Yes Taoiseach, but if we’re going to have a Referendum why not have a meaningful one?

So, it’s official. The Irish people want a referendum, whether the Constitution says they need one or not? Micheal Martin thinks it’s overblown, and that the real problem is that the current treaty does not actually address any of the real problems facing the Irish (nay, the European) economy:

For all of the fighting in December about the place of existing European Union treaties and institutions, existing treaty law will remain fully in force. The draft treaty explicitly states that the whole issue of real change is being kicked down the road – with a target for doing something within five years.

As drafted, it is a minimalist pact which does little more than put a small amount of extra enforcement behind policies which are already incorporated in EU regulations.

The treaty’s fiscal targets are those which were agreed last year and finalised in a regulation which came into force in November.

Some groups are talking about how this pact is revolutionary and dangerous. This is nonsense. As drafted it is a tokenistic effort which entrenches already agreed policies but fails completely to address the causes of the crisis.

In a thinly veiled dig at Sinn Fein (and their eagerness to have another good day in the High Court), he talks about groups in a rush ‘to have something to campaign against’. But he then goes on to suggest that instead of putting all its efforts to avoid a referendum vote, the Irish government should

…make sure that something emerges which is worth voting on. As things stand, the problem with this treaty is not that it does too much, it is that it does nothing about the real causes of this crisis. In particular it completely ignores the policies required to return growth and job creation to Europe.

Whether of course Ireland (or any of the small countries whose courage to stand up for themselves Mr Martin plainly commends) has the means never mind the clout to withstand Frau Bundeskanzlerin’s persistent calls for coercive powers over smaller countries (which pretty much comprises all of the EU these days), is another question.

But what Mr Martin is looking for is a premise upon which this government might fight and win (unlike the last) the first time round.

, , ,

  • George

    Sounds to me that Martin wants one referendum that hands over all the power to the EU now rather than some voting on some piecemeal one in 2012 full in the knowledge that the bitterer pill to swallow will come in a couple of years.

    We only need a referendum whenever more sovereignty is handed over so why the big hurry to hand it over in advance Michéal?

  • giantstairs

    I couldn’t give a monkey’s what they do because they are a foreign country, just like Sarkozy and his antics, both of which have probably a roughly equal influence on my future life.

  • Mick Fealty

    It’s a moot point what constitutes ‘foreign’ in a pooled network like the EU. The quality of their decisions matters a great deal to everyone in NI, whatever else you might feel.

    The Republic as well as being foreign, is also NI’s key export market. Ask any decent sized dairyman within fifty miles of the border? If you are interested in expanding the NI economy, you should also have an interest in what affects it, surely?

  • michael-mcivor

    This decade is going to be remembered for the one with all those Referendums- interesting times or not there could be big change on the way-

    There is nothing wrong with having a good day at the high Court- especilly if you win and you were right-

  • Mick Fealty

    Or the bookies Michael.

  • John Ó Néill

    My understanding is that SF, like the govt, are seeking legal advice and I’ve heard a couple of interviews where SF spokespersons have said that they have no interest in recourse to the High Court or Supreme Court if there is no reason to go there.
    Karen Devine, a lecturer in DCU’s School of Law and Government, was speaking on Vincent Browne’s show last night and reckoned that, due to precedents like Crotty v An Taoiseach, it would be likely that a decision not to go to a referendum would be overturned by the Supreme Court due to the fact that the terms of the new treaty would remove the budgeting power from the Oireachtas (a rather ironic point under the circumstances, but a constitutional one nonetheless). That was just before the publication of the last draft of the treaty text, though, and it appears that there is sufficient creative ambiguity around the role of the Court of Justice and the deficit limits to bypass a referendum, although any ambiguity will likely find someone willing to test it in court.
    Given that, at a time of global recession and austerity Germany has record low unemployment when other states are hitting 20% and higher, some of the euro-sceptics may challenge the treaty on the grounds that it is not balanced towards the EU states but Germany. Peripheral austerity, to preserve the finance houses in Frankfurt, Paris etc, isn’t being mirrored by similar austerity in Germany, but rather by German leveraging the mechanisms of the EU and ECB for German interests (and these weren’t agreed as Martin claims, but introduced as the six-pack of technical amendments late in 2011).

  • Mick Fealty

    Indeed John. But you don’t get the full picture unless you also take in Dan O’Brien and the German lawyer who both point out how trivial the matter to be put to the people is likely to be.

    Moreover, it is also clumsy for the govt to set foreign policy in such a manner that the judiciary rather than the executive get final say on said policy.

    It’s clever positioning from the FF leader for what is not likely to be a very clever fight.

  • John Ó Néill

    But this is purely a matter of positioning – none of the three on last night’s discussion had seen the unpublished text, so all were talking in the dark. O’Brien and Ursula Tipp (the German lawyer) both pushed the nothing to see here line which will surely be the government’s no-referendum position. Devine simply argued that on precedent it was likely to end up in the Supreme Court and would go to a referendum. The optics of a consultation aside, I’d guess the AG had already indicated what type of wording would avoid a referendum so I can’t see one happening.

    At the same time, I’d guess the bigger danger here is that part of the pro-referendum sentiment identifies the EU instruments and the machinations of the politicians as ways to bypass public engagement (i.e. transparency) in these processes. Which is a danger for anyone on the no-referendum side of the debate (Martin included). Effectively that is what became the register of the Lisbon debates, regardless of whether it reflected the actual substance of the treaty (judging by some of the early noises today, a lot of the Yes arguments from the Lisbon campaigns – good for jobs, etc – are being dusted off again just in case). But people will see that lack of engagement as reflecting the perceived divorce of the taxpayer from the core social transaction, in that taxes no longer pay for services, but simply service someone else’s debts. This resonates with the perception of how we keep being told that fiscal mechanisms and the markets seem to require bottom up austerity (yet seem to preserve clean profit lines at the top). This also requires the off-setting of private finance losses in one EU state onto the sovereign debt in another (the most significant context of all of this). As much as they can dream otherwise, Martin and FF will clearly be identified with the problematic aspects of these.

  • wee buns

    ” bypass public engagement (i.e. transparency) in these processes. Which is a danger for anyone on the no-referendum side of the debate (Martin included). Effectively that is what became the register of the Lisbon debates, regardless of whether it reflected the actual substance of the treaty ..’’

    Good point – reflected in survey findings re Lisbon 1 & 2 = results show that Yes votes were often not based on direct support for the Treaty, but based on support for the Government, family member etc – whereas No voters being more likely to find actual cause to vote against the Treaty.

    (Unfortunately mislaid link to akshal survey…)

  • Mick Fealty

    wee buns,

    I’d like to see that survey. All the evidence I’ve seen on Lisbon 1 suggests that a large chunk of the No vote was defensive, in response to a derisory Yes campaign that self destructed through sheer lack of preparation and the incongruity of the question being asked.


    Martin is anti referendum? Given as you have already pointed out, even SF are hedging, that’s a bit of false dichotomy, surely? I expect Crotty will shoo them all into the fold since the judgement pretty much locks any foreign treaty which seeks to trade sovereign power into amending constitutional law.

    So Martin is positioning himself so that when a referendum comes he can slap both the Irish Government for bringing forth such an inadequate proposition and Sinn Fein for being reflexively anti European and seeking to take unnecessary risks with Ireland’s economic future.

    It’s a good match with the FF base (both past and present) since, unlike SF’s support, it is probably the most pro European of any of the southern parties.

    Given current circumstances, will it work for him? Well, so long as the whole sheebang doesn’t collapse in the meantime, probably.

    But Greece is not going into that nice austerely furnished German fold, and Italy’s structural reforms remain nothing more than good intentions on paper, not to mention all that toxic bank debt being paid down by European taxpayers, I’d not be counting too many chickens too far ahead.

  • Alias

    I don’t think he is ‘positioning’. Martin has always been fanatically euro-federalist. He is simply saying what he has always said: “we need more EU”. His goal is set out in the Treaty of Rome.

    True, he can beat the government up for not demanding that the EU demands greater fiscal control from its Member States insofar as these fiscal controls could be used for fiscal stimulus of the economy (as the Irish state is bankrupt due to the EU forcing it to underwrite German and French banks, etc, it has no money to finance fiscal stimulus so it may as well surrender than useless sovereign power to the EU too), but is there really any votes in lamenting that the EU isn’t doing what the government could have done itself if unmitigated europhiles such as Mr Martin didn’t give the sovereign powers away and didn’t sacrifice the economic welfare of the nation to bail-out the eurosystem and his Treaty of Rome dream?

    He is only reduced to crying “Why isn’t the EU doing something?” because he has placed the country into a position where it is dependent on the EU to do something. As John pointed out, the EU is “doing something” for Germany. Why were German car sales up 8% last year while Italian car sales were down 15%? Because ‘one-size-fits-all policies fits one and not all. Ask Mario Draghi. Indeed, as Germany booms, Mr Draghi will come under pressure to increase interest rates. Won’t that one-size-fits-all policy work wonders for the Irish borrowers and struggling mortage holders…

    In regard to Lisbon, Martin urged other Member States to proceed with their ratification procedures after the treaty was rejected by the Irish people. That treason was undertaken for the express purpose of forcing the Irish people into a 26:1 ‘us against all of them’ showdown, wherein it was hoped the fickle Irish would backdown. Like the rest of his europhile ilk, they are the EU’s men in Ireland.

  • Mick Fealty

    I would not be so sure of that. This is not an EU pact. In fact it’s being forged in spite of the European Commission and Parliament.

  • John Ó Néill

    Mick – I’d meant that Martin/FF, despite the posturing over a referendum, still want the measures in place (they aren’t exactly calling for a no vote). Already the good-for-jobs nonsense is being spun out (which is true depending on where you are in the EU as I quoted earlier). This is about privileging (and continuing to protect) the speculative virtual economy by taxing the hell out of the real economy to support it, and it won’t play well with people at the moment as pro-EU sentiment has taken a big hit. And the FG/Lab reflex to problems is still to point and shout “Look, they are Fianna Fail!”to tie Martin & co into every problem.

  • tuatha

    As far as ceding the Oireachtas’ budgetary powers to a foreign entity, surely that’s done been done & gorn?
    As when the Bundestag saw our 2012 Budget before the Dail.
    Or that Troika thingy – there was outright shock/horror, I tells ye, SHOCK!, at the suggestion of an Ubergruppenbeobachter being seconded by Merkozy to vet Greek government financial decisions but we welcomed our alien Overlords months ago.

  • Mick Fealty

    Not sure I get your meaning with ‘virtual econony’. DO you mean the markets?

  • John Ó Néill

    Economy based on trading against future profits, rather than actual physical economic activity. Am not saying it is completely unnecessary but that refusing to reduce the scale of the financial industry is a core problem here.

  • Neville Bagnall

    Martin is mostly right. The Treaty is a sideshow, aimed primarily at the German taxpayer and provides neither a solution to the current problems nor will it prevent future crisis.

    That is not to say that it completely pointless. First and not for nothing it is a significant strengthening of the Stability and Growth Pact Legislation. That provides more equality between member states. Remember that the first breach of the SGP rules came about when Germany and France overruled smaller states. They could not do that under this Treaty.

    Secondly, to the extent that it provides comfort to German taxpayers, it brings Eurobonds, debt restructuring or greater fiscal transfers closer. And one or more of those will be in the final resolution.

    As for fiscal restriction. We have already seen that the markets limit a nations fiscal freedom, either through rate increases or refusal to lend. Currently governments aim to run balanced budget and borrow in recessions. Under the new rules we should aim to run a budget surplus and spend our savings in a recession. As a social democrat (in favour of regular state investment rather than debt financing and public-private partnership/investment) I’d prefer that model. I don’t see that it is significantly more fiscally restrictive that what we’ve always done. The good thing about this crisis is that never again can it be said that we cannot afford to raise and invest taxes in the economy. Even the most left wing of governments would not have pumped as much public money down the drain as has happened in the last few years.

    On the ex-ante declaration of borrowing requirements, or even the deficit procedure, why is our budgetary process so opaque?
    Many countries manage to have a long, drawn out and largely public debate on their budget each year, with a Government proposal that is examined and modified over a number of months, often with expert testimony and advice sought by parliamentarians before it is finalised. We have a tradition of secrecy surrounding the budget, a tradition that is largely dysfunctional (leaks and balloons) and unnecessary.

    Martin suggests a number of more important measures than this Treaty. But he well knows that none of them are on the table at this time. He’s playing politics. Well, shock, horror! Who’da thought?

    The Treaty should be voted on. We should vote on the Treaty and its post-crisis implications. If anyone can suggest how that can be achieved I’d love to hear it. If there is a vote, a significant section of the voters will vote on everything but the Treaty. Still, it should be voted on.

    A solution to the crisis is still a ways off, and might not even require a Treaty, as its mostly about economics and politics, not treaties and institutions.

  • Alias

    Mick, there are no ‘temporary little arrangements’ with the EU. Once you give power away to the EU, you never get it back. This pact might be bilateral but it will eventually be absorbed into the EU treaties so it is a “first step” in the EU’s customary step-by-step approach to ever-closer union, particularly fiscal union. As the ECJ has made explicit, Member States have no legal right to reclaim any paricular sovereign powers that they forfeit.

    “It is the first step toward a fiscal union.” – ECB President Mario Draghi

    Mario Draghi understands that perfectly.

    Fiscal control simply means that Germany can be assured that eurozone members can be forced to transfer a greater percentage of their tax revenue to fiscal transfers to German banks rather than spend these taxes for the purposes for which they were raised, e.g. healthcare, education, infrastructure, etc.

    Martin might think he is being ‘clever’ to say that no principle was conceded here (because it was actually conceded months ago) but the principle that nations should have sovereign authority over their own national budgets was most certainly conceded, and Mr Martin as a fanatical euro-federalist raises no objection to that loss of sovereignty, merely acting to finesse its theft by denying the theft occured.

  • wee buns

    Key (spontaneous) factor behinfd No vote – lack of understanding mentioned by 45%.
    ‘Soft No’ vote = 65% give reason of not understanding the Treaty.
    ‘Hard No’ vote = 30% cite issues relating to the Treaty itself.
    Loss of power to large countries is also offered as (13%) of No vote.
    ” Findings compound the overall effect of No voters beong more likey to find actual cause to vote against the TReaty.”

  • Mick Fealty

    Thanks wee buns!! My next question is, who would have understood it? It was a complex document I’m not even sure it’s sternest critics understood as a whole.

    That lack of coherence seems only to copper fasten the status quo, not as radicals like Crotty who thought it would underpin independent sovereignty.

  • Alias

    Incidentally, Germany circulated a secret document (later leaked) called “Assurance of Compliance in the 2nd GRC Programme” to all heads of government wherein it sets out who is actually in control of Greece and what the sole function of the Greek state is to be under German control:

    1. Absolute priority to debt service
    Greece has to legally commit itself to giving absolute priority to future debt service. This commitment has to be legally enshrined by the Greek Parliament. State revenues are to be used first and foremost for debt service, only any remaining revenue may be used to finance primary expenditure. This will reassure public and private creditors that the Hellenic Republic will honour its comittments after PSI and will positively influence market access. De facto elimination of the possibility of a default would make the threat of a non-disbursement of a GRC II tranche much more credible. If a future tranche is not disbursed, Greece can not threaten its lenders with a default, but will instead have to accept further cuts in primary expenditures as the only possible consequence of any non-disbursement.

    2. Transfer of national budgetary sovereignty
    Budget consolidation has to be put under a strict steering and control system. Given the disappointing compliance so far, Greece has to accept shifting budgetary sovereignty to the European level for a certain period of time. A budget commissioner has to be appointed by the Eurogroup with the task of ensuring budgetary control. He must have the power a) to implement a centralized reporting and surveillance system covering all major blocks of expenditure in the Greek budget, b) to veto decisions not in line with the budgetary targets set by the Troika and c) will be tasked to ensure compliance with the above mentioned rule to prioritize debt service.

    The primary function of the Greek government under de facto German colonisation is to extract resources and wealth from its citizens which are to be duly transferred to German banks. All other functions of the state are secondary, and can be exercised only after the primary function is satisfied.

    What Michael Martin isn’t telling you is that Ireland is under the same regime, and he is eager to collaborate with it.

  • Mick Fealty


    Isn’t this just credit law for nations?

  • Alias

    No, it is an abandonment of the principle of democracy and the purpose of states and sovereign nations – that they exist to serve the interests of their nations.

    Germany has reduced the Greek state to the function of serving the German nation: “State revenues are to be used first and foremost for debt service, only any remaining revenue may be used to finance primary expenditure.”

    Show me a constitution that has that function as its first article.

  • There has been a lot of fretting about the “loss of sovereignty” involved in the austerity programme, but it is focusing on the wrong problem. Countries lose sovereignty the moment they borrow money from the bond market, just as an individual loses his personal freedom when he takes out a mortgage or a car loan. You get benefits now, in return for commitments that you are expected to honour. If you can’t or won’t honour those commitments then you’re in trouble. Arguing that states are exempt from honouring their commitments (absolute sovereignty) is a recipe for international anarchy.

    For decades, governments have borrowed on the assumption that they will be able to roll over the debt indefinitely, and investors have bought government bonds on the assumption that they are a safe investment. It was a convenient fiction, but was bound to come unstuck eventually.

    Alias, democracy only implies that states are governed by their people – it is a purely internal arrangement. It does not negate the duty of the state (as a corporate entity) to its creditors. Sovereignty does not mean doing whatever you want, it means taking responsibility for your own actions. Now, you can propose debt restructuring as a solution, but there’s no point bleating about how unjust it is that sovereign debt holders have power over states – we gave that power to them when we mismanaged our economy.

  • Mick Fealty

    Andrew makes a fair point. If sovereign states are going to splash cash they don’t have the means to service, that means either doing what Argentina did and what Iceland is doing now and default, or have others bail you out.

    In the early days of the US Dollar there was no fiscal union. States just defaulted. What’s happening here, I think, is the beginning of a staged process that will allow states to opt in or out over an period of time in hopes of getting towards something more stable.

  • John Ó Néill

    The current lending system now clearly blurs the line between private and public borrowing and lending (and lenders don’t automatically have to lend, either – they should assess the risk of default beforehand).

    At the minute, sovereign states (that still can) borrow cash on private markets but, in the Irish case, instead of the lender having to see the borrower default (presumably as much for the lender not sufficiently appraising the risk as anything else – they could have chosen not to lend if they believed there was a risk of default – this system should work both ways). But the lenders also deploy their own government to leverage the money back from the borrowing state even though that government wasn’t party to the original lending. The bigger issue here is that the offices of the EU were/are/can be used by the lender’s state governments to then socialise the lending via the ECB and transfer the loans into the public sphere, when, in the Irish case, neither the ECB nor the German government were party to the original loans. Whilst the likes of the German government (or Angela Merkel, at least) intervened and blurred that relationship between sovereign borrowing and private lending with third party interventions, states won’t be allowed to default because of who they are now politically/diplomatically involved with. It’s not so much that the issue for sovereign borrowing is the lenders, but, the third party interventions and the idea that the shared values of the EU extend into the economic sphere now looks fatally damaged.

    The underlying method also seems familiar.

  • Mick Fealty

    It’s the bank guarantee that blurs that distinction. That was a domestic decision taken in spite of the prevailing views in Europe John.

  • John Ó Néill

    And based on some pretty suspect information from the banks as well.

  • Mick Fealty

    Indeed. But the larger point is that Ireland is in a mess which is in large part of its own doing. German banks lent wrecklessly, sure. But now they have money, real money and none of the peripheral states do. Now they are demanding tight fiscal rules as the price of staying in the Euro. What scope does Ireland realistically have to buck that?

    In addition is also obvious that if Crotty was intended to preserve Irish sovereignty. It’s not worked in the way it was originally intended.

  • wee buns

    Do yuou suggest that because of Crotty’s precedent, EU key players were more inclined to resort to means of obfuscation?

    Crotty intended to protect, and that is all we have legally – and the argument of sovereignty being already forfeited is a skinny argument for further copper fastening.

    Nobody was/is supposed to understand Lisbon 1, 2, or 37 …

    YET as has been shown by that survey, issues relating directly to the Treaty actually were understood (if not in their entirety) by a key group of No voters.

    Surely Crotty’s very existence is what encourages us to continue to be an informed and questioning electorate?

    A much overlooked & under reported aspect of the upper echelon Troughers, was a set of wildly grandiose plans to transform Dublin into a financial centre on a par with Frankfurt or London.

    Credit cards being rammed down the throats of unemployed and low income workers was a not an ethical component of these grandiose delusions, and must not – on principle – be allowed to be used as justification for socializing debt.

  • Alias

    “Alias, democracy only implies that states are governed by their people – it is a purely internal arrangement.”

    So we can both agree that democracy and EU rule are incomptible.

    “It does not negate the duty of the state (as a corporate entity) to its creditors.”

    Who said it did?

    “Sovereignty does not mean doing whatever you want, it means taking responsibility for your own actions.”

    It means having the power to determine your own affairs. The issue here is taking responsibility for the actions of others because you do not have the sovereignty to decide for yourself if you want to bail-out French and German banks or not.

    I didn’t power half a million from reckless German lenders, so I fail to see where I have a moral obligation to repay that amount per capita. I might consider of 50k reasonable if that money was borrowed by the state to fund the welfare of the nation, since I’d consider it a national duty to help out my own nation. I don’t consider that I have any duty whatsover to contribute a Ferrari or a villa for the upkeep of a bondholder’s mistress.

    The problem here is that when a nation gives its sovereignty away to a third party such as the EU, that third party then exercises that sovereignty to promote its own interests and not the redundant interests of the nation that gave it away.

    Since others have the sovereignty, they get to determine how it is to be used. In this instance, it is to be used to bail-out massively over-leveraged German banks.

    Let’s have no nonsense about German prudence: no major German bank has a leverage ratio of less than 52. A safe leverage ratio is 7. These were gamblers who would now be bankrupt if they did not use the sovereignty that other nations foolishly gave away for the express purpose of forcing states to underwrite their losses.

    “Now, you can propose debt restructuring as a solution, but there’s no point bleating about how unjust it is that sovereign debt holders have power over states – we gave that power to them when we mismanaged our economy.”

    As Martin pointed out, the Irish economy was managed in accordance with the EU’s Maastricht pact. It ran a fiscal surplus. The problem for Ireland was not caused by lack of fiscal control, so extra fiscal controls is a solution for an irrelevant problem.

    The problem was caused by the EU exercising the sovereignty that the nation gave away to implement monetary and macroeconomic policies that were utterly destructive to the Irish economy. In addition, EC introduced a Directive that allowed banks to become massively overleveraged. In contrast, the Irish Central Bank never permitted an Irish bank to get above a leverage ratio of 6 when it still had the sovereignty to regulate them.

    The Irish central bank is now 100% under the exectutive control of the ECB under the Maastricht, and it is that institution which failed to keep the banks in check. Under one size fits all, if German banks wanted to leverage up an insane ratio of 52, then Irish banks could do the same under the same EU law.

    What there is no point “bleating about” is what Germany is bleating about: that it’s own economy will collapse when a default occurs. A writedown of a mere 2% of a German banks assets is enough to render it insolvent.

    Having lost its economy under the existing rules, Germany simply changed the rules. The old rule under which their reckless banks gambled away their nation’s wealth was that taxpayers were not responsible for contracts undertaken with private businesses, whereas the new rule is that all old contracts to private business must be underwritten by taxpayers.

  • Alias

    To come back to this point about the Irish Central Bank. Folks are deliberely fed the misinformation that this institution operates in the interests of the Irish state and that it takes its policy and direction from the Irish government.

    In reality, the Irish Central Bank is an instrument of the ECB and takes its policy and guidelines from the ECB. It is unconstitutional under the Maastricht Treaty for the government to offer any advice whatsoever to the Irish Central Bank about what policy might be deemed helpful to the Irish economy or the nation.

    The Irish Central Bank is an instrument of the ECB and under its sole executive control. It’s regulation is EU regulation, determined by the ECB alone in its sole interests. If you want to blame this institution for its failure to regulate banks then understand that you are actually (and correctly) blaming the EU for its regulation of Irish banks.

  • Alias

    Also, let’s compare how the Irish Central Bank controlled the external debt when it was a sovereign institution of the Irish state to how it controlled the external debt when sovereignty over it was given away to the EU.

    Ireland’s external debt spiked to a massive 1,84 trillion euros in less than 10 years of EU rule.

    Less than 10 years prior to that, in 1999, the external debt stood at a mere 11 billion punts.

    That is what happens when you give your sovereignty away.

  • tuatha

    Alias – thanks for those numbers. Printed out and stuck on my wall as, if not aide de memoir then memento mori for any who come after, so that they will know how we were betrayed and sold into servitude.

  • Alias,

    You consistently and wilfully confuse sovereignty with power. They are not as simply related as you imply: ask Swaziland or Bangladesh.

    The issue here is taking responsibility for the actions of others

    Cleaning up other people’s mess is an unfortunate fact of life.

    So we can both agree that democracy and EU rule are incomptible.

    The EU has its problems but it is not anti-democratic. Sovereignty is not indivisible.

    As Martin pointed out, the Irish economy was managed in accordance with the EU’s Maastricht pact. It ran a fiscal surplus. The problem for Ireland was not caused by lack of fiscal control, so extra fiscal controls is a solution for an irrelevant problem.

    Having a fiscal surplus is not the be-all and end-all of managing an economy. We were destroyed by an asset-price bubble that people should have seen coming. Stamp duty should have been hiked aggressively at the first sign of it taking off, and the surpluses used to build up a sovereign-wealth fund to underwrite our pension system. Monetary policy is not the only tool available to combat inflation.

    Bank leveraging is a separate (and global) problem, though of course the two are linked. Had Ireland taken action on asset prices, the effects of the global bank crash would have been much less severe.

  • John Ó Néill

    What scope does Ireland realistically have to buck that?

    The only options left to the Republic at the time of the bank guarantee, and later, were/are nuclear. If government was to properly investigate the information flows that were available at the time of the bank crisis on which decision making was based and evaluate them against corporate enforcement, company law and other relevant criminal codes, it does not take a genius to recognise that the guarantee was based on either inaccurate or false data and should have been voided immediately. The pace of the Anglo investigation is so slow that there is widespread suspicion that it won’t reach the DPP before the last unsecured, unguaranteed bonds are paid out (why these are being paid out whilst a Garda investigation is ongoing into Anglo seems odd). Given the weird patterning of high profile arrests for questioning coinciding with bad fiscal news, the idea that there has been political direction to the Gardai around the timings isn’t as far fetched as it sounds.

    The nuclear option is a default of one form or other. The alternative is an extraordinarily protracted period of up to 20 years where repayments on the loans and interest will equate to the state’s revenue from income tax. This isn’t a viable business model for any organisation.

    And the lessons learnt? The same finance houses can lend recklessly again having not taken their losses this time around, and, if they fail again, they can rely on the German or French government to use the offices of the ECB and EU to social their losses onto tax payers outside of their state. I was never much of a Eurosceptic, but this just ridicules the underlying ethos of the EU.

    As to the blame – estimates are that a third of the debt is mortgage debt (a chunk of which is serviced by the mortgages holders), a third is developers and a third bank losses. So clearly, we ‘didn’t all party’ or go ‘mad’ to use Enda’s phrase: two thirds of the state’s debts are down to a handful of Irish people and arguably that two thirds should not be featuring on the national debt in anyway. It is worth noting that part of the problem for the developers was that they built houses that there wasn’t demand for and created over-supply: people weren’t just buying them up for sake of it. The failures: whilst politicians can be blamed, but can largely claim their decision making was based on the information supplied by other parties, the other failures in bank lending and risk assessment and in the regulators office can still be subject to sufficient scope to provide a legal basis for default, rather than a moral or ethical one. Default and what would happen next (which simply isn’t clear) seems to be the only alternative to a complete generation of permanent austerity, or outright asset-stripping to stave it off.

  • John,

    Going nuclear now, before we are in primary surplus, would be catastrophic. There may be an argument for defaulting on the entire stock of debt once the books are balanced. We wouldn’t be able to borrow a red cent, but that might not be such a bad thing in the long run. Think of it as cutting up the credit card.

  • Alias

    “You consistently and wilfully confuse sovereignty with power. They are not as simply related as you imply: ask Swaziland or Bangladesh.”

    You are entitled to invent your own reality but you’re not entitled to insist that others must live in it.

    I regret to inform you that it is not “Swaziland or Bangladesh” to which you should turn for a definition of sovereignty. It is the justices of the Irish Supreme Court who will interpret what sovereignty means, and they will do so from a careful reading of how the Irish constitution has implicitly or explicitly defined it (particularly aricles 5 and 6). Alas, “Swaziland or Bangladesh” is as relevant as Timbuktu.

    Sovereignty is the authority of the collective to make decisions in its collective interest and to act upon them.

    Your bizarre ‘understanding’ of what sovereignty means was provided to you by Germany for its own selfish purpose: that it means taking responsibility for other peoples actions, and bailing out German banks accordingly.

  • Alias,

    You’re off the mark again. You say:

    Sovereignty is the authority of the collective to make decisions in its collective interest and to act upon them.

    with which I completely agree. But you have not addressed my point that having legal authority does not automatically give the state the capability to exercise it.

  • Alias

    That’s an interesting point, Andrew, but I wasn’t aware that you were making it.

    I addressed it before, and that old post is not irrelevant to this thread. The problem with retaining sovereignty over certain matters while giving sovereignty over related matters away is that you are severely circumscribed in the exercise of the sovereignty that you retain by the need to coordinate policy on shared matters with the party that you gave the sovereignty away too. That is exactly why the government agreed to underwrite eurosystem debts when that action was demanded of them by the EU. In theory, the government had the sovereignty to refuse but in practice that option was not available to them. If the government did not coperate with the ECB, the ECB would not cooperate with the government. Therefore, giving part of your sovereignty will render your exercise of the part you retain entirely academic.

    “Part of the existing agreement with our external partners is not to allow any Irish bank, including Anglo Irish Bank, default on its debts to bondholders for fear of paralysing wider European financial markets. I share the Irish public’s dismay at the cost and unfairness of this policy and the delay it caused to the State’s recovery.” – Enda Kenny

    Kenny is correct about that point. The State is required to put the EU’s interest before the redundant national interest, and thereby acting according to the common good of the EU.

    Folks might cite Article 6 of the Constitution to refute that:

    “All powers of government, legislative, executive and judicial, derive, under God, from the people, whose right it is to designate the rulers of the State and, in final appeal, to decide all questions of national policy, according to the requirements of the common good.”

    Article 6 states that the government is only authorised by the people to decide policy according to the common good of the Irish nation, so why then are they acting according to the common good of the EU against the common good of the nation?

    Simply because the people qualified Article 6 with the Maastricht Treaty and the Lisbon Treaty to replace the common good of the nation in respect of the sovereign powers derogated with the common good of the EU.

    Those treaties form part of the Constitution and duly bind the government. Even though Kenny admits that the policy is destructive to the common good of the nation (“the cost and unfairness of this policy and the delay it caused to the State’s recovery.”), he is not acting unconstitutionally by blatantly violating Article 6 – simply because the nation itself has violated it by ratifying the relevant treaties.

    Unfortunately, the nation gave its sovereignty in these matters away to a supranational authority which therafter exercises that derogated sovereignty to promotes its own interests, and not the interests of those who gave the sovereignty away. It is in the EU’s interest that debts should be contained within the borrowing state by a process of converting those debts into sovereign debts rather than those debts to defaulting to the lending state.

    The State retains very limited sovereignty in this area, so while it may have on constitutional paper the right to refuse to force its citizens to claim debts that do not belong to them, in practice the process can proceed without the government’s approval and that forces the government to comply with the direction of those who now hold the sovereignty that it has given away.

    For example, the Irish Central Bank is an instrument of the ECB and takes its policy and guidelines from the ECB. It is actually illegal under the Maastricht Treaty for the government to offer any advice whatsoever to the Irish Central Bank about what policy might be deemed helpful to the Irish economy or the nation. The Irish Central Bank, as an executive instrument of the ECB, has used its sovereignty over banks to convert circa 180 billion worth of bank debt into sovereign debt without the knowledge or consent of the Irish people and without any veto whatsoever by the Irish government.

    While the Minister of Finance is the sole shareholder in the Irish Central Bank, all of its executive powers are exercised by the ECB to promote the EU’s interest, not the redundant Irish national interest. The Irish taxpayers have 0% executive control over the Irish Central Bank but they remain 100% liable for how the ECB uses its sovereignty over it.

    So Irish taxpayers now owe all the debts accumulated by the Irish Central Bank in its efforts to bail-out bondholders. The Irish banks now own zero since the ECB, via the Irish Central Bank, has taken all of their prime assets as security for the loans its advanced which were in turn used to bail out EU bondholders. There is not a thing left to pay the depositors.

    In any default situation, there would be absolutely nada left in the State, and all of that was done without the government’s consent as such consent comes directly via the treaties that have amended the Constitution.

    In simple terms, the government has sovereignty over three or four toes while the EU has sovereignty over both legs. Uncooperative toes might cause a stumble or two, but not much else. Eventually, the toes fall into line amd make sure their movements line up with the legs.

    Kenny, like Cowen before, has to operate within the limitations that the nation imposed on him. At the end of the day, they gave their sovereignty away and now they’ll have to face the firestorm…

  • Alias,

    The previous government’s bank guarantee was not made at the behest of the EU, it was made at the behest of the banks. Once that was done, a Rubicon was crossed. That we are now responsible for them is a scandal, but it is not one that has any easy solutions. I’m not sure why you continually talk as if the bank guarantee was the EU’s fault. Could the EU do more to help Ireland out of her problems? Of course. But blaming Europe (or the Brits, or the Yanks) for all Ireland’s ills is intellectually lazy.