Karl Whelan: Will this Treaty Imply More Austerity for Ireland?

I hope Karl does not mind a link to his post back here on the mother ship.   Karl’s post does a very nice job explaining that the Treaty does not imply additional austerity beyond what Ireland is committed to under the revised Stability and Growth Pact.  This fact does not seem to be getting through.    

The basic conclusion (emphasis in original):

. . . Yes campaigners have failed to highlight that the treaty does not, in fact, imply additional austerity in the coming years relative to what would occur if there was a No vote, even if the EU did decide to fund Ireland via EFSF or some other vehicle. The fiscal parameters laid down in the treaty are all part of the existing EU fiscal framework that Ireland is already operating within and would continue to operate within after a No vote.

83 replies on “Karl Whelan: Will this Treaty Imply More Austerity for Ireland?”

This is a political as well as a economic decision.

I am voting no because I do not believe in the entire global and especially European monetary , political & economic construct.

I don’t expect a no vote will pierce the Dragons heart but I merely want to see a scale stripped off the beast one at a time.

As I said before we are dead anyway , there is little return in accepting the darkness now – the scraps off the table have been taken away from the bottom feeders as the project moves to a higher tempo.

Just remember lads these Bozos have turned Europe into a 2nd and possibly 3rd world continent and yet they could not give a damn.

They will continue to misallocate capital for their own benefit until we do indeed witness the second fall of Rome as that is all they know.

I cannot say when exactly we do embrace the Barbarians as our saviours but it is getting closer by the year.

@John McHale

“This fact does not seem to be getting through. ” I am not surprised at all.

Just ask yourself this question. How would the highlighted text in the KW post would impact a general audience?
There is nothing wrong with the sentence and KW may not have been trying to reach a general audience but a few points.

How many people in the voting public would independently understand the words ‘fiscal’ or ‘parameter’. IMHO you would have lost half the audience with those two alone. Pu the two together and you would have lost haalf and sent a further quarter to sleep.
Most people have no idea what ‘fiscal framework’ Ireland is operating under. I include myself in this category, even though thanks to Seamus Coffey, I now believe it to be an Excessive Deficit Procedure or some such.

If economists or others want to get the general public to understand the issues involved, then they will have to translate their arguments into more simple and straight forward language.

PS. I confess to still having to think about the difference between ‘fiscal’ and ‘monetary’ every time these come up.

@Joseph
Did you read the propoganda pamphlet pushed through our letterboxes…. it was a absolute disgrace.

It equated countries to households that I am sure even Karl would reject.

If it was explained to them that defecits are merely money production that commercial banks and others use to extract a interest income so as to bail themselves out of catostrophic “Growth” malinvestments they might see things a bit differently.

I’m waiting for the ‘scaremongering’ to switch to the possibility of Fiscal Compact mandated Tax Harmonisation, Fiscal Union etc. Has anyone spotted any?

Meanwhile, LucindaWatch has her saying on RTE “we don’t make up these figures on the back of an envelope”. A perhaps unfortunate choice of words given the top-notch performance of Gavin Kostick’s envelope powered GDP forecasts.

I wonder if you get a higher figure if you use a brown one?

Spose one could reasonably ask – Why bother with the damn thing at all? And why the ridiculous timing before the new French President has settled in and the debate in the Bundestag is only warming up?

Which begs the question if the ill-considered timing might have something to do with the Promissory Notes being morphed to Sovereign Debt on an EFSF deal sometime in late May which, ridiculous as it seems, would be spun as an achievement when the only achievement would be to leave PNs as PNs and to restructure at 0.01% interest over a 100 years? or bury them as deep as Anglo-Irish and INBS should have been buried rather than burden the Citizenry with their rotting corpses at the expense of an entire generation?

Yes – I agree with Karl Whelan, and all sane commentators advocating a NO vote, that Ireland’s Fiscal situation needs to be brought under control [my main arguments here relate to the HOW and the regressive nature of present efforts and the ability of certain interest groups to avoid realistic contributions to same] –

At a broader level it is now increasingly recognised across Europe that Angela’s Fiscal Corset was designed for Deutsche National Interests – Local Deutsche political centre right interests – and that the 6-pack and the SGP are already extant – Simply adding to the flawed analysis that EU crisis is a Fiscal Crisis – when in fact it is a Financial Crisis flowing from institutional weaknesses in monitoring dodgy captial flows.

The Economics of the damn thing are NONSENSICAL – not a single economist in Ireland or Europe is imho after 3 months of asking capable of defending its social scientific validity ….. How does such nonsense assist in getting Europe out of this crisis?

It would reflect the height of Irish Stupidity to vote yes to such Nonsense based on such a flawed analysis ….

VOTE NO FOR IRISH INTELLECT AND FOR A CHANGE IN DIRECTION IN EUROPE.

Ireland can manage its fiscal adjustment – Ireland cannot carry the equivalent of 40-50% (gdp/gnp) of odious financial system debt. This is reality – we’ve had more than enough of this merkozian nonsense.

@Joseph

I think you should allow for some division of labour. Most readers of this blog (and Karl’s blog) are generally conversant in economics jargon, though we do try to keep it to a minimum. I hope the posts here have an impact on the wider debate through journalists and (hopefully) politicians, who are better equipped to distil the message in more easily communicated terms. The debate is very much in the political arena now.

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@The Dork of Cork

This is a political as well as a economic decision.

The Fiscal Compact has three astonishing weaknesses which the general public may end up understanding despite the Establishment line being parroted by most of the media. People just have to look at what is not being mentioned.

[1] The fiscal compact would in no way have prevented the European component of the Global Financial Crisis, or prevented the Irish property bubbles inflation or proper resolution. It addresses imaginary problems (except in Greece) and it is a nakedly right wing political instrument intended to strengthen Germany/ECB primacy in the EU and conservative political control in Germany.

[2] The economic policies that the Fiscal Compact ensures will be complied with (under threat of huge fines) are the same set of policies that are already not working! The Fiscal Compact takes a huge and failed policy experiment (S&GP and its deformed offspring) and makes it a constitutional requirement of Eurozone membership. It is Orwell meets Kafka meets Hayek.

[3] The set of people supporting the Fiscal Compact in Ireland and Europe is an almost exact match with the set of people responsible for both Ireland’s credit boom and the way the European financial sector has been protected at the expense of the state after our latest crisis of capitalism. The level of integration of Fine Gael and the wider European establishment with the banking sector is a real weakness for those promoting the treaty.

I really do not know how Labour in Ireland can justify supporting the Fiscal Compact themselves, its at odds with every left wing principle and the treaty intentionally prevents social democratic policies from being applied in Europe.

@David
You don’t understand – the fiscal situation needs to be “under control” so that the credit banks can be free to introduce their credit poison again and do yet another Pump & Dump operation

Why was there aTitianic malinvestment of capital David ?
Because capital was given a false price signal ever since the early 1980s at least.
Wages have declined relative to output on a dramatic scale … which means only commercial bank credit production can give you “growth”

Witness the very flawed thinking of Honahan & Walsh as referenced to by Micheal Hennigan in the new economy post below this.
They seem to delight in a artificial capital creation process with nowhere to go as eventually when credit booms bust there is no demand for these absurd products.
Global wars have cost less then this post 1980 capital misallocation.

These are the people running this country ,Europe and the globe.

@Dork

No, I did not read the leaflet. If I see it I will it.

But I am going to vote yes, mainly with a view to Ireland’s history of engaging its adversaries.
I am mindful of how ‘Ireland’ allowed itself to be dragged into the European wars of the 1680’s, when once again who sat on which throne was the most important consideration, and of the DeValera’s stupid and inglorious insistence on an all out assault on the Custom House. [Note that Dev was not in the front line].

When Ireland breaks with the EZ, it should be on an issue of critical and immediate importance to Ireland’s interests.
Ireland had to balance its budget whether we vote yes or no. A no vote will not change that one iota. In fact it bring that imperative forward.

But it will immediately put Ireland in the front line against Germany/ ECB. France under Hollande, Spain, Belgium, Greece, Italy and others would be delighted. But make no mistake their delight will not extend to their rather empty pockets.
Ireland is now in a war for its survival against powerful adversaries at home and abroad.
One has to be very careful about committing to battle.

I recommend some of our solidly “yes”-vote economists take a trip to Euro 2012 in Poland. Have a few beers in Warsaw, a Sunday brunch at the Sheraton maybe and take the train down to Poznan to see our lads playing. You might travel via Lodz and take a look at where Dell have relocated to – by the way, the train will be more like an ocean liner on tracks than the decrepit rolling stock here. And in Poznan, marvel at the roads and infrastructure as you make you way to the charming old square for post match celebration hopefully.

Of course Poland doesn’t have the euro and is unlikely to before 2015 but it is aiming to sign up to the Fiscal Compact now nonetheless.

Poland has a debt to GDP today of 56%. Ireland’s will rise to over 120% next year according to last week’s Stability Plan Update.

So how do the “yes”-supporting economists see Ireland and Poland developing over the next decade as we both compete for that all-important FDI in Europe – keep that picture of Dell in Lodz in mind. Ireland may or may not be able to manage with the debt burden, but compared with some of our competitors there is no doubt they start out with a massive head-start. And a “yes” vote is another confirmation of acceptance of the bank bailout debt – of which €30bn-plus in prom notes and bonds have yet to be honoured – by this State.

Are we allowed advocate a vote on here? If so, “No” to the “Bank Debt Treaty”!

@Joseph

“PS. I confess to still having to think about the difference between ‘fiscal’ and ‘monetary’ every time these come up.”

Try these two mnemonics

MIM – Monetary Interest (Rates) Money (Supply)
STAB-f – Spending Tax and Borrowing – fiscal

@Joseph
The European project is the first in modern times where the banks have control or near control of the European printing press.
Only Treasuries should control the issuance of money , central banks should do what they are told when it comes to Money as they only normally function with their banks collateral & not the medium of exchange – you are essentially accepting no Goverment when you vote for any of this darkness.
You are voting for a further darker expression of debt slavery.

As I said we are dead anyway…. its a easy choice after you come to that conclusion.

It seems to me that both sides are playing games with words on this.

The Left Alliance folks are often saying that the Treaty means more austerity without being very clear about whether they mean more austerity than we have now (which is true), more austerity than is already planned (which may or may not be true depending on how growth and tax revenues develop – but is most likely true in my view), or more austerity than we have already agreed (which as various luminaries have demonstrated here is probably false).

The pro-Treaty folks are often arguing that the Treaty means no additional austerity, without being explicit that they mean no austerity in addition to the several billion they have already planned, and the several billion more that will be required if their projections turn out again to be overoptimistic.

I presume that these two approaches are both informed by well-considered communications strategies. If the entertaining debate on the topic on Prime Time the other night is anything to go by, the former dominates the latter.

@David

You have indeed been pushing for an explanation of the precise numerical rules. Unfortunately, there is a degree of arbitrariness about the 3 percent (actual deficit), 0.5 percent (structural, with a potentially substantial adjustment period), and 1/20th (debt reduction) rules. As noted in my previous post, all three rules can be rewritten in terms of an implied debt reduction rule. The basic economics is that debt levels must be brought down to levels consistent with creditworthiness (and reduced risk to euro zone partners — including us — where costly mutual support arrangements are present among other spillovers). In addition to underpinning the development of these mutual support mechanisms, a credible fiscal framework should in itself help the reestablishment of creditworthiness, actually allowing more space for a phased adjustment.

We could debate the rights and wrongs of bank debt issue ad nauseum. But the fact is that senior bond holders and the depositors who wanted to get their money out have now largely been paid. We have to ask where we go from here. Putting aside the positive case for a strong fiscal framework, there are the basic facts that the Treaty does not add to the constraints on our fiscal policy (although there will be some enhanced domestic enforcement and the rules framework will have more permanence), and rejecting the Treaty entails easy to see risks to our ability to continue to adjust our unsustainable fiscal position in a phased way that does minimum harm to our economy and society.

Of course, there are important issues relating to how the burdens of adjustment are distributed and the need to confront vested interests. But dissatisfaction with how things are progressing should not lead you to risk to a major worsening of the crisis, which would probably hit the most vulnerable worst of all.

I have said before that the most coherent argument for a No vote comes from those who understand very well the likely consequences, and they would like to throw the cards in the air and see various interests scramble. For them, collateral damage seems a price worth paying. From reading you comments over the last couple of years, I don’t get the sense you are in their camp.

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@Jagdip

+1, particularily concerning the bank bailout.

I think there is excessive focus on the impact of this treaty on the plan for fiscal consolidation and whether or not we will get money from the ESM, the IMF or whomever.

The major issues facing us are the overall debt burden and where growth/employment are going to come from. A cursory glance at the growth assumptions in the current plan suggest that it (the plan) is unrealistic and unimplementable.

The sooner the political and economic establishment take their heads our of the sand the better and the first step on this road is a No vote.

@Joseph Ryan

But I am going to vote yes, mainly with a view to Ireland’s history of engaging its adversaries.

I think this misses a critical element, that voting “Yes” strengthens the core’s stranglehold over the periphery and strengthens the EC’s institutional allies and political fellow travelers in Ireland. A “yes” vote also rewards Ireland’s political class for their failure when they went to Europe and meekly accepted the bondholder bailout, the six pack and the new six pack with remotely detonated suicide vest.

Accepting the Fiscal Compact guarantees that smaller states are to be used as fodder for the banks and Ireland may not be able to engage it adversaries again. We may not need a full fight now but an exploratory action is required.

If you read this blog you must get the sense that the political right (and the majority of Ireland’s “serious” economists reside there) are salivating over the opportunity to finally take economic decision making out of the hands of the people and complete the conversion of Europe from social democracy to market superstate. Fiscal rules, privatization and the shrinking of the state forever.

The Fiscal Compact (Bank Debt Treaty) is an enabling act for the neoliberal consensus and the power of the financial sector in Europe, do not approve it just because you are worried about disorder.

Fear as much as hubris leads to poor decisions.

@ Jagdip Singh

on tracks than the decrepit rolling stock here. And in Poznan, marvel at the roads and infrastructure as you make you way to the charming old square for post match celebration hopefully.

Have you actually used trains in Ireland in recent times? Have you travelled on US trains or experienced the overcrowded airports and potholed infrastructure?

As in China, the hardware in Ireland is a bit ahead of the software. There is a good Cork-Dublin service and T2 in Dublin airport is not the cow shed Michael O’Leary wanted it to be.

Last year Poland canceled a contract for a stretch of highway with the first Chinese firm to win a major public works deal in the European Union.

Work on about 50 kilometres of the A2 highway that was to connect Warsaw with Berlin went on hold in May after China Overseas Engineering Group Co., or Covec, stopped paying subcontractors. The company in 2009 agreed to build two stretches of the highway for about 1.3 billion zlotys (€370m), an amount the government agency in charge of the project considered below its own estimates. Poland’s law favours the lowest bids made in public procurements.

– – A situation similar to the Turkish company which won the Ballincollig bypass project on the Cork-Killarney route.

As for Dell, the hourly manufacturing rate in Poland is €7.

The independent TDs who pocket over €40,000 tax-free annually in a special bonanza thanks to a deal that was done by Jackie Healy Rae and other independents with Bertie Ahern in 1997, surely wouldn’t support that austerity?

Coming to think of it, with farmers saying that Brussels (Germany?) provides 94% of their income and the standard of living of many others is supported by the EU/IMF, why shouldn’t we ask for more?

@John McHale,

Though you may have detected their presence here – and acknowledge the validity of their argument, I would venture that the ‘throw the cards in the air’ brigade comprise a vanishingly small percentage of the electorate. They are hugely swamped by the ‘raid, tax and spend’ brigade. Simply because you judge their arguments to have little or no coherence doesn’t mean that they should not be confronted.

They are getting a free ride, here and elsewhere, and they, increasingly, are seizing the perceived moral high ground. Just because their arguments are economically and strategically illiterate and upset the economic purists here, doesn’t mean they don’t secure traction with many citizens.

Evil prospers when good men and women remain silent. It’s even worse when they make noise that pleases them, but doesn’t resonate with those who need to hear. And it’s even worse again when people are eager for guidance from the ‘public intellectuals’ whose professional activities they fund and this quidance isn’t comunicated clearly.

You really must be joking if you think those who have knowledge and competence can rely on journalists and politicians to communicate their esoteric mumblings.

@Micheal
Don’t get me started with trains……
We do indeed have the most modern DMUs in Europe (NIR & IR) especially when compared to the UK – the southern Irish rail problem is chiefly of a monetary nature.
Europe simply does not give the tokens to spend on its capital investments which makes them sadly redundant.

@Paul

What exactly would you have us do? Most contributors here have written op-eds — there isn’t an infinite demand I assure you — and go on broadcast media when asked (provided our day jobs allow it). Though it is not fashionable to say so, there are some highly competent journalists and politicians. I would not underestimate the indirect route to influencing debate.

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@Paul Hunt

They are hugely swamped by the ‘raid, tax and spend’ brigade. Simply because you judge their arguments to have little or no coherence doesn’t mean that they should not be confronted. They are getting a free ride, here and elsewhere, and they, increasingly, are seizing the perceived moral high ground.

Now why on earth would there be the common perception that the anti Fiscal Compact alliance have the moral high ground in this debate I wonder? Suggestions anyone? There simply must be a reason.

As for the economically illiteracy of the anti FC forces, that ship has sailed and has commenced shelling the port from which it departed.

The most that honesty allows our fiscal rules based policy making enthusiasts to say is that, given how restrictive the six pack is already, the Fiscal Compact is not much worse (“relatively benign” in Seamus Coffey’s distinctly faint praise) in the policy set it requires. The new, and apparently somehow strategically advantageous, situation that the Fiscal suicide Pact beings us to is that if the policies continue to fail we get punished for deviating from them and we agree to be stuck with the bank debt. Lunacy.

@John,

Fair enough. You and your peers are perfectly free to stick to not underestimating the ‘indirect route to influencing debate’. I was just seeking to have that confrmed. Thank you.

@DOD
I have to agree that holding a referendum at this time is ridiculous. We now have Ollie Rehn moving the goalposts again (as reported in the FT today) and proposing various growth initiatives and possible delays with meeting fiscal targets.

@Paul

Okay, maybe I am deluded about the indirect route. But you still haven’t told me what it is you think it is we should be doing.

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@Paul,

They are getting a free ride and the moral high ground because the message to the public from key treaty proponents is no more honest than theirs.

Many leading treaty proponents are skirting around the reality that there is a lot more austerity already planned. If they were honest they would say clearly that there is a lot of painful austerity coming whatever happens.

They are also skirting around the reality that official economic projections appear to have a systematic upward bias, which means that the austerity that is coming is probably significantly worse than is currently planned.

Treaty proponents are discredited by the fact that the fallacies being propounded by the ULA and Sinn Fein are no more than the fallacies propounded by many of the proponents themselves writ somewhat larger. Since it took office, the government and its allies have sold the message that there is an easy way out – that real austerity can be put on the long finger, that we can continue to pay our public service beyond our means, that low to middle income earners can continue to benefit from exceptionally low levels of direct tax, that social welfare rates can be maintained, that only uncontroversial structural reforms are required. It’s meretricious nonsense, but it is exactly the message that Sinn Fein and the ULA are selling now with a little extra puff.

@John McHale

John – I welcome your explicit acknowledgement on the ‘degree of arbitrariness’ on the three constraints – 0.5, 60.00, 1/20 ….

As Jagdip notes, We have unfinished business with EC/ECB on Irish DEBT dynamics related to the Irish/European financial system … present trajectory is unsustainable (and no amount of creative accounting, SPVs, or other smoke and mirror stuff will convince me otherwise based on the real facts available at the mo, most facts identified on this blog) and I’m not one of the ‘anarchic’ toss everything into the air brigage from either anarchic right or left …. but voting NO, imho and based on a ‘sensible’ 😆 radical analysis, will not lead to such an eventuality … but will open up saner and wiser possibilities … if we have the leadership to act on such possibilities.

@German Citizenry Join us and lobby in Bundestag for real social democracy instead of the present financial system dictatorhip

Countries around the world envy Germany’s economic success and look up to it as a role model. But a closer look reveals a much bleaker picture. Only a few are benefiting from the boom, while stagnant wages and precarious employment conditions are making it difficult for millions to make ends meet. By SPIEGEL Staff

What a year it’s been for carmaker Audi and its employees, a year marked by the biggest profits in company history, a bonus in the millions for its chairman and handsome bonuses for many employees — though little to nothing for those at the very bottom of the pay scale.

http://www.spiegel.de/international/business/0,1518,830972,00.html

@Ceterisparibus

The recent report from the Referendum Commission, on failure of the vote on Oireachtas Inquiries [assisted by the last minute poltroon of ‘precious’ 8 AGs who would have been expected to appear before such inquiries] provides a rationale for postponing it … may I suggest December 31, 2012 – by which time all could be changed utterly …

Yet another circular argument that uses the ‘answer’ as the premise of the argument.

ie

Since what we are doing now is within the strictures of previous (Orwellian) ‘Stability & Growth’ tablets, they must always & forever be the right macro economic prescription (sub text – in a flawless Euro system). Therefore, we should enshrine them in our Constitution.

Of course, one finds precisely the same fallacious thinking behind all the flawed neo classical assumptions that pervade what passes for mainstream macro economics. As Steve Keen & others have described with great clarity.

So, not really surprising to find such methods alive & well at irisheconomy.ie

Meanwhile, after 4 years plus, lurching from one ad hoc ‘can-kicking’ to the next, the Eurozone crisis is deepening further. As even a cursory glance beyond the ‘deckchairs’ to the real economy data in Europe tells us.

“Oh Ireland, if only you were growing…”

http://bilbo.economicoutlook.net/blog/?p=19247

“Why the Eurozone is destined to fail”

http://bilbo.economicoutlook.net/blog/?p=19247

@Bee Cee Tee
Be careful with the word Austerity….. it is a bankers expression.

It is a mechanism to bail out their credit /debt investments by not producing enough money into the economic medium in the hope new oil/gas production will come on line.

When the ratio of money and credit change in a economy – economies simply change their dynamics.
The overall wealth at even given time REMAINS CONSTANT.
If however they persist with this austerity over time the stock of fixed capital which is rational cannot be saved.
Think of it as 2 stocks …. the stock of debt above and the stock of physical & human capital below.
These past 5 years the Banks have tried to stop the flow.
en.wikipedia.org/wiki/Stock_and_flow

The spice must flow
http://www.youtube.com/watch?v=dcgft-iiZ_s

@BCT

It is a nice change to be accused of underplaying the need for additional budgetary measures.

@Paul H

Paul why are you so hot and bothered about this? You are a proponent of reform you keep saying isn’t going to happen thanks to the FODAR’s power (which is dependent on copper-fastened credit lines Wichita you think our university economists are not doing enough to ensure remain in place).

The truth is that they have done sterling work, even to the point of repeating eachother’s public pronouncements about the likelihood the FC will make little difference to budgetary considerations. They came out en-mass almost from day-1 to day the constitutional amendment should be passed.

You will note they have gone big on the “it won’t make much difference” line together with “there is no guarantee funding would be available from other sources” line. This is fairly powerful marketing and lends much gravitas to the pro FC campaign. They have helpfully gone small on the non-vanishingly small possibility that a deflationary spiral around the globe could mean the FC renders the EU poorly equipped to respond as other currency blocs go Keynesian bigtime. They have gone small on the question of currently unforeseen decisions to be taken in the name of administering the super-constitutional belief system that is the Fiscal Compact. They have gone all quite about “option value”.

I think you are being unreasonable and unfair. Compare all the media appearances, op-eds and blog posts pointing out every weakness that can be found in the ‘no’ campaigners arguments with the deafening silence over, oh, I don’t know, say the fact that Croke Park was supposed to dissolve in the event of any significant deterioration in the budgetary situation not foreseen six months before the IMF were called in.

I imagine you think some form of funding would be made available for the second bailout we are told it is ludicrous to anticipate. I also imagine you are cynical enough to contemplate the referendum being re-run perhaps with a less all-encompassing totally future-proofed constitutional get-around in the wording.

Why are you so cross about this- what is it you think John and his fellow safe pair of hands, incrementally inclined colleagues to do?

@ BeeCeeTee,

“They are also skirting around the reality that official economic projections appear to have a systematic upward bias, which means that the austerity that is coming is probably significantly worse than is currently planned.”

Well said old boy.

I believe the greatest threat to growth in Europe is “Globalisation”.

Any increase in buying goods in Europe will be met by increased work in the Far East, not here.

Europe has a…

Energy crisis, Economic crisis, Unemployment crisis, Financial crisis, Debt crisis, Credit crisis, and coming down the tracks we will have a Pension crisis, and aging demographic profile crisis.

All we are missing is a Military Crisis followed by a Food shortage crisis.

Perhaps the Military crisis is only around the corner when Israel strikes Iran which might be this year.

Of the peripheral EU nations my money is on Spain. Spain will have to stand up for itself, break ranks and or force the issue with the European Core. With almost 50% of those under 25 unemployed Spain is well on the way to very serious social unrest, perhaps even civil war.

John

Say most respected international economic commentators eg Paul Krugman. George Soros, Martin Wolf ,Larry Summers etc have opined that the current austerity poloicies may/will create a downward spiral and there is a timelag error at work with previous austerity policies –so things will continue to deteriorate.

Now if we vote yes it might/would be interpreted as agreeing with this policy. The perceived reality that we are the best boys in the class would be reinforced and this might give this particular Irish austerity is welcomed by Irish voters, when the reality is our gross debt levels are unsustainable.

How can a yes vote get this message out?. Why should we disagree with all these international economic commentators?. Raymond Crotty has provided the Irish electorate with an opportunity to alert Europe to what may be a misguided policy.

JMcH “the Treaty does not imply additional austerity beyond what Ireland is committed to under the revised Stability and Growth Pact. This fact does not seem to be getting through.”

I agree with JR that this is not surprising. However, it’s simple enough. Official Ireland has lost credibility and trust with the public through lack of performance (versus promises, spin, etc.) and lies. It is now commonplace to hear that no one believes what the Govt is saying…..even here. Also, people notice (with distain) the ‘rocket economy’ spin, the missed targets and woeful negotiating by the Irish Govt, but above all that the economy continues to slide without light at the end of the tunnel…..That lack of real hope for the future is a real Achillesheel for the Y camp…..The Y camp cannot prove that anything is improving…people can see that with their own eyes.

Also, the economics are one thing but the inherent social injustices cannot be ignored in the equation. The public also notices that the continued downward slide is to the detriment of many and the benefit of the few(er).

Mike Hall “Since what we are doing now is within the strictures of previous (Orwellian) ‘Stability & Growth’ tablets, they must always & forever be the right macro economic prescription.”
That’s a good comment Mike. Just because the Stability and Growth Pact was agreed to by Ireland many years ago does not mean that it is the correct prescription for Ireland’s current economic woes. In fact, for me, it re-emphasises just how inflexible that framework is, to be exacerbated by the FC….despite all ‘protestations’ to the contrary.

Our only hope for becoming prosperous in the next fifty years is to go with the flow and vote yes. Critical mass is shifting in a direction that favours the heavily indebted countries. France, Italy and Spain in addition to the troubled smaller countries all need stimulus policies. Germany itself while trying to talk a good anti inflation, anti economic ruin and pricing itself out of export markets is not standing on firm ground since the latest PMI and other indicators are pointing to a softening of demand in Germany. Mercedes are heavily discounting cars in North America to increase volume, since price competition is the product of bankrupt minds there is a hint of desperation there. VW and BMW are also engaged in price competition.

Conditions are evolving in our favour as the nations having economic difficulties multiply the level of the lake will rise and we will rise with it.

To vote no emphasises that we are not trustworthy and that our gov’t is a gov’t in name only and cannot be taken seriously.

A reason to vote Yes?
John Bruton says we can influence other parliaments (on their budgetary decisions) in the Indo today….
“And, under article 13 of the Stability Treaty, government and opposition parties the Dail will have a new means of observing, and influencing, the economic policies of other EU countries. There will be a new conference of parliamentarians drawn from economic affairs committees from all member states of the euro. As an export economy, we need to have an input into the policies of our neighbours, and this provision the Stability Treaty will help ….

Now I look forward to telling Schauble where he is going wrong (with his own economy). For starters he is borrowing too cheaply… 1.58% for 10 yr money at close yesterday. He is exporting too much also…stop Mercedes from selling all over the world and maybe BMW also. He could also order Siemens to stop winning contracts to build all sort of plants in dubious circumstances…ala recent. Greek settlement.

Great reason John. Educate the plebs. I also liked your credit union analogy a few days ago…..and Jesus wept.

….and I must repeat that I am not against the FC per se (even though why hold the ref now when the FC is likely to change?). It would be a more constructive tool in less distressed Ireland circumstances, where austerity would accompany growth. My real concern however is that the FC straightjacket will exacerbate and accelerate the downward decline in the absence of growth (during continuing contraction), driven there by Ireland’s underlying chronic insolveny which needs to be addressed first…..and soon if there is to be any chance of medium term improvement in Ireland’s economic outlook. It is ‘over-medicating” the patient, at the wrong time….the patient is too vulnerable at present to sharply deteriorating health.

@ All

Assuming that Hollande wins, the political landscape in Europe is going to look very different on Monday morning. The likely outcome has already been reflected in European stock markets. A number of articles in the newspaper of record underline this point (a recognition of which has not been detectable hitherto on this blog).

http://www.irishtimes.com/newspaper/frontpage/2012/0505/1224315653619.html

Notably;

“On the options for renegotiation, Ms Trautmann said the socialist was open to discussions with EU partners. “We can see how these . . . questions can be addressed, whether within the framework of a treaty, a protocol, a regulation or a political decision,” she added.

The adviser said Mr Hollande’s campaign team respected Ireland’s democratic process and “it would not be for us to say how the Irish should vote on the pact”.

“If the Irish government says, ‘we have ratified but we support François Hollande’s growth pact’, things will be possible from that point,” said Ms Trautmann, who was minister for culture and communications in France’s last socialist administration”.

If this is the new French president’s negotiating position, there are many ways of describing it and “robust” is not one of them. Or, alternatively, Ms Trautmann has a poor grasp of the EU and is not a reliable indicator of what is intended.

This might be more accurately reflected in another IT article;

http://www.irishtimes.com/newspaper/world/2012/0505/1224315652108.html

Notably;

“In March, he [Hollande] declared he would renegotiate the compact: “If tomorrow I’m president, I’ll say there are parts of this treaty we can accept, but we won’t accept sanctions that are against countries’ interests and, second, we’ll add growth, activity, big industrial projects, eurobonds to pull the economy ahead.”

He later told a German newspaper he would not endorse the treaty if it did not contain measures for promoting growth”.

In short, because of the uninvited guest at the party – the financial markets – Hollande has to move quickly to find some measure of agreement with Merkel which is a lucky point as far as the timing of the Irish referendum is concerned. That the outcome will involve any process of “re-ratification” by those countries that have already ratified can be fairly safely ruled out.

Press reports suggest that Van Rompuy will organise an informal dinner of the members of the European Council but this cannot obviously be decided until the menu is decided and pre-cooked.

@Mickey
Sweet Jesus ,spoken like a true Kerryman.

This is not a equal game of chess – we have only one move and us pawns are likely to get cut down anyway.

This is not the eurovision either – you should not care what other people think of you…… this is not a corrupt executive decision (thank you Mr Crotty)

They don’t need stimulus policies – it would be like those frog leg / electricity experiments.
The system is dead … its a cadaver.

The entire global monetary system has been giving false signals to capital for 3 decades or more.
You really don’t want give it one more stimulus…….
http://www.youtube.com/watch?v=EOcJwt8XB4M

You need to bleed the credit malinvestments from the system via a Fiat issuance / tax on previous credit malinvestments policies.

John

Say most respected international economic commentators i.e the FT A-list eg Paul Krugman. George Soros, Martin Wolf ,Larry Summers etc have opined that the current austerity poloicies may/will create a downward spiral and there is a timelag error at work with previous austerity policies –so things will continue to deteriorate.

Now if we vote yes it might/would be interpreted as agreeing with this policy. The perceived reality that we are the best boys in the class would be reinforced and this might signal that this particular Irish austerity is welcomed by Irish voters, when the reality is our gross debt levels are unsustainable.

How can a yes vote get this message out?. Why should we disagree with all these international economic commentators?. Raymond Crotty has provided the Irish electorate with an opportunity to alert Europe to what may be a misguided policy.

Paul W,
If Ireland is chronically insolvent and reject the FC why would our creditors extend more credit. It is much more likely that they stop funding, negotiate a debt write down and cut public spending to match revenues.
So many of the No camp do not realise that the game is virtually up. Voting No will crystallise what they fear most which is that that everybody pays for the services they consume.

@ John Corcoran

The truth of the matter is that nobody cares. The Irish economy is 1% of the EA, a lesser percentage of the EU and an even smaller percentage of the global economy.

I would be very surprised if the Irish electorate has not grasped this simple fact. If it has not, the outcome may not be quite as dramatic as many imagine. The stew we are in will simply be deeper.

@Paul Hunt

Accusing peope of throwing their hands in the air is a whisker away from telling them to go and commit suicide.

Is it not far better to confront the unsustainability of our debt burden than to bury our heads in the sand?

@Paul W
Re your link.
It’s a no brainer all right.. But not in the way he meant. He must be doubling down after losing his proverbials on the bet that Greek bonds due last march would be paid out in full. I think they paid about 40 at the time. But then of course he is probably gambling with OPM.
Evangelios is warning of catastrophe if the voters don’t back PASOK ..a bit like our guys.
Monday should be interesting…what was that Chinese curse?

“Yes campaigners have failed to highlight that the treaty does not, in fact, imply additional austerity in the coming years relative to what would occur if there was a No vote, even if the EU did decide to fund Ireland via EFSF or some other vehicle.”

This is a fairly disgraceful strawman, and Karl Whelan out to be ashamed.

Nobody has claimed that it means additional austerity now *for us* – what it does do, though, is enshrine austerity into law forever, beyond the period of the Troika programme.

@Tull
There is no reason to stop services that require more labour inputs then energy.
The money supply simply fictionalises the energy base or energy ration in our case.
I feel you don’t grasp the dynamics of this.

“I really do not know how Labour in Ireland can justify supporting the Fiscal Compact themselves, its at odds with every left wing principle and the treaty intentionally prevents social democratic policies from being applied in Europe.”

The Irish Labour Party is not socialist, and never really was a traditional socialist party. They are a left-wing, right-of centre party. FG is a right-wing, right-of-centre party, which was left-wing, right-of-centre. FF was a populist party that spanned slightly left-of-centre to right wing.

ILP joined the current coalition administration for power (office) reasons, though they claim with all the insincerity they can muster that they are there to ensure their election policies will be enacted.

@ Shay Begorrah

If you read this blog you must get the sense that the political right (and the majority of Ireland’s “serious” economists reside there) are salivating over the opportunity to finally take economic decision making out of the hands of the people and complete the conversion of Europe from social democracy to market superstate. Fiscal rules, privatization and the shrinking of the state forever.

This is it exactly. Putting failed former PD-er Colm McCarthy on a new ‘Bord Snip’ brings to mind foxes, and hen-coops.

@EWI
“Nobody has claimed that it means additional austerity now *for us* ”
Really? Nobody? No person at all? No one has claimed that voting yes means 6 bn in extra cuts?

Given that I can no longer believe my ears, I have to conclude that I must live in the same fantasy world as the rest of the fairies (the confidence fairy, the money fairy and the train-as-mass-mode-of-transportation fairy, though I believe that one lives in Cork).

@ Tull

‘So many of the No camp do not realise that the game is virtually up.’

Perhaps, but there are several games going on at once. The fiscal balance game is just one of them, and, as Dork suggests, it’s probably part of a global play around energy, currency wars and capital flows. It could equally be argued that the Yes camp do not know that the Ireland Inc game is up.

@JMcH,
The accusation was addressed far more to members of the government, business representative organisations and professional media commentators.

Keep up the good work on the IFAC. Even if I think its position on budgetary adjustment is too weak, it stands almost alone in official Ireland in arguing that the current rate of adjustment is too slow. You deserve the country’s thanks for taking that position.

@ hogmanhew

Really? Nobody? No person at all? No one has claimed that voting yes means 6 bn in extra cuts?

You’re welcome to tell me where you heard that.

I certainly haven’t heard any such claim.

@ Tull
“so many of the No camp do not realize the game is virtually up”

It could be argued that so many on the yes camp do realize that the game is up and are proposing yes to keep themselves in clover just a bit longer.
I would also argue that there are many in the No camp for whom the game is already up regardless of a Yes or No vote and who would like to see heretofore untouchables suffer just a little.

@ Tull
“so many of the No camp do not realize the game is virtually up”

It could be argued that so many on the yes camp do realize that the game is up and are proposing yes to keep themselves in clover just a bit longer.
I would also argue that there are many in the No camp for whom the game is already up regardless of a Yes or No vote and who would like to see heretofore untouchables suffer just a little.

@EWI
“You’re welcome to tell me where you heard that.”
Mr. Adams says so: http://www.sinnfein.ie/contents/23032

Many others do to – unions, ULA, SP.

“I certainly haven’t heard any such claim.”
You are either stupid or not telling the truth. I don’t believe you are stupid.

I’m not so much ‘hot and bothered’ (Thanks, Grumpy), as wondering why I bother at all. I still cling to the hope that the sound good sense of a majority of citizens will prevail, but the debate being conducted, by both proponents and opponents, is dishonest and disingenuous to varying extents. It is possible to fool all of the people some of the time – and people who are disposed to be for or against are being fed some self-serving, disingenuous, hypocritical nonsense, resp, by the proponents and opponents of the FC, but it is dangerous to dice with the possible reaction of both these voters and the undecided, if or, more likely, when they detect rat-like odours.

Most of Official Ireland’s leading economists may feel they are unable, professionally, to descend in to the political trenches – though a few having a leg in Official Ireland by virtue of status and tenure but advancing ‘alternative economic models’ seem to perceive no such restraint. But their desired objective detachment is compromised on two fronts. They are unwilling or unable to devote the resources and effort to outline the structural reforms required to counter-act the inevitable detrimental impact of fiscal adjustment – or to engage publicly when half-arsed proposals are advanced by government in these areas. And, secondly, even if they were, their narrow, neoclassical microeconomic mindsight prevents them from saying much that is useful.

I probably should leave it at that. I can’t change it. Opportunities are emerging to engage on these issues in some sectors more generally throughout the EU. Ireland had an opportunity to re-juvenate itself and emrge much stronger from the debris of this traumatic crisis. But the grip of those who pulled it down – and weigh it down – is much too strong.

Those who know me well think I’m a right eejit for bothering at all. Let them wallow, they say. They’re right. I’ve given it my best shot. I’ll have to let ‘events’ unfold.

@hoganmahew

from the Sinn Fein link:

‘The Sinn Féin approach is based on fair taxes, investing in jobs, debt restructuring and growing the all-Ireland economy.
Sinn Féin would :
• not pay the promissary note.
• support those on low and middle income
• introduce a third tax rate and a wealth tax,
• bring in savings by for example, capping public sector salaries at €100,000.
• And critically we would invest in jobs and growth.
• And Sinn Féin would not sign up to a Treaty that would drive the country deeper into recession.

Sinn Féin has also called for: •
• Increasing the lending capacity of the European Investment Bank to stimulate activity in the real economy.
• Cleansing the European Banking system of toxic debts.
• Debt-restructuring agreements involving debt-write-downs for heavily indebted states.
• Ending the obligation on the state to pay the Anglo Irish Promissory Note and un-guaranteed senior bondholders in Anglo and other banks.

“Sinn Féin has also set out in budget submission after budget submission exactly how we would close the deficit and fund the state and put public finances back on a sustainable footing. This includes paying the wages of nurses, teachers and Gardaí and providing decent frontline services.
“For all of these reasons and because there is an alternative this Austerity Treaty must be opposed. Vote No on May 31st.

+1

and on future funding – a word from the IMF … honest broker!

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

http://www.imf.org/external/np/tr/2012/tr050312.htm

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.

Well, I can certainly see HOW the deficit programme coud be implemented more effectively in bringing in dosh from protected and powerful vested interests and lessening the present overly regressive nature of the cutz …

We can handle the Deficit Issue – The key to progress remains seriously addressing odious financial system Debt throughout Europe.

essential to the good functioning of the euro area

This is the fulcrum point for the Fiscal Compact.

It seems probable that a goodly chunk of the GIIPS are either in or slipping into a prolonged period of stagnation, irrespective of the compact.

Lower living standards are being experienced; and the likelihood is that living standards will continue to decline in order to meet bank refinancing costs and reduce public deficits.

This trend is not something politicians rush to put before their populations. Curiously, many in the GIIPS are already on low wages. A question must be whether the afflicted in Europe needs to drop to Asian labour rates in order to recover?

@The Alchemist

Take a serious look at German wage rates:

Countries around the world envy Germany’s economic success and look up to it as a role model. But a closer look reveals a much bleaker picture. Only a few are benefiting from the boom, while stagnant wages and precarious employment conditions are making it difficult for millions to make ends meet. By SPIEGEL Staff

What a year it’s been for carmaker Audi and its employees, a year marked by the biggest profits in company history, a bonus in the millions for its chairman and handsome bonuses for many employees — though little to nothing for those at the very bottom of the pay scale.

http://www.spiegel.de/international/business/0,1518,830972,00.html

@Paul H

Am genuinely confused by your stance lately.

On the one hand you have been brilliantly eloquent at times on the entrenched interests in the Irish economy and the way in which their self-interested conservatism stifles any attempt at reform the country needs long term. (if a little reluctant to provide any specific proposals in this forum that might give people something to target).

On the other, you say that these desired reforms will not occur until “events” force the government to confront these interests.

On yet another, you are seem annoyed that an event which could rattle these vested interest groups’ cages and has the potential to introduce a wedge between the government and those who it sucks up to, might not be being headed off effectively enough.

I don’t get it.

@grumpy

Yes – Paul Hunt’s recent meanderings leave me also in the camp of ‘genuinely confused’ … as do those highly elusive abstract ‘events’ …

@Paul Hunt

Take a break Paul. I’ll see if I can set up a date with Seven_of_9 on some reasonably well run planet where all special interest groups are to be found only in the kryptonite mines …. have you not noticed that all the ‘gouging special interest groups’ that you usueally rail against are advocating YES …. so as to maintain their obesity in the flatulence to which they have become accustomed!

@Grumpy,

An ‘event’, in my books, is something that blindsides the hubristic or the unjustifiably complacent or the lazy-brained. (And I have gone on at excessive length about reforms required in the energy sector – as well as key pointers on competition policy, public-directed charges, consumer representation, the financing of infrastructure investment, competition policy, etc.)

This referendum is not an ‘event’. It is a choice between accepting the EU as the least worst organisation of arrangements among the nations on this continent or revising the engagement with these arrangements and retreating to an uncertain future in the Anglo-Saxon trans-Atlantic economic space.

The latter may achieve the result you desire, but it will be accompanied by a lot more that you may not find very desirable.

I’ve just had enough of the hubris, hypocrisy, disingenuousness, dishonesty and cunningly concealed obstructionism – and I’m prepared to wait for blindsiding events.

@DOD

….Countries around the world envy Germany’s economic success and look up to it as a role model. But a closer look reveals a much bleaker picture. Only a few are benefiting from the boom, while stagnant wages and precarious employment conditions are making it difficult for millions to make ends meet…..

BINGO!

It is this attack on wage labor that is EPP politics and education. Who do you irish Folks feel about the prospect of working a full time job but not having enough money in your pocket to feed family and pay bills, then have to stand in line to get pocket money from the state to make ends meet?

THIS is the german model they are going to implement when they talk of job initiatives, slave labor.

VOTE NO!

PH,
You loyalty to the discredit EU means you cannot conceive that inflicting defeat on a daft idea opens the way for the reforms you claim to want.
DOD,
Dogs and fleas.

Update:

Blind Biddy dancing a jig on Nikki’s golden butter box (picked up in Marseilles) while tuning in to France 24 and sipping some Remy ..

Might need to open a second bottle of Remy … Austerity Postponed & The Bazooka Reloaded … I hear that Tull has joined the ULA … & DOCM has rejoined Fianna Fail … strange times …

@Schleswig-Holstein [h/t ceteris – u got a link?

FDP – do the decent for Europe and GO.

@ John Mc Hale

“hope the posts here have an impact on the wider debate through journalists and (hopefully) politicians, who are better equipped to distil the message in more easily communicated terms.”

I had a look at this weekend’s Connacht Tribune and there wasn’t much sign of the message getting through. Someone in Tuam organised a meeting to warn against “years and years of austerity that would destroy services and communities. ”
And a lot of people read the Connacht Tribune.

Maybe UCG could do some outreach work.

@David O’Donnell

“President Hollande 51.9%”

Have one for me. I thought he’d be a bit higher than that though

Exit polls in Greece looking very interesting if true…. we know how good they are at reporting stats.

@ DOD

just watch the Frager10 in the next few weeks…. har har har

@ DoD

I saw that in the Weekend section. Says it all about where Ireland is now.
Meanwhile the IT is sticking the knife into RTE . There was an op-ed today about Groupthink. From the D’Olier St glasshouse.

Comments are closed.