The Fiscal Treaty Yes or No

There is no point speaking with you on this anymore, Finbar. You don't fully understand a lot of the points you raised and wont see beyond it even when your points were corrected. There are some people who will debate away and take points from both sides and others who wont, making them pointless to debate with bar making sure there points are corrected to prevent further confusion.

insight_man; Some points raised here were news to me and something I wasn't fully aware off. I'd love to know more about the whole contributing to the bailout fund (which I don't have a problem with in theory, but when we don't have the money and will have to pay even more interest - that's where I am concerned) so I want to chase that up a bit more. Also, in relation to how much the limit for debt actually would be.

I'm not entirely happy with saying there is no "alternative funding" to bailouts, when there is - its a question of how much, what terms, etc. which might not be as favourable as the EU fund. That's why I would prefer we accepted the bailout offer from Europe.

Are the cons to treaty? I think so, from what I understand. Are the cons outweighing the pros? Doesn't seem like it.

insight_man wrote: »

Just another piece of information to put to everyone. You will have heard the phrase 'its just like taking out an insurance policy'..sounds reasonable. Insurance policies costs money...right.

The cost to Ireland of approving the treaty is €11.1 BILLION. Yes €11.1 BILLION. This is our contribution to the ESM fund in order to establish it. This is in addition to all the interest payments that will have to be made.

Now Ireland doesen't have the money to pay this...so what happens?

Ireland borrows the money at high interest rates from the Germans, French banks etc and then we pay vast amounts back in repayments. So a country that is essentially broke, if you believe that wisdom, gets into even deeper and deeper debt, while trying to get out of debt. The very same goes for Greece, Portugal and Italy and fairly soon Spain too.

However the Germans and the French and Dutch, because of their strong credit rating, simply has to put up guarantees but no hard cash, so it doesent cost them anything, but their banks and bond holders make billions of euro from the countries they are supposedly helping out like good neighbours.

A very very expensive insurance policy. The saying goes 'Beware of wolves in sheeps clothing'.

Okay, this was new to me so I spent a bit of time researching the claim.

Firstly, the emergency / bailout fund total is going to be €500bn (on top of €200 billion already committed to bailouts for Greece, Ireland and Portugal) funded by 17 euro area member states. An initial paid-in capital is required by all such states. For Ireland, we must pay initially €1.273bn in five equal instalments starting in July 2013. We have such money readily available without needing to draw down or ask for an additional loan by the state.

We do not need €11.3bn for "membership" as you describe. This figure you quote is our overall guaranteed sum in the event that the ESM draws down the full €500. So, like other states, if the ESM needs to give someone a massive bailout which means drawing down all funds available (ie €700bn) than that is where we would need to pay out.

insight_man wrote: »

Didn't look it up in the dictionary but paying €11.13 Billion for membership of the ESM probably fits the bill. That along with the interest payable on the €11.13 Billion could certainly be described as austerity.

As above. This figure is incorrect in the terms of how you describe it and there is no interest payable.

insight_man wrote: »

Funding will be available there is no doubt about that. Certainly you'll hear the scary stories that we won't have money to pay social welfare, nurses, teachers etc. How many times have we heard that line from the FG/Lab government. The same people who said a yes vote to lisbon would bring jobs, investment, security, keep our young people at home etc. remember all that? The same people who are now cutting wages, social welfare, nurses, doctors, guards, education and special needs budgets, just like the previous government.

It has already been established that there will be funding available. There are many sources for funding. Like here at home, the bank & credit union may refuse you a loan but you can pop into your local loan shark. The problem? The terms are unknown, we have no idea how much we can get or how much we will have to pay back. Its very unlikely they will offer better rates than the ESM, therefore, austerity will be harsher.

The euro will NOT be allowed to fail because Ireland 'owes' billions to German, French and other banks and they all want their money back, plus an unravelling of the euro is disastrous for those very same countries. All All economists and bankers have said this already over the last few years.

This isn't about the Euro failing or not. Plenty of economists are backing the treaty also.

So we will have availability of money, especially as we have passed every exaamination of our finances by the trioka since we went into the current programme. As a result our government has been telling us that our reputation is being restored and that we won't even need a second loan anyway, so the issue is unlikly to arise in the first place.

Its also about looking ahead - who would have expected this bailout to be needed? Who is to say that we wont get another economic crisis and require additional funding?

However if we vote yes to the austerity treaty the certainity that a number of very important and crippling things will happen to Ireland because its part of the treaty:

We must pay €11.13 billion into the ESM fund, as our contribution, a very expensive 'insurance' policy

Incorrect, already explained this.

We must also reduce our debt to GDP ratio beyond the current 3% target (which is currently crippling the country) to 0.5%. If we can't reach 3% how do you think we reach 0.5%? Just imagine the cuts needed and the social chaos that will entail.

The government have already acknowledged they wont reach this target. Treaty or no treaty, this is a problem we have. There is no sign of harsher austerity as the EU/IMF have given us the "green light" in each review of the bailout programme and are saying we are meeting the requirements.

Lastly we must comply immeadiatly with the 60% rule. This means we must lower our debt to 60% of our GDP. That gap is estimated to be (almost exactly) €100 Billion by all leading economists. This gap must be reduced at a rate of 5% over 20 years (know as the 1/20 rule). This means FUTHER cuts of €5 Billion per year on top of all the other cuts ie: (5b x 20 = €100 billion) -Ireland cannot now nor ever will be able for such harsh measures.

This is one of the parts of the Treaty which is there already in EU law. This will not change even if we vote No.

The process of reducing our debt to 60% of GDP will be a gradual process, happening over many years. Ireland will not have to begin this process until 2019.

Economic growth can be expected to do a lot of the heavy lifting. In the 1990s, we reduced our debt-to-GDP ratio from 95% to 35% through economic growth. This is what we need to do again.

Reducing our debt ratio is in our own interests irrespective of this Treaty. Otherwise, we will continue to spend a huge amount of our taxation revenue (20% at present) paying interest on our national debt, when it could be spent on schools and hospitals.

Finally, if we fail to make these 'adjustments' the European Court will fine us €120 million per year, as a slap on the hand. So that really helps us out of our troubles.

Hope this clarifies the real hard issues for you and the real questions you must ask yourself, ie how much money this is really going to cost us and can we afford it. Ireland simply cannot survive these measures without destroying any semblence of a caring society. Without leaving total destruction behind.

The measures outlined above will be EU law and will be enforced by the European Court and the unelected commissioners, so there is no 'pulling out' afterwards. We can just about pull back from the abyss at this stage, before the vote, but if we vote yes what has happened here already will be the proverbial walk in the park. Yes or no...you decide.

One would hope that by 2019 we won't be in such a situation.

insight_man wrote: »

Interesting view on prudent budgeting Max Powers.

But consider this in your quest for information and making an informed choice on prudential budgeting and if that concept fits with this treaty:

Article 4 of the Fiscal Compact Treaty also known as the Austerity Treaty, requires contracting parties (us) to bring our debt to GDP ratio to 60%. This is known as the 1/20th rule. It requires the contracting party (us) to reduce any imbalance in our deficit by 1/20 per year of the figure that exceeds 60%, until the 60% is reached.

Most economists estimate (because it's looking forward a bit, it's not possible to state the figure to the nearest cent) that our 'imbalance' in 2015 will be €100 billion. Therefore this rule, which becomes EU law and enforcable by the European Court, means that Ireland will have to introduce cuts and savings of €5 billion per year...for 20 years (5 x 20 = 100)

This is on top and in addition to, any cuts already required / planned under the current programme which is for 2 or 3 more budgets.

Most economists have said that Ireland cannot and will not survive such a programme, without destroying the very fabric of Irish society.

This provision gave rise to the term Permenant Austerity. I'm sure you can see the cause and effects for yourself.

As a numbers person consider this also. Irelands 'insurance' policy ie the ESM, requires us to pay €11.13 billion into the fund. No options, no choices this is the figure.

Ireland does not have the money, so we borrow the money at high interest rates (from German & French banks etc), then try to pay it back with further cuts, higher taxes and charges etc.

You would have to consider all this when you talk about 'prudential budgeting'. It can be argued that this process is the direct opposite to the prudential budgeting you are in favour of.

I hope this post helps you and other boards members when trying to make up your mind wheather to vote yes or no.

I have addressed all of that. Its an exaggeration and scaremongering, as it twists the actual facts.