Ireland is voting in a referendum on an EU austerity pact. If Dublin does not accept tough budget deficit obligations, it would be a kiss goodbye to EU rescue money, which could be followed by default and a eurozone exit.
The mooted European Fiscal Pact was initiated by Germany and France. If approved, it would oblige Dublin to strictly control is budget deficit, which reached 13.1 per cent last year.
The treaty commits all ratifying members to achieve budget deficits of 1 to 0.5 per cent of economic output.
The pact was signed in Brussels on 2 March by all 25 EU members except the Czech Republic and the UK. Yet the pact needs to be ratified by national parliaments, so far, it has been ratified by four member-states.
It allows member states to co-ordinate their budget policies and impose penalties on rule-breakers, which is seen by many opponents as an uncontrolled dictatorship by eurocrats.
If the Irish say “No” they would not affect the adoption of the treaty, as it needs 12 EU member states approval to take effect.
But a “No” vote would be a goodbye kiss to European bailouts, which means the country is out money by next year. With severe ramifications.
Which makes Dublin’s possible course of action a bombshellm as the “No” way would be a disaster for vulnerable markets already smashed by the Greek crisis.
Ireland was the first country to receive 85 billion euro of financial help from the European Fund of Financial Stability in 2010. The Irish economy began sinking following a banking system collapse in 2008.
The country has already stepped on austerity path trying to rise taxes and cut spending to reduce the budget deficit to 8.6 per cent of GDP. On 1 March the European Commission approved another rescue tranche of 5.8 billion euro for Ireland.
Ireland is the only state which is putting the fiscal pact to a national vote due to its legislation.
The latest Irish Times/Ipsos MRBI poll suggests that 39 per cent of those asked how they were likely to vote on the treaty said yes, 30 per cent said no, and 22 per cent said they did not know, while 9 per cent said they would not be voting.
The uncertain outcome is still very much in the hands of undecided voters.
Yes, there’s No room for Maybe
The country’s Prime Minister Enda Kenny has urged voters to support the referendum.
“It will create stability in the eurozone that is essential for growth and job creation. A strong yes vote will create the certainty and stability that our country needs to continue on the road to economic recovery,” he said.
The economy is tightly bound to the ailing eurozone, through bank loans and bailouts. And many economists think a No vote would mean even steeper austerity, and difficulty borrowing from financial markets.
Professor Brian Lucey from Trinity College Dublin told RT: “Let’s argue about the sensibility of what’s going on, but if there’s a club, and they want to be part of it, you know, you join the army, you wear the boots, and we would be rejecting that, and I think that would be, while attractive from a national pride perspective, is it a pride we can afford?I’m not sure people think it is.”
The anti-treaty fight is led by Gerry Adams, the leader of Sinn Fein, the Irish left-wing republican party, who aims to stop what he described as a pact that would worsen the Irish government’s “terrible policy of austerity.”
“It would mean another significant reduction of our sovereignty and a handover of the democratic rights of Irish people to unelected and unaccountable bureaucrats in Brussels, Strasbourg and Frankfurt,” Adams warns.
This view is shared by Richard Boyd Barrett from United Left Alliance. In an interview to RT, he explained: “What we’re concerned about is that, in effect, because all the gambling debts of the banks have been put onto the state, that this will mean permanent austerity, billions worth of cuts every year for at least a decade or more to meet the treaty targets.”
Since 1987, Ireland has put all EU treaties to a referendum vote and has a history of defiance against integrity laws.
In 2001 and 2008, 3.1 million Irish voters twice rejected European Union treaties, though both votes were then overturned in subsequent polls.
The defector behavior in the past makes many suspect that Dublin could thwart the cuts.