Originally Posted by Genghiz Cohen
what good are rules that don't help?
The main aim of the Stability Treaty is to ensure that messes like Greece don't happen again, firstly by ramping up the monitoring of budgets (the Greek Department of Finance manipulated stats for years, effectively scamming the EU and the private finance markets) and secondly, by ensuring that governments which overspend are contractually and publicly obliged to reduce spending and/or increase taxation, if they do take on excessive debt.
The Treaty is much less applicable to Italy, Spain, Portugal and Ireland, for the following reasons: Italy has a high budget deficit and national debt, but it's considered (mostly) able to repay this given reasonable economic conditions. Spain's government stuck to the EU targets pretty much faultlessly, but the amount of private credit (delivered via banks) became unsustainable, much as it did in Ireland and Portugal. Property crashes in these three countries wiped billions off the present value of private credit, and governments were forced to step in to avoid a general financial meltdown (bear in mind here the global meltdown that happened when Bear Stearns and Lehman Brothers crashed in the US; people seem to forget this disappointingly persistently).
So in short, the Stability Treaty won't do much to or for Ireland one way or the other since the Irish government has generally stuck to the terms and conditions it lays out anyway. That said, the Irish tax base was heavily dependent on the property sector, so once that went down the pan, so did amount of tax collected by the Irish state; hence the current €20 billion difference between income and expenditure and the governments less-than-successful attempts to widen the tax base. There's also a persuasive argument that the general terms and conditions contained within the Treaty should be governed by primary legislation enacted within the Dail, and not by the Constitution which is difficult to change.
What the Stability Treaty doesn't do, and what Central Bank Governer Patrick Honohan called for yesterday
, is (a) to regulate the private credit market -- aka the banks -- to enforce prudent lending policies and (b) to consider setting up a pan-European banking agency which will step in, at the EU level, to stabilize shaky banks, rather than leaving them become the responsibility of the state (as happened/is happening in Ireland, Spain and Portugal with catastrophic results).
If the Stability Treaty enacted such an EU-wide institution, people would be start-raving insane to vote against it. As it stands, and with its general inapplicability to Ireland and its missed opportunities, I'm about 60% in favour of the Treaty, so I'll probably be voting yes if I remember to.