ECB on the Fiscal Compact

  • 10/05/2012 – Publication: Article, Monthly Bulletin, May 2012, pp 79-94, A fiscal compact for a stronger Economic and Monetary Union, 222 kb, en

See also:

  • 10/05/2012 – Publication: Article, Monthly Bulletin, May 2012, pp 95-112, Comparing the recent financial crisis in the United States and the euro area with the experience of Japan in the 1990s, 715 kb, en

67 replies on “ECB on the Fiscal Compact”

The Yes vote is now in the (nose)bag. The Irish Thoroughbred Breeders Association and Irish Thoroughbred Marketing have called for a Yes vote to keep Ireland inside the eurozone. I kid you not.

It should go through ‘on the nod’ then. The Yes camp will gallop away with it. We’ll be saddled with this fiscal compact for years, we ….

I’ll just get my coat…

A gabfest that might have some relevance in the context of the ECB’s offering:

Quite a big gathering of the ‘great and the good’ for the first day – Barroso, Monti, et al. The latter apparently wants a ‘coalition of the willing’ on growth.

The second day on energy had quite a bit of dissent on EU energy policy, but, not surprisingly, the press releases don’t reveal it.

Proceedings should be published in the near future.

The horse breeders were the first Irish “industry” to plug into the global petrodollar system – they simply want the remaining depleting oil to be recycled into Horse flesh for as long as possible.

Independent European countries , independent of Shieks , Bankers and their BMW merchants would crash the price of oil and grossly damage their Industry.

“The State of the Union”
They are joking right ?
No I guess not……. the ESM dictatorship will be upon us soon with not even US like Bullshit democracy.
Anyway I prefer more honest systems of control – no need for illusions.

These guys have destroyed what was once great about Europe – its diversity and introduce even more of their devastating Masonic blandness.

It really is beyond sickening.
We have enough obelisks , evil eyes , concentric geometric patterns to last us generations.
Why do we need more of this stuff.
Why can’t they leave what remains of the token but broken Basket islands of Europe in peace ?
Why ?
What is the point of this destruction ?

I bet you that energy conference will not touch on the monetary system and how it effects energy capital creation and use throughout the full spectrum of the supply & consumption chain.
The EIB will probably just talk about how their Solar power thingies is doing so well in Spain as it is sunny and all but will not point out that you can’t see its energy input on a Spanish TPES graph unless you use a Magnifying glass (also accidentally & quite conveniently burning the paper in the process)

“A general vulnerability of the existing framework is that it lacks instruments for situations in which a country’s fiscal policy, despite strict surveillance, enforcement and correction mechanisms, continues to go harmfully astray. This could be tackled by giving European institutions the competence to effectively compel euro area Member States – in a graduated manner as the situation deteriorates – to take the necessary fiscal policy decisions.”

What instruments/competence might we see?

That ECB document :
‘A fiscal compact for a stronger Economic and Monetary Union’
is a sickening document
Examples abound throughout it. Here are two.

1. In addition, the flexibility of labour markets needs to be enhanced, given the high level of unemployment in many Member States. Wage flexibility will particularly allow the appropriate degree of wage differentiation across different types of workers and stimulate the hiring of young, female and older workers. Rigidities in labour markets need to be addressed by reducing the degree of employment protection for permanent jobs. Other labour market reforms that should be pursued in order to alleviate bottlenecks and foster flexibility include the reduction of minimum wages, the elimination of wage indexation mechanisms and the strengthening of firm level agreements so that wages and working conditions can be tailored to firms’ specific needs.

2.Looking further ahead, ambitious steps towards improving the EU fiscal framework, in particular for euro area countries, will be necessary to address the remaining shortcomings. A general vulnerability of the existing framework is that it lacks instruments for situations in which a country’s fiscal policy, despite strict surveillance, enforcement and correction mechanisms, continues to go harmfully astray. This could be tackled by giving European institutions the competence to effectively compel euro area Member States – in a graduated manner as the situation deteriorates – to take the necessary fiscal policy decisions. That should help to provide credible incentives for sound fiscal policies.

“This could be tackled by giving European institutions the competence to effectively compel euro area Member States – in a graduated manner as the situation deteriorates – to take the necessary fiscal policy decisions. That should help to provide credible incentives for sound fiscal policies.”

This is from the institution that dealt the coup de grace to Ireland by insisting that all bondholders get paid and that all bank bondholders ranked above State bondholder, bank depositors, everybody.

If there ever was a reason to vote no to the compact the ECB is that reason. They have fully confirmed their undemocratic and odious philosophy in that article.

It is the same crew involved in the trans Atlantic slave trade of old.

Hold no illusions about what is behind that curtain.

Pure Evil.

Its the Dutch banks come back to tear the clans apart one more time for the laugh like.
Meanwhile Bord Failte is doing the gathering thingey…. nobody asks why everybody is gone like.

The Irish better get a grip fast – We are at War.

@Joe Noonan

““A general vulnerability of the existing framework is that it lacks instruments for situations in which a country’s fiscal policy, despite strict surveillance, enforcement and correction mechanisms, continues to go harmfully astray. This could be tackled by giving European institutions the competence to effectively compel euro area Member States – in a graduated manner as the situation deteriorates – to take the necessary fiscal policy decisions.”

What instruments/competence might we see?”

I’m still waiting for a convincing position on how this bit:

” giving European institutions the competence to effectively compel euro area Member States – in a graduated manner as the situation deteriorates – to take the necessary fiscal policy decisions”

does not combine with this part of the proposed constitutional amendment:

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

in a way that could potentially lead to a destination not currently envisaged by those advocating the ‘yes’.

I find this particularly curious because proponents of a ‘yes’ vote are quick to paint the ‘No’ side as reckless, and often admit that the only real virtue of a ‘Yes’ vote is its lack of recklessness.

If the ‘Yes’ campaign were anything like competent they would be able to get a convincing, thorough and properly thought out rebuttal to this out within minutes – because it would have occurred to them and been factored in prior to drafting the referendum wording.

Thanks to Aisling for having a crack at this the other day, but this has not been dealt with yet. Can somebody in the ‘yes’ camp get on with it please and explain why no new bodies with competence under the treaty could come into existence and/or that voting structures could not emerge that would leave Irish politicians saying “Oh, but nobody could have foreseen that!”.

Lets have the answers.

Oh, Grumpy, please…

This crisis was 30 years in the making; it’ll take a few more years to get the institutions and procedures in place to even get close to resolving it and getting things on to a sounder footing. This Fiscal Compact is just the first real step – and is the minimum required to get voters in the creditor nations interested in consenting to something being done.

That is why this vote is so important. The Irish people have to decide whether to join with the creditor nations and participate in the development of the EU in a global context that they (and most other member-states) are seeking to craft or to withdraw closer to the semi-detached position that Britain is pursuing.

Words like excrete, pot and off spring to mind.

@Joesph Ryan

That ECB document : ‘A fiscal compact for a stronger Economic and Monetary Union’ is a sickening document

The mask is off alright, with German support the ECB are going for broke on a market coup in EU, after the biggest failure of the markets in eighty years.

It is not difficult to see why the market fundamentalists, financial capitalists on and their hangers are so firmly behind the Fiscal Compact and the German/ECB position. It is their political wish list, their set of class interests prioritized in European law – a grab bag of neoliberal sweets.

The question remains why so many people who claim to have left or libertarian leanings support it. What do they think comes after the bank debt and wage flexibility (downwards) enabling law precisely?

It is after all the most unrepentantly economically right wing and undemocratic initiative ever attempted in the EU. The ECB are publicly advocating the privileging of discredited right wing economic dogma and financial sector interest over national political preferences, or even international ones. The economy is to be run for the benefit of the banks and German exporters with a little liberalization and wage flexibility for the lower orders to keep them too busy emigrating to wherever the work is to organize or rebel. Shocking and monstrous.

It is not possible to reconcile support for the Fiscal Compact with support for popular democracy or social justice. How does Eamon Gilmore sleep at night? Who does he think will vote for the Irish Labour party after our act of Union with the European financial sector?

@Paul h

There was an attempted fanfare about three years ago as the concept of the “Think-Do Economy” was to be Ireland’s answer to the slump in The property Market. It bit the dust after some wag on the radio noted that it would make a change from the usual Irish approach of “Don’t Think, Just Do!”.

The referendum is at the end of May. What’s the rush?

Here is what wiki has to say about your thoughts:

“”Shit or get off the pot” is a common English language colloquial expression, used to imply a person should follow up their stated intentions, with action. It is also used to urge someone to complete a task with a greater degree of efficiency or timeliness than is observed at the time the expression is used. Implicit in the expression is that the person, by failing to act, is preventing others from acting.”

First of all, I’m just noting what is going on and asking questions.

Second, isn’t it the yes ca paint that should be completing their tasks with a greater degree of timeliness and come up with the answers – or is it still OK in Ireland for important decisions to be made without scrutiny?

Now if you’ll excuse me I must go off in a huff.


This is not a good day for Spain. The day began with the EU Commission revising its estimates for the Spanish economy. The contraction is now expected to be considerably deeper. Rather than contract 1% as the EU previously projected, now it is expected to shrink by 1.8%. The deficit this year, which was originally supposed to be 4.4% and PM Rajoy said would be 5.8%, before accepting a 5.3% target, is now likely to be 6.4%, according to the EU. The government is denial and even today is claiming the 5.3% goal is achievable this year and 3% next year.

Spain unveiled its new efforts to address the banking problems. It is the fourth one since the crisis began and the second one since Rajoy became PM. It is not likely to be the last either, as it seems largely to have failed to get ahead of the market expectations. In fact, today could mark the first time that the (generic) 10-year bond yield finishes the week above the 6% threshold in six months.

The key weakness of the earlier plans has not be addressed. Like them, the new plan appears to under-estimate the potential bank losses. Ironically, no major Spanish bank has reported an annual loss since the crisis began. If the news is too good to be true, it probably isn’t.

Spain is forcing the banks to boost their loan loss provisions on real estate loans by 30 bln euros. They have already put aside about 54 bln euros. The Center for European Policy Studies warns that bank losses could be as high as 380 bln euros. Moody’s estimates Spanish bank losses could be around 305 bln euros.

Read on: and shudder …

And ESM designed to place all this on shoulders of Spanish Citizens …. where the 1/20 will keep them in penury for a couple of generations … while the vichy-financial system and its matrizsQuidesque overlords party on …………. Spain needs this Fiscal Corset like a Hole in the Head. Time to place VichyNationalism in its own black hole – and put a lid on it.

Think of a speeding car about to crash applying the brakes with bald tyres in slippery conditions in bad weather with a dodgy engine…… Its going to crash.

Maybe sometime in the future a better car will be built with a better engine and good brakes, but this one is crashing with or without a FC carburettor…


Apologies for sending you off in a huff. For a while it seemed you had a similar take as the bould Tullmcadoo – who, by advocating a no vote, takes what I would decribe as the Michael Collins stance “the sooner mayhem is forced and the more there is, the sooner we’ll have an outcome and the better the outcome will be”. As a West Cork man I have a lingering affection for that stance.

You seemed to be as similarly energised as Tull, but about the Croke Park Agreement. Now you seem to be scratching around for a principle, in addition, to justify a ‘no’ vote.

Given the extent of dishonesty and diingenuousness of both campaigns, it would be wonderful if one could vote to give them both a kicking.

@ Paul Hunt

Some eu cartoons

I particularly like to the one, ‘in this room we have a man actually worshipping the euro’ 🙂 Also, the one with the Titanic sinking and about to slide beneath the waves, and someone calls out, ‘ComeON Everyone, We haven’t finished ratifying the ICEBERG 🙂

You can join in the fun and draw something accompanying the caption Vote Yes, over a picture of Democracy in Europe, in the form of a large self destruct button 🙂

Pail, I think I might be the nearest thing you will come across to an impartial observer. I observe an unseemly rush to corral the public who generally don’t understand the economics into voting one particular way, a way that will guarantee the interests of the country’s stifling vested interests. The questions I posed should have been asked by others earlier. The yes campaign looks shabby.

@Shay Begorrah

I agree with you. The ECB route is a very dangerous one
““This could be tackled by giving European institutions the competence to effectively compel euro area Member States – in a graduated manner as the situation deteriorates – to take the necessary fiscal policy decisions. That should help to provide credible incentives for sound fiscal policies.””

You can almost fell the dentist’s drill in that sentence.

Is it safe?
Definitely not.

I want to disassociate myself from your suggestion that we give the Shinners a kicking. I am too young for major reconstructive orthopaedic surgery.


Fair enough. The ‘yes’ campaign is, obviously, seeking to “guarantee the interests of the country’s stifling vested interests”, but, with their pig-eyed focus on this, they have failed to notice that the landscape in Europe is changing in favour of genuine structural reforms. They are complacently satisfied that they have dealt with the structural reform programme required by the Troika – and whittled it down to nothingness.

Their smug complacency and self-satisfaction is a tad premature. “Events, dear boy. Events.”

I find it hard to leave the nonsense that is being spouted go uncontested, but I should really, since it changes nothing. Only something that blindsides them will have the necessary effect – and probably a few of these ‘blindsiders’ in succession. But I would much prefer that this were not a ‘no’ majority.

Re the objective ‘in-betweeners’ it was an observed psychological condition observed on the Titanic and later noted to yield a poor outcome for chances of survival in any situation of trauma or shock, simply being frozen by the situation and unable to take decisive action. There will of course be those who regard themselves as considerably informed who won’t decide Y or N. But there’ll be a large majority of the Y led by banalities, fear mongering, purposeful refusal to engage with the detail of the FC, ushered to the trough that hides the economic/democratic self destruct button. We’ve already seen a rise in syncretic politics with proponents of the Y denouncing both the left and the right. This is usually a precursor of a form of national socialism that is anti democratic. This is the way of socialism for the banks; last time Europe had something parallel to this, it was nothing to to with Y, it was called Z which stood for a Third way that was very dark indeed.

@Joseph Ryan

The ECB route is a very dangerous one

It appalls me how little debate there is about the institutional push in the EU to make decision making on economic policy less democratic and less accountable. European democracy is to be restricted to choices compatible with ‘market discipline’, fiscal prudence and monetarism.

Karl Rove, GW Bush’s brain, aimed to create a ‘Permanent Republican Majority’ through social engineering, private media control and culture war but having seen the mixed outcomes in the US the EU equivalent to achieve a permanent neoliberal consensus is get to democracy before the voter is consulted. Chomsky would understand.

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@Joseph Ryan

The ECB route is a very dangerous one

The EU’s democratic deficit has become a large unaccountable institutional surplus, the ECB and the European Commission are attempting to restrict the policy sets available to voters in national elections when voters have no reciprocal power over these institutions. Voters in Ireland, Spain and Portugal will be able to choose any option as long as it approved by bodies they have no influence over.

This is made even less bearable by the repeated demonstrations that these same bodies believe in magical things (‘Deutchy, the confidence fairy’, ‘Keyney, the Inflation Monster’ and ‘Panicky, the Market Discipline Unicorn’) and have failed dreadfully to address the real issues – its national austerity in an international private financial sector crisis!

As the Guardian noted recently governments may fall in the aftermath of the European component of the global financial crisis but Barosso, Rehn, Draghi and Rompuy are safe from the will of the people.

I think that Hayek would have approved of this democracy with ECB characteristics – no tyranny of the Omnipotent Elected Assembly for the EU.

Is it safe?

Great film, I must watch it and ‘Three Days of the Condor’ again.

As for the polls, I think they’re more than a little commissioned within an ‘if-you-build-it,-they-will-come’ ethos.
Anybody got a couple of grand spare to carry out an independent one & prove me wrong ?


Reality bites!

Your guide to the Fiscal Compact sides:

Against the treaty: Some former terrorists who robbed banks in the name of the Irish Republic but who promised the people of Ireland that they would stop.
For the treaty: Some active terrorists who have robbed the Irish Republic on behalf of banks and who have promised the ECB to continue.

The pro Fiscal Compact side[1] polished their routine of fear and lies on the Lisbon Treaty rerun and perhaps they will win again but eventually they will get theirs and the reverse Robin Hood routine may lead to a change in circumstances they will not enjoy.

[1]: We can count the Irish political establishment, the vats majority of Ireland’s right wing economists, our well padded senior civil servants, our failed banking sector luminaries and the major newspapers who stoked the property boom as being for the Fiscal Compact. Knaves and fools.

That’s my new favourite scam – the Central Bank will still exchange euro at 1.27 so they get to pocket the difference. You can expect to see another ad up there next week offering 75 cents per punt!


‘Ho, ho’, arse mise; as I laughed in Irish. If only.

Mr. McCarthy is in fine form again:

But it provides hostages to fortune galore that will be exploited mercilessly and irresponsibly by the ‘no campaign’. For example:

“If it is European Central Bank policy that bank creditors should be paid in all circumstances, there will need to be eurozone resources available to meet that obligation, or the solvency of more states will be threatened.

The current unsustainable arrangement where banking losses are transferred on to the balance sheets of over-borrowed governments is a moral hazard regime: it removes all market discipline on banks.

Further banking bubbles are likely unless the policy is abandoned, in favour of a regime where failing banks are re-capitalised through losses imposed on those foolish enough to have financed them.

As well as protecting governments from insolvency and taxpayers from unreasonable impositions, this change in policy would reduce the risk of further banking bubbles. This issue constitutes an existential threat to the viability of the common currency and will not go away until it is addressed.”

This is an open invitation to the ‘No’ campaign to make the case that an Irish ‘no’ vote is the best way to exert pressure on the ECB and the governments behind it which have collectively established its powers and duties to change its policy – and ideally to provide significant relief on the bank debt that has been imposed on taxpayers.

And this:

“It should be conceded from the outset that the fiscal treaty is not an adequate response to the weaknesses in the eurozone design. Had it been in force, it might have helped to forestall the budget excesses in Greece, but would have made little difference in Ireland or in Spain.”

This ‘little difference’ will be exploited mercilessly by the ‘no’ campaign. It is almost impossible to establish the counterfactual definitively, but I would be very surprised if the fiscal pact were in place that it would have not revealed that much of the bubble-era tax revenue employed to achieve a fiscal balance was ephemeral, unstable and unsustainable – and that remedial fiscal actions (and even more) would have been required.

And this:

“..voters should proceed on the basis that European policymakers will pursue their own narrow national interests as they perceive them. Irish voters are perfectly entitled to do the same.”

This, for me, is the worst of all as it encourages an ‘us versus them’ mentality that runs totally counter to the foundation principles of the EU and to which it has, however patchily, sought to adhere since its inception. It goes right back to the original concept of ‘sinn fein’ – irrespective of the antics of the political faction that currently bears that title. Irish policymakers are also European policymakers – even if their impact may be limited they share common interests with policymakers in other small economies and the Commission exists to protect and advance the interests of the Union.

I know that economists must stick to their last – being ever so ‘umble, but economics is a much deeper, wider and more insightful discipline that its leading practitioners in Ireland reveal or employ. Employing the insights of the new institutional economics or of political economy might fill those schooled in the narrow neoclassical mainstream with unease but it is no betrayal of the discipline – or a move beyond a well-founded application of the discipline.

The application of some long-established insights of institutional economics and political economy explains perfectly simply and in a common sense manner that may be understood by ordinary citizens precisely what is going on and the precise nature of the choice before Irish voters.

Hvaing being misled by their governing politicians (and their predecessors) the Fiscal Compact is the minimum that voters in the creditor nations (and, in particular, in Germany) require before they will consent to taking the steps that are required to resolve this crisis. It is also a key first step in seeking to re-balance the economic power exercised by participants in the bond markets (both bank and sovereign) and that exercised by sovereign governments.

The urgent nature of the task, the weakness of the Commission and the self-serving antics of the British and the Czechs meant that it was formulated in an inter-governmental context rather than by the Commission in an EU context. (This, incidentally, is perhaps the principal reason that Ireland is having a referendum.) The Commission has been forced to pedal furiously to re-craft this as a Union instrument with effective opt-outs for those whose governments have refused to ratify it.

It is the first serious institutional and procedural step to begin to resolve this crisis. On its own it is inadequate; but it is vitally necessary and it is the first of many. Irish people have a simple choice: either to participate wholeheartedly in this process or to retreat increasingly to the margins occupied by Britain.

The ‘yes’ campaign is shabby. It is driven by Official Ireland seeking to protect its interests to the detriment of the majority of the citizens. As a result the campaign is both disingenuous and dishonest – but no more than that of the ‘no’ campaign. This is damaging and dangerous to the democratic process.

But pieces like this are equally damaging. Although ostensibly advocating a ‘yes’ vote they present no positive arguments. This ‘lesser of two evils’ approach is worse than insipid Anglicans pondering abortion. And they provide unwitting support and comfort to the ‘no’ campaign.

@Paul Hunt

I did not think that the Colm McCarthy article was as you describe :
” But pieces like this are equally damaging.”.
In fact I think it was an excellent article. Even if Ireland decides to vote yes, we are under no obligation to refrain from accusing the ECB of the deliberate rape of the country to pay Bank bondholders. That is what they did. And they did it to protect the national banks of France and Germany in particular. As ‘Deepthroat’ would say ‘follow the money’.

The choices are simple.

1. Vote no, which will require bringing the budget into balance in 2013. The idea that there are other potential lenders is pie in the sky.

2. Vote Yes. Continue as we are with the grindingly slow acceptance of reality, while sheltered sectors continue to do very well and the debt burden is accumulated to pass on to our children and grandchildren.

A third alternative would be a yes vote followed by balancing the budget in 2013, through rapid and socially responsible balancing of the budget. The better off paying the vast bulk of the adjustment though increased taxes, removal of all tax reliefs and credits, capping PS pay and PS pensions, removal of increments, cuts to PS pay above certain levels. But no PS job losses.

In the absence of that third alternative, I find it tempting to vote NO.

The quote from Colm McCarthy that you refer to is one of the more honest observations in the crisis to date. If it upsets people, so be it.

““..voters should proceed on the basis that European policymakers will pursue their own narrow national interests as they perceive them. Irish voters are perfectly entitled to do the same.””

Ironically the change in US and EU policy which demands the levying of financial costs to the taxpayer may be about to run its course. If Spanish banks really do need 200bn euros to shore up their balance sheets, it will bring that S

Sovereign down. The French banks cannot be far behind. At that point the game is up and the presses will have to roll. Then we will be very happy the PNs are still there as they can be zeroed at a stroke.

McCarthy is right though The EU project is clinically dead at this point. The British view of a collective of nations taking decisions on a case by case basis based on national self interest is correct. We shold quickly move to put our own house in order and adopt much of your agenda-take out the tax raid and spend merchants.

Which brings me to Mr Ryan menu which is insufficient and not fit for purpose. It is nice and fluffy but ducks all the hard issues. Our SW rates are above international norms, our Minimum Wage is too high. Public secotr pay at the bottom as well as the top is relatively out of whack with reality. The cost of utilities is too high because of regulatory capture. Medical costs are too high-about the only area of the “professions” where that still applies.

@Paul Hunt

Colm McCarthy is an economist in the ’empiricist’ tradition.

The economics of the Fiscal Corset are NONSENSE. He knows this 100% and has posted so on this blog. Unlike others around here, in terms of orthopaedics, McCarthy has a backbone and never refrains from placing his name and his reputation to his opinions.

This is an Opinion piece, as he has nothing of any social scientific validity to state on its economics; because it doesn’t exist.

In terms of odious financial system debt, as the government is incapable and more than likely unwilling to address this – then the Citizenry are entitled to Vote NO to ‘signal’ their ‘opinion’.

A much more ‘inclusive’ and non-regressive approach to the fiscal, which demands taking on vested interests, and a top up from EFSF, can take the ESM out of the equation. Markets will react positively to a pragmatic ‘restructuring’/’writedown’ of this odious debt.

We can do fiscal without the uber-deutsche nationalistic merkozian Korset.

p.s. On a personal level, I think you are losing the plot somewhat.

That was typical nonsense from Colm Mc – its very easy to magic away the debt , You print baby.
The Exchequers of the entire european continent are now Bank Bitches.

The banks collateral is now worthless – which is why they wish to gain control of fiat without that nasty politics getting in the way of things.

The ESM will bring in full scale fascism to this country and others as the bankers will gain full control of Fiat , which is something of extreme value to say the least.
The fact that there is no debate about ESM is truely shocking given the fundamental nature of that sordid business as the banks have no business interfering with fiat or the money of the state
The names of our Parliamentary members will live in infamy when they vote for that debt slavery compact.

You are truly naive if you think we can keep bubble era income/living standards, default on the borrowings associated with that life style, reject their (the German) current solution and then borrow more money from THEM.

You have truly lost the plot.

@The Dork

Barry Eichengreen [h/t naked capitalism

Is Europe on a Cross of Gold?

ROME – Increasingly, one hears predictions that the euro will go the way of the gold standard in the 1930’s. And, increasingly, the reasoning behind such forecasts seems persuasive. But does that mean that the euro doomsayers are right?
Agreement today on the diagnosis facilitates mounting a common response. Unfortunately, there is growing evidence that the medicine on which European countries have agreed – austerity – is killing the patient. There is now talk of adjusting the dosage, but talk has not yet given way to action.

CommentsView/Create comment on this paragraphWill things turn out differently this time? There is no question that the greater scope for cooperation that exists today bodes well for the euro. But it is the precise policies on which European governments cooperate that will tell the tale.

@Paul Hunt

But pieces like this are equally damaging. Although ostensibly advocating a ‘yes’ vote they present no positive arguments. This ‘lesser of two evils’ approach is worse than insipid Anglicans pondering abortion. And they provide unwitting support and comfort to the ‘no’ campaign.

You have to be the most irredeemable neoliberal fanatic, or a CDU fifth columnist, to see any virtue in the Fiscal Compact, and Colm McCarthy is neither.

It is is a shame he can not grasp the nettle but every time I read him I think he gets closer.

He acknowledges that the current EU bank support regime is a step away from a kleptocracy (with ultimately German beneficiaries) but he will not make the link that every reasonable person does- we can not borrow except under the auspices of the European Union because we are trapped by European Union policies that we have no control over.

Whether it is the unlimited state liability for banking debts (unless I presume you are Germany or a “close friend”), the wrong headed headed economic regime (supply side solutions only need apply) or the phantom battle against inflation in the midst of an unemployment crisis Ireland finds that the mandated European solutions are to problems it does not have.

Essentially the relationship between Ireland and the EU has become an imperial one, we find ourselves subject to the core’s wants and without any viable way of changing their needs (though we could have let some banks go under). We have taxation in the form of the bank bailout without any meaningful representation.

We can not be both a viable sovereign democracy and yet be subject to the rule of German economic priorities that accepting the Fiscal Compact entails. Even with access to the ESM (and who knows what the conditionality might be – a statue of Hayek in every school?) we would still be committed to bailing out the financial sector and the precedent would remain set that peripheral economies exist to buy German goods, support the common currency and keep their mouths shut.

I know some here would prefer a common market with a sham national parliament to a republic but I suspect many of the voters being bullied into voting for the Fiscal Compact do not know that this is the decision they are being forced into taking.

It looks like we have a formidable coalition in the ‘no’ camp: (not all mutually exclusive, of course, but some strange bed-fellows, all the same)
1. the ‘raid, tax and spend’ brigade,
2. the keepers of the flame of the Mythic and Transcendental Republic,
3. the naive believers in some social democratic nirvana,
4. those who reject anything to do with the EU,
5. those who wish to strike a blow for their perception of European democracy,
6. those who believe the EU project is finished and that alternative arrangements are required,
7. those who wish, in this instance, to signal their opposition to the way its institutions have functioned during this crisis,
8. those fed up with the continued application of one-sided, fiscally-focused economic adjustment and, finally,
9. those who wish to compel Official Ireland to confront economic reality.

And in the ‘yes’ corner we have (again not mutually exclusive) the hand-wringing least worst optioners and the representatives of Official Ireland furiously dissembling and scare-mongering or both to protect their power, positions, prvileges, profits and prestige.

It is difficult to decide which side more deserves to lose this contest, but it appears to be becoming clearer which will.

I have just listened to a retarded debate on the Marian F. show.

Ganley just talked about the bank debt which is not the issue now ….. Bruton is clearly brutal , you had some girl ( “practical businesswoman” , la la la with a weird Dublin 4 accent and a strange concept of money….she must also be a housekeeper I guess.

They all accept that states must get their money from Banks……money does not come from banks baby or at least it should not.

The ESM is the most dangerous mechanism ever to have been created on this continent.
The bankers wish to have a more direct control of fiat as their bank assets are worthless.
That is a very direct dictatorship.
The question always orbits around independence from bankers , always.

We are dealing with a very deep conspiracy of control which went into a higher gear 40 years ago.
Money Sovereignty is what it is all about – debt is a Hypothetical construct.
This debt is however destroying wealth on a vast scale.

I meant to add that more than one European central banker has been briefed to spread this story around over the weekend. Put the fear of God into those Greeks so that they vote the ‘right way’ next round.

Central bankers as Political agents — this is the future of Europe I am afraid.
With ESM it will appear normal practise.


PR Guy,
The Greeks are being told to do the decent thing & leave. It is now clear that the Euro will condense down into a small core -perhaps excluding France- and a periphery of floating currencies.

@ All

It is to be regretted that the real story of the day is in the SBP which can no longer be linked to directly and subjected to the penetrating intellectual rigour of debate on this blog. However, the term “shovel ready” has to be added to the list of buzzwords such as “frontline services”.

On the article by Colm McCarthy, the buzzword to be applied would be “conflicted”. But Shakespeare said it all centuries ago through the mouth of Falstaff.

Shakespeare, in Henry IV, Part One, 1596:

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

@ Paul Hunt

I do not think that you need to worry. Ganly, for example, is a busted flush. He is getting on the train too late and even if it ends up in the wrong siding it will not change by one iota the situation facing the country.

@Grumpy My pleasure. But you didn’t actually explain what your issues with my analysis were?

There can be no guarantees as to the future. We make informed judgements based on the facts we have before us. Any one who purports to guarantee something in the future is, almost by definition, lying.

So assuming that we’re grown ups who don’t believe in the tooth fairy, how can you ask for certainty as to potential future outcomes, or withhold judgement until such certainty is given?

The stability treaty doesn’t change anything that you’ve worried about. But that is not to say that treaties we have already allowed the Oireachtas to ratify won’t result in the conclusions you fear. I don’t easily see it, but I suspect that when Maggie T signed the Single European Act having announced that she had read it “cover to cover”, she didn’t easily see restitutionary claims amounting to hundreds of millions of GBP arising as a result.

Both because she couldn’t foresee the House of Lords recognizing the right of restitution for “mistake of law” cases (Lincoln B.C. v Kleinworth Benson in 1998 when the HL decided to acknowledge that they didn’t “find the law”, they “made the law”), and she couldn’t foresee the CJEU recognising that while direct taxation fell within the purview of the MSs such competence had to be exercised consistently with Community Law (as then was) in Schumacker (1995).

If you want to be scared of all possible future developments there is nothing any one can say to set your mind at rest. They offer assurances, they must be lying. They don’t and they haven’t actually dealt with your concerns.

re- PR Guy & Dork: ”…more than one European central banker has been briefed to spread this story around over the weekend. Put the fear of God into those Greeks ” & ”Central bankers as Political agents”

Is this material below plausible: (from: germany-begins-quantifying-cost-greek-exit-and-discovers-contingent-liabilities-are-all-too-real )

”First came the rhetorical jawboning, where following announcements by Fitch, European politicians, and finally Germany’s finance minister, the scene was set to prepare the general public that despite protests to the contrary, a Greek exit from the euro would not really be quite the apocalypse imagined. Now comes the actual quantification part, whereby in addition to adding numbers and determining what the further sunk costs to a Greek bailout will be (hint: much, much greater than anyone can conceive), Germany has finally understood what we have been warning for over a year: that contingent liabilities become very real liabilities when a threshold event forces the transition from “off balance sheet” to on, and the piper has to be paid. According to an analysis released hours ago in Wirtschafts Woche, Germany “would only absorb losses of 76.6 billion euros in Germany. This amount results from bilateral aid loans, the liability of Germany’s share in credit rescue fund EFSF, Germany’s share of losses of the European Central Bank (ECB) and the German share of liability to the credit support of the International Monetary Fund (IMF).”

“There is a limited transition period where we have to manage the nervousness on the markets,” Mr. Schäuble said. “If it is clear that by the end of 2012 or the middle of 2013 that we have all the ingredients for new, strengthened and deepened political structures together, I think that will work.”

He sees the turmoil as not an obstacle but a necessity. “We can only achieve a political union if we have a crisis,” Mr. Schäuble said.


74% of North Rhine Westphalia say NO to wearing Angela’s Corset!

53% of Irish in latest SBP poll say YES to wearing Angela’s Corset!

It follows that Angela Merkel’s Austerity Policy is more popular in Ireland than in North Rhine Westphalia!!!! The Irish must Love Austerity and paying off the debts of VichyBankers …

Is Minister Big Phil putting something in the waters?

re FT article on hard times for Forex Traders.

Good to know that all that LTRO money is sitting there just waiting for those Forex Traders to add value to all our lives, especially their own!


I don’t really care that much – I’m an observer who has been fairly clear from before the FC was cobbled together that whatever it said, Ireland and the other peripherals would fall over themselves in a scramble to sign.

I’ve also been fairly clear that the referendum would be passed.

I just find it really bizarre that there is so little intelligent debate or discussion about whether or not additional bodies could be created to administer part of or make recommendations, take measures etc as part of the administration of the FC, how those bodies might be structured, voting requirements etc etc. Given the fact that the Compact is all about fiscal restraint I think the lack of even idle or academic curiosity is odd – particularly given things like Ireland’s low corporation tax ‘strategy’ and a newly high tax fan in France.

So far as the public know, there is no possibility of any new institutions being involved etc etc. This might be correct, or might not be, but how weird is it that nobody cares?

You can approach the referendum question in a practical way, by considering only the most likely scenarios under current expectations in terms of institutional structure and involvement. You can consider the width of the wording of the amendment to the constitution and say ‘ah well, we’ve used it before with EU treaties’ and most likely be right that nothing will come of it; but someone should be considering the tail risks.

Maybe I’ve been observing financial markets and economies too long, in that there is rarely much insight to be gained in considering only the most obvious scenarios, but I am surprised given what Ireland has recently woken up to about assumptions of competence and rigour, that the interest just isn’t there.

The grown ups just know, know what has to be done and the only thing that matters is making sure it is done. The powers pushing the FC in Ireland seem to have that attitude that silly, waste of time moany and cribby finding fault with it can be indulged, if necessary, and if we are bored, after the event.

@ grumpy

The amendment refers to “bodies competent under that treaty”. What provision or basis do you see for the establishment of new ones?


So far as I can see the combination of a weak Commission and a political imperative, in particular, in Germany, to start nailing the feet of actual or perceived fiscal recidivists to the floor drove this exercise down the inter-governmental route. Cameron, pandering to probably the most Eurosceptically disposed Tory party ever played silly buggers (and the Czechs aso joined in). The effort since has been to re-establish the competence of the Commission and other existing EU instititutions.

If it had been developed by the Commission with opt-outs for malcontents, I doubt we would be having a referendum.

But even if more competences have to be transferred or additional institutions established and procedures authorised (which is likely because this is the only first step in a long process to resolve this crisis) it is almost certain that they will be subject to the TEU or amendments to it – and will not flow from this Treaty.

I think you’re looking for a fly when we’re miles away from producing a full jar of ointment.


Most of the noise coming out of Germany at the moment seems to be of the variety: make threats so that those pesky Greek voters come to their senses in the second election and put the pro-bailout parties back in power so that we can continue to siphon money from as many Greeks as we can for as long as possible.

Making threats to achieve the required result in voting eh? Kind of rings a bell somewhere.

@Grumpy Do you think there should also be debate about the future use of space weaponary by the UN?

Is your issue just that no one seems to be conjecturing about the future, or is it that no one seems to be conjecturing about the future of this treaty?

I really don’t see this treaty giving rise to new bodies, the existing EU treaties are a different matter.


I really don’t see this treaty giving rise to new bodies, the existing EU treaties are a different matter.

How about if I said “Do you see this treaty being used to further restrict the policy options available to Irish voters in future administrations?” – so far all our pooled sovereignty turns out to have been given away after all.

The Fiscal Compact makes Ireland not just a hostage to fortune (How strictly will the stupidity pact be interpreted? What will the political bias of the ECJ be?) but prisoner to a process of EU policy formulation we clearly no longer influence.

@ Paul Hunt

I would suggest that on the issue of the role of the Commission, the exercise of negotiating the fiscal pact as a form of inter-governmental agreement has, paradoxically, served to re-establish the fact that its services cannot be dispensed with. Indeed, one of the knottiest legal issues, I understand, was to place it among the “competent bodies” without actually compromising its existing treaty status which would have been the case were it, for example, able to take a “contracting party” before the ECJ.

On the last-mentioned point, I re-post here what I posted on another thread.


Apropos the issue of technical advice, there was an interesting letter in last Saturday’s IT on the role of the ECJ in the context of the fiscal pact which deserves attention.

To a lay person with some knowledge of the subject, the advice in the letter is correct as far as it goes but it fails to give the necessary weight to what the treaty actually says viz. that it is only a contracting party which can take an action against another that fails to put the structural deficit rules fully into national law. The booklet of the Referendum Commission errs by omission in the same way when it states simply “the issue may be referred to the Court of Justice of the EU”.

The parallels drawn with the rest of EU law in the IT letter are also not valid as the treaty, again, states in its relevant Article 8.3; “This Article constitutes a special agreement between the Contracting Parties within the meaning of Article 273 of the Treaty on the Functioning of the EU”. In short, it would be more correct to say that it is an inter-governmental agreement drawing on the services of the ECJ under a little (if ever?) used article dating from the Treaty of Rome.


It is also worth noting what the Referendum Commission states in its pamphlet now in the hands of the electorate.

“The Treaty (TSCG) states that the countries that ratify it will aim to bring its substance into the EU treaties as soon as possible and withing five years at the latest (this is called the “repatriation clause”)”.


Thank you. I noted your earlier assessment of this letter in the IT. I think we can take it as read that this fiscal pact, for a variety of reasons, is a temporary and, most likely, one-off abberation from the normal process of extending competences at the EU level. Everything else that is being doing, and the much more that will be done – and will have to be done, in relation to new or revised competences, institutions and procedures will be effected using the existing processes.

It is truly ironic that its temporary, one-off nature is probably the principal reason that Ireland is having a referendum. The dishonesty and disingenuousness of both sides is truly dispiriting and is dangerous and damaging to the democratic process. Citizens are being lied to, being deliberately misled or being subjected to blackmail to varying extents. And most citizens, in sofar as they are paying attention, know this. What makes this exercise so surreal is that most citizens would welcome a balanced and factually based assessment of the situation, would be well able to digest it and make a sensible decision.

And what is worse is that out leading economists who are not inadequately rewarded from the public purse and who I believe have a duty to discharge are transmitting very mixed signals. Some are sowing confusion, some speak in riddles that goes over the heads of most voters, others can only wring their hands and speak of least worst options, while many remain silent.

You seem to remain sanguine that the sound good sense of a majoity of voters will prevail. I’m less confident.

@ Paul Hunt

I do remain sanguine. It is easy to demonstrate that the holding of referendums on esoteric topics such as the TSCG is an aberration stemming from an aberrant Supreme Court decision which has never been corrected. It is hardly surprising that the undertone of farce evident in precious referendums is now becoming a bit of a crescendo. The reputation that the Irish have in Europe is not as positive as we like to imagine. The TSCG calls our bluff. Being good gamblers, the average punter will recognise this.

When the TSCG is out of the way, the fun will really start. The bringing into line of income with expenditure will unmask the many rent seekers (maybe even those involved in UORR). On the silence that you perceive, the explanation is simple; many of those that might be in a position to contribute are in their ranks.

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