Fiscal Treaty Referendum.....How will you vote?

beeftotheheels wrote: »

Not quite that simple I'm afraid.

Let's look at the case of Mr X, a higher paid public servant who earns €200k.

We cut his salary by €100k so we save €100k, right?

Wrong.

Of the €100k we cut 50% odd had come back to us already through income taxes. So after income taxes cutting €100k saves us €50k. But then Mr X cuts back on spending. Which reduces the amount of VAT we get out of him. It also puts pressure on the businesses Mr X used to spend his salary in.

This is why smaller cuts over a longer period are generally preferred to huge cuts now. The huge cuts don't actually save the amount they would appear to save, and have hugely negative knock on consequences for the rest of the economy.

That's not to say I approve of public sector employees earning €200k in Ireland - I don't. I just chose this as an example.

I keep saying this to people over on The Journal as they scream for slashing the public service pay. And unsurprisingly they keep calling for it. I have never in my life seen so many people calling for things that will do the exact opposite of what they claim they want. You try to explain that but it makes no difference either.

carveone wrote: »

Ok, I'm way off topic now but do you think it would be possible (or legal) to direct social welfare payments given how much of government spending it comprises? You hear about children going hungry but I still see a lot of people heading directly to the pub from the post office (I'm not pointing fingers here, just saying it happens and I see it happening).

No idea on the first point.
I think there's no doubt we should be concerned about how some social welfare is spent.

carveone wrote: »

If the social welfare office issued cards that could only be used to purchase basic necessities: food/clothing/school books/etc, then that would direct more of this money back into the economy. Maybe. This is heading down the food stamps route and I'm possibly grasping at straws.

I personally believe a lot of social benefits should be paid with a 'credit card'. A card which should not allow the purchase of certain goods. How easy or legal that is to do is another point.

carveone wrote: »

Edit: I thought the Journal would be against slashing public service pay given how left leaning their forums are... At least on the Treaty front.

I think if you're looking for sense in the comments on The Journal you're looking in the wrong place

kearn83 wrote: »

The aim of the Treaty is to ensure that the euro area is a stable currency system. It seeks to do this by introducing common rules to foster budgetary discipline among the countries in the euro area, then to strengthen the coordination of their economic policies and, finally, to improve the way they manage the Euro zone by strengthening its governance system.


However, a 'no' vote risks diminished influence for Ireland and potentially a second tier status for Ireland within the Euro zone.Euro zone countries that do not ratify the Treaty will not have a vote in the election of the President of the Euro Summit (the meeting of Eurozone Heads of State and Government).

Any country that fails to ratify the fiscal treaty by next March will not be entitled to aid from the permanent European Stability Mechanism, which comes into force this summer. This presents a serious problem, because the lack of such a safety net would impede the campaign to regain access to private debt markets.

The flaw in that argument is that the provisions denying non-ratifyers access to the ESM is contained in a different treaty over which the Oireachtas has a veto - the ESM Treaty which we are not getting a referendum on. The Referendum Commission admitted today at the press conference (as reported on RTE News at One) that the Oireachtas can theoretically block the ESM Treaty despite the govt's support for it. Unlike the Fiscal Compact, the ESM Treaty is under the ambit of the EU and therefore requires unanimity to come into force. Since the ESM Treaty and Fiscal Compact are interdependent, the threats contained in one fall if the other does.

Secondly, in the final French Presidential Election debate last night, Francois Hollande reiterated his intention to renegotiate the Treaty. Therefore we may be voting on a Treaty that will never come into force. This referendum is therefore premature. By voting no we can seek a better deal at the impending renegotiations heralded by a Hollande Presidency. The realpolitic is that the Fiscal Compact and the ESM will not happen without the support of France.

Happyman42 wrote: »

Isn't there an oversight on the part of economists though, in that they don't allow for the intervention of politics?
I'm undecided in all of this and I don't understand the finer points of economics but it seems to me over the years that politics often undermines the projections. I know of no economist that has been right on every issue affecting Irelands journey because the political scenario changes everything. Is there one?
I take economic forecasts with a pinch of salt tbh.

Economics is a social science, there are no hard and fast right and wrong answers.

Anyone who believes that there is one simple answer out there to our troubles which we are being prevented from following because of malice or ineptitude at the level of the EU/ ECB/ Germany/ unions/ social welfare recipients/ rich people/ oil companies/ insert other here is guilty of wishful thinking.

Ozymandius2011 wrote: »

With regard to Irish bosses of multinationals calling for a yes vote - remember that the head of Intel Ireland was appointed to a state-board by Mary Coughlan after the successful yes campaign which he supported in 2009.

Post hoc ergo propter hoc?

Scofflaw wrote: »

Sorry - can you please stop repeating that the government have a veto over the ESM. They don't. ESM goes ahead as long as countries subscribing 90% of the capital ratify. There is no Irish veto.

What the government has a veto on is the amendment of Article 136 TFEU, which aims to provide a clear legal basis for ESM. Vetoing that amendment might, but probably wouldn't, prevent ESM going ahead. It was originally decided as a safety clause in case the German Constitutional Court ruled against EFSF on the basis of the 'no bailout' clauses in Articles 122 and 125 - but they didn't, and while the amendment remains useful and desirable, there is no guarantee that it is actually required. At this point, indeed, it is most likely that ESM would go ahead anyway.

And that's aside from the fact that the Irish government is realistically not going to veto the amendment.

Please get your facts straight in future.

cordially,
Scofflaw

But if as is likely the French pull out of the Fiscal Compact as presently constituted, surely that makes it very unlikely the ESM Treaty will come into force?

ixtlan wrote: »

According to FG/Lab they have re-negotiated the IMF/Troika agreement, but you may notice little change. Hollande can likewise find ways to add to the treaty without requiring a re-ratification.

Ix.

He has repeatedly stated he intends to reopen the Treaty. He has stated he will not ratify the present Treaty. If he doesn't ratify the existing Treaty then a new Treaty will be required. An Irish-style figleaf won't cut it. Scofflaw actually started a thread saying Hollande said he will not ratify the present Treaty.

Dirk Gently wrote: »

This guy seems to disagree. He reckons we'll need a referendum on the ESM Treaty and Art.136. He seems to think it should (and by law will have to be) run and passed before the creation of the esm

Some of his arguments have merit, some are nonsensical and non sequiter.

1. The exclusive competence argument. Might have some merit but I don't think that the CJEU would look too kindly on it, more likely to give the TSCG a conforming interpretation.

2. If he's right on the exclusive competence argument it certainly does not follow that a referendum in Ireland could be required, or indeed that it could fix it. We have to hold a referendum when we sign a treaty which surrenders greater foreign policy controls to the EU based on Crotty. Nothing to do with economic policy but with foreign policy.

So any changes to the rules around currency don't require a referendum under Crotty.

The TSCG is only being put to a referendum because it is not an EU treaty, and even then I suspect that that was a close call for the A-G.

We sign bilateral conventions (double tax treaties) which restrict our ability to levy taxes all the time and they never come anywhere near a plebiscite. Were the SC to actually rule that any treaty involving fiscal disciplines had to be put to the people they'd undermine Ireland almost entirely as a center for investment since they'd throw into question the legitimacy of our DTT network on which FDI relies heavily.

Scofflaw wrote: »

Most of the negatives people raise - where not based simply on misunderstandings - seem to be objections to the fiscal limits, even though we've been signed up to the same fiscal limits for 20 years. What new negatives do you see?

Scoff, you're being a little economical with the truth if you consider the treaty limits to simply be a reaffirmation of the fiscal limits we have been signed up to already for 20 years already.

If that were truly the case, then there would be no argument for the treaty whatsoever - We've already signed up to the terms 20 years ago, right?

The new negatives I see are:

- Reinforcement of the lazy German narrative of the crisis as an entirely fiscal one. This is bad for Ireland, and the Eurozone. We need to take every occasion to reject the German narrative.

- Implementation of fiscal limits of extremely vague value into Irish law. Governments which go against these fiscal limits - even where breaking the limits makes economic and fiscal sense - will be in breach of the law. We will be making it illegal to pursue good economic policies.

- Its still prone to political influence of the large core states.
- Its penalties for "rogue" states are very poorly considered. Where Article 126-11 allows for some discretion in the penalties applied, Article 8-2 only proposes financial penalties. This hardly resolves the problem. A "Cant pay" state will simply be unable to pay. A "Wont pay" state will be unlikely to pay.


We can continue to pursue the status quo, where we remind the Germans that we signed up to these terms 20 years ago, that our adherence to them is monitored by the EU already, that we observed those terms far better than they ever did, and that as soon as we get the ship righted we will continue to honour those terms for whatever good it does us.

And if in some point in the future we are forced to back this treaty as the price of some "bailout" from Germany, grand, we'll do it then when there is a benefit to us involved. The fiscal treaty even anticipates that some contracting partners will join at a later point. No hassle.

On the other hand, given we are already signed up to these fiscal terms, is there any particular reason to implement this treaty into Irish law?

If Ireland were the only country in the world in any kind of trouble - and certainly it's easy to get that impression in Irish forums and media - I doubt there would be much of a question mark over the success of the programme. The risks to the programme are primarily exogenous.

Weren't exogenous risks considered when the plan was put together? Or did everyone just optimistically predict great success and dismiss the possibility of things not going as well as hoped?

I hope they considered exogenous risks when they pulled together the plan underpinning this fiscal treaty we're supposed to have such confidence in.

@Scofflaw

The Germans certainly have a very particular view of the crisis, but if that's their price for progress that's their price - because, again, none of the limits are new. Nor will they go away if Ireland votes No - not even for Ireland.

This Treaty isn't the price for anything because the Germans are not selling. I know English is not Germany's first language but they've been relentlessly clear on their answer to any sort of fiscal transfers - No.

The only horsetrading going on here is in the imagination of the treaties advocates. Germany is not engaged in any horsetrading. They view the problem as a fiscal problem. They view this treaty as the solution. The end.

No, there are exceptions for any conceivable circumstance circumstance conceivable by the authors at the time the treaties creation where breaching the limits would actually be useful In the view of the authors of the treaty.

Fixed that for you.

I don't disagree with that, but again, those limits have been in place for 20 years. The Treaty is not aimed at Ireland, but at convincing the German public the PIIGS aren't actually fiscally reckless, something that's necessary before a German government can sign up to anything like eurobonds.

But the Germans should already be convinced by that logic. Ireland has been following the fiscal terms of the Stability and Growth pact successfully up until a global economic crisis whilst Germany has been in nearly constant breach of them. Spain has a lower debt % vs. GDP than Germany does.

There is nothing in the German political leadership which is in anyway interested in reversing the German narrative of the crisis - they are themselves championing that narrative of fiscally reckless peripheral states trying to hoodwink and cheat decent, hardworking Germans. People who see this as some sort of trade-off are in denial. If there is a trade-off then let it be a trade-off: we are being asked to sign up to a bad deal which we wont be able to back out of anymore easily than the Euro. In exchange for....something in the future. Maybe.

As a handy side-effect the better enforcement means that the other large countries who were able to flout the S&G limits will be less able to do so

That's *extremely* optimistic. The enforcement is as prone to influence from the large core states as the existing EU system for the reasons I've noted already - if large states can beat the existing EU mechanism, they will beat the treaty mechanism for the same reason. All that's left then is to hope some tiny peripheral state, utterly dependent on Germany's goodwill for its economic survival, will engage in some David and Goliath legal struggle against Germany or its allies...

What "better enforcement" means is that it gives the large core states more opportunity to bully and intimidate the smaller peripheral states as they can take them to court, independently of the report of the Council. Even the threat to do so would do immense harm to the ability of that smaller state to raise debt.

Id be quite surprised if advocates of the "Do whatever the EU/ECB/Germany says" school of thought think Ireland would be able to resist that sort of influence...indeed, advocates of the "What we need round here is some Belfast efficiency" school of thought are counting on the Irish government being bullied and influenced against their own judgement - right?

The Germans already have a debt brake in their Basic Law, so I'm afraid that's irrelevant.

A debt brake law that hasn't stopped them exceeding the treaty fiscal limit by more than 20% already, so quite relevant.

A qualified majority leaves a little political room - but if that's an issue, why is the existing much larger political room in the Stability & Growth Pact not an issue for you?

Its a problem from a certain perspective, sure, but I don't see that the solution to the problem of large core members being practically unaffected by the penalties mechanic is granting those same large core members the ability to bring the smaller states to court for breaches identified in the opinion of the large core members alone.

That's like solving a stubbed toe by breaking the patients arm.

I don't believe any country is likely to use it, to be honest. But this business of "ooh, nobody will dare challenge Germany"...eh, no. Does Germany never appear before the ECJ?

Doesn't that undermine your own "better enforcement" angle? The reality is the only states likely to use it are the core states, like Germany or its allies.

If Germany breached the fiscal terms, can you honestly say you would be here advocating that Ireland should bring Germany to court over the issue? Its unlikely because you are selling the whole Treaty as being part of a scheme to win the goodwill and forgiveness of the German people for crimes both real and imagined. Ireland bringing Germany to court would erode all that goodwill in an instant.

That's going to be the choice faced by all small states - Germany will be free to bring them to court, but they'll be very slow to attract the ill-feeling of the banker of Europe.

This business of "ooh, nobody will dare challenge Germany? :pac: Your whole argument for the treaty is that we should back it to appease the Germans...

What would you suggest as an alternative?

The markets been doing a pretty good job so far of disciplining fiscal impropriety...states which stupidly guaranteed all the banks, lied about their fiscal situations, or continue spending well beyond their means are all getting very clear discipline on those issues.

And in terms of benefit - I would consider ESM access an immediate benefit, because the time I see us as quite likely to need it is about 18 months away.

Yeah, I saw us needing a real bailout back in November 2010 after the "bailout" was agreed. ESM access is not a real bailout so its of no benefit.

The EU/ECB will not permit a disorderly default in Ireland - they will do anything to prevent it regardless of us being in the Treaty or not, so long as we show ourselves as being honest and reasonable partners (I do not hold to the Provo/ULA narrative where being unreasonable and dishonest is seen as a valid option). We need to constantly and consistently point out the flaws in the bailout, how bad it is, how it cannot succeed. We cant get back into the markets anyway, so pronouncing how great a bad deal is only serves to eliminate our credibility.

Unfortunately, we have spent the past 2 years telling anyone who'll listen how great the bailout is and how it will definitely work and there's no problem. Its a little late in the day to suddenly turn that on its head...

Sigh. Obviously they were, but there's a limit to how quickly you can safely cut a deficit, even if many idiots can't grasp that, and market confidence (and thus rates) is not a mathematical function of Irish deficits. The deficit cuts are generally regarded as being about as deep as you can safely go, which means that exogenous risks are as hedged for as they can be - and they remain larger than anything Ireland can do about them.

If the exogenous risks were considered, might it be fair to qualify that by saying any exogenous risks conceivable by the troika at the time the bailouts creation were considered - I hope their imagination regarding conceivable circumstances has improved in the past few years. They'll need a really impressive imagination to consider all conceivable circumstances over the next 20-30 years where it might be advantageous to breach the fiscal limits in their new treaty.

If there is a limit on how quickly a deficit can be cut, *and* the exogenous risks were realistically assessed in the plans creation, wouldnt it be fair to say the plan was wrong headed from the start by calling on a tiny open economy to shoulder immense private and public debts without any relief, whilst cutting public spending hugely, all in the midst of a global economy that could at best be described as..."challenging".

Basically Scoff, the plan was a lousy, lousy plan from the start. Risks and downsides were dismissed or downplayed, benefits and progress over-hyped. It was an exercise in fantasy, where the EU/ECB were determined to string up Ireland as a bloody and broken example to Spain and Italy, to warn them from ever daring to look for a bailout.

And now they're back with their fiscal treaty which is of similar intellectual value.

Sand wrote: »

This Treaty isn't the price for anything because the Germans are not selling. I know English is not Germany's first language but they've been relentlessly clear on their answer to any sort of fiscal transfers - No.

The only horsetrading going on here is in the imagination of the treaties advocates. Germany is not engaged in any horsetrading. They view the problem as a fiscal problem. They view this treaty as the solution. The end.

Written in stone, like everything in politics...

Sand wrote: »

Fixed that for you.

Yes...don't do that. Quote me straight and then do your own. Anyway:

No, there are exceptions for any conceivable circumstance circumstance conceivable by the authors at the time the treaties creation where breaching the limits would actually be useful In the view of the authors of the treaty.

No - you should really look at what the definition of exceptional circumstances is - any unusual event that impacts the economy of the country, and period of negative GDP growth or even low growth. You're welcome to tell me what that doesn't cover that would produce a deficit.

But the Germans should already be convinced by that logic. Ireland has been following the fiscal terms of the Stability and Growth pact successfully up until a global economic crisis whilst Germany has been in nearly constant breach of them. Spain has a lower debt % vs. GDP than Germany does.

They're apparently not, though. Either that, or the Treaty is not Germany's baby.

There is nothing in the German political leadership which is in anyway interested in reversing the German narrative of the crisis - they are themselves championing that narrative of fiscally reckless peripheral states trying to hoodwink and cheat decent, hardworking Germans. People who see this as some sort of trade-off are in denial. If there is a trade-off then let it be a trade-off: we are being asked to sign up to a bad deal which we wont be able to back out of anymore easily than the Euro. In exchange for....something in the future. Maybe.

But you haven't put forward a convincing case for this being a bad deal other than that it "enshrines the German narrative of the crisis", even though the limits were first created 20 years before the crisis. Is your objection here purely about feeling slighted by the German viewpoint?

That's *extremely* optimistic. The enforcement is as prone to influence from the large core states as the existing EU system for the reasons I've noted already - if large states can beat the existing EU mechanism, they will beat the treaty mechanism for the same reason. All that's left then is to hope some tiny peripheral state, utterly dependent on Germany's goodwill for its economic survival, will engage in some David and Goliath legal struggle against Germany or its allies...

Rubbish. Not sure you've even bothered reading the mechanisms before trotting this out. The two mechanisms are quite different in terms of how easy it is for large states to prevent sanctions. In one all they needed to do was not support them and they had pretty much a guaranteed block - in this version they need to line up a proper qualified majority, which includes a numerical majority.

What "better enforcement" means is that it gives the large core states more opportunity to bully and intimidate the smaller peripheral states as they can take them to court, independently of the report of the Council. Even the threat to do so would do immense harm to the ability of that smaller state to raise debt.

Id be quite surprised if advocates of the "Do whatever the EU/ECB/Germany says" school of thought think Ireland would be able to resist that sort of influence...indeed, advocates of the "What we need round here is some Belfast efficiency" school of thought are counting on the Irish government being bullied and influenced against their own judgement - right?

Against an utterly fixed narrative that small states spend their days in fear and trembling while the locker-room bullies strut about unchallenged, there's not much point in arguing. It always amazes me any small state has ever signed up for the EU, let alone queued and jumped hoops to get in, but they have - probably because your mental picture of the EU is rather far from reality.

A debt brake law that hasn't stopped them exceeding the treaty fiscal limit by more than 20% already, so quite relevant.

Put in place in December last year. So, no, not relevant to current or past levels of debt, but rather relevant to your claim the Treaty would in future shackle Germany.

Its a problem from a certain perspective, sure, but I don't see that the solution to the problem of large core members being practically unaffected by the penalties mechanic is granting those same large core members the ability to bring the smaller states to court for breaches identified in the opinion of the large core members alone.

That's like solving a stubbed toe by breaking the patients arm.

See above re your imaginary EU.

Doesn't that undermine your own "better enforcement" angle? The reality is the only states likely to use it are the core states, like Germany or its allies.

If Germany breached the fiscal terms, can you honestly say you would be here advocating that Ireland should bring Germany to court over the issue? Its unlikely because you are selling the whole Treaty as being part of a scheme to win the goodwill and forgiveness of the German people for crimes both real and imagined. Ireland bringing Germany to court would erode all that goodwill in an instant.

That's going to be the choice faced by all small states - Germany will be free to bring them to court, but they'll be very slow to attract the ill-feeling of the banker of Europe.

And again we're back at a paranoid fear of the larger states. Plus, again, not reading the Treaty. The Treaty does not empower the states to take each other to court for breaches of the fiscal limits.

This business of "ooh, nobody will dare challenge Germany? :pac: Your whole argument for the treaty is that we should back it to appease the Germans...

No. Again, this is your version of the world, not mine. Not "appease". It's a quid pro quo.

The markets been doing a pretty good job so far of disciplining fiscal impropriety...states which stupidly guaranteed all the banks, lied about their fiscal situations, or continue spending well beyond their means are all getting very clear discipline on those issues.

Are you claiming the ratings agencies and the markets did a good job of enforcing sense over the last decade?

Yeah, I saw us needing a real bailout back in November 2010 after the "bailout" was agreed. ESM access is not a real bailout so its of no benefit.

A real bailout being where people give you free money?

The EU/ECB will not permit a disorderly default in Ireland - they will do anything to prevent it regardless of us being in the Treaty or not, so long as we show ourselves as being honest and reasonable partners (I do not hold to the Provo/ULA narrative where being unreasonable and dishonest is seen as a valid option). We need to constantly and consistently point out the flaws in the bailout, how bad it is, how it cannot succeed. We cant get back into the markets anyway, so pronouncing how great a bad deal is only serves to eliminate our credibility.

Unfortunately, we have spent the past 2 years telling anyone who'll listen how great the bailout is and how it will definitely work and there's no problem. Its a little late in the day to suddenly turn that on its head...

My point about 18 months had nothing to do with all that, though. The troika funding runs out in December 2013, and we have 2014 to fund. Even if the programme has worked absolutely to the letter, we will have an €8bn maturing government bond in mid-January, and an expected deficit of €10bn.

If the exogenous risks were considered, might it be fair to qualify that by saying any exogenous risks conceivable by the troika at the time the bailouts creation were considered - I hope their imagination regarding conceivable circumstances has improved in the past few years. They'll need a really impressive imagination to consider all conceivable circumstances over the next 20-30 years where it might be advantageous to breach the fiscal limits in their new treaty.

If you're cutting as fast as you can, then you can't cut faster, no matter what the exogenous risks.

If there is a limit on how quickly a deficit can be cut, *and* the exogenous risks were realistically assessed in the plans creation, wouldnt it be fair to say the plan was wrong headed from the start by calling on a tiny open economy to shoulder immense private and public debts without any relief, whilst cutting public spending hugely, all in the midst of a global economy that could at best be described as..."challenging".

Basically Scoff, the plan was a lousy, lousy plan from the start. Risks and downsides were dismissed or downplayed, benefits and progress over-hyped. It was an exercise in fantasy, where the EU/ECB were determined to string up Ireland as a bloody and broken example to Spain and Italy, to warn them from ever daring to look for a bailout.

And now they're back with their fiscal treaty which is of similar intellectual value.

As far as I can see, all of the above posits as an alternative a universe where either Ireland had not taken on "immense private and public debts", or where everyone else was so flush with cash and their own banks and finances so rock-solid that they could afford to generously say "sure, don't worry about it".

Complete debt forgiveness - heck, even partial debt forgiveness - would be nice. But when debt is forgiven, somebody somewhere makes a loss. Who shoulders Ireland's debt on Ireland's behalf, and why? What's in it for them?

cordially,
Scofflaw

at the moment looking through the booklet that came in the post ( The Stability Treaty) and will make up my mind when i have looked up what it all means to us,