schuldenkrise (debt crisis).

The middle class suffers in Ireland.

http://www.faz.net/aktuell/wirtschaft/schuldenkrise-in-irland-leidet-die-mittelschicht-11729769.html

Use Google translate.

@rf

“That was more a longwinded way on my part of wondering how we devalued in the 80s/90s. Was it primarily through printing money or one of the mechanisms you mentioned?”

Keeping it brief, Punt and Sterling diverged a lot post link, with £ strengthening, largely due to North Sea oil and the Thatcher “A-level economics” (remember that jibe?) experiment of thumping the table and whacking up interest rates in order to do whatever was necessary to halt high inflation. The fx market bought into the idea and sterling spiked.

Ireland continued to have high inflation for about two years after it went down in the UK & lots of public sector borrowing.

The 1992 devaluation was really the market recognition (and eventual political acknowledgement of the apparent reality) that the ERM rate was too high for Ireland to keep up with Germany – particularly after the UK had accidentally done itself a favour by withdrawing and Spain had devalued.

The realities that occurred to people during the ERM crisis should be ringing bells currently. Germany’s economy is ‘too good’ for the non-core.

About time an Archbishop spoke up.

http://www.guardian.co.uk/politics/2012/apr/29/cardinal-david-cameron-favouring-rich

@John McHale
re
“Their abhorrence of how some vested interests have captured the State makes them willing to deliver a very deep shock to Ireland’s economy and society. ”

Any possibility of a little divesting of those vested interests in the next few weeks? All in the spirit of ‘we’re all in this together’ you understand.

@Grumpy
Germany is not as strong as it once was…. as Steve says it borrows from our accounts.
It has become more mercantile as its domestic energy resourses has dwindled , socialising these effects & malinvestments throughout the union.
Total Energy self suff.
Y1990 : 0.53
Y2009 : 0.40

Coal self sufficiency
Y1990 : .947
Y2009e : .639

When Germany is withen the union , when it shuts down those Nuclear plants… we pay for it.
Its time to bring back more rational national economies …. it will reduce the power of the financial sector somewhat as rational trade flows rather then capital flows is what is needed in the Europe of today.

Thanking you for the response Grumpy

@JMch

Whatever about people who might think Ireland should perhaps not ratify it, nobody is actually just being asked if they think Ireland should ratify the Fiscal Compact Treaty – though that is what is filling the media.

The actual question is below. It is quite possible for many people, mild-mannered macro-economists included, to think that Ireland would be wiser to sign up to the Treaty than not to, but think that the answer to the following question should be ‘No’. Just because it might embarrass Enda, doesn’t mean the question is badly drafted and should be re-drafted rather than voted for:

“Specifically, you will be asked to vote YES or NO to adding the following to Article 29.4 of the Constitution of Ireland:

“10° The State may ratify the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union done at Brussels on the 2nd day of March 2012. No provision of this Constitution invalidates laws enacted, acts done or measures adopted by the State that are necessitated by the obligations of the State under that Treaty or prevents laws enacted, acts done or measures adopted by bodies competent under that Treaty from having the force of law in the State.”

I am more concerned with the political consequences of this trearty as we are told the economic criteria have already been adopted at EU level.

The political landscape will dictate our (i.e. the EU’s) capacity and willingness to pull ourselves out of this hole.

John

The fact that we are left to speculate about that is reason enough for men in grey suits to have a word with Enda. How could you vote ‘Yes’ to that question unless you are genuinely certain what set of ‘bodies’ could be granted exactly what competencies under the Treaty, and what set of ‘acts’, measures’ and ‘laws’ could possibly follow at some point down the line?

Isn’t is bog standard procedure for academics to say to exam candidates:

“Read the question. Answer the question asked. Do not answer a question you would like to have been asked”.

The media is full of answers to a question that hasn’t been asked. Beta minuses all round I’m afraid.

@DOCM

Yours 7.43pm

If only life were so simple.

@ Bryan G

A method will be found to force-feed the prisoner – nobody wants to lose control of events, or create any martyrs.

@ Paul M

Nobody doubts that it could get nasty but it may be the only circumstance in which we properly re-structure Irish society.

This is akin to the old story of the Chinaman burning his house to roast the pig.

Following a No vote, only fools could believe that it would not trigger at a minimum, months of uncertainty.

Or maybe Chancellor Merkel would resign and the rest of Europe prays for eurobonds to appear like manna in the desert, in step-march behind President Hollande and his aide-de-camp, Ms Thirty-five-hour-week ?

Of course in Ireland, the usual trench fodder would be on the firing line while the comfortable with a grip of the public megaphone also pray for a return of the tooth fairy.

Just wonder for a moment about a strange world to some: a struggling trading company, surviving fours years of a brutal recession, each month just able to collect enough from debtors to meet the payroll.

Just tell me if you even once had the direct exposure to experiencing the fear of unemployment etched on the faces of employees in such a firm, that they again have to be the expendables on a toss of a coin?

@The Dork of Cork Says:
Looking at all those faces staring out at me from the Indo rag its hard not to escape the conclusion of how truely inadequate the Irish “elite” really is.

+1

@grumpy:

It is the words “necessitated” and “obligations” that worry me most. Who is going to decide that a particular act is “necessary” in order to fulfill our “obligations”, and on what basis?

@ Paul Hunt

You’re right of course to suggest that on reform, the timidity of the Celtic Tiger years continue.

There is a reluctance to directly challenge authority including what is under their own noses.

In The Irish Times today, John McManus says that the ‘superstar’ economists want to have their cake and eat it.

There is certainly a problem in playing to the public gallery.

An individual who wishes to have a durable impact cannot have long-term relevance by seeking public approval through reinforcing simple and delusional narratives.

The penny can eventually drop for even the gullible.

I’m not advocating that people should seek to create enemies but the bitter truth should be presented unvanished.

http://www.irishtimes.com/newspaper/finance/2012/0430/1224315361496.html

John McManus is one of the few credible journalists we have got. Good to seem him out the economist cartel who failed to spot the bubble and who predicted a soft landing. Why should anyone listen to them now?

@ All

For a graphic cartoon representation of the operation that John McHale describes cf.

http://www.independent.ie/opinion/analysis/james-downey-mr-hollandes-opus-to-change-face-of-europe-3094841.html

@ all

http://www.etenders.gov.ie/search/show/Search_View.aspx?id=APR333217

Interesting tender there – anti ballistic equipment also being requested !

Prudent or are some gearing up for a slapping!

@MH

“Just wonder for a moment about a strange world to some: a struggling trading company, surviving fours years of a brutal recession, each month just able to collect enough from debtors to meet the payroll.”

Michael, I can almost hear the phone call from Sean Fitzpatrick to Brian Lenihan in Sept 2008 saying something similar to pressurise him into “doing the responsible thing” and guaranteeing all the bank’s liabilities.It is easier to make a decision that avoids risks in the short term in exchange for risks in the long term. Ireland is amazingly good at that sort of co-out decision-making.

The referendum will probably be passed in the end because the ‘human shields’ tactic will be deployed by the countries powerful groupings. Lets not do their work for them at this point.

Both you and Paul Hunt should realize that Croke Park 2.0 is going to be ‘negotiated’ soon to further entrench the costs of TDs and PS services. The sheltered private professions have a symbiotic relationship with them. Do you two really think there will be real reform, of the type the dogs in the street know is appropriate, while the gravy train is absolutely guaranteed to arrive on schedule all the time?

The other pitfall of a ‘no’ vote is of course that (regardless that it was inevitable anyway) the need for the second bailout will be blamed on voting ‘no’.

You can just picture Noonan next year: “We were recovering well…. on track…. poster boy…… weren’t even heading there….. economy about to take off like a rocket….. then silly people who should never have had a vote anyway voted against….. that was what really threw the spanner in the works…… is my teaching job still open? Wow, is that how much my ministerial pension will be worth? I hear property is cheap in Spain at the moment.”

I don’t know why I’m even entertaining the idea. A ‘no’ vote is as likely as Ulster winning the Heineken cup.

@Kevin
+1

@docm. kevin, sarah

The second part of this wording is giving a wide ranging constitutional get-around to ‘bodies’ that derive their competence from an international treaty which is all about one particular vision of “discipline” and subscribes to one particular wing of the spectrum of economic beliefs. It is also being pushed through by Ireland’s great and good effectively under duress. It is not a run-of-the-mill change to allow an EU treaty that people by and large think is a good idea.

Is it sensible to combine:

“We have to sign the Fiscal Compact Treaty, even though it is bad economics, because we have a gun to our head”

with such powerful and future-proofed constitution-proofing for anything that might follow from or be set up under the Fiscal Compact treaty down the line? Wouldn’t it be more sensible to do the minimum necessary to allow it to be signed (that is, if you think it should be signed)?

@ PR Guy

“silly people who should never have had a vote anyway voted against…’ I’m sorry, but I don’t regard myself as silly. But I did receive similar blanket accusations from Bertie Ahearne’s soft landing brigade. The “Y’ camp will reap a similar FF harvest..

@DOCM re James Downey article,

”
Experts say that Europe must have “a real central bank” with an expanded mandate and enhanced powers. That implies debt-sharing and, quite likely, debt forgiveness.

And as if this were not sufficiently dramatic, it implies a giant step towards federalism.

At the time of the Lisbon Treaty debate — and before that, during the debate on the aborted European constitution — I saw Lisbon as a compromise, the maximum degree of federation the peoples of the European Union would accept. Since then the arrangement, to put it mildly, has not worked well. We have to come closer together or risk dissolution. ”

Think of it, what is James Downey advising there, this is part of the ‘Yes BUT’ campaign…

1. Vote ‘Yes’ because experts say ‘ “Europe must have “a real central bank” with an expanded mandate and enhanced powers. That implies debt-sharing and, quite likely, debt forgiveness”

Don’t want to make too much fun of this, but its a bit like advising someone to invest all their money in Anglo after the bank’s collapse because ‘experts say the bank should be recapitalised and its lending book losses paid for by taxpayers..Lol, oh no, that’s what happened. Alright, just, I need another analogy, stick with ‘that’s black, vote for black because experts say it should be white’ 🙂

2. But James Downey seems to have lost the head totally on advocating federalism, even though he acknowledges since the Lisbon Treaty Debate, to put it mildly, it has not worked well.

3. Don’t tell Downey the Compact will disenfranchise the periphery and seal up the core from future political and economic influence by the periphery by restricting voting to members of the core.

http://www.independent.ie/opinion/analysis/james-downey-mr-hollandes-opus-to-change-face-of-europe-3094841.html

It just goes to show there are some who are so brainwashed they’ll sign a blank cheque, debate on the merits or otherwise of EU membership, is of no consequence whatsoever to them, they’ll sign anything with Y on it 🙂

Simply Say No especially if you don’t understand what you are signing up for and especially if presented with delusional and ludicrous fantasies re federalism, burden sharing, when you have evidence based information on how such non existing policies have stuck Ireland with the bill it has.

The ‘Y’ vote will be led by those on comfortable Croke Park salaries who want to keep onto them. Their pockets will be picked if Y is passed in a far bigger and more profound way than if they voted NO. But hey, any short term gain obtained will prove to be very short sighted. Mark my words 🙂

Downey does draw attention to the role of SF. It is unfortunate SF with their political baggage appear to be fronting the No campaign. It is unfortunate an alliance of FF and SF as an enlightened new party of the future are not fronting the No campaign. And so it is, we’re turkeys for XMas, fellow Thermopylites but hey, its great to be a member of the NO campaign 🙂

oops should be “new party of the future from the future…”

@MH. Paul H

On the effect on ‘reform’ of gravy-train availability (sorry if I’m overdoing it but..):

“The UK Treasury accused the commission of “wilfully ignoring” member states’ calls for restraint. “It is unacceptable for the commission to propose an inflation-busting budget increase when governments across Europe are making difficult decisions on public spending,” said Mark Hoban, the Treasury minister.

A French government spokesperson dismissed the proposal as “impossible, unjustifiable and unacceptable” while a diplomat from one of the EU’s northern member states called it “hilarious”.”

more of similar at
http://ftalphaville.ft.com/blog/2012/04/27/978021/the-eu-budget-no-solidarity-during-austerity/

@ grumpy

Do they not realise austerity does not apply to the financial sector and gravy-train bureaucracy

Here’s Michael O Leary on the EU gravy train 🙂

@ PR
We do have a school classroom reaction to votes, etc.
But we presume there is a teacher in there too!

@grumpy

http://www.newstalk.ie/programmes/all/talking-point/listen-back/

Go to about 20 minutes – I ask specifically about that line.
Now look, I’m not saying I’m not concerned – I’m extremely, em, grumpy, about this whole thing, but Gavin is the expert on this.

“We need new management teams from the business sector eg Michael O Leary, min for Tourism”

“Here’s Michael O Leary on the EU gravy train”

“I doubt if any TD has created a business or a job ever.”

I’ve been out of the country for a while, but are the Irish people still mythologising ‘job creators’?
I might give it a couple more years.

@NEL

Thanks for that link. (Sarah, cant open your recording – but will for the mo assume it doesn’t deal with the question definatively.)

“There’s nothing new in the proposed construction at all – in incorporating the Stability Treaty the wording is otherwise identical in terms of ‘necessitated’ ‘obligations’, ‘bodies competent’ and ‘force of law’ to the current article 29.4.10°”

The point I am trying to make above
http://www.irisheconomy.ie/index.php/2012/04/29/the-fiscal-treaty-in-the-sunday-papers/#comment-274742

is that this protection from interference by the Irish constitution is being applied to a rather different thing. The leap of faith in granting this to who knows what bodies may order who knows what measures under the Fiscal Compact is not the same as that that the country made previously in relation to the EU generally.

“which are necessitated by the obligations of membership of the European Union or of the Communities”

is swapped for

“which are necessitated by the obligations of the State under that [Fiscal Compact] Treaty”

The FCT is an International Treaty, not an EU Treaty. Should the level of trust and commitment to the ‘gun to our heads’ agreement be the same?

The second part

“No provision of this Constitution … prevents laws enacted, acts done or measures adopted by the European Union or by the Communities or by institutions thereof, or by bodies competent under the Treaties establishing the Communities, from having the force of law in the State”

has to be compared with:

“No provision of this Constitution ……..prevents laws enacted, acts done or measures adopted by bodies competent under that Treaty from having the force of law in the State.”

What you have to satisfy yourself of is that it is appropriate for the original wording – which deals with ‘the force of law in the state’ and the authority of what most people would understand as “the EU” – to be robotically applied to this new, controversial and unwillingly signed international Treaty. This does not seem to me to be directly equivalent to membership of the EU – a club Ireland willingly joined.

Whatever presumably German hard-money inspired “bodies” can be said to derive competence from the Fiscal Compact Treaty will have the same authority (so far as the Irish constitution is concerned) to enact laws, do acts, and carry out measures that will all have the force of law in Ireland.

What “bodies” are going to be or might at some point be ‘competent’ under the FCT? How are they going to take decisions on these acts, measures or laws? How is the voting going to be handled? What majorities will be required and on what type of matter?

If a body competent under the FCT (note not subject to this part “laws enacted, acts done or measures adopted by the State that are necessitated by the obligations of the State under that Treaty” ) lost the run of itself and voted to take a measure that was not “necessitated” by the FCT, where is the constitutional protection?

Does any one think it is impossible or very, very unlikely that the FCT could result at some point in some controversial diktats given the existence of the European Fiscal Crisis and some very hotly contested economic ideas which currently hold sway – thus making these considerations a bit ‘cribby’ and ‘moany’?

Has all of the above been sorted out – or do you just take it all on trust?

@ grumpy

On comparisons with the once celebrated Seanie, there should be a slight difference between a leading insider seeking another political favour, in a desperate situation and for example pointing out that people who may have never made consequential decisions in their professional lives, may well propose such in respect of national policy that will not impact themselves but would likely inflict the greatest pain at the bottom of the economic pyramid.

Reform is boring to many apart from the vested interests and this time in 2017, Marine Le Pen may well be heading for le Palais de l’Elysée.

Some of the ‘people of standing’ who get heard in our partly-democratic system are against what they term ‘austerity’ but there is seldom references to the kleptocracies, because those who have the priviliges believe that they can maintain them.

We once viewed Ulster Unionaists as unreasonable with the ‘”What we have we hold,” attitude.

In time, fiscal contract or not, as in Afghanistan, where there is little point for outsiders to try and speed up transitions to recognitions of human rights, accountability and democracy, it may well be best to let people do as they wish.

So in Europe, the deity cannot decide on sustainable growth; Japan had two remarkable transformations since 1868. It hasn’t been able to manage a third.

There is no politician or group of politicians that can do it as it’s not a closed system.

Governments can agree on short-term measures but that is not a guarantee for long-term growth.

Last year Irish farm incomes rose because of international prices but there was no rise in output.

After 60 years, Ireland’s exporting sector is overwhelmingly dependent on American firms and Bruton is in America this week looking for jobs.

Are we in a position to take dramatic steps that may not suit our owners?

During the bubble, we were never a wealthy country. Living standards in Ireland and elsewhere will take a long time to adjust to more realistic levels.

One possible outcome is that Europe is heading towards a collapse of peripheral banks.
The LTRO has been a sneaky mechanism to transfer liability from the core to the periphery – essentially allowing the periphery banks to buy junk govt bonds.
The spectre of full blown depression in Europes periphery is becoming very real.

Before I vote yes to this thing – can someone give me a cast iron guarantee that it can be undone?

@grumpy

gah! but it does! And I asked specifically because you had raised it here.

@sarah

So what are the answers to the points in my last post?

@paul quigley

Scaremongering about Sinn Fein is mandatory at the Indo.

The levers of both class and status anxiety are liable to be applied in order to try and roll the populace into the Fiscal Compact, you can be sure that both of the right wing establishment papers will be heavily hyping the “loony left” and “former gunmen” angles of the treaty opposition.

The campaign for the treaty will necessarily be the campaign against the treaty’s opposition. Everyone accepts that the Fiscal Compact is a hare brained solution to a problem that nobody except Greece had, its only potential benefit is that it makes us better able to weather the crisis that current German/ECB dogma has brought apon us. Even at the Irish Economy, and we have some fairly unrepentant right wingers/financial sector apologists here, no one thinks that the Fiscal Compact is other than a distraction.

Also coming up in the Irish Times and Independent’s Fiscal Compact coverage:

* A vote “Yes” is a vote for jobs*[1]
* A vote “Yes” is a vote to remain at the heart of Europe*[2]
* A vote “No” will mean not being taken seriously by our betters in Europe.[*3]
* A vote “No” will see the ATM’s shut down and the great unwashed eating each other’s brains.*[4]

Notes:
[1]: Well paid jobs in the ECB, European Commission and IBRC at least.
[2]: As a punching bag for whichever alliance of large countries is dominant.
[3]: Everything that DOCM has ever written.
[4]: Exactly the reason we continued with the genius of the great financial sector bailout after it turned out the banks were dishonest, greedy and incompetent.

@Eureka

“One possible outcome is that Europe is heading towards a collapse of peripheral banks.”

The FT are saying that Spain is setting up one or maybe several Manamas
But the Gov are not putting in any money. Maybe the will go for PNs. That would cover it..defer payment and then look for a discount.
Maybe Nama should offer consulting services.

Btw, Angela says it “forever”. One good reason to say no.

@Grumpy

Maybe our (8) former Attornies General could voice an opinion on this constitutional amendment. After all they were quick to ensure the proposed Oireachtas committees did not encroach on fair procedures.
So perhaps they could voice an opinion on ceding power to “bodies competent” in perpetuity.

@sarah

Got your link to work asnd wasded past all the adverts.

You did a good job of asking the question, but your interviewee didn’t really engage. You got a rather glib, reassuringly if not dismissively intoned reply to the effect that:
a) this form of words has been used in respect of EU Treaties
b) there are no new institutions [currently] being set up.

Both oif these we already know. I don’t want to repeat myself, there is detail in the above comments, but the questions about this form of words for the constitution amendment arise from both the fact that this is not a constitutional work around for the EU, it is an inter-governmental Treaty [hmm, but not nothing] and [more pertinently] also from the future-proofing from interference by the constitution, for any new “bodies” set up, or existing ones emporeded to administer the Treaty. It is entirely appropriate that consideration be given to the possibility the way the Treaty is enforced could in the future be different to how FC optimists imagine.

Is it sensible and necessary to give a total constitutional exemption for anything a body administering the Treaty decrees – no matter, according to the wording, whether that decree is necessitated or not by the Treaty.

Just to take a quick and dirty flyer, say a FC administering body decreed in 3 years time that Corporation Tax should be harmonised, or that people with red hair should pay more income tax?

On the political front fate is unfolding as it should. The trend to elect left wing governments is becoming well entrenched. Poor Angela is losing Nicolas and is in danger of losing herself in Sept./Oct 2013. Italy’s next national election is Apr. 2013, Monti has stated decidedly that there will not be a second round of austerity. Spain’s Peoples Party (right wing) has 186 seats in a 350 seat legislature and is likely to call an early election in response to widespread unrest. The Netherlands 3 party coalition is on shaky ground.

The result is that by the end of the year the political climate will thaw, money will flow the periphery will grow. All Ireland has to do is sit back and do nothing. Our present gov’t should be able to do that.

more pause

http://www.independent.ie/opinion/comment/ambrose-evanspritchard-francois-hollandes-election-will-mean-the-beginning-of-the-end-for-german-hegemony-3095827.html

Hi there this is all good getting the support from the E.U. but what are we giving them as security, also must add there is worse off cunterys in the E.U. than Ireland and with this treaty it says to tackle the economic crisi and to restore international investor confidence. so If some one was intrested in coming to ireland and the E.U. thinks ireland is ok and the jobs are need more in spain, will then the investor mite get a bitter deal from the E.U. to move the investor to spain, also on the first page of the book it says “ensures that your government doesn’t spend more than it can raise in taxes over time” then down on the end of page it says ” do not effect the role of Government and national parliaments in decision making on tax and spending” so again the people at the top gets more money and do what they want with the money. let the EU run us and get read of our government we will save money who will say yes to that because that is what is happing. thanks i say NO