Access to EU Funding

At the EU summit of the 21st of July last the leaders’ statement said that:

“We are determined to continue to provide support to countries under programmes until they have regained market access, provided they successfully implement those programmes. We welcome Ireland and Portugal’s resolve to strictly implement their programmes and reiterate our strong commitment to the success of these programmes.”

This was reiterated as recently as the EU summit of the 30th of January when the statement of the EU leaders said that:

“We welcome the latest positive reviews of the Irish and Portuguese programmes which concluded that quantitative performance criteria and structural benchmarks have been met. We will continue to provide support to countries under a programme until they have regained market access, provided they successfully implement their programmes.”

These both seem pretty unequivocal to me and have not been contradicted in any subsequent EU statements I have seen.

94 replies on “Access to EU Funding”


I don’t really get your point.

Are you saying that funds will continue to be provided to Ireland irrespective of how we vote in the upcoming referendum, as long as we stick to the program?

So no fear then. Regardless of what we vote in the referendum we will continue to be supported until we have regained market access even if that means a second bailout. Best we put the two statements above on the front of all Irish newspapers so that the electorate know that……


I am not at all sure that is the case. The Government’s stated intention is to ratify the Treaty. Surely, the positions that you quote are based on that in fact being what happens.

As a non-lawyer, I’d really like to know: irrespective of how we vote, is there anything to stop these guys simply changing their minds? For example, is Hollande bound in any way by Sarkozy’s signature when it comes to future funding?

I cant really see the negatives in ratifying the treaty (in particular I cant see how the provisions become permanent as they are not being written into the constitution.

In my opinion, the probability of us being able to access funding if we rejected the treaty would go from 90% to 85% or something like that. You can never be certain the funding would be there even if we vote yes but I really dont think the EU is prepared to cut us off – they have too much to lose.

I would still vote yes as downside of yes (to me zero) >>> downside of no (small percentage increase in probability of not being able to access funds)

I believe a ‘no’ vote will have no impact on funding for the next couple of years. Europe will just quietly ignore a ‘no’ vote and things will carry on as before. Cutting off funding would have too many wider eurozone implications.

This vote should be viewed as a referendum on membership in the euro itself. We are going to have to leave eventually so let’s vote ‘no’ and get the negotiations started asap.

Agree. They have too much to lose. Does anyone really believe they would pull the plug given the lengths they have gone to with Greece. As for a yes vote being an insurance policy…

@John Mch

“I am not at all sure that is the case. The Government’s stated intention is to ratify the Treaty. Surely, the positions that you quote are based on that in fact being what happens.”

Thats quite an assumption. If there is conditionality attached to the leaders’ statements it should be possible to find it in print. Where exactly is it?

There are way too many assumptions being made at the moment. What a shables of a campaign -did the government think nobody would bother thinking about it very much?

Is the gun loaded?

Has Angela fired six shots or only five? In all this excitement, the Finance Ministry seems to have kind of forgotten.

Do you feel lucky punk country?!


I wouldn’t call it an assumption. While we wish it were otherwise, there is a large amount of uncertainty surrounding the implications of a No vote. We may get more clarity on certain aspects, but it is unavoidably partly an exercise in trying to get a sense of probability distributions. I read Seamus as predicting that the probability of continuing to receive funding is high regardless of our willingness to sign up to the compact provided we meet programme conditions. I would put the probability significantly lower. I know this will lead to accusations of scaremongering. But if there are probable — even if not certain — consequences, I think we would be remiss not to point them out.


Actually Professor McHale, IMHO,you are incorrect.

If you check the Dail records, or threads on this site, over the last 4/5 weeks you will find a speech by Finance Minister Noonan (after the announcement that a referendum would be held, but before a date was set) in which it seems very clear that funding will not be affected during the program regardless of what the result of the referendum is.

If I remember correctly the relevant speech by Minister Noonan was also posted on this site and I also drew attention at the time to the fact that it seemed very clear that funding under the program would not be affected by the referendum result.

I am not sure of the exact date of the speech but late March early April is the best place to start looking.

BTW I am alarmed that this excellent site is allowing scare mongering to enter this debate and even more alarmed that some members of the Yes side are enthusiastically (and simultaneously) promoting scaremongering and “happy clappy pro EU guff”. I t have to credit Eilis O`Hanlon, on twitter, with that last quote.

Most Irish people, like me are pro- European and want to see the European project succeed (ideally with a common currency/monetary union/exchange rate mechanism which works) but are adopting a “wait and see” approach while they evaluate this in a careful and considered way.

By doing so Irish people will carefully consider recent pan European developments and upcoming election results/announcements throughout the EZ/EU while they look for some signs of realisation among the EU/EZ/ECB that continued uncertainty may create an adverse response among the electorate.


@ Kevin,

Of course they can change their minds. Tracking the contortions on Private Sector Involvement since Deauville exemplifies this.

@ John

There was no Stability Treaty at the time of the July statement. There was when the January summit rolled around but they hardly changed the wording at all. They could easily have included a clause on the implications of the Treaty’s ratification for programme countries in the statement but did not.

The July statement indicates that the current programmes will last for those countries “until they have regained market access”. The shut-out clause for the ESM specifically refers to “new programmes”. Why the need to include the adjective?

There is nothing absolute in all of this. From what I can see we are in an existing programme that lasts until we regain market access. No new programmes will be established through the ESM unless such countries have ratified the Stability Treaty. It is an intrepretation but I have seen nothing to suggest otherwise.


Could I suggest that it should not be beyond the wit of contributors to this blog to pull together sources on this. Once we have all the quotes, press statements, announcements etc we can all consider them and apply our variously predjudiced judgement to them. Who knows maybe a real consensus would be forthcomming.

At the moment we have Seamus and Bryan G’s sources above, we have generalised chatter from the government that seeks to give the impression Seamus might as well be imagining things and we have variousattempts at ‘practical judgement’ where people say things like:

” I do / don’t think official funding would be automatically / easily / at all available after the first bailoutfor a second bailout”

@John McHale

While we wish it were otherwise, there is a large amount of uncertainty surrounding the implications of a No vote.

A “Yes” vote is also a vote for the “creditor state” intergovernmental method in the EU and with that the sovereignty we imagined we were pooling in the EU has instead been confiscated.

Its widely accepted outside neoliberal circles that the medium to long term economic implications of the austerity that a “Yes” vote to the Fiscal Compact will sign into law permanently* will be negative for any country not part of the greater German copropserity sphere (a sphere that seems set to shrink to just Germany, its banks and the ECB).

The further implications of submitting to EU monetary and economic policy being set inter-governmentally among the self styled “core” nations are even more negative and more serious – after the ordoliberal handcuffs are on who knows what exactly Germany, its close allies and the ECB have in mind for us? Recent events do not give any comfort to those who imagine that the attitude of the core to the periphery is other than predatory.

We have to fight this or Europe is lost to us, and the progressive character of the EU is lost too.

* “Pacta sunt servanda” joins “parri passu” in the list of Latin phrases that best serve the powerful.

@ Seamus,

Thanks, I suppose I shouldn’t be so puzzled by the attention paid to Eurobabble.

@ Shay

“Oderint dum metuant” is the one to remember.

I think its highly likely there was a agreement between London & Paris on “The Irish problem”.
I.E. – drop kick the Irish back into the Anglo monetary sphere.

The stuff that we witnessed so far was perhaps mere puppet theatre before the final act.

The camel and his hump / kettle and black come to mind when one side accuses the other of scaremongering.

From 1972, there were warnings of tempests, pestilence and racism was used too.

The permanent anti-Europe folk opposed the accession of Spain and Portugal in 1986. Then a decade ago, self-styled leftists shamefully made common cause with extreme Catholic groups in opposing the historic entry of the former Soviet empire states in Eastern Europe.

There was a significant number that supported this stand.

We should know that when we developed from a very poor level, attitudes towards solidarity changed. Now we’re back to expecting solidarity from others and even if the Fiscal Compact is just a quid pro quo for a government providing bailout funds, can we not make that gesture?

Foreign taxpayers’ money is supporting Ireland’s day-to-operations.

Twice in a generation, Irish governments wrecked the economy; we do need external supervision and eurobonds will not be considered without some sort of governance mechanism like the treaty.

There is no perfect multilateral treaty or constitution but life evolves. It’s better to have an initial framework to work with than have 25 or 27 nations discussing the issue for years.

As for funding, it’s likely that a treaty would have precedence over a summit statement which may just relate to current programmes. The ESM takes effect in coming months.

“I thought our program was over at the end of 2013?”

Interestingly, there’s nothing in the troika material – or at least, I can find nothing there – about continuation of funding past the end of the programme in December 2013. If there’s a formal commitment to continue funding Ireland in the event that we don’t regain market access, would that not be written down somewhere?


“Oderint dum metuant”
The favourite saying of Caligula ….he ran into financial difficulties also and found novel ways of raising cash…don’t think they had sovereign bonds then.
Maybe Mickey could get some ideas…

A number of other desperate measures by Caligula are described by historians. In order to gain funds, Caligula asked the public to lend the state money.[44] Caligula levied taxes on lawsuits, marriage and prostitution.[45] Caligula began auctioning the lives of the gladiators at shows.[43][46] Wills that left items to Tiberius were reinterpreted to leave the items instead to Caligula.[47] Centurions who had acquired property during plundering were forced to turn over spoils to the state.[47]
Now the plundering bit is interesting…

You do realise the 1990s western European “boom” was primarily the result of resourse consumption collapsing in the former Warsaw pact.
Even Poland reduced its coal consumption , increasing its coal exports during those years.
Now that Poland is growing again it subtracts coal consumption from the remaining bits of this glorious continent.
Soon it will be importing coal – but from where ?

These economic games we play with are zero & negative sum games.

Re “continue to provide support to countries under programmes until they have regained market access”

And that would be “continue to provide minimum support to implement austerity, avoid debt write down, no burden sharing, further lending to casino financial institutions, further loans for taxpayers and sovereigns to bail out insolvent banks, further disenfranchisement of peripheral members of the EMU, further sanctions and other measures to be decided against sector 13 peripheral members in breach of edicts of unelected ECB/ESM Bundestag elected committees, all aboard the euro ghost train to the market….Meanwhile thanks a lot for the bill for odious IBRC and Enda does look forward to rejoining the markets in 2013…”

All this wishy, washy fantasy nonsense gave us the guarantee; now the same delusory thinking having been brought to the edge of default(we’re still on track for default) in its bailout with terms that cannot be paid back, is leading the Irish economic horse to the ESM glue factory 🙂

You couldn’t make it up. Re “continue to provide support” …Some ‘support’ you really do not need. Selling the Irish constitution to the ECB/ESM under some vague hope of undetermined support unsupported by evidence, is not the kind of support you need.

It may be the support the ESM/ECB needs before sinking its teeth into state assets to make up for the coming shortfalls in repayment schedules for IBRC related debt, its certainly not support you need 🙂

@Seamus are you really comfortable in defining re-accessing the bond market in a manner that excludes rolling over the January 2014 bonds earlier this year given the LTRO?

I realize that arguments on the referendum should not be based on “fear”, but neither should it be based on “complacency”.

I don’t doubt for one moment that, if we reject the referendum, some funding will be made available to us to avoid the poster child of the program defaulting. I seriously doubt, that if we reject the referendum, such funding will be made available to us on terms that we could get is we approve such referendum.

The German taxpayer needs to see there being consequences to voting against the stability treaty, even if said stability treaty could only have prevented our problems had Germany adhered to it, given that unilaterally we didn’t breach the SGP until the walls came a tumblin’ down, a position only made possible by so many of the larger States ignoring the SGP.

Furthermore, the Spanish situation (compounded by political events in France and the Netherlands) puts into sharp focus the consequences of making a State stand over its banks to protect an extraterritorial currency/ banking system. We should be positioned to benefit from this, post hoc, but rejecting the stability treaty would undermine our position here.

We’re a member of the club. A rule abiding member of the club. We think the rules are wrong. We think that they ought to be amended. But to go it alone on this, to ignore the rules… not the best place to position Ireland. Better to force the point that creating too close a link between the banks and the sovereign undermines both, and negates all the potential benefits of a union with a free movement of capital.

@John McHale

“I am not at all sure that is the case. The Government’s stated intention is to ratify the Treaty. Surely, the positions that you quote are based on that in fact being what happens.”

As I pointed out yesterday, the commitment to fund until market access is regained does not require treaty ratification as a precondition. If you can point to any document or statement that refutes this, then please do so, otherwise it is reasonable to assume that such a precondition does not exist.

Seamus Coffey and grumpy have already made the points I would like to make, but I’ll expand a little. The government was always very clear that it was up to the Attorney General and the Courts to determine whether a referendum was needed or not. It would not, and could not, have given any assurances at EU Council level that the treaty would be ratified, only that the necessary procedures would be followed. Thus if it were the intention that the reaffirmation of the funding commitment required treaty ratification as a precondition, that’s what the Jan 30th statement would have said, simply by adding “and ratify the TSCG” at the end.

It did not say that, however. Ireland has “form” with respect to referenda, and it is just not credible that the possibility of a referendum, and the possibility of a “no” vote, were not considered before the statement was issued.

The fact that there is an existing commitment is not, of course, the same as cash in the bank. However that is a separate issue and relates to whether the commitment will be honoured or not.

@ Bryan G My understanding is that the existing Programme is a legally enforceable agreement under (at least) international law. In that sense, it stands alone.

@ Bryan G The existing Programme is a legally enforceable agreement under (at least) international law. In that sense, it stands alone.

Sewnding this in again as my first attempt at posting has been blocked “awaiting moderation”.

“The fact that there is an existing commitment is not, of course, the same as cash in the bank. However that is a separate issue and relates to whether the commitment will be honoured or not.”

And – legally – where will that money come from? We’ve had challenges to the EFSF and the ESM, there have been various other challenges to governments putting their hands in their pockets for bailout money. The ESM is now a legally solidly based fund – on what legal basis will we be accessing “continuing funding”, and who will have to approve such funding?

@Bryan G

Here is what the EFSF factsheet says (I7, p. 21):

“The ESM will be the main instrument to finance new programmes as from July 2012. The EFSF will, as a rule, only remain active in financing programmes that have started before that date. For a transitional period until 2013, EFSF may engage in new programmes in order to ensure a full fresh lending capacity of €500 billion. After 2013, EFSF will continue in an administrative capacity until all outstanding bonds have been repaid”

My interpretation, though I am happy to be corrected, is that from July 2012 (assuming that the ESM has come into force), new programmes will be funded by the ESM. If the ESM proves insufficient, new programmes can be funded from the EFSF until July 2013. The EFSF will continue to complete the funding of programmes that have started before July 2012, and will continue in an administrative capacity until all funds have been repaid.

I do not see any basis for believing that additional funds beyond existing programme commitments will come from the EFSF. As Seamus points out, there is a political commitment to support countries meeting their programme conditions until market access is regained. I stressed at the time that this was a very positive breakthrough for Ireland in terms of regaining market access. It was reaffirmed in March and I believe it is sincere. But, from my reading, any additional funding beyond existing commitments will now come from the ESM. Provided we are part of the fiscal compact I believe the political commitment stands — and it continues to be hugely beneficial. But I cannot see it being honoured if we refuse to be part of the new arrangements for mutual discipline. I would be extremely relieved if I am wrong.

@ Aisling,

I’m not advocating a ‘No’ vote, and in my opinion “there is little to be gained from rejecting the Treaty.”

Your comment lays out the potential costs that a rejection may bring. I just think this issue of a funding shut-out is being overplayed. A higher cost of funding and/or increased conditionality are very possible but a shut-out, in my opinion, is improbable particularly if we make continued progress in reducing the deficit.

I am concerned about the January 2014 bond. It is an event that we have to get through.

The bond swap with the covered banks pushed €3.5 billion of it out to 2015 so there is now a total of €8.2 billion maturing in January 2014, but that is still funding that we do not have.

At the end of 2011 we had €13 billion of “Exchequer cash balances” per page 28 of last week’s Stability Programme Update and these are expected to remain largely unchanged over this year and next. However, this is only on the assumption of a return to market access.

The Stability Programme Update doesn’t provide a funding needs/sources table but the Fifth IMF Review does on page 29. This shows that the assumption of constant cash balances requires the raising of around €15 billion of market funding over the next 18 months (as well as around €1.5 billion per annum from the State Savings Schemes). Absent this funding we will be out of cash entering 2014 and will not be in a position to redeem the January 2014 bond (or fund the €10.4 billion Exchequer Borrowing Requirement for 2014).

We will need around €18 billion of funding in 2014 and although it is only 20 months away it has not yet been put in place. The plan is to try and access some market funding towards the end of this year and a five-year yield of 5.4% is high but not unduly so.

Until we see the reaction the NTMA gets when it “dips its toe” in markets later this year we will not be able to gauge how accurate an indicator that is.

At this remove it seems likely that we will need some non-market funding in 2014 but I cannot see us being denied it because we did not ratify a Treaty which contains a set of budgetary rules we have already agreed to adhere to.


“I realize that arguments on the referendum should not be based on “fear”, but neither should it be based on “complacency”.

I don’t doubt for one moment that, if we reject the referendum, some funding will be made available to us to avoid the poster child of the program defaulting. I seriously doubt, that if we reject the referendum, such funding will be made available to us on terms that we could get is we approve such referendum. ”

I am glad you agree that referendum arguments should not be based on fear but unfortunately at the moment the Yes advocates also seem to be attempting to “brush over” a lot of post referendum UNCERTAINTY. In doing so IMHO they are effectively implying that things “MIGHT” be better if the referendum result is positive.

Of course there will be some sort of funding available (if needed) for the “poster child of the program” whether that manifests itself in EU/EZ/ECB or bi-lateral loans from within the EU.

When people argue that even the EU will not provide “favourable”funding (if needed) that does not mean that certain states within the EU would not find it beneficial to provide bi-lateral funding.

With or without this referendum we currently do not know whether the treaty will actually come into force or if the Euro will survive outside of Germany and Luxembourg.

If the Euro does not survive it will IMHO be extremely unfortunate.The currency needs to be fixed in a way that matches Europeś needs not necessarily abolished.

However if the Euro collapses “funding” will not be an issue for Ireland because we will either be printing Punt Nua or using Sterling (which does a lot of “printing”) as a conduit.

IMHO an Irish “default” will not come into play(apart from the prommissory note shambles) in any future funding/restructuring scenario.That is not “complacency” because I doubt if anyone can feel very compalacent about a possible post Euro scenario.

As for favourable “terms” if Ireland does not reject the referendum I do not think it is politically sensible to assume that the German election in Autumn 2013 will return the present coalition government.

IMHO it would also not be wise politically (if the German election does return some kind of Merkel led coalition) to assume that popular opinion, public policy or socio/economic conditions in Germany will remain the same as they appear to be today.

At present the whole Yes argument in Ireland seems to be very parodoxical. We have a government which is determined to reduce the deficit/return to market funding and a “Yes” side trying to introduce the “spectre” of not being able to return to the markets or reach program targets.

In my opinion the Government should become “emotionally detached” from the referendum result and concentrate on meeting the program targets while preparing for the Troika farewell bash.

The current Irish government (which I feel is trying to do its best in very diffcult circumstances) should not be associating itself with contradictory “scaremongering and happy clappy” messages which may very possibly lead to an adverse reaction or “protest vote”

IMHO the real debate should be about what this vote means for the the future of the European Project and since we are privileged to have a referendum (which I think was the right decision by the government) we have an obligation to fellow Europeans to debate this within the European context.Most Europeans have a good grasp of the language in which this debate is being conducted

That is why I, like the the majority of Irish people, have decided to adopt a “wait and see” approach and why I welcome the opportunity to respond to your valuable thought provoking comment:)


A general election in Germany soon would be cool …

Time for the FDP to do the states of Europe some service and go ….

Timing is dreadful – based on content it is better to vote NO.

No rush in voting through the ESM stuff in the Dail – or even calling a vote.

A deal on vichy_financial system debt is still required to become in any way sustainable around here. If one doesn’t go lookin for it it ain’t goin to happen.

All this establishmentarian fearmongering is suffocating, and nauseatingly embarrassing … let’s get the Supreme Court to declare, somehow, the whole exercise to be as nonsencical as Edward Lear’s ‘The Owl and the Pussycat’ and that there is already more than sufficient nonsense in the Irish Constitution without adding further contagion, hence saving us from making ultra roight eejits of ourselves.

@ All

This is a truly amazing series of exchanges and exemplifies the immaturity of the country’s involvement internationally. This involvement cannot be reduced to the level of access to an ATM euphemistically entitled “official sources”.

On the point about continued assistance, in the event of a no vote there is little doubt but that it would be forthcoming but not from either the EFSF or the ESM. One can imagine how strong the negotiating hand of Ireland would be in trying to organise what would probably be a series of bilateral assistance arrangements (as was the case with the first Greek bail-out).

One of the most telling remarks by Karl Whelan this morning was that “the IMF is not a charity”. Neither is the EU!


Minor point:

The Irish Citizenry is not a charity for the financial system!

@ DOCM “there is little doubt but that it would be forthcoming but not from either the EFSF or the ESM.”
Don’t agree with that. Europe is a huge cr of Ireland. It is inconceivable that they would not be or would not want to be involved in any future solution /resolution. Leaving it to the IMF or others would result in huge losses for our EU crs. It is illogical (and pure scaremongering) to think that they will not be involved. It’s got nothing to do with charity (clearly). It’s self interest for them.

@ Paul W

As has been made clear in earlier posts by others, the EFSF is being wound up and participation in the ESM is precluded for countries failing to ratify the TSCG. I am not disputing that assistance would be forthcoming. I am simply making the point that, after a no vote, the country would be in a weaker and, quite frankly, humiliating position with regard to receipt of further assistance by way of loan. Furthermore, the IMF has made clear that it is assisting Ireland in the context of assistance from the countries of the EU.

Viewing outside assistance as a form of charity lies in the widespread belief in Ireland that the world somehow owes a living. It doesn’t! The entire point of the TSCG is to bring home that fact not alone in Ireland but in other countries of the EU that have been living beyond their means for decades. The ESM is an undertaking by the better-off countries to assist provided they take the necessary steps nationally to put their budgetary houses in order.

That’s it!


Apparently there is a page 1 headline in the Independent tomorrow that the “Election Commission” (who are these guys – and how come they know and understand this stuff so much better than we do – or is it just gross mis-reporting?) have decreed that JOHN MCHALE IS WRONG on this!!!

The general public will be informed in the morning that Mr McHale is hopelessly optimistic about the country’s funding prospects in his judgement that Ireland might have some awkward moments and that it cannot 100% automatically rely on further post 2013 official funding as a result of EU leaders’ statements stating that it can.

Apparently this 100% correct and 100% independent and 100% more expert than us “body” is reported as stating that “IRELAND WILL BE CUT OFF FROM OFFICIAL FUNDING IF IT VOTE ‘NO'”.

Why are we wasting our time?

Aren’t we already in excessive deficit procedure regardless of the fiscal treaty and therefore subject to whatever the European Commission decides is needed to get us back to SGP criteria?

There will be funding available in 2013-14 if we vote No. Advanced nations don’t do hard, uncontrolled defaults, and nor do they default if they have the sufficient fiscal flexibility to keep paying (which we do). So there will be funding available.

However, anyone who does not see the chain of negative events or implications from a No vote is mildly delusional. We don’t maintain our sovereignty in the event of a No, we’re likely to lose even more of it when we’re forced to take Bailout 2.0 in 2014. That one ain’t gonna be anywhere nearly as fun as our current faux-austerity adjustment. That one won’t have the IMF involved as an independent adjudicator. The rest of Europe will have largely gotten its house in order by then, and the rest of the world will be in full recovery. No one is gonna be too friendly or sympathetic when we show up again 6 years after our first implosion, still trying to do it our own way but with their money.


“still trying to do it our own way but with their money”.

+ 1

You are a bit optimistic, however, with regard to the rest of Europe getting its house in order.


Quite a little tantrum. I made what I think is a substantive point that based on more recent developments the odds of a continuation of EFSF support is less than Seamus supposes. I noted above why I believe this to be the case. I hope Seamus is right and I am wrong. It seems to me that Eoin gets it about right above. As you know, I have typically thought highly of your contributions. But can you disagree without being so disagreeable?

@DOCM +1 on BEB being optimistic on European prospects but otherwise being about right on ours.

The problem as I see it is that if you acknowledge that any alternative funding could be made available, people assume that this must be on better terms than present, as opposed to worse terms which is the reality.

So politicians then have to explain that other, as yet undefined, funds may be made available to us, but probably on less favorable terms. Since they’re undefined SF will then question the assumption that the terms will be unfavorable.

Good grief Raymond Crotty did this country a huge disservice!

@ Paul W

As I omitted to mention the dreaded markets, I am taking the liberty of inserting the following quotation from John McHale which nails down the essential elements;

“… stronger countries – who themselves have vulnerabilities – are understandably reluctant to take on large contingent liabilities and weaken incentives for fiscal discipline (moral hazard) without reasonable assurances of disciplined fiscal policies from their euro zone partners. Even with beefed up mutual support mechanisms, potential bond buyers are also looking for strong fiscal frameworks to support the political capacity to work back towards debt sustainability and ultimately less vulnerable debt levels”.

Think this assumption is worth highlighting…. Its in Eoins post but this assumption has been driving a lot of the responses….

The rest of Europe will have largely gotten its house in order by then, and the rest of the world will be in full recovery.

Then is 2014…. by then should really be Jan 2014… lets be kind and say June 2014…

Lets see what happens….. I hope you are right but I suspect not.


“Why are we wasting our time?”

Tell me about it.


“One of the most telling remarks by Karl Whelan this morning was that “the IMF is not a charity”. Neither is the EU!”

Neither am I. But I seem to be being treated like ‘giving’ to support the banking sector and our nation’s unfunded liabilities is all I’m useful for.


Good grief Raymond Crotty did this country a huge disservice!

Indeed. What could be more tiresome for the Irish establishment than having to try and win an argument in public for extreme ideological policies set by a cabal of EU insiders, financial sector lackeys and neoliberal hacks?

The cynicism and contempt for popular democracy that pervades the ranks of the EU insiders is an awful, awful thing. You really do make me sick.

Henry The Sixth, Part 2 Act 4, scene 2, 71–78

@John mchale

Front page headline , I am told, of the “Irish Independent” print edition

“No vote will cut off access to EU bailout funds, says watchdog”

I’m afraid I don’t understand your characterisation of my comment above as “a little tantrum”.

I have bothered to think about questions like this quite a bit over quite a long time. I’m sure you have too. I think funding would probably not be cut off in the event of a ‘no’ vote – and I am not trying to sell any particular line. I also get the impression you think funding would probably continue to be available – as do many other disinterested observers.

Mr and Mrs Bloggs on the high street are not so well informed. They read newspaper headlines – and thats about it for most.

Now do you think that headline is an going to give the man on the street a fair and accurate impression of the reality?

If it is so simple, why are we discussing it?

I’m sorry if you took umbrage at me using your name in that comment, but I think if you read it again, calmly, you might realise that my target was either the reporting by the newspaper, or the simplistic conclusion reached by the referendum commnission. You appear there simply as a currently engaged ‘yes’ leaning commentator who is more inclined towards the idea funding would be under threat than most – the point being that if the whole thig is as simple as the headline suggests, why are we bothering.

To be clear, I think that headline is misleading, and suggestive of either bias in the reporting or bias/misunderstanding in the commission’s analysis. Having now read the article it is clear the newspaper is using a misleading headline.

(btw that was sarcasm, not a tantrum, and anyway what is wrong with commentators that do what it says on the tin?).


I owe you an apology. I was evidently a bit grumpy myself getting up this morning.

I did see sarcasm. In fact, I thought you were making up the article to drive home a sarcastic point about referring to probabilities. I should have waited to wake up properely. (I had also read your post on the other thread. I try to have a reasonably thick skin, but . . . ) Hopefully no hard feelings.

Distractions, distractions, miss_informations, dummies, side-tracks …

Massive focus on unknown consequences a deliberate tactic of the financially captured politicos and the known nonsensical substance (sic) of the actual Content of the Fiscal Corset now almost totally ignored ….

0.05 un_measurable in anyting approaching real time
60.00 arbitrary 1/20 arbitrary & specific to Dr Merkel in her time for her own reasons. Overall – zero social scientific validity

A NO vote demonstrates some maturity in refusing to place nonsense into the Irish Constitution – and will be welcome by many other savvy European citizens who have been denied opportunity to vote on this …

A simple declaration of intent to Fiscal Prudence should be sufficient.

As to funding, EU funding will be available; does anyone seriously think that the EC and ECB will allow Ireland to default due to having to shoulder the odious burden of ~90-110 billion in Financial Sytem debt – the equivalent of 1.5 trillion for the Germans? A deal on this odious debt – which must involve the ECB – remains essential if Ireland is to re-enter commercial markets. I view a NO vote as essential to securing such a deal … but it is most unfortunate that leading politicians prefer spin to addressing reality and presenting Sound Empirical Arguments at European Level – the IMF have stated, in as bold a language that that institution is capable of, the Ireland must have a deal on vichy-financial system debt to place debt dynamics on a sustainable footing …..

Fiscal we can do – I would like more discussion on the HOW? WHO? WHERE? WHAT? WHEN? … methinks we might have figure out the WHY? at this stage in the slow-learning process!

@grumpy, John McHale

Would you two like a room?

I hear that prices have come down in all those NAMA run hotels around town ….

Yoko is not available this time …. and the Dutch are having none of this Fiscal Love-In stuff at the mo … hard core in East Berlin ….. and .. er .. Merrion Square …

@ DO’D You’ve illustrated my point on Crotty beautifully. Thank you.

“A NO vote demonstrates some maturity in refusing to place nonsense into the Irish Constitution”

Nothing is going into the Constitution other than a provision allowing the Government to ratify the treaty. The treaty itself is not going into the Constitution, nor should it.

We should have an informed discussion on this, but we won’t. Straw men will be hoisted and the debate derailed as is the norm with referenda in this country.

The unfortunate practice of rerunning referenda will further influence this travesty of democracy.


A provision allowing for ratification of nonsense implies acceptance of such nonsense.

Now – in the spirit of constructive debate and with a focus on content – can you shed any light on the social scientific validity of the constraints 0.5, 60, 1/20 in the so called ‘Compact’?


You link to the Indo – many thanks

‘AN independent referendum watchdog is to back the Government’s claim that access to the EU bailout fund will be cut off by a No vote to the EU fiscal treaty.’

Educate me please anyone – is the above quote

a) Ironic?
b) Idiotic?
c) Moronic?

Oh I got it now – it was the word ‘Independent’ that threw me.

That means something completely different outside of Ireland.

So much agonising and bickering for so little value-added, and so little clarity.

It says in black and white (in the ESM Treaty of 2 February 2012): “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 [Stability Treaty] by the ESM Member concerned…”

So – if we don’t ratify the Stability Treaty, we are effectively declaring ourselves uninterested in getting any ESM money, as and when our existing EFSF-funded programme expires. Full stop.

If we take such a step, who knows what happens next? Either the rest of the EU will take us at our word and leave us to our devices (with mutterings of “good riddance”), or we scramble to recover ground and claim that we didn’t mean what we voted for: in fact it was just a reckless and pugnacious gambit. And could we have our ESM funding anyway please.

What is the rational upside for such a gambit? Why on earth would so many contributors to a respectable economics blog go off the rails on these simple matters of fact? Really.

@Ordinary Man

So if an “independent” body agrees with simple statements of fact made by the Govt then it can no longer be considered independent? What if Minister Noonan were to boldly declare that 1+1=2?

I’m sure that even such a proposition, if advanced by Govt, would receive a hostile reception for some quarters around here.


In that case, whose social scientific opinions on the content of the ‘compact’ do you follow or trust in advocating a Yes Vote to the upcoming referendum? Can you refer me to the appropriate scientific text, grounded in empirical evidence, and on any plausible theoretical basis?

btw you are more of a social scientist than you might realise! .. or .. er .. let on …

I’m voting yes because I don’t see any downside to doing so and I see plenty of downside to voting no.

Were this an EU treaty I’d have a lot more difficulty with it since it would be being hard baked into our laws, but it is not. If it was an EU treaty then a rejection by us could prevent it being applied to others, but as its not we can only look at the impact of a vote for us.

So, not being an EU treaty, if it is discredited it can easily be removed or altered. In financial terms it can’t have any downside for us until 2017 at the earliest giving us 5 years to figure out if helps or not. Five years during which it cannot hinder us.

A no vote can have a downside for us this year when we could get down graded or which will impact on the NTMA’s ability to dip their toe in the water without the backstop of certain cheap ESM funding.

That’s the rationale behind my advocating a yes vote.

We’re in the club, why throw our toys out of the pram which will impact on confidence in Ireland’s ability to exit the program and potentially cause a viscous circle over something which won’t impact on us for five years and which might not even survive that long?

@Con Moriarty

So much agonising and bickering for so little value-added, and so little clarity<….%gt;So – if we don’t ratify the Stability Treaty, we are effectively declaring ourselves uninterested in getting any ESM money, as and when our existing EFSF-funded programme expires. Full stop.

Nice try Con but Seamus’s point was that the continuation of the pre ESM negotiated programme is not contingent on enacting the Fiscal Compact and that the “if and when” of EFSF-funded programme expiration is if and when we regain market access.



Your ‘opinion’ is noted.

I regret that you are unable to discourse wrt to the substance and content of the treaty; and in this, you are not alone in basing your considered opinions solely on perceived consequences.

It grieves me to see an erudite and conscientious citizen such as yourself left in such an intellectual, social scientific, and political vacuum that no one can apparently explain to you the underlying rationale of the simplistic troika of 0.5, 60, and 1/20th.

@ Con

From the article cited (their spelling)

‘The independent Referendum Commission will support the Government’s view by stating the treaty says access to the fund is based upon ratification.’

By definition the fact that there are two views as to the consequences of ratifying the treaty, how, with any credibililty can an ‘Independent Commission’ express any view or interpretation as to the consequences of implementation or non-implementation? The consequences of this treaty are what is not agreed, that is the debate.

Therfore all this commission should be doing is presenting the treaty for a vote. The consequences of implementation are for other non-independent self interest groups to state opinions on.

I have expressed no opinion on it, the Government’s view or anything else.

I merely comment on the abuse of the word independent.

Getting a bit touchy and only day two ! 😉

@David I’m struggling to get worked up about any particular numbers since all will be open to the charge of being arbitrary. If instead of 0.5% it was 1% would that change your vote?

If the debt to DGP ratio was 75% would that change your vote?

If we agree that there should be limits on both the structural deficit, and the debt to GDP, which I think most of us do, then it also follows that there must be a time period for adhering to that target. If 20 years strikes you as too little, would 25 years make a difference to your vote?

These numbers were agreed as part of a political process. 60% debt to GDP was agreed in the SGP, at a time when coincidentally German and French debt to GDP was in and around 60%.

We have to acknowledge the politics here, rather than pretending that the numbers can be looked at in a vacuum, rather than pretending that numbers can ever mean anything in a vacuum.

@Aisling et al

The Fiscal Compact – informing the 50% who don’t understand it

OK, so according to the Sunday Times Behavioural and attitudes Survey on the 22nd April 50% of the electorate/those intending to vote (not sure which) in the upcoming Fiscal Compact referendum apparently do not fully understand the Fiscal Compact (downloadable here). This is a worry for me because if you are going to vote on something that will have profound implications for your fellow citizens you owe it to yourself and the rest of the country to fully inform yourself as to the implications of the treaty. Afterall, would you sign a contract without knowing it’s terms? Well, I suspect the answer would be no and as such therefore you should be approaching the fiscal compact with the same mindset. It is a contract between this state (through it’s citizens) and the EU.

@ David That piece starts off by identifying that people don’t feel comfortable with the treaty, and then goes on, under the guise of “explaining it” to offer a very biased interpretation.

It doesn’t mention, for example, that since we’re in excessive deficit procedure under the SGP a vote on this treaty will have limited impact. The only way for us to get out of excessive deficit procedure is to either get our debt to GDP under 60% or to leave the EU.

The piece goes on and on about the austerity implications of the deficit rules, but ignores the fact that our Government does not have, and will not have for the foreseeable future, the option of engaging in any expansionary fiscal policy. Our books are a mess, we have to sort them out, and this will be the case for years to come.

So arguing about the potential negative impact of the Stability treaty on our economy now is just intellectually dishonest. Austerity, tempered by the lending from our colleagues in the EU/ IMF, is what we have to deal with now, and for the foreseeable future.


That piece for Irish Left Review was written by Mark McCutcheon, whose area of expertise afaik is taxation:

Presented here for purely pedagogic purposes on the actual content.

@David I should add after the glib response above that being a tax adviser offers no particular insight into the stability treaty. You might get some knowledge of EU law if you work on the right clients but the level of knowledge in Dublin compared to London for example, is really poor.

Working in a big four environment offers some insight into how finance works. But I can assure you that in that environment there are also many, many muppets.

So we should each form our own views rather than just accepting those of so called experts.


I merely pop in an FYI,fairly regularly, where I deem it of possible relevance. I leave readers to make up thier own mind; I do like to take a crack at spinners at times, simply for the sheer enjoyment of doing so.

I make up my own mind based on my own research and in the human and social sciences I’m generally skeptical of all experts …. until I have sussed out their form …

p.s. mind the muppets (-; probably all Yes-men anyway!

FYI Lucinda’s Logic

The [Fine Gael] press conference was chaired by Minister of State for European Affairs, Lucinda Creighton who said: “I believe passionately in voting Yes, because so many of my friends of my generation now live abroad.”

She said there was “a moral obligation” to vote Yes, to help ensure that young people had a future.

“This decision is about people, not party politics or ideology,” Ms Creighton said.

She said she wanted to “acknowledge the help and support from Fianna Fáil”.

“Fianna Fáil should be given credit for their stance,” she added.

No comment!

@Seamus Coffey

I agree. Discourse on funding is way over the top … top up to the present one in 2014 necessary if no write down/restructure on bank debt ….. I’m guessing the poorly thought out gadarene rush to May 31 relates to dumping the PNs on the Sovereign from the EFSF …. ?

@ Con Moriarty

I sympathise with your view. The deterioration in the discussion is notable, especially when it comes to simply ignoring basic facts e.g. with regard to (i)exclusion from the ESM if we vote no and (ii) the termination of the EFSF.

That a sentence in the conclusions of the European Council aimed largely at persuading markets that there will be no sudden stop to funding from “official sources” can be viewed by some as capable of being weighed in the same scale as an alternative is a victory of hope over reality.

@Seamus actually watching the debate I would like to thank you for trying to refocus the debate around the fact that we probably will still get funding, most likely from the EFSF, even thought I suspect that a higher price would be exacted.

I thought that this thread was watering down the risks associated with a No vote, risks which predominantly relate to the cost of funding and the pricing of uncertainty.

The intellectual dishonesty of the debate on VB (from both sides) is throwing your attempt at honest discourse into sharp relief.


‘@Seamus actually watching the debate I would like to thank you for trying to refocus the debate around the fact that we probably will still get funding ..’


tuned to VB – did Lucinda say anything of substance on prime time? .. a phrase even? Was Europe mentioned?


“That a sentence in the conclusions of the European Council aimed largely at persuading markets that there will be no sudden stop to funding from “official sources” can be viewed by some as capable of being weighed in the same scale as an alternative is a victory of hope over reality.”

Particularly when that sentence contains such a large number of variables! What is “market access”, and who decides whether Ireland has it? Our 5 year bonds are at 5.38% – only 0.59% above the rate the IMF are lending to us at. Is that “market access”?

The statements quoted by Seamus Coffey are political statements and are not legally binding.
In contrast, the provisions in the Fiscal Treaty limiting access to the ESM to countries which ratify it, have a legally binding effect on the ratifying counties and trump any political statements they make in Summit communiques.

In any event, I think the Summit statements were made on that assumption that everyone would ratify, and were not intended to contradict provisions of the Treaty.
I think these quotations by Seamus Coffey from the Summits are thus not in fact relevant to the referendum

@john bruton [or whoever you are ….

Emeritus Fine Gaeler and IFSC PR Guru ‘allegedly’ states:

‘political statements are not legally binding’

… well, in terms of FG it would appear that after more than a year in office that there is more than sufficient empirical evidence to support your statement; I can ‘think’ of a few hundred examples, but so as not to bore the reader I will simply note a couple:

[i] not one red cent to the banks [audience laughter …

[ii] all members of state boards will be requested to resign within 6 months of FG taking office (the brudder on tidying up corporate governance) [ politico appointments galore to state boards since …

In the immortal words of James Kemmy ‘If the shoe fits, wear it …

A Must Read

Terrence McDonough is professor of economics at NUI Galway

Treaty not a safe option but a perilous experiment

Let’s consider again what’s on the table.

1. Structural deficits for Ireland should be about half of 1 per cent of GDP, with a 3 per cent top limit on the headline deficit even in the worst years. This requirement seriously compromises government ability to end recessions.

The implementation of the 0.5 per cent structural deficit rule in the new treaty is considerably more stringent than any of the existing “six-pack” regulations, which are themselves unwise. Eventually, a shortage of government bonds will emerge, forcing conservative investors such as pension funds into less safe investments, risking the reappearance of dangerous asset bubbles.

2. Debt should be 60 per cent of GDP. If debt is greater than 60 per cent, it will be reduced by 1/20 per year over the next 20 years. This would start in 2018, when the bailout terms expire, and could require up to €5 billion a year in savings to 2038.

3. Even after we reach this target, Ireland will be forced to run primary surpluses, that is excluding interest payments on the national debt, for many years, taking steam out of the economy.

4. If these conditions are violated, control over fiscal policy is ceded to Europe and the European Court of Justice.

Take a country at the bottom of a depression. Force it to run budget cuts and tax increases year after year after year. Force this same policy on its neighbours and trading partners. Run this into the foreseeable future and hope it results in stability, confidence and recovery. This is emphatically not the safe option. This is a dangerous experiment, completely without historical precedent.


Professor McDonough contd.

It is claimed this situation will result in disaster, and that even if we believe the fiscal treaty is a serious mistake, we have a gun to our head. In fact, Ireland will have a number of options in this event.

First, Ireland is certainly small – but it is still scary. A disorderly Irish default would threaten the stability of the European banking system. A European Central Bank intervention to restabilise the system would be considerably more expensive than a second bailout of what is a small country. It is highly unlikely Europe would ignore its self-interest in order to spite the Irish electorate.

Funds would be found outside of the ESM. The European Financial Stability Facility (EFSF), for example, is accepting applications for new money up to the middle of 2013 and will stay open to administer this money in subsequent years.

Secondly, Ireland also has the option of borrowing from the International Monetary Fund rather than the European institutions. The Department of Finance was forced to admit this over the weekend when the IMF said as much. It has been pointed out Ireland is entitled only to apply for the money. But this would also be the case with the ESM.

A third possibility is to set about partially closing the budget deficit. The Irish tax take as a percentage of gross domestic product (GDP) is well below the EU average. Taxes on wealth and high incomes are considerably under-exploited.

A fourth possibility is the restructuring of debt. The Anglo-Irish promissory note payments alone constitute €3 billion in any given year. Most commentators outside Ireland believe restructuring of some sort will eventually take place in any event.

A fifth, under-discussed, possibility is the issuance of innovative debt instruments. It would be possible to make Irish bonds acceptable in payment of taxes in the event of any default. This should eliminate the risk premium which makes it difficult for Ireland to re-enter the markets at this time.

A judicious combination of these strategies would be better than relying solely on any one of them. In the event of a second bailout, the resulting gap can be closed in this way.


@Seamus Coffey

Apologies for over-citing … in terms of challenging the content of the article … you might open a thread on it when you find time. In general terms, I agree that funding will be made available to Ireland when needed, esp for the big bond in 2014 … and this thread has been very informative in combatting simplistic spin ….

Keep up the good work … especially the spin-free empirics.

It is interesting to note that, despite both of them posting their views subsequent to my post, neither David O Donnell nor Seamus Coffey actually address the point I made about the latter’s original post.

Summit declarations do not carry the same legal or binding force as Treaties.

So Seamus Coffey’ s attempt to dismiss the content of the Fiscal Compact Treaty on the ineligibility of non ratifying countries for the ESM, on the ground of his interpretation of the Summit declaration, is wrong. The Treaty is what counts,not the Summit declaration, as misinterpreted by Seamus.

In any event, as I said in my post, the framers of the Summit declaration would have framed it on the assumption that the countries that had signed the Treaty would ratify it and were not amending the Treaty as Seamus Coffey seemed to think they were.

Both correspondents need to remind themselves that any further funds Ireland may get from any European Fund will have to be underwritten by the taxpayers of other European countries who will want assurances that they will be repaid in full and that is why they insisted on the provisions of the Fiscal Compact…to ensure that the public finances of all countries are conducted in such a way as to maximise the likelihood that funds borrowed, will be repaid.

That is not blackmail, it is commercial common sense

@ John,

I don’t think anybody has said that summit declarations have the same binding force as Treaties but they are declarations of intent.

There is also no disputing that if official funding is provided to Ireland this will come with conditions for improved fiscal performance. However, this does not need the Fiscal Compact. We have already received approval for more than €40 billion of EU funding and this was granted in the absence of the Fiscal Compact.

It did come with significant conditions, and in the EU’s case, those conditions are primarily the annual deficit targets to bring the overall deficit below 3% of GDP by 2015. None of these are changed by ratifying or not ratifying the Fiscal Compact.

We are going to be an Excessive Deficit Procedure regardless. If we ratify the Treaty there is still no guarantee of getting EU funding. To do so we must satisfy (or more accurately attempt to satisfy) the conditions of the EDP.

Our EU friends don’t need the Fiscal Compact to monitor our fiscal policy. The aim of the Fiscal Compact is to introduce national monitoring as the first line of defence but it is not the only one. We have already signed up to all the fiscal rules in the Fiscal Compact (and some more besides).

As you know the 3% deficit rule and the 60% debt threshold are from 1992. The balanced budget rule is from 1997 with the variation in terms of the structural deficit introduced in 2005. The debt brake or ‘1/20th’ rule is from November 2011. In addition we have agreed to a government expenditure rule.

I think the taxpayers of European countries are getting plenty of assurances that we will try to ensure that they will be repaid in full. There is no suggestion that we deviate from the outlined plan to bring the deficit down. There will be domestic differences over how we achieve that but there is almost universal acceptance that we must bring the deficit down and do it quickly. The measures that have been introduced to date are testament to that.

This country is going through a huge adjustment process to restore order to the public finances. It is true that the availability of official funding has allowed the process to spread out over a longer period of time but that does not mean that the process is any less difficult.

I do not think it is commercial sense for the EU to threaten to cut off the ‘poster child’ just because that country did not ratify an inter-governmental agreement which is primarily made up of EU rules that that country has already agreed to adhere to. And in my opinion the EU (or those who make the decisions) thinks the same way.

The Stability Treaty says:

“POINTING OUT that the granting of financial assistance in the framework of new programmes under the European Stability Mechanism will be conditional, as of 1 March 2013, on the ratification of this Treaty by the Contracting Party concerned”

Why did they say “new” programmes? Why not just programmes? The interpretation by many (including you) is that all funding granted after 01/03/2013 will be conditional on ratifying the TSCG. If that is the case why the need to put an adjective before programmes?

@Seamus to answer your last question existing programs can be moved over from the EFSF to the ESM with their terms and conditions already agreed prior to the TSCG. You couldn’t retrofit Greece’s current programme with a TSCG ratification clause if powers outside Greece decided to transfer their undrawn funding to the ESM once it is up and running.

The inclusion of the word “new” doesn’t actually help. The logical arguments help more.

@Seamus Coffey

thanks for that.

@ John Bruton

… from Der Spiegel yesterday …

Austerity Success

This has been the case with Ireland, where the budget deficit soared by 31 percent in 2010 after a number of banks ran into trouble. The country had to be rescued with bailouts, and it embraced a radical austerity program that produced unexpectedly rapid results. Unit labor costs declined, exports rose, and the budget deficit shrank to nearly 9 percent within two years.

This success is also reflected in the country’s current account balance. After a huge deficit of €10 billion ($13.25 billion), it is once again positive.,1518,830594,00.html

This is the perception. [I’m not getting into whether I agree or not here]

It is simply not conceivable that funding will not be available from EU to Ireland should it need it, which it certainly will sans a deal on odious vichy_financial system debt lumped on the Irish Citizenry.

@ Seamus Coffey

If you will forgive me for intruding in these exchanges, you risk losing sight of the main event by concentrating on the detail of the narrative up to this point. The fact of the matter is that there is a crisis of not just financial but political confidence in the EU and the EA at this juncture. The TSCG is a first step in remedying it.

I posted this link to a recent address by Draghi on another thread. It is worth a read.

In short, as the Der Spiegel article referred to above illustrates, we are still boxing with two gloves. A no vote in the referendum – which is only necessary because of failures over the past decades to resolve issues posed by an initial faulty Supreme Court judgement – would tie one hand behind our backs. Or, to put it in another way, from another branch of sport, put us on the back foot. Whether funding would or would not be available is not the main issue. Indeed, posing the question is enough to confirm that we may lack the essential characteristic of sovereignty viz. the absolute conviction of the ability of a people to stand on their own i.e. pay their bills.


No problem paying our own bills – I strenously object to having to pay for the bills of the vichy_financial system.

Your patrician high tory elitism and implied judgement on the ignorance and stupidity of the lumpen citizenry wrt to the Crotty Judgement is noted – and simply noted are you are being true to form. Deliberative democracy is such a nuisance at times as it may place the privileged positions of the goughing upper_echlelons at some risk and possibly engender nightmares of the French Revolution in such elevated circles.

Raymond Crotty has done the Citizenry of this State some service.

The economics of the fiscal compact is NonSense; this is more than sufficient for me to vote NO. There are also political arguments for voting NO. But I’m not getting into the little spat between Karl Whelan and Peadar Toibin, two intelligent men of standing, on the distinctions between economic and political – in this case, both apply.

In response to Seamus Coffey’s last post, I am afraid I am not as assured as he seems to be by the fact the provision in the Fiscal Compact Treaty barring access to the ESM to non ratifiers refers to “new” programmes. It will be for the Finance Ministers of other countries to decide what “new” means and there is no guarantee that they will decide that Ireland looking for more money will not be regarded as something “new”, given that we will not by then have repaid what we had borrowed from the ESFF.

But let me put forward another scenario where there would be no ambiguity.Suppose Ireland, having voted “No”, briefly regains market access in temporaily benign bond market conditions But then these conditions worsen. Ireland at that point again needs official assistance. Such an application by Ireland for aid would definitely be regarded as a new application, but it would ineligible for the ESM because Ireland had declined to ratify the Treaty.

Why should we put ourselves in that position for no gain?

The 0.5% structural deficit condition in the Fiscal Compact Treaty will be of little relevance to Ireland for years to come, because we will have to run structural surpluses to get down to the 60% debt/GDP ratio, which will not happen for a long time, given where we will be starting from. Seamus correctly points out that the 60% ratio is something we agreed to back in 1992.

So why remove ourselves from eligibility for the ESM for new programmes ,just because of an objection to something that will not affect us, if ever, for years to come?

It is also important to point out to some of the other contributors to this conversation that, even if we never bailed out the banks, most of our present debts derive from having spent more on day to day services that we take in in day to day revenue. Dan O Brien published calculations that show that in the Irish Times some weeks ago.

@ John,

I agree with virtually all of that and have previously said that “all in all there is little to be gained from rejecting the Treaty”.

If the Treaty is rejected we will be forced to adhere to the budgetary rules anyway but will be denied access the new European Stability Mechanism (ESM) bailout fund. This will have no impact on the current EU/IMF programme we are in and, if necessary, this programme can be extended. However if Ireland needs to enter a new programme of assistance at some time in the future we will not be granted assistance via EU loans and may be left in a vulnerable funding position.

There is little that is new in the Treaty, and some of the rules governing fiscal policy in the EU have been left out altogether. It is hard to know why this Treaty is necessary, apart from appeasing voters in France and particularly Germany.

We cannot avoid the fiscal rules in the Treaty. We cannot avoid the measures necessary to bring our deficit under control. The Treaty may be part of a long-term move for a more fiscally-integrated Europe. This would be a real change and one we should be part of. All in all there is little to be gained from rejecting the Treaty.

I just think that the issue as it was discussed this week, i.e. a continuation of the current arrangement, was completely overplayed. Here is another scenario. Suppose the referendum is defeated in a few weeks, but the Fiscal Responsibility Bill, which puts the rules in the Fiscal Compact into national law, is passed later in the summer. We would not be signatories of the Treaty but again we would be showing our willingness to “stick by the rules”.

I disagree that getting the debt down to 60% of GDP requires running structural surpluses. First, it is the overall balance that matters to the change in the debt ratio.

Second, as long as the nominal growth rate exceeds the overall deficit the debt will fall. The original Maastricht criteria existed in a world of 5% nominal growth and deficits of 3% would eventually see that debt converge on the 60% reference. Of course, this didn’t happen in practice as lower growth/higher deficits kept the debt higher in many countries but with no penalties for high debt there was little that could be done.

The new debt brake rule just gives a numerical requirement for debt reduction that is little different to the Maastricht criteria but now there is a benchmark to be compared against. In a world of 5% nominal growth, the debt brake would be satisfied even with overall deficits of around 3% of GDP. The debt brake rule becomes effective in Ireland in 2018 and knowing what nominal growth will be then is anyone’s guess.

The balanced budget rule (the 0.5% structural deficit) is actually more stringent and we have to move to that as soon as we leave the Excessive Deficit Procedure. Again, however nominal growth may be able to do most of the heavy lifting.

If we move to a position of satisfying the balanced-budget rule by reaching our Medium Term Budgetary Objective of a structural deficit of 0.5% of GDP then that will be more than enough to satisfy the debt brake rule.

Finally, on funding I agree it is a political decision and there are no absolutes. We are often told that something is impossible only for it to happen a few months later (Greek default for example). The rules allow the EU wiggle room to extend existing programmes and I think they will use it. The hope is that the ESM will never be used. I like to imagine that the Stability Treaty/ESM is an attempt to prevent the next crisis as it does little to solve the current one.

@John Bruton

‘.. even if we never bailed out the banks, most of our present debts derive from having spent more on day to day services that we take in in day to day revenue.’

I agree, and have never disputed this fact, which has been emphasised on this blog by Colm McCarthy and others. Nor have I disputed the common sense strategy of getting deficit under control – I do have serious reservations on HOW this is being done, its regressive nature, and the ability of certain interest groups in the upper echelons to protect their positions. Based on emprical evidence over past year it appears that Fine Gael is as spineless as Fianna Fail in taking on such interests …

I am and will continue to be vehemently opposed to how Irish Admins and EU Institutions have lumped the equivalent of 40-50% [gdp/gnp] on Irish citizens making debt dynamics unsustainable. The supine nature of previous and present admins on this issue is vexing in the extreme.

Returning to the Economics of the TSSG, I can not find a single economist on the island of Ireland, or in mainland Europe, who can justify its social scientific economic validity, based on empirical evidence, or on any reasonably plausible theoretical foundation. For countries such as Ireland and Spain I believe that it will lead to a spiral of depression. It is a political power play for certain core nationalist interests at a partucular point in time and is deeply flawed.

Hence, I vote NO.

@ John,

Here is a quote from Enda Kenny from the Feb 1st Leaders Questions after the TSCG had been agreed:

Deputy McDonald should also bear in mind that central to the issue debated by the Irish officials and myself is that 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. That is the story.

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.

A country will “continue to receive funding so long as it measures up to the conditions for which it signed on. That is the story.” We signed up the conditions in November 2010.

And one from Michael Noonan from a Parliamentary Question answered on the 9th of February.

Assistance will be provided under strict economic policy conditionality. Furthermore, the modified treaty establishes a new precondition for benefiting from such assistance as of 1 March 2013 (recital 5): member states concerned must ratify the “fiscal compact”, i.e. the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union, and implement the balanced budget rule as specified in that treaty within the agreed timeline (one year after entry into force).

It has been clarified that the linkage of both the ESM and the Intergovernmental Treaties refers to new applications for assistance under the ESM and will not affect the transfer to the ESM of undisbursed amounts under the EFSF to Ireland (and other programme countries).

In this context it is important to note that the Euro Area HoSG, in their conclusions of 21 July and again on 30 January 2012, committed to continuing to provide support to countries under a programme until they have regained market access, provided they successfully implement their programmes. This reaffirmation is a welcome confirmation that commitments in relation to provision of funding will be met.

The ESM will replace the EFSF. While the ESM may assume the rights and obligations of the EFSF, this should not affect the terms and conditions of the amounts transferred to the ESM and subsequently disbursed to Ireland.

Although not as unequivocal as the statement from Enda Kenny the third paragraph reiterates that the “confirmation that commitments in relation to provision of funding will be met”.

We can’t say that they are right. The funding decision is clearly a political one but it is not as cut and dried as the wording in the Treaty suggests.

@Seamus Noonan’s speech reiterates my interpretation that the word “new” relates to grandfathering existing programs. If Ireland, as with Greece, requires a second bailout, then chances are that that would constitute a “new program”. Just as altering the capital and duration of an existing loan would generally constitute a different (new) loan under Irish law.

So if Ireland needs a second bailout, we have to be prepared to be bound by the terms of the ESM relating to new funding, or take our chances that logic will prevail. The former being guaranteed, the latter not so.

Transcript of a Press Briefing by Gerry Rice, Director, External Relations Department, International Monetary Fund

QUESTIONER: And just a separate follow up. For Greece, in the review, or actually as part of the new EFF agreement, the Fund made it clear that any financing gaps that developed, Europe had given assurances to the IMF that they would cover those financing gaps. But are there similar assurances from Europe on Portugal and Ireland for any potential financing gaps there?

MR. RICE: Well, I think really the question is best addressed to the Europeans, but I think at several points over the last several months the governments of the Euro zone have made clear their commitment to the stability of the Euro zone, including providing resources as needed to program countries, provided the programs are being implemented effectively.’

… including providing resources as needed to program countries, provided the programs are being implemented effectively. Hmmm

MR. RICE: I won’t get into the specifics of the different programs, but again, just to repeat, and I think if you look at some of the declarations made by the European governments, public declarations over the past several months, they have made clear their commitment on the financing side to program countries. Again, provided the programs are implemented effectively. So you know, I didn’t mean to be flippant by saying ask the Europeans. But it’s just I think it’s a matter of public record.’

Time to bury the spin_dummy that NO funding will be available should the Citizenry, in its wisdom, decide to vote NO, for whatever reasons. Yes – the No funding discourse if Citizenry votes NO of the FF/FG/LP troika is as nonsensical as the economics within the Fiscal Compact itself.

Two Nonsenses do not make a Sense.

@Referendum Commission
Please note.

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