Banking Crisis EMU

RTE: Nation to Be Spared From Promissory Note Deal

RTE’s Nine O’Clock news are reporting Enda Kenny as explaining that promissory note negotiations are totally separate from the question of will the Irish people vote for the Fiscal Compact Treaty and that the Irish people will not bribed to vote for the Treaty.

RTE also noted that the latest Council meeting was “dominated by jobs and growth” which sounds like great news. And, best of all, reporter Tony Connelly helpfully explained that it was now felt that asking for a better deal on promissory notes was actually a bad idea because it would send a bad signal to financial markets that we were not able to cope with our debt burden and that there was no way this issue would be dealt with any time before the summer.

Ok, so be it. But I suspect that “the Irish people won’t be bribed” may prove to be the worst referendum slogan in history.


Treaty Agreement: January 30

Information on the Treaty agreed last night by 25 EU member states is available here. Somewhat remarkably, given that draft texts have been circulating for weeks, there is no version of the agreed text.  Anyone out there have a link?

I’d note that the materials released all point to the need to implement the structural deficit rule at “constitutional or equivalent level” while the Independent reports that “preferably constitutional” is in the final draft.

If indeed it turns out that we need a referendum, this is a pretty bad start.

Update: The EU Council have finally released the text here. Anyway, “preferably constitutional” has been retained, which begs the question as to what van Rompuy and his officials were up to with their statements about “constitutional or equivalent level”.

Fiscal Policy Political economy

The fiscal compact and referendum mechanisms in Ireland

The Minister for Transport, Mr Varadkar, in commenting on whether a referendum will be necessary for Ireland to sign up to the fiscal compact is reported to have made the commonplace point that

There’s only one reason why you have a referendum and that’s where there is a requirement to change the constitution.

Em, not quite.

Apart from a political view that a referendum might be desirable in any event, there is a particular mechanism in the Constitution of Ireland for holding a referendum, even when a measure does not require constitutional amendment. This is set out in Articles 27 and 47, whereby one-third of the Dáil and a majority of the Seanad could petition the President to decline to sign and promulgate a Bill “on the ground that the Bill contains a proposal of such national importance that the will of the people thereon ought to be ascertained.”

The detailed provisions of Article 27 envisage that if such a petition were successful, the will of the people could be ascertained either by referendum (in which at least one-third of those on the register would have to vote “no” in order to veto, by virtue of Article 47) or, in effect, by a general election.

I guess the fiscal compact itself may not in fact be a Bill, but presumably the detailed fiscal provisions of the agreement will have at least that legal form. Apart from whether the required numbers of TDs and Senators would line-up for the petition which Article 27 envisages, whether or not this mechanism will be applicable seems to me, as a non-lawyer, to turn on whether the Bill in question is a “Money Bill”. Money Bills appear to me to exempt from Article 27 (reading back to Articles 23 and 22) but I may be mis-reading that, so perhaps we might get some legally informed views in comments.


New Fiscal Compact Draft

Via the IIEA blog, a new leaked draft of the proposed fiscal compact. Importantly for Ireland, the wording that balanced budget laws need to be “constitutional or equivalent” has been replaced with “preferably constitutional”.


Draft Treaty

A draft of the proposed Treaty has been released. I think we should be very very slow to look to put this to a referendum, if such is required (and it probably is).  Many things may happen in the meantime that could derail this particular process.

In the meantime, our leaders should stop making up exciting scenarios involving Ireland leaving the euro if a treaty is rejected. That Stephen Collins vehemently disagrees with this only strengthens my conviction on this point.


A Yes or No Referendum on Euro Membership?

I wrote this post last night for the IIEA blog. I concluded it by discussing what I view as the likely upcoming referendum

Quoting myself(!):

It will be very important that other Eurozone member states be careful when discussing the problems faced by countries such as Ireland, for whom ratification of a new treaty will be politically complex.

For all the temptation to present such an agreement as a “yes or no” moment on euro membership (a temptation last seen with Mrs. Merkel’s “ya oder nein” moment) the truth is that there is no clearly defined way to expel a country from the single currency. Beyond the potential of a bullying approach back-firing with the Irish public, a focus on a referendum as a decision about euro membership risks triggering a massive bank run as depositors take flight to avoid the redenomination that is being threatened.

Needless to say, what happens today? Our own Minister for Finance comes out with the following:

FINANCE Minister Michael said today that any referendum here on the new EU deal would essentially be a vote on the country’s continued membership of the eurozone.

“It really comes down on this occasion to a very simple issue, do you want to continue in the euro or not,” Mr Noonan said in an interview with Bloomberg Television.

“Faced with that question, I think the Irish people will pass such a referendum.”

I think this is a very poor way for the government to approach this issue and I would hope they reconsider it.

The Irish public have a history of responding poorly to threats as a motivation for voting for EU treaties. And if Mr. Noonan is keen on triggering another disastrous bank run (this time also involving retail depositors) then he should keep talking this way and linking the probability of Ireland being in the euro with the latest polls on how likely the referendum is to pass.

The truth is that, whether people like it or not, the debate about this referendum will have many parallels with the Lisbon Treaty debate. It wasn’t true that voting no on Lisbon meant leaving the EU. But it was true that the rest of the EU could have decided to form some new agreement, something which would have required a complex legal and political process.

Similarly, there is simply is no expulsion route from the euro. If Ireland voted down the new intergovernmental treaty but the government wished us to stay in the euro, then there is nothing that could be done to eject Ireland from what is legally a fixed and irrevocable currency union.

It is possible for other countries to move on after an Irish No vote to set up their own currency union. However, this would require them to leave the euro, which would very likely involve them leaving the EU. Legally and economically, such an approach would be hugely difficult for the EU, certainly more difficult than going on to apply the Lisbon changes to some inner core EU.

So a “No” vote would likely leave the EU with a legal and political mess similar to that which occurred after the failure of the Lisbon vote in Ireland in 2008. From the point of view of the core EU countries, this is all very undesirable. They hardly want to admit that any country that doesn’t like the proposed treaty should go around asking for changes on an a la carte basis. If this were the case, then there probably would be no treaty at all (no bad thing, some might say).

But that’s where things stand and it wasn’t a situation schemed up by Irish politicians.

Government ministers should say there is simply no question of Ireland leaving the euro and that’s the end of it. Then they should enter treaty negotiations reminding everyone in Europe of the terrible nuisance that is their constitution and of the huge decline in the popularity of the EU in Ireland since Lisbon and Nice were voted down.

While I don’t necessarily want to endorse Fintan O’Toole’s language about causing trouble, the legal situation is what it is and the government need to make the most of a bad situation. (This issue was also discussed on Monday’s edition of The Frontline).

It’s time to argue for a better treaty and a better deal on the IBRC debt.

It’s not time to bully the public about signing up to whatever is put in front of them or face being booted out of the euro.

Fiscal Policy

A New Referendum?

My presumption has been that any set of “fiscal union” measures of the type mentioned here will require a referendum. Far more trivial international agreeements have required them, so surely this would too. Eoin reckons it can be avoided via some Lisbon-related maneuver.

I’m not a constitutional expert but some of our readers must be. What do people think? Can we get some concrete cites to the relevant articles or protocols.