At a time when the Government is advancing the ridiculous proposition that the Irish State is “regaining its economic sovereignty” by leaving the Eurozone bailout, sensible people will be more concerned at the possibility of a Cypriot-style “bail-in” for the Irish banks, entailing confiscation of customer deposits over €100,000, as the euro-currency crisis continues and the planned EU “banking union” makes provision for such steps.
The continuing Eurozone crisis was discussed at the EPAM conference in Athens, Greece, last weekend week.
At this event representatives of organisations from different EU countries agreed on the vital need for the Eurozone States to re-establish their national currencies and work towards the dissolution of the Eurozone, which is destroying the democracy of the peoples and States that use the euro and wreaking economic destruction and social misery on country after country.
Below for your information is a copy of the joint press statement that was issued after this conference on behalf of the participant organisations.
It was signed by Anthony Coughlan on behalf of the above organisation.
I suppose that you would count me as one of “the usual suspects” whom you refer to in your Irish Times article of last Saturday (23 March): ”Cypriot crisis puts Irish experience into perspective”, as wishing “to make political capital out of the initial botched attempt to impose some losses on Cypriot depositors”.
While you make valid points in your article, its concluding thrust – that “the EU and its institutions have made Europe a far better place than at any time in its history” – sidesteps the question of whether adopting the Euro-currency and becoming a member of the Eurozone, which is currently a legal obligation on all EU members except the UK and Denmark, have really made Europe “a far better place”.
Do you really believe that Europe is a better place today than it was, say, twenty-five years ago?
As the Cypriots, Greeks, Portuguese, Spaniards, Italians – and we Irish – are discovering the hard way these days, the EU/EC of, say, 1988, before the euro-currency project was embarked on, was by any objective standard surely a better place than the EU of today, when tensions and even hatred are growing between creditor and debtor States INSIDE the Eurozone and when the peoples of the ten EU States which have decided to stay OUTSIDE the Eurozone and to retain their national currencies are thanking their lucky stars they did not join that crisis-racked entity.
This point is made strongly by Bernard Connolly in the introduction he has written to the recent new edition of his classic book, “The Rotten Heart of Europe:The dirty war for Europe’s money”, which I am putting a copy in the post for you today in case you have not read it.
Connolly knows what he is talking about when it comes to monetary matters and his book sets out clearly how the Euro-currency was envisaged by its progenitors from the start as a device for pushing the peoples of the EU towards a supranational fiscal and political union, a quasi-Federation which would be under Franco-German political hegemony and in which the Brussels-Frankfurt bureaucracy would have vast executive powers.
This development was meant to erode – as it has eroded – the democracy of the Eurozone’s Nation States without replacing this with any meaningful democracy at the supranational level.
The latter is indeed in principle impossible, for there is no EU/Eurozone “demos” or people who are willing to identify with and give allegiance to such a supranational entity as truly “theirs”, and such an EU/Eurozone “demos” cannot be artificially created.
In other words, contrary to what your article of last Saturday implies, there is a qualitative difference between the pre-Eurozone and post-Eurozone EU, just as there is inside the EU between the 17 countries which have adopted the Euro and the 10 EU Member States which decided to retain their own national currencies.
As former Commission President Romano Prodi exulted some years back: “The two pillars of the Nation State are the sword and the currency, and we have changed that.”
Maybe you would consider sometime addressing these differences between the countries INSIDE the Eurozone, which Ireland’s leading politicians were foolish and irresponsible enough to join in 1999 even though we do over two-thirds of our foreign trade outside it, and the ten countries OUTSIDE the Eurozone which are still members of the EU.
On a related point: as Germany uses the crisis of the Euro-currency in an ever more obvious attempt to impose its political-economic will on the 16 other Eurozone Member States, it may be worth reminding Irish Times readers that from next year, 2014, Germany’s relative voting weight under the new population-based EU-law-making system enshrined in the Treaty of Lisbon will increase from its present 8% of the total number of EU Council votes to 16%, the voting weights of France, Italy and Britain will increase from their present 8% each to 12% each, while Ireland’s relative voting weight in making EU laws will decline from its present 2% to less than 1%.
You will agree, I am sure, that this step, which most Irish people and indeed most Europeans are currently quite unaware of, is unlikely to make the rest of the Eurozone/EU look more kindly on Germany.
With best regards
PS. I am copying this letter to some of your fellow commentators in the Irish Times and other papers for their information, as doubtless they will have read your Saturday article also. The crucial distinction between the crisis in the Eurozone and the situation in the rest of the EU is too often not made by those who wish to divert attention from the historical catastrophe which the single currency is manifestly turning into.
- Why the Euro Crisis Isn’t Over; The economist who dared to predict Europe’s mess, and was fired for it, says there is much more pain to come – Wall Street Journal
- The rotten heart of Europe? – Irish Independent (2000)
- The Rotten Heart of Europe; Bernard Connolly – Faber and Faber, new edition
- A look inside “the rotten heart of Europe” with Bernard Connolly – CNBC
- The Rotten Heart of Europe: Bernard Connolly and Anatole Kaletsky discuss – BBC
Where we are on the 40th anniversary of joining the EEC
The Political Basis of the EU:
All States and aspiring States have their myths of origin. The myth of origin of the EU is that it is a peace project to prevent wars between Germany and France – as if a tendency to go to war is somehow genetically inherited.
The actual facts are however that the first step towards supranational economic integration, the European Coal and Steel Community of 1951, was to facilitate German rearmament at the start of the Cold War with Russia and to reconcile France to that fact. The US wanted a rearmed West Germany inside NATO. This greatly alarmed France which had been occupied by Germany just a few years before.
Jean Monnet, who was America’s man in the affair, came up with the solution. To assuage France’s fears he drafted the Schuman Declaration proposing to put the coal and steel industries of France, Germany and Benelux under a supranational High Authority as “the first step in the federation of Europe”. A federation is a State, so the political aim of establishing a State or quasi-superstate under Franco-German hegemony has been there from the start. The EU celebrates 9 May, the date of this Declaration, as “Europe Day” each year. Monnet became secretary of the supranational High Authority, the predecessor of today’s Brussels Commission.
Thus historically the EU is in its origin an out-of-date legacy of the Cold War, pushed by the USA in the 1950s to provide an economic underpinning to NATO in Europe.
Simultaneously “Europeanism” became the creed of a legion of intellectuals across the continent, disillusioned by the failed ideologies of the 20th century. They provided ideological arguments in support of their assault on all things national. Their central assertion was that conflict between Europe’s States could be prevented by putting their national democracies under the control of a supranational high authority of non-elected technocrats – namely themselves or people like themselves – while trying to merge their peoples in a kind of jellybowl of nations.
They developed the doctrine that by “pooling” sovereignty small States increase their influence over bigger ones, whereas in practical reality it is the other way round. Classically, the concept of sovereignty means that a State is the sole author of the laws prevailing in its territory. For EU members however most laws now come from Brussels. Talk of pooling sovereignty is like referring to a woman as being half-pregnant. Sovereignty “pooled” is sovereignty surrendered.
Forty years after the 1951 Coal and Steel Community, and the 1957 Treaty of Rome setting up the European Economic Community(EEC) which followed, another shift in Franco-German power, Germany’s reunification as a side-effect of the collapse of the USSR in 1991, led these two countries to establish the European Economic and Monetary Union (EMU) and its single currency, the euro.
The big increase in Germany’s population and territory on reunification greatly alarmed France. However France had nuclear weapons, which Germany was precluded from having under the post-War treaties. The deal between the two of them was EU Monetary Union for Political Union or, put crudely, the Deutschemark for the Euro-bomb. Germany would give up its national currency, the symbol of its post-war economic achievement, and share the running of a new supranational EU currency with France, while France agreed to work jointly with Germany towards a supranational EU political union with its own common foreign, security and defence policy.
This would give Germany a central role in running a potential EU world power, with its finger on a nuclear trigger in due time. France in turn hoped the euro would give it a political lock on Germany. “The two pillars of the Nation State are the sword and the currency and we have changed that,” exulted EU Commission President Romano Prodi. A Franco-German army brigade with joint officers and a joint command was simultaneously set up as a symbol and prototype of the EU army of the future. Belgium, Luxembourg and Spain have since joined this as contributors to a common “Eurocorps”.
France and Germany are said to share a common interest in being joint engines of the EU integration project. The conventional wisdom has been that if they stay together they can push through the Brussels institutions whatever policy suits their interests, while between them they are strong enough to prevent any other group of EU States from adopting policies they do not like. The reality is somewhat different however, as Germany was always going to be the big winner in moves towards an EU monetary and political union.
The Intoxication of Big Powerdom: Tuilleadh
- Lord Wolfson prize (Daily Telegraph): How to escape the euro with the minimum of pain
This summarises the entry to the Wolfson prize by Roger Bootle and a team from Capital Economics.
There is no doubt that euro exit would be messy and – if handled badly – extremely damaging, not only for the country concerned, but also for the rest of us. But it needn’t be handled badly. Indeed, there are ways of dealing effectively with all the key practical difficulties.
If handled well, euro exit could present weak peripheral members with a much better prospect than remaining in the euro. Moreover, their exit could enhance the prosperity of the rest of Europe – and the wider world.
The relation between two different treaties we are asked to ratify, which people Need to understand
The Government’s announcement of a referendum on the so-called “Fiscal Compact Treaty” (properly titled the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union/TSCG) calls in question its original intention to introduce the quite different European Stability Mechanism Treaty (ESM) to the Dáil for approval of its ratification on Tuesday or Wednesday next, or else sometime in the present pre-Easter Dáil term, as the Taoiseach recently announced.
The ESM Treaty would set up a permanent Eurozone bailout fund of at least €500 billion form this July – an economic firewall against sovereign debt “contagion” spreading to Spain and Italy. It has to be ratified by all 17 Eurozone States by their appropriate constitutional procedures. The ESM Treaty would commit Ireland to contributing €11 billion to the permanent Eurozone fund – so much money up front and so much in guarantees called “callable” capital later if required. There is already talk of boosting this fund by another few hundred billion once it is established, to which Ireland would naturally have to make a contribution also.
The Preamble to the ESM Treaty, which can be easily downloaded from the Internet, states (Recital 5): “It is acknowledged and agreed that the granting of fonancial assistance in the framework of the new programmes under the ESM will be conditional, as of March 2013, on the ratification of the TSCG [that is, the “Fiscal Treaty”] by the ESM Member concerned…”
This means that if the ESM Treaty, is ratified by Ireland sometime this month – we will be committing ourselves to contributing €11 billion to a fund from which we can receive no benefit or advantage whatever if voters should vote No to the Fiscal Treaty referendum that will presumably be held sometime in May or early June, although the Fiscal Treaty need not be ratified until the end of this year. The ESM Treaty was signed on2 February, the Fiscal Treaty/TSCG was signed on Friday last.
Would the Government not be acting in a very foolish fashion to lay the country open to such a possibility?
Would not the Irish State appear to be acting really bizarrely in the eyes of international public opinion if the ratification of these two quite different treaties was put the wrong way round in this way – very much against the Irish People’s interests?
Or has the Government in mind to introduce and ratify the ESM Treaty during March, as the Taoiseach said,
- thereby binding the State to contribute €11 billion plus to this permanent Eurozone Fund,
- and then use that as a moral bludgeon with which to browbeat a bamboozled electorate into voting Yes to the “Fiscal Treaty” – on the ground that if they should vote No to it, they will be depriving themselves of possible access to the permanent Eurozone fund at some time in the future?
Could our leaders really be so cynical?
Surely it becomes imperative in these circumstances that the Government should postpone ratification of the ESM Treaty until after the referendum on the Fiscal Treaty has been held?
The 17 Eurozone Prime Ministers and Presidents have agreed that they would try to bring the ESM Treaty into force by July. The original intention with this treaty’s predecessor, ESM Treaty No.1, which Michael Noonan and the other Eurozone Finance Ministers signed last year, in July 2011, had been to bring the permanent ESM fund into being in 2013, although ESM Treaty No.1 was never sent around for ratification. The date of next July would still give Ireland plenty of time in which to hold its “Fiscal Treaty” referendum in May or early June and thereafter ratify the ESM Treaty (No.2) to come into force by July if the people should vote for it.
Anthony Coughlan (Director)
Filed under: EU Economy, Irish Economy, Euro / Monetary Union, Anthony Coughlan, Referendum, Fiscal Union, Fiscal Compact Treaty | Clibeanna: irish referendum, European Stability Mechanism, ESM, Fiscal Compact Treaty, Treaty on Stability, Coordination and Governance in the Economic and Monetary Union, TSCG, fiscal compact, fiscal treaty referendum | Leave a comment »
Two Steps to a Fiscal Union for the Eurozone… & A Third Step to Distract Attention from the First Two
The Urgent Need at a Minimum For a Government White Paper
“It would be tragic and fatal if we were to lose democracy on the road to saving the euro”
– Dr Andreas Vosskuhle, President of the German Constitutional Court, 2011
“There are 27 of us. Clearly, down the line, we will have to include the Balkans. There will be 32, 33 or 34 of us. No one thinks that federalism, total integration, will be possible with 33, 34, or 35 States. Clearly there will be a two-speed Europe: one speed that moves towards a Federation for the Eurozone and one speed for a Confederation within the European Union.”
– French President Sarkozy, 8 Nov. 2011
The Economic and Monetary Union which Ireland signed up to under the 1992 Maastricht and 2009 Lisbon Treaties assumed that the 3% and 60% of GDP deficit rules for every Eurozone State would be abided by and enforced by means of the sanctions – warnings, special deposits, fines etc. – which are set out in those treaties. If they had been and if the rules of the EU treaties had been enforced for all, there would have been no sovereign debt crisis in the Eurozone and no need for any Eurozone bailout fund, either temporary or permanent.
When Germany and France broke the rules of the EMU by running big government deficits in 2003, the EU treaty sanctions to enforce the 3% and 60% deficit rules were not applied against them, and they were thereafter effectively dropped for everyone else. Ireland did not break these excessive deficit rules however.
Now – to deal with the dire consequences for millions of people of this failure to enforce the rules of the original EMU, while at the same time increasing their own political sway over the Eurozone – Germany and France, supported by the Brussels Commission, are seeking to change the whole basis of the Economic and Monetary Union which Ireland signed up to. They are doing this by establishing a permanent €500 billion ESM bailout fund which is to be surrounded by a whole panoply of controls over national budgetary policy, including the permanent balanced budget rule (0.5% deficit rule) proposed in the “Fiscal Compact Treaty” that German Chancellor Merkel insisted on over Christmas.
In considering the possible implications of all this it is worth bearing in mind that in 2014, just two years time, under the Lisbon Treaty Germany’s vote in making EU laws will double from its present 8% of total Council votes to 16%, while France’s and Italy’s vote will go from their present 8% each to 12% each, and Ireland’s vote will halve to 1%. Similar proportional changes will be made in voting within the Eurozone.
The temporary Eurozone bailout fund, the European Stability Facility (EFSF), which was established to lend money to Greece in May 2010, and from which Portugal and Ireland subsequently got bailouts, was established under Art.122 TFEU of the EU Treaties. This Article permits Union financial assistance to be granted when a Member State is in “severe difficulties caused by natural disasters or exceptional occurrences beyond its control”. Excessive budget deficits built up over long periods of time are scarcely what this Article was meant to cover, so the very questionable legal basis, to say the least, of the temporary fund has led to this Article being now abandoned and replaced by an entirely new EU Treaty provision, an amendment to Article 136 TFEU, to give a long-term legal basis in European law to the permanent €500 billion bailout fund which the Eurozone States want to set up from this July. Ireland commits itself to making an €11 billion contribution to this fund in various forms of capital by means of the European Stability Mechanism (ESM) Treaty which can be concluded amongst the 17 Eurozone countries once the EU 27 have amended Art.136 TFEU so as to give permission for it in European law.
The Government wants the Dáil and Seanad to approve this hugely important Article 136 TFEU amendment to the EU treaties during the current Dail term without any referendum of the Irish people even though this amendment and its legal/political consequences would mark a qualitative change in the direction of the EU and in the character, scope and objectives of the Economic and Monetary Union which the Irish people signed up to when they approved by referendum the 1992 Maastricht and the 2009 Lisbon Treaties. The amendment to Article 136 would extend the scope of the existing EU treaties significantly and bears a huge weight of legal/political consequences. It reads: “The Member States whose currency is the euro may establish a stability mechanism to be activated if indispensable to safeguard the stability of the euro area as a whole. The granting of any required financial assistance under the mechanism will be made subject to strict conditionality.”
Approval or non-approval by Ireland of the authorization by the 27 EU States of this permanent bailout fund for the Eurozone is the only thing on which the State still has a veto – unless the Dáil and Seanad throw that veto away by failing to insist on it being used. That is why the media and opinion-formers should urge the Government to exercise it. If the Government is too afraid of the wrath of “Merkozy” and the Brussels Commission to do that, our media and public opinion should call on some public-spirited party or individual to challenge that failure before the Courts.
For if a referendum on approval of the European Council Decision to adopt the Art.136 EU amendment were found to be constitutionally necessary in Ireland, it would put the State in a powerful position to exact major concessions on the national debt, on the Anglo-Irish promissory notes and on the terms of the Troika’s Memorandum of Understanding in order to persuade Irish voters to agree by referendum to the Art.136 amendment of the EU Treaties permitting a permanent Eurozone bailout fund to be established. Why should the Government throw away Ireland’s best bargaining card in this way? Why should it be afraid to take the only course which offers hope of rapid radical relief to the people’s current dire straits?
Such a constitutional challenge, if it were to be taken, would need to show that the Article 136 TFEU amendment to the EU Treaties is a claim to, and an assertion of, a significant extension of EU powers, scope and competences which cannot legally be brought into force in Ireland by the “simplifed” EU treaty revision procedure of Art.48(6) TEU that was used to adopt the amendment, whatever may be the constitutional position in the other EU States … And that therefore approving it in Ireland requires prior permission from voters in a referendum, as a significant surrender of Irish State sovereignty would be involved. It is not just issues of EU law that are at stake here. It is widely recognised among economists that the proposed ESM Treaty and the permanent funding mechanism it would establish for the Eurozone, with their accompanying apparatus of controls of national budgets, go nowhere near to solving the current financial crisis of the euro area. A challenge to the constitutionality of the Government’s proposed mode of approval of the Art.136 TFEU amendment would open a valuable opportunity for the adoption by the Eurozone Member States of a more rational and effective scheme for dealing with the area’s financial crisis, with more emphasis on stimulating economic growth and demand across the area, to the benefit of the common good of Ireland and the other Eurozone countries.
STEP 1 TO THE NEW EMU:
The 27-MEMBER EUROPEAN COUNCIL “DECISION” TO MAKE THE ART.136 TFEU AMENDMENT TO THE EU TREATIES
This “Decision” of the European Council of 27 Prime Ministers and Presidents was made in March 2011 (Decision 2011/199/EU) and gives permission under EU law to the 17 Eurozone Member States to set up a permanent bailout fund for the Eurozone. Ireland has a veto on this Decision, for before it can come into force it must be approved by all 27 EU Member States “in accordance with their respective constitutional requirements”. This means that in Ireland the European Council “Decision” to make this Art.136 amendment requires approval either by the Oireachtas or by the people in a referendum. It calls for the latter if the amendment – despite the implicit claim of those deciding on it that it does not extend EU powers – does in fact extend them, and does in effect entail a surrender of State sovereignty which goes beyond the original “license” which the Irish people gave the State in earlier referendums to join a “developing” European Community/Union.
In other words, approving the “Decision” of the European Council to amend the EU Treaties requires a referendum in Ireland if it can be shown to widen the scope and objectives of the present EU treaties by significantly increasing the powers of the EU. Under the so-called “self-amending” Article 48(6) TEU which was inserted in the EU treaties by the Treaty of Lisbon, the 27-Member European Council of Prime Ministers and Presidents can take decisions to amend most provisions in the policy areas of the EU treaties as long as such amendment does not increase the Union’s powers/competences. For the European Council to purport to authorise under EU law the setting up of a permanent bail-out fund for a sub-group of EU States can arguably be said to be a significant claim to, and assertion of, increased powers for the EU as a whole, as up to now the EU treaties provided for no such fund or mechanism in the Monetary Union either directly or indirectly. The treaties provided rather for an EU Monetary Union which would not require or permit cross-national “bailouts” under any circumstances and would be run on quite different principles to what is being now proposed.
If the Eurozone can set up a Stability Mechanism “intergovernmentally” amongst its 17 Member States, why is any amendment to the EU Treaties by the 27 to permit that needed? It seems plausible to contend therefore that this Art.136 TFEU amendment would put the Economic and Monetary Union which Ireland signed up to when the people ratified the Maastricht and Lisbon Treaties on a quite new and different basis. This new basis would entail a significant move towards a Fiscal Union for the 17 Eurozone States in addition to the Monetary Union, as well as an Irish commitment to a panoply of accompanying supranational controls over national budgetary policy. Therefore it arguably would be unconstitutional for the Oireachtas to attempt to give the necessary approval of such a European Council Decision without an Irish referendum.
STEP 2 TO THE NEW EMU:
THE EUROPEAN STABILITY MECHANISM TREATY (ESM) BETWEEN THE 17 EUROZONE STATES
The European Stability Mechanism Treaty sets up the European Stability Mechanism, an entity with legal personality of which Ireland would become a member. It sets out the institutional structure and rights and privileges of this “ Mechanism”. The Mechanism will include a permanent €500 billion bailout fund and the treaty stipulates the contributions which each of the 17 Eurozone Members must make to it in accordance with a “contribution key” annexed to it. The ESM Treaty provides that the fund may be increased later by agreement and there is already talk of increasing it. Ireland must contribute €11 billion to it “irrevocably and unconditionally” in various forms of capital. The ESM Treaty was signed by EU ambassadors on 2 February 2012 – replacing an earlier ESM Treaty which was signed by Minister Michael Noonan and other Eurozone Finance Ministers in July last year but which was never sent around for ratification. The 17 Eurozone States have agreed that this ESM Treaty No.2 will be ratified so that it can to come into force by July this year. The Government has in mind to bring it before the Oireachtas for approval in this session, so it is likely to be introduced to the Dáil on Tuesday or Wednesday of next week.
A Dáil motion to approve the ratification of the ESM Treaty for the 17 will presumably be taken at the same time as the motion to approve the “Decision” of the European Council of 27 Prime Ministers and Presidents to insert the Art.136 amendment into the EU Treaties by means of the “simplified” amendment procedure of Art.48(6) TEU. There will presumably also be an accompanying European Communities Amendment Bill to implement the Art.136 TFEU amendment and the provisions of the consequential ESM Treaty in Irish domestic law.
The ESM Treaty is to come into force once it is ratified by signatories representing 90% of the initial capital of the fund, so that Ireland has no veto on it.
The preamble to the ESM Treaty states (Recital 5) that it is agreed that money from the permanent ESM fund will only be given to Eurozone States which have ratified the later “Fiscal Compact Treaty” and its permanent balanced budget rule or “debt brake” and that the two treaties are complementary.
In 2011 Attorney-General, Mr Paul Gallagher SC advised the then Fianna Fail Government that there would be no constitutional problem in Ireland with the European Council “Decision” to make the Article 136 TFEU amendment to the EU treaties because, he advised, authorizing a sub-group of 17 Eurozone States to set up a permanent bailout fund for the Euro area does not extend the competences of the EU. Mr Gallagher had previously advised Messrs Cowen and Lenihan on the night of the September 2008 blanket guarantee for the Irish banks. He also advised that the ESM Treaty for the Eurozone which would be authorized by the Art.136 TFEU amendment to the EU treaties would not raise constitutional problems here either. That advice was given however in relation to ESM Treaty No. 1 which was later signed by Finance Minister Michael Noonan and the other Eurozone Finance Ministers but was never sent around for ratification. Mr Gallagher was not dealing with the agreement amongst the Eurozone States in ESM Treaty No. 2 that any money from the permanent bailout fund when that was set up would only be given to States which had inserted a ”debt brake” into their national Constitutions or the equivalent under the provisions of the Fiscal Compact Treaty, for Chancellor Mertkel had not yet even mooted that.
It is desirable that the advice of Attorney-General Máire Whelan SC on the constitutionality of the Art.136 TFEU amendment to the EU treaties and the ESM Treaty No.2 which follows from that, should be made available to the public, preferably through the medium of a Government White Paper.
[N.B. It is unusual for an EU-related treaty to be signed by anyone other than EU Prime Ministers and Presidents. In the case of the ESM Treaty (No. 2) it was signed by Eurozone ambassadors to the EU on 2 February 2012. Was this meant to minimize public attention to its signing?]
A THIRD STEP THAT HAS DISTRACTED ATTENTION IN IRELAND FROM THE FIRST TWO…
THE “FISCAL COMPACT TREATY” (TREATY ON STABILITY, COORDINATION AND GOVERNANCE IN THE ECONOMIC AND MONETARY UNION)
The Fiscal Compact Treaty, properly titled the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union (TSCG), was insisted on by German Chancellor Angela Merkel over winter 2011, essentially as a gesture towards German public opinion. When the Deutschmark was being abolished in 1999 the German people were not told that they would be committed to an EU Monetary Union with a huge permanent bailout fund to which they would be expected to be the principal net contributors. Rather they were told instead that the “no-bailout clause” of the EU treaties, Art.125 TFEU, guaranteed that there would be no bailouts by the others for any Member State using the single currency which did not abide by the excessive deficit rules. Germans are naturally indignant at the radical change in the EMU that is now being proposed. Chancellor Merkel’s insistence on a permanent balance budget provision /”debt brake” being inserted into national Constitutions by means of the Fiscal Compact Treaty, as was done in Germany two years ago, is meant to reassure her voting public that in budgetary matters the other 16 Member States of the Eurozone, including Ireland, will henceforth behave like Germans! Yet most economists regard a permanent balanced budget rule as absurdly inflexible, for Governments do need to run deficits on occasion in order to stimulate their economies and expand economic demand when that slumps heavily in their domestic or foreign markets.
Approving the European Council Decision to insert the Art.136 amendment into the EU treaties, ratifying the subsequent ESM Treaty with its strict budgetary rules in early March and ratifying what is stated to be the “complementary” Fiscal Compact Treaty towards the end of this year will have the effect of removing virtually the whole area of budgetary policy from the national to the supranational level of the Eurozone – without a referendum in Ireland or even a Government White Paper on the implications of that. It should be noted that the additional wording of Art.136, which is being asked to carry a heavy burden of subsequent changes, does not amend or even refer to the “no bailout clause” of Art.125 TFEU.
These developments would remove much of the stuff of national decision-making and normal party politics from the arena of democratic consideration and debate in this country.
The provisions of the Fiscal Compact Treaty were agreed at the EU summit on 30 January but they will not be put into proper treaty form and signed by the 17 Eurozone States until March – probably at the EU/Eurozone summit meeting on next Friday. They need not be ratified until the end of this year. This treaty provides for a permanent balanced budget rule or “debt brake” of 0.5% of GDP in any one year to be inserted in Eurozone national Constitutions or the equivalent. All 17 Eurozone States must ratify this treaty, but it comes into force once it is ratified by 12 of them, so that Ireland does not have a veto on it.
The preamble to the Fiscal Compact Treaty refers to the fact that money from the new permanent bailout fund (the ESM fund) will only be given to States which have ratified it. As treaties for the 17-Member Eurozone, both the ESM Treaty and the Fiscal Compact Treaty derive from the 27-Member amendment to the EU Treaties referred to in Step 1 above. Most of the provisions of the Fiscal Compact Treaty overlap with the so-called “Six Pack” of EU regulations and a directive which constitutes the “Reinforced Stability and Growth Pact”, and which were put into EU law last December.
It is important to note that the European Stability Mechanism Treaty and the Fiscal Compact Treaty are not EU treaties binding in EU law, but are rather “intergovernmental treaties” amongst the 17 Member States of the Eurozone, although they provide for the full involvement of the EU Commission and the European Court of Justice in their day-to-day implementation.
The Government has invited public submissions on this Fiscal Compact Treaty to be made to an Oireachtas Committee over the coming months, which is a most unusual development. Presumably this is meant to distract media and public attention from the implications of approving the Art.136 amendment to the EU Treaties, on which Ireland has a veto, without a referendum, and ratifying the ESM Treaty which derives from that. These are clear moves towards a fiscal union for the Eurozone, and the Oireachtas is being invited to approve them in the next couple of weeks without any significant public discussion, at least to judge by the virtual total silence on them to date. At a minimum the Irish public deserves a White Paper on these hugely important developments before Ireland’s last EU veto of significance is abandoned and it becomes too late to save further large areas of our national democracy.Issued for public information by the National Platform EU Research and Information Centre February 27, 2012 janthonycoughlan at gmail dot com 24 Crawford Ave. Dublin 9 01-8305792
First published online @ http://www.indymedia.ie/article/101440
Filed under: Tax Harmonisation & Economic Effects, EU Superstate, Irish Economy, Euro / Monetary Union, Referendum, Fiscal Union | Clibeanna: ireland, European Stability Mechanism Treaty, euro, eurozone, fiscal union, sarkozy, eu treaties, irish, treaty, Economic and Monetary Union, temporary Eurozone bailout fund, European Stability Facility, EFSF, permanent €500 billion bailout fund, European Stability Mechanism, ESM, Fiscal Compact Treaty, Treaty on Stability, Coordination and Governance in the Economic and Monetary Union, TSCG, Angela Merkel, merkozy | 4 Comments »