Ireland must face down the financial blackmail and vote “no” to Fiscal Union

The amenable Irish Prime Minister, Enda Kenny, sent a bit of a shiver through Brussels on Monday.  He announced that while he supported fiscal union, the constitution meant that Ireland couldn’t sign up without first holding a referendum.

In Brussels, annunciating the word referendum has roughly the same effect as saying “Ni!” to somebody. So averse are the European political class to any exercise in popular power, that many Brussels apparatchiks experience a physical pain upon hearing the R-word.

In fact that’s probably a slight over-simplification. The consensus seems to be that referenda are things that should come in twos  or not at all. Ireland, after all, had two referenda on the Nice Treaty, after failing to pick the “correct” option the first time around, and, for the same reason, voted twice on the Lisbon Treaty. So as far as Brussels etiquette is concerned you can mention “r-word”, but be sure not to use it in the singular. Your interlocutors will not thank you.

It is, of course, thoroughly proper that Ireland should hold a popular vote before signing up to Fiscal Union. Governments should not have the right to give away, willy-nilly, the powers lent to them by the people. And this treaty does represent a dramatic transfer of power away from Irelands elected institutions.

Under the agreement governments are  to be automatically fined if budget deficit’s exceed a mere 3% of GDP. In this way, Fiscal Union effectively outlaws Keynesianism. Given that downturns tend to automatically push public finances in deficit – due to higher benefit queues and lower tax receipts – any future government would be compelled to cut spending and raise taxes during a recession. The people, meanwhile, would be unable to vote in a government that’s not committed, by law, to a policy of mass unemployment.

To make matters worse Europe is holding a financial gun to Ireland’s head on this matter. If Ireland votes “no”,  its access to the European bail-out fund will be cut off. This in fact represents a rather unseemly moving of the goal posts, as far as recent Euro-Irish relations are concerned. The Irish government, remember, needed to be bailed out, not because it overspent, because it sunk billions into rescuing Anglo-Irish Bank. The primary beneficiaries of that banking rescue, meanwhile,  were not the Irish people but the financiers of France and Germany  who had lent billions to Anglo-Irish, which they stood to lose had the bank been allowed  to go bust. In return for rescuing the banks, and running up an unmanageable national debt to do so, it was agreed that Ireland  would be given access to the European bail out fund – funds that it required, precisely because it had effectively nationalized a large chunk of toxic assets and bad debts for the benefit of bondholders across the continent.

But now the rules have changed! Ireland, god help it, has kept its side of this ridiculous bargain, running up a huge national debt in the process. Yet it’s now being told that it will only have access to bail out funds after 2014 if it agrees to set aside a huge swathe of its sovereignty, by signing up to Fiscal Union.

One rarely if ever observes the spirit of 1916 amongst Ireland’s conetmporary political class, and it is hardly surprising that nobody at the top is ready to call the blackmailer’s bluff. Indeed, Ireland’s entire political establishment – Labour, Fianna Fail and Fina Gael, – are pushing for people to vote yes, against Sinn Fein and the Socialists who, virtually alone, are pushing for a no vote.

Now there is a time and a place for invoking the heroic struggles of olde. But it would surely be farcical if the near-century that has elapsed since the Easter Rising, concludes with Irelands entry into the pact of Fiscal Inion. Indeed it would be both tragic and farcical if, after many centuries in which Irish men and women have fought and died for independence, the Irish people are left with a state that does not control its own fiscal or monetary policy – and which cannot therefore decide upon basic social and political questions for itself.

As the centenary approaches, Enda Kenny and co. would do well to remember a time when some of their compatriots were willing to take uncomfortable political decisions and  to  withdraw co-operation from what was then the biggest bully in the playground. They won’t of course show any such bravery,  but the people of Ireland just might.

To contact Reuben email reuben@thethirdestate.net