Tell me it isn’t so

It has the ring of truth. You got a problem with madness? Might explain why you left.

I posted this link to an up-to-minute report from Le Monde which is a more reliable guide as to what is happening than the FT.

http://www.lemonde.fr/election-presidentielle-2012/article/2012/05/07/croissance-les-partenaires-europeens-de-m-hollande-veulent-negocier-vite_1696984_1471069.html

The key sentence is the following;

“Les homologues de François Hollande sont prêts à ajouter une déclaration au pacte budgétaire, voire un protocole, mais pas à remettre en cause le corps du texte”.

Hollande’s major difficulty is that he cannot retreat too much from his eletoral platform before the legislative elections. But the elements for a major deal are there, all the participants being pushed at this stage to get the European show back on the road.

Might be an idea to put up the whole thing for those not in a position to go searching for it:

“High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email ftsales.support@ft.com to buy additional rights. http://blogs.ft.com/the-world/2012/05/european-elections-reaction-live-blog/#ixzz1uBZGRxyA

Continuing our tour of European capitals, to Dublin now and Jamie Smyth of the FT, who reports that the Irish government is anxious to avoid any major renegotiation of the eurozone fiscal compact by François Hollande ahead of its referendum on May 31.

Eamon Gilmore, Ireland’s deputy prime minister, said Hollande’s victory would provide impetus to a European growth agenda that Ireland has been promoting for some time. But he said Hollande’s plan to renegotiate the pact to include growth would not have constitutional implications for Ireland and so would not derail its May 31 referendum.

“We don’t have to change our constitution to take economic measures to promote growth,” said Gilmore, whose Labour party belongs to the same European political group as the French Socialist party and who was in Paris to congratulate Hollande.

Hollande’s campaign pledge to renegotiate the fiscal treaty has caused concern in Dublin, which is in the grip of a finely balanced referendum campaign. While welcoming any measures to promote growth in Europe, Dublin fears any suggestion of a major re-write of the fiscal pact could destabilise the government’s Yes campaign and, if agreed, render its referendum redundant. Dublin is lobbying Paris against pushing for changes to the core treaty text or anything that could be considered “constitutional” in character and require a second Irish referendum for ratification.

“I have discussed this with leading figures within the French Socialist party,” Gilmore told Irish radio on Monday. “What [Hollande] is talking about is not the treaty insofar as it supports budgetary discipline.””

@ All

Coincidentally, Hugh Carnegy of the Paris office of the FT was on the News at One just now and he confirmed what has been glaringly obvious for some time viz. Hollande is not seeking a change to the fiscal pact. Carnegy quoted a member of the entourage of Hollande who said that they were concerned by what was not in the treaty, not what was in it. In other words, some kind of accompanying “growth deal” is in the works and France under Hollande will not ratify the treaty until it is in place.

The legislative elections take place in France on 10 and 17 June. It does not take a brilliant political strategist to figure out that the deal will be agreed sufficiently in advance to have a favourable impact as far as the new French government is concerned.

It is equally difficult to imagine it having any impact other than that of supporting the view that a yes vote in the referendum would be the right vote for the Irish people. Or, to put the issue in a more neutral way, it will make it more difficult to see what advantage there would be to voting no.

P.S. The decision on the date for the referendum seems to have been taken with blissful disregard to what was going on outside the confines of the political debate in Ireland. Nothing new there!

Gilmore was on the RTE news last night saying there would be no change to the treaty but he spoke like he knew events have a habit of overtaking the best paid plans.

Having convinced himself that Lough Derg is a 5 star retreat especially in the bare feet he is now faced with the offer of a bar of chocolate. The torment must be a catholic thing.

As the only EZ country to have a referendum it must surely be a source of potential embarrassment if we need abandon the 31st May referendum now (as Deputy Shane Ross has called for).

But if a modified Fiscal Treaty codifies rules and organisations for the growth element, what choice will we have but to run the referendum again?

On a related point the two Greek “pro memorandum” parties have dropped from 251 seats to 149 seats in the 300-seat Greek parliament. It might be a stretch for the 151 “anti memorandum” parties to form a government, but the betting must now be we have a hard default now in Greece. What repercussions here?

@ Ceterisparibus

For the simple reason that we are not even at the races. Given the likely sequence of events, the closing week (or weeks) before the referendum should be very interesting indeed.

The FT’s rolling blog also has the following interesting item on a key aspect of the “growth deal”; how will it be paid for?

“The chancellor told Austrian state radio that there is no alternative to continuing austerity in highly indebted countries. But he hoped that Hollande’s victory would give more impetus to balance austerity with “a policy that emphasizes growth and employment in Europe, which is a central parameter for stability and social peace”. He also sees chances improving that the eurozone will agree on an internationally coordinated financial transaction tax. The Austrian coalition government already put €1.5bn in revenues from such a tax in the budgets for the next three years, and will face a serious shortfall if the levy does not materialise”.

Chasing hares remains a favourite sport on this blog and elsewhere. This is one that might be worth the effort.

@Jagdip
re “But if a modified Fiscal Treaty codifies rules and organisations for the growth element, what choice will we have but to run the referendum again?”

@Grumpy has been making the point here for some time that the actual wording of the amendment gives enormous powers to ‘bodies competent under the treaty’.
One wonders if E Gilmore has read the wording !

@Jagdip
Hard default in Greece? You can buy their 10yr for 21.66 today versus 25+ a few days ago. So much for the hedge fund guy in NY saying buy. He must have been unloading.
They have a funny system in Greece. Samaras will get a 50 seat bonus…so who knows, can he govern?
And the legal of Official debt is so high that it is difficult to see how it can be resolved with Official haircuts.

@ Ceterisparibus

On re-reading your comment, and for the avoidance of any misunderstanding, what I find “bizarre” is the rush to judgement evident in some of the above comments.

In my view, it is in Ireland’s interest to ratify the TSCG for the simple reason that it might provide some guarantee against any future incompetent government (in which we seem to specialise) bankrupting the country again. This assumes that we will emerge from our present status as such, the chances of which would not be advanced by voting no. However, the latter argument weighs less with me and, indeed, were this to be the outcome, the first objective would be achieved but in a much more painful manner. (The argument that eternal austerity is implied by the terms of the treaty has been shown to be so much twaddle in several cogently argued contributions on this blog).

DOCM,
You are correct in your supposition that Hollande will not try to renegotiate the Treaty as he will be humiliated if he does and his presidency will be over. A few Growth bells and whistles will be added to a side letter.
Greece may be offered a honourable exit from the EU and reunification with Turkey.
Here in Ireland the left wing No squeal foul. However, even if there was no treaty we would have to balance the budget. My own hope is for a no vote and a rapid cull of the national herd of sacred cows.

@Ceteris

I think we might need disagree on the Greek 10-year bond. Here’s the link to Bloomberg’s pricing and it seems to have been hovering around 21% for the past couple of months but has spiked by 11% (in relative terms) to 23% today.

http://www.bloomberg.com/quote/GGGB10YR:IND

@Eoin

A special adviser to Francois Hollande was interviewed on RTE radio’s This Week programme yesterday and she was quite upbeat about a renegotiation of the Compact and of there being a new text. With France at the vanguard and the economies of Ireland, Spain, Italy, Greece and Portugal in support, why shouldn’t 50%+ of the EuroZone’s population have their voices heard so that we get a Compact more sympathetic to our circumstances?

Despite the excitement, the ancien regime> of the bubble years will not be restored in Dublin.

The odd naive American my take a bus to Athlone from Shannon or Dublin Airport and fall on their back when asked for a downpayment of 50-100% with an order. Serious traders would head for Guangzhou.

@DOCM
Hollande is an astute and expierenced politicians who will be well aware of the limitations but he still needs a 60 percent majority to pass the FC. With parliamentary elections coming up its likely he will get concessions from Merkel.
Whether the Growth element is by way of Protocol, codicil or other device the fact remains that we are being asked to vote on an incomplete Compact. Of course we could get an entirely seperate Growth Compact…and as grumpy says, the competent bodies (to which we are about to cede sovereignty) may decide for us.

@ Jagdip

France has professional politicians too. Like Irish ones, rhetoric and actual delivery may be slightly different. Any renegotiation will be the end of Merkel. Any growth compact will be as a separate agreement, which will allow both sides to paint it as a ‘victory’.

“The agreements must be adhered to. They are the best way forward for Greece,» Chancellor Angela Merkel’s spokesman Steffen Seibert said during a regular news conference.”

Angela didn’t notice that 60% of the electorate decided otherwise.

I see that her German task force of 40 hotshots are having difficulty with office accommodation in Athens. Apparently the Public sector workers don’t want them in the building..fearing for their own safety.

@Eoin

“Das geht einfach nicht” and “Der Fiskalpakt ist beschlossen und muss jetzt weiterbearbeitet werden” says Chancellor Merkel in today’s leading German broadsheet.

Or “It [renegotiation of the Compact] simply isn’t going to happen” and “The Fiscal Compact is agreed and must now be progressed”

Obviously there is no sense that a Government politician in Ireland would have the luxury of adopting such a position, but could we now take advantage of all those alliances that Eamon and Lucinda have been forging since coming to office over a year ago, and present something like a unified front with France?

We may be asking too much if we think that whereas the ENArques at SocGen screwed us, an ENArgue at the Elysee is going to save us.

Jagdip Singh Says:
May 7th, 2012 at 2:22 pm
…. could we now take advantage of all those alliances that Eamon and Lucinda have been forging since coming to office over a year ago, and present something like a unified front with France?

ROFLMAO!

@Eoin
“Any growth compact will be as a separate agreement, which will allow both sides to paint it as a ‘victory’.”
Which I think is as it should be. While maintaining a structural fiscal balance over the cycle (whatever that turns out to be) is a goal in itself, so is continued cohesion funding.

It is not enough to ever say “this country doesn’t need help” particularly since shocks tend to affect the construction sector disproportionately and so are amenable to smoothing through infrastructure spending. Aside from local benefits, the benefits to, for example, integrated power, telecommunications and communications should help the european economy as a whole. As many national projects are beyond private sector financing, so trans-national projects are probably beyond national funding.

PS I meant to add, a separate growth pact would also have the advantage of allowing for asynchronous shocks – where some parts of the EU or eurozone are affected, but not others. It relieves the ECB, to some degree, of using the bluntness of interest rates with the negative side-effects they can have.

JHC!

@ Tull

“However, even if there was no treaty we would have to balance the budget. My own hope is for a no vote and a rapid cull of the national herd of sacred cows”.

I am tempted by the last option myself. However, it brought to mind the “Falstaffian” nature of the Irish psyche.

Falstaff: ‘The better part of valour is discretion; in the which better part I have saved my life.’

Shakespeare, in Henry IV, Part One, 1596:

The average voter will retain nothing of the debate other than (i) they can go ahead without us (ii) we need the money and there is no point in putting it at risk.

@ DOD

Just when you thought they couldn’t do anything that stupid – guess what?

Don’t you worry ,no amount of lobbying by Dublin will make any difference whatsoever .

Stay away from the FC, its Hamlet’s

“’tis an unweeded garden,
That grows to seed; things rank and gross in nature
Possess it merely.”

Ireland has its bailout. If its not working (its failed), renegotiate it, we’ve no need to be blackmailed into one that is bigger, even more gross, worse than the first 🙂

Whats shocking about it?

The only thing thats shocking is that FG and LAB were elected and people expected that this time they’d run the country different to Fianna Fail.

Never happened before, so why would it happen now.

FG and LAB show no imagination in govt. Its part of the reason that FF always kept on coming back.

And only for SF fianna Fail would be looking at a return to power in 3 years time.

Willem Buiter had a good piece of advice for European politicians in a VOX-EU interview he gave: If you don’t understand what is going on then keep your mouth shut.

I can understand where Gilmore is coming from, viz. the treaty may increase stability in Europe and move us towards a managed resolution of our problems in the future. Also, politicians always keep voicing unwavering support for a position they have previously adopted because they know that all inititives are a work in progress and you can’t get anything done if you look for perfection at every stage. Furthermore, it may be Gilmore’s expectation that the referendum may be defeated and he does not want the Govt to be lamed by the Germans et al if and when that happens.

Overall though, I think he should have kept shtum rather than contradicting the leader of France.

@Eoin

AFAIK the Fiscal Compact only suggests that the debt brake be given constitutional status. The referendum will not make all aspects of the Treaty constitutional imperatives. Therefore the suggestion that any additional growth clauses would be put in the constitution is probably incorrect. They would merely be immune from being deemed unconstitutional.