How will a No vote prevent austerity?

Stabshauptmann wrote: »

You'll have to forgive me for not been 100% up to date with EU law.

I can see that the fiscal rules and limits are basically a repeat of what we signed up to in the Six Pack Agreement in 2011. If we have already signed up to them, I think it strange that a new treaty would be required, and that we would need to amend our constitution.

What's changing are the enforcement mechanisms, and in particular - something I suspect has something to do with our referendum - the requirement to put mechanisms for enforcing limits into national law. Note, though, that the fiscal limits are not being put into the Constitution.

Stabshauptmann wrote: »

My understanding is that the Stability and Growth Pact set a structural deficit limit of 3%, the six pact lowered this to 0.5%, but that up to this point our commitment isnt all that binding. This treaty makes significant changes to the way a country would be sanctioned for breaches, and infact a budget in breach of these limits would be unconstitutional. So really, the limits in Articles 3 and 4 (I need to digest whats in the other thread) have a significantly new meaning.

No...there's a good bit of confusion in there!

1. The 3% and 0.5% rules are separate rules - the latter is not the new version of the former!

2. The 3% rule for general deficit is binding, and has been all along. Breaches of this limit will - eventually - produce an "excessive deficit procedure", and an excessive deficit procedure will - eventually - produce a financial penalty, which - even more eventually - may finally be converted into a fine.

3. The 0.5% "structural deficit" rule isn't binding in the same way - breaching it produces no external action, and does not lead to fines or sanctions. Indeed, currently it has no enforcement mechanism as such. The Treaty would require Ireland to create a domestic mechanism to move back towards that limit in the event of our structural deficit exceeding 0.5%, and it would also require us to create independent national bodies responsible for tracking the structural deficit and implementing the correction mechanism.

4. No change is made in the way countries can be sanctioned for breaches of the limits, with the exception of the voting mechanism, which changes from a majority to pass to a majority to block. The details and steps of the excessive deficit procedure are exactly the same.

5. A breach of any of the Treaty limits would not be unconstitutional, because the limits are not going into the Constitution. That seems to be the real reason the government fought to keep the limits out of the Constitution originally, not to avoid a referendum.

Stabshauptmann wrote: »

From an official EU website explaining the Fiscal Compact and what it changes:
http://ec.europa.eu/economy_finance/articles/governance/2012-03-14_six_pack_en.htm

"The Fiscal Compact...and the six-pack will run in parallel. On the one hand, a couple of provisions included in the TSCG are mirroring concepts existing in the Stability and Growth Pact as reformed by the six-pack: medium-term objectives [limits in Arts 3 & 4].

On the other hand, some provisions of the TSCG are more stringent than the six-pack. ... In practice this means that if a "euro-area Member State" breaches the deficit criterion a kind of reverse qualified majority voting (RQMV) applies to all stages of the EDP, even if not foreseen in the six-pack.[/b]

See point 4.

Stabshauptmann wrote: »

Moreover, as mentioned above, the TSCG requires Member States to enshrine the country-specific MTOs in national binding law, preferably of constitutional nature."

See point 5.

Stabshauptmann wrote: »

Or to put it another way, we got into this recession without breaching these limits, this treaty will not prevent another recession, and the limits will be most relevant to countries currently in recession.

Oh, we'd still be in recession, certainly. We'd allowed - or even encouraged - such a massive property bubble that something like 15-25% of our GDP and employment, and roughly the same proportion of our State income, was all balanced on top of that property bubble. We couldn't avoid a recession.

Nor will any treaty ever prevent a recession - thinking it would is like thinking we could pass a law banning 'flu. So I would look at whether what we get out of the Treaty would have been helpful in spotting and perhaps correcting our bubble, and I think the answer is that the structural balance rules, and the independent national bodies the Treaty would require, probably would be helpful.

One of our greatest lacks during the whole bubble was the lack of an independent statutory body charged with looking at what the government was doing with the State's finances. Instead, we had the press, who, if anything, exacerbated the bubble with property porn and bubble cheerleading, plus McWilliams and Morgan Kelly. Everybody else bought in. So I think we need the kind of body or bodies the Treaty requires.

And I daresay that had we had such a body as the Fiscal Advisory Council, it would have had its statutory wings clipped the minute it made a negative noise. The same would apply to any body we might create on a purely national basis for the future, too - so the idea of a national body backed by a Treaty does appeal.

Would it avoid a recession? Not if we did the property bubble thing again - but it might avoid the situation where not only did we head into recession, but we did so with such unhealthy public finances that the State could do nothing in the way of stimulus.

cordially,
Scofflaw

blowtorch wrote: »

Interesting comment in the Indo. (link below)
Mr Drennan, as I walked through the town centre where I live here in France yesterday afternoon, I happened upon a walkabout by one of Mr Hollande"s new ministers, two days into the job. There were few people about so I stopped and was asked did I have a question for the Minister. I asked about the possibility of referendum problems in Ireland in a few weeks and the likely fallout. Her reply was that, though she didn't have the details yet of the quid pro quo, a second Irish bailout for the banks had already been agreed with the Irish government. She could only smile at the incredulous look on my face. I just moved on. Now I know why the referendum will have a second chance to pass, despite the late denials. Are they all lying? Could someone please ask Enda if he is willing to resign if a second bailout is indeed required or if the referendum has to be put to the people more than once? After all, he is the one denying it is required. Maybe then, he might tell the truth. As for me, I am glad to be out of it. Good luck back there.

Link http://www.independent.ie/opinion/columnists/john-drennan/john-drennan-enda-a-man-of-the-people-no-more-3112654.html

Isn't there a lot of mention of Ireland 'perhaps' needing a 2nd bailout, from Michael Martin, Joan Burton, Eamon Gilmore etc. in the past few days,. If the above is true, then they are just preparing us for what has already been agreed.

That link seems to bring you to an article about Enda, nothing about this quote you have posted. Is it the right link?

Ozymandius2011 wrote: »

New development today: in an interview IMF boss Christine Lagarde has said it may be worth the EU increasing the baikout to Greece to get them to remain in the Euro. It suggests to me by implication that Ireland would still have access to funds even if we voted no, because although Greece has not voted no, this affair suggests the Establishment will go all out to protect the Euro even if the midst of political Euroscepticism in a member state.

So yet again all we need to do is hope for the best and it will all come out smelling of roses. You'll forgive me if I work with the knowns (Fiscal Treaty) rather than your wishful thinking.

later12 wrote: »

I know when the Irish programme ends - but I don't think anyone is quite mad enough to think that no new funding will be agreed before the current funding expires.

Regardless of the Treaty, one of the major lessons that the European financial and sovereign crisis ought to have taught us is that it tends to be more advantageous to accept reality sooner rather than later.
Regardless of the Treaty, therefore, I think we ought to be negotiating the second round of an Irish crisis programme very shortly - if indeed general discussions are not already underway.

You might note that my argument was not that ratifying or renouncing the treaty is of no consequence. I was responding to your suggestion that a bailout for a country that has not ratified the TSCG will be illegal, and to another poster who suggested that if a second bailout has already been agreed then Ireland must ratify the TSCG. Obviously neither are quite correct.

Yes, I have to agree that the legal loophole is probably there - the speeding up of ESM ratification has left that theoretically open. Unfortunately, I don't see this as any more reliable than the other "loopholes" that have been discovered, because the Treaty still requires conditionality quite aside from that.

So we're left in a position where, if the other ESM countries don't decide to make TSCG ratification part of the conditionality anyway (and nothing prevents that), we're still looking at a similarly weak Irish bargaining position as creating a bailout from scratch gives us. And, I think, despite the possibility of your interpretation, that the probability of legal challenge is also there.

cordially,
Scofflaw

Economist Michael Taft says the Treaty will unite Europe in economic stagnation.

Ozymandius2011 wrote: »

Economist Michael Taft says the Treaty will unite Europe in economic stagnation.

Er...the figures Taft uses in his article don't seem to be anywhere in the report he references as their source.

cordially,
Scofflaw

oscarBravo wrote: »

I was just looking for those.

The article is actually about eurobonds, and doesn't seem to use the IMF projections Taft quotes either. If that's so, he's comparing two sets of projections with different starting assumptions and claiming them as comparable scenarios.

cordially,
Scofflaw