Do the govt need a No vote in #euref…

..and, to provide similar political cover, does the No side need a Yes vote?

The only thing that is clear from the lead-up to the referendum on Thursday is that neither the changing political and economic context of the Austerity/Stabilitytreaty nor it’s relatively bland content has really generated much energy, despite the ramifications of ratification.

The value of referenda has been disputed on here before. Indeed, Minister of State Leo Varadkar suggested that referenda were not democratic at the start of the campaign, as he: 

… would be concerned that it would turn into a referendum on extraneous issues such as septic tanks, bondholders, banking crisis or decisions being made by the Government, such as cutbacks.

Ironically, given that state budgeting and finance underscores social policy and structural and strategic decision-making, there are few issues which could not be potentially linked in to the central theme of achieving the required levels of structural deficit and budgetary discipline.

But a campaign which began with contradictory messages (see Vincent Browne’s piece in the Irish Times) doesn’t appear to have enlightened people very much as to what they are voting for or against. Overall this may retrospectively be viewed as simply more displacement activity around the various crises which are afflicting the eurozone. A certain amount of local apathy will probably be reflected in a relatively low turnout on Thursday: with a narrowing of the margin in some polls, this could still mean that it will be decided by the side which has managed to mobilise it’s vote better.

(Personally, I think the changing context alone is sufficient to warrant a No vote since, despite all the claims being made by proponents of a Yes vote, there are no guarantees that the Treaty will not be amended by the time it comes into force on 1st January 2013, which would then require another referendum. Not many other states appear to be in a particular hurry to ratify it, with only 3 of 25 having done so thus far. The latter factor should have set off alarm bells by now.)

In that regard, with the end of the troika’s programme in 2014, the state will either have to return to the bond markets, massively cut government spending, or, seek a second ‘bailout’ programme. While the Yes side have claimed otherwise, any other eurozone state can veto an application to the ESM, so even a Yes vote will not resolve the funding problem that will be caused by the debt overhang toppling back onto the state’s day-to-day finances. No-one is making a public pretence that the state will have a balanced budget by 2014 (again, despite the vote taking place in a couple of days, there is still no detail or small print on when and how the penalty mechanisms in the Treaty would operate or kick in if it doesn’t). 

In reality, though, much of this referendum is superfluous. The Treaty and the problems it sought to address are now historical, as the problems in Spain and the Spanish banks are begining to manifest themselves and the quantum of resourcing required to ‘resolve’ a Spanish funding crisis are only talked about in billions because it still seems politer to refer to them in terms such as 700 billion than 0.7 trillion. And ultimately, the ‘Republic’ of Ireland is not large enough to be a central focus of any actual resolution of the financial crisis in the eurozone. If it is lucky, it may eventually benefit from a solution. 

In the meantime, Yes or No, the wider monetary context is liable to be unchanged, and any of the negative consequences being forecast by both camps could come to pass. In that regard, losing this referendum might even be preferable to both sides in the medium term as it would conveniently shift the blame for the further cuts, declines in growth or even contractions that will happen as the scale of the Spanish banking crisis (or another Italian or Greek problem) unfolds. Politically, Fine Gael have already an insurance policy of sorts as they have let Fianna Fáil’s leader take more of a role promoting a yes vote, although the distinction between the parties has blurred further. Beyond some liberal social policy, there is less and less leftist mark-up language in the Labour script and party strategists cannot be overly comfortable with the limited oxygen that was available on the yes side, or, the future political damage it might sustain if a successful Yes campaign’s claims are subsequently exposed as flawed. Sinn Féin have gained about as much as it can from this campaign: not just in opinion polls (which have only a limited currency) but also in more high-exposure field-testing of its front bench. At the same time, it needs to consider how to position itself if it has designs on a place in the next coalition and find issues with more common ground for confidence-building with some of the other parties (watch for this as the next local government election campaigns unfold).

The most likely change that will occur in eurozone policy won’t come from a Yes or No vote in Ireland: it will come from electoral change in Germany. In the meantime, the referendum will simply fill the vacuum created by the political and economic inertia.

You can check out more here… or view my history blog here