Thirtieth Amendment of the Constitution (Treaty on Stability, Coordination and Governance in the Economic and Monetary Union) Bill 2012: Second Stage (Resumed)
Thursday, 19 April 2012
Dáil Éireann Debate
Minister for Justice and Equality (Deputy Alan Shatter): The stability treaty is simple in nature. This is not a complex issue because the treaty relates to a very simple matter. The treaty is designed to protect the citizens of this State from reckless spending on the part of future generations. Essentially, it will also ensure sound budgetary principles. The treaty will protect the current and future generations — the current children of this State and the future grandchildren of many people who live here — from Governments engaging in the type of reckless spending policies pursued from 2002 onwards by Fianna Fáil-led Governments.
Despite how it is being termed by some on the opposite side of the House, this is not an austerity treaty. It is, rather, a treaty which is designed to ensure an ultimate end to austerity and to protect the current and future generations from a repetition of the bad politics of the past. Much of that type of bad politics has coloured many of the contributions that have been made by those who are opposed to the treaty and who are calling for a “No” vote. The bad politics now being peddled by Sinn Féin and various Independent Deputies posits that the State is some form of bottomless ATM which provides money to the Government and that this can be spent without anyone taking responsibility of any kind for raising other funds.
This State is on the road to recovery. There are difficult times ahead and tens of thousands of families continue to experience problems. The treaty is a piece of the jigsaw which must be completed to ensure we continue on the road to recovery. It will also ensure the multinational companies operating in the State and those outside it which are considering the possibility of establishing operations and creating jobs here will have confidence in the budgetary policies that will be implemented by future Governments and also in the stability of the euro.
There are far too many Members of this House — in Sinn Féin and the smaller parties and on the Independent benches — who continually call for additional expenditure in respect of everything without recognising the need to raise money to achieve this. Deputy McDonald stated the Government is inviting citizens to set in stone a binding international agreement that will place serious restrictions on our capacity to borrow. Despite the reckless spending of the previous Fianna Fáil-led Government and the appalling legacy inherited by the current Administration, the Deputy apparently believes there should be no constitutional or legal barriers of any nature erected to prevent a future Government replicating the disastrous policies of the past. There is a terrible dishonesty at the heart of the Sinn Féin approach to this issue. In her speech, Deputy Mary Lou McDonald stated: “It is important to say that those of us who have been critical of EU institutions, policies and treaties are not, therefore, anti-European.” The reality is that Sinn Féin has been obsessively opposed to every EU-related treaty since referendums have been held on the issue, and the position taken by Sinn Féin is no different today than in the past. The Sinn Féin Party, as well as Deputies Higgins, Boyd Barrett and Mattie McGrath, are followers and leading proponents of the “money grows on trees” school of politics. It is the bad politics of the past which these people continue to articulate in the present, and which no Government should be permitted to engage with in future.
It is in the national interest that we effect debt reduction, bringing budget deficits under controlled limits. It is in the interest of the people of this State and future generations that people should vote “Yes” on this treaty. Deputy Higgins has criticised the fact that EU member states which do not ratify the stability treaty will not be able to access the European Stability Mechanism, arguing that this is “outrageous blackmail”. It seems that he and others believe this State has a continuing right to receive funds without being obliged to take action to deal with fiscal difficulties. There is a belief on the part of Deputy Higgins and others that we are entitled to live beyond our means and continue to receive financial hand-outs from the rest of Europe. There is a total lack of reality in this approach, and it is grossly dishonest to deceive voters in this way. Is it not reasonable for citizens of other EU states to ask if we need additional funding, why we should receive it in the absence of bringing debt under control and supporting the essential legal architecture being put in place to ensure we do not get into similar difficulties in future?
Deputy Ó Cuív has said that although he is opposing the treaty, he is in favour of fiscal discipline, again replicating the bad politics which he and his colleagues engaged with in government. It is a great pity that at that time the Deputy did not express some enthusiasm for fiscal discipline.
There are two specific and positive reasons for a “Yes” vote, and I have already emphasised the first. It is to ensure no reckless spending by any future Government to the detriment of our people. In the background we have an insurance policy of being able to obtain assistance through the ESM should we need to seek it in future. It is my hope and belief — shared by the Government — that we will not require additional financial assistance through the ESM but it would be extraordinarily unwise to exclude the possibility of such assistance being available in the context of the choppy fiscal and economic waters through which our State is travelling and which currently prevail across a number of countries in the European Union. We must ensure the stability of the euro and our continuance on the path to recovery. We must see that those who use Ireland as access to Europe will continue to do so, expand their presence and continue to create jobs and attract new companies to Ireland. It is important we vote “Yes” and support the treaty, and I urge people to do so. I urge those calling for a “No” vote to explain to the people where they anticipate funding will come from in the absence in future years of this State having sensible fiscal policies and balanced budgets, which can lead us to paying for the expenditure we incur as a State.
Deputy Michael McGrath: I welcome the opportunity to make a contribution on Second Stage of this Bill to provide for a referendum on the European fiscal stability compact. If we needed a wake-up call for the Government and those of us who support the passage of the treaty, we got it with the opinion poll published by The Irish Times this morning. That indicated clearly that the outcome of the referendum hangs in the balance and it could go either way. The advantage is with the “Yes” side currently but that could change, depending on the type of campaign conducted by the “Yes” side, in particular, over the six weeks to polling day. Time is short and every day from now on must be used constructively by those of us advocating a “Yes” vote in the referendum to the people. As the leader of the “Yes” campaign, there is a particular onus on the Government to run a vigorous and vibrant effort over the next six weeks.
The most fascinating figure from today’s poll is the statistic that almost four people from ten, or 39% of people, have not yet made up their mind, and such people may be convinced to vote either way. The “Yes” side currently leads that poll with 30% to the 23% of the “No” side, with 39% of people saying they do not yet know how they will vote. There is still an information deficit and although the treaty is relatively straightforward and accessible, the majority of people do not know what is involved. There is a great onus on the Government to ensure the necessary information is put out there in a clear, simple and understandable manner.
There were other interesting statistics concerning other issues in the poll. Some 66% of people believe Ireland is better as part of the EU, as opposed to 22% of people who disagree with our participation. There are three times as many people who believe Ireland should be part of the EU as people who do not share that view. This treaty is not about Ireland remaining in the European Union but we have been given an indication that people are favourably disposed to Europe and Ireland’s ongoing involvement in all affairs at the European Union level. Further poll findings indicate that 59% of people are dissatisfied with the manner in which European leaders are running the EU, which means there are a number of conflicting forces in play. People are positively disposed to Europe and Ireland’s engagement with the Union but people are not impressed with what they have seen at a European level, including the management of this crisis since 2008 and the series of crisis summits and meetings last year. They seemed to be endless, and night after night people looked at the news to see leaders going to Brussels for more crisis and emergency meetings. Nevertheless, the problem rumbled on and people lost faith in the institutions of the European Union and the political leadership because of a failure to grasp the seriousness of the crisis and to react in a decisive manner.
Additionally, the poll indicated that people do not believe the Irish Government’s contention that we will not need a second bailout, as 58% of people stated that Ireland will need a second programme of assistance. In a way, that may work in the Government’s favour as if people think that way, they will recognise the importance of having the backstop of the ESM fund available to Ireland. It is unquestionably one of the selling points for the “Yes” side and those looking to pass the treaty. Nevertheless, the starting point for the Government and those of us who believe in this treaty should be to accept that it will be a difficult sell. The Irish people are in a very hard place today and are really struggling. They are disillusioned with politics and many have lost faith with the current Government already because of the abandonment of many election promises, the handling of the household charge and the water charge debacle over recent weeks. They are now reading speculation about the roll-out of the property tax from 2013.
It all comes down to the campaign run. As with every election any of us has contested during the years, if one does not engage in a robust and vigorous campaign, meet people and explain where one is coming from, one will not be successful. The Government has an opportunity to make the referendum campaign its single priority for the six weeks before polling day. It must meet people as soon as possible to explain the benefits of the treaty and repeat what was done during the second referendum on the Lisbon treaty when civil society groups were invited to actively engage and support the campaign. I take my hat off to the Irish Farmers’ Association which has already sent members an information leaflet summarising the treaty in simple and understandable terms. If we can persuade other groups to do likewise, the treaty stands a good chance of being successful. Given that many people are more inclined to listen to civic leaders than they are to political leaders, it is particularly important that we secure the support of civic society.
The European Union has received a great deal of bad publicity recently and, in Ireland’s case, some of it has been justified. While this debate is not an appropriate one in which to dwell on the issue, people are especially annoyed about the intransigence shown by the European Central Bank on the issue of sharing the burden of bank related debt. Even in recent weeks, members of the board of the ECB have issued hardline statements on the promissory note arrangement. We have bought some time, perhaps a year, which gives us a window of opportunity to secure an overall deal. People are annoyed when they see the obvious unfairness in the manner in which Ireland has been treated on this issue.
The Fianna Fáil Party is genuinely committed to the treaty and I encourage the Government to involve us in the campaign in so far as possible. We will actively campaign in the referendum. Opinion polls have consistently shown that those who support Fianna Fáil are strongly pro-European, as was confirmed in an opinion poll published today. My party will play its part in ensuring there is a strong campaign on the “Yes” side. While we recognise that the Government has a leadership role in the referendum, we do not want to be sidelined.
Deputy Michael McGrath: We want our voice heard and an opportunity to advocate the reasons we want our supporters and the wider population to vote in favour of the treaty. My party also recognises the shortfalls in the treaty. I note from the Tánaiste’s contribution that the Government also recognises the treaty does not provide a panacea for all of the European Union’s ills. Nevertheless, it is a step in the right direction.
The fact that the fiscal compact is not a full EU treaty makes it a tricky issue. It also means unanimity among member states is not required. As a result, only 12 eurozone countries need to ratify the treaty for it to proceed. The fiscal rules in the treaty are, by and large, enshrined in various regulations and codes to which we have already signed up. It would be highly disingenuous, inaccurate and dishonest of those who oppose the treaty to suggest that if the people vote against the treaty, the country will not be required to balance its books over time or that we will find an easier or less painful way of achieving the fiscal correction we all agree is necessary. Do we really believe that in the event of Ireland failing to endorse the treaty the international markets will demand a smaller price from us than our European partners and the IMF which are funding us under the programme? That is manifestly not the case. On the contrary, it is inevitable that if Ireland rejects the treaty, the costs of borrowing will dramatically increase by virtue of the fact that we will no longer have access to the backstop of the European Stability Mechanism. Without this backstop being available, the insurance policy, as the Taoiseach described it, and the costs of borrowing will inevitably increase. That is a risk we cannot afford to take.
The requirement to reduce the structural deficit to 0.5% or less is onerous. We need absolute clarity on the definition of the term “structural deficit”. Furthermore, each member state must have an input into the determination of the timeframe within which it must achieve the 0.5% target. Having engaged with the Taoiseach on this issue, my party has been assured the Government will have a significant input into any such determination for Ireland. This is very much to be welcomed.
People must consider who is lining up on the “Yes” and “No” sides of the referendum debate. The opponents of the treaty have opposed every European treaty placed before the people. While Fianna Fáil is critical of the Government on many issues, we recognise that the opponents of the current treaty would have opposed any deal the Government had secured in Brussels, irrespective of its contents. They opposed membership of the European Economic Community and on every single occasion a question concerning our engagement with the European Union has been put to the electorate, they have opposed it.
The Fianna Fáil Party has been critical of the Government’s decision to sign up to a measure that will remove the insurance policy of access to the ESM from countries which do not endorse the treaty. This outcome marked a failure of the negotiating strategy of the Government. The fiscal stability treaty, as constructed and with all of its conditionality, stands none the less. It has been signed by the Government and awaits the approval or rejection of citizens in its current form.
One intriguing aspect of the debate is the backdrop of the French presidential election campaign. It is noteworthy that François Hollande, the socialist candidate, and Nicholas Sarkozy, the incumbent, are calling for the role and mandate of the European Central Bank to be broadened from its current narrow definition focused on price stability to include growth. As the Tánaiste is aware, my party has been advocating this position for some time and welcomes that it has moved centre stage in the French presidential election. I hope this will result in changes to the mandate of the ECB because we will only be able to reduce our debt to GDP ratio to 60% over time through economic growth. We will not be able to cut our way to the 60% target without growing the economy. I hope that message will be listened to throughout Europe.
I am somewhat concerned by reports that the socialist candidate in the French presidential election hopes to reopen the debate on the fiscal stability treaty if he is elected. He should clarify precisely what he means in this regard. Some of the speculation suggests this may result in a protocol being attached to the treaty. It is unfair on the Irish people to vote on the treaty when the candidate most likely to become the next French President is indicating he wishes to reopen the debate on it. This is regrettable as it introduces an element of uncertainty. I hope that in the course of the next six weeks the muddied waters will clear and people will learn exactly what M. Hollande is seeking and precisely what they are voting on.
I urge the Government not to rest on its laurels. With the referendum hanging in the balance, a full and vigorous campaign will be required on the “Yes” side to ensure its passage. We, in Fianna Fáil, will play our part.
Deputy Robert Troy: I thank Deputy Michael McGrath for sharing time. I will be brief as my party colleagues have articulated the Fianna Fáil Party position of support in this important referendum. It is good that the Government has conceded that holding a referendum is necessary, giving the people an opportunity to have their say on what will be an important amendment to the Constitution. It is important that the referendum is taking place at the end of May. The opinion poll findings published today show four in ten people are unsure of what way they will vote, which means that the treaty is on a tight wire. It behoves all of us in the political parties which support the treaty to get out and sell the message in a very clear manner and layman’s terms in order that the general public will understand exactly what it is about.
The Tánaiste and Minster for Foreign Affairs and Trade is present in the Chamber. I ask him to encourage his colleagues in the Cabinet and on the backbenches to refrain from adopting a partisan approach to the treaty, as it is important that we all support it. It is important that my party is brought on board in support of the treaty. We have already heard partisan comments during the debate, which I do not think are helpful. We need to unite to sell the message to the public about the benefits to be gained in passing the treaty. It is not a foregone conclusion that it will be passed. We have had experiences in the not too distant past when arrogance took hold and previous referendums failed. I, therefore, encourage certain Ministers to refrain from adopting such an approach.
While the treaty will ensure we will have protection in the future, that we will have prudent governance and that we will not end up again in a situation where there is such a high debt to GDP ratio, if it had been in place prior to the crisis, would we be in a different position now? We might be marginally better offer, but we would not be a whole lot better off. Many of the problems we face today are as a result of the disastrous banking policies pursued in the last decade or so, not just by Irish banks but also by European banks. Nothing has been done to bring about changes to ensure this will not happen again. While I accept that the promissory notes cannot be a prerequisite for passing the treaty, the Government should not drag its feet in this respect; it should continue to try to renegotiate the cost of recapitalising the banks because that is the fundamental problem.
The treaty will provide confidence for the markets in the future. Its passage will ensure our ability to avail of the European Stability Mechanism, should we need it. That is very important. It seems the treaty is obsessed with fire prevention methods for a house that is already on fire which is how I heard it previously described. It is a pity there is not more in it to stimulate the economy, as we cannot continue to cut our way to a deficit of 3% of GDP. The Government needs to stimulate the economy. We need to ensure we try to grow our way out of our current difficulties. The 400,000 unemployed want to see what benefits are in it for them to ensure we grow our way out of our problems, rather than cut our way out.
We need to sell a clear message. I compliment the IFA which has brought out supporting documentation for its membership. My party met and discussed the treaty earlier this week. We will be encouraging our members to engage actively in supporting the referendum and I ask the Tánaiste to ensure we refrain from engaging in partisan politics in the national interest. As many have alluded to, we run the risk of being left on the platform if the train goes and the referendum is not passed.
Deputy Olivia Mitchell: As there has been a widespread welcome for the fact that we are holding a referendum, I imagine most people are in favour of the Bill. A few might quibble about the actual wording of the treaty and what is proposed to be inserted into the Constitution because it is definitely minimalist. However, it has to be so because the treaty, fewer than a dozen pages long, is clear and unambiguous. Therefore, the wording to be inserted into the Constitution has to be equally clear. Most of us know what happens when wording in a constitution is not clear. The wording limits the impact of the treaty to what is included in the treaty and decisions made based on the treaty, rather than trying to anticipate in the Constitution what those decisions might be.
Ideally, the debate should be about the referendum, not about other extraneous matters. However valid people’s concerns are about these matters, considering the state in which the country finds itself, neither emotion nor rhetoric has any role to play in the decision we have to make. The debate should not be about whether we should be in or out of the euro or whether the treaty is a referendum on the euro because it is not. It is about giving security and providing certainty and confidence for the markets in our currency and economies. That is of most significance to us. We know what the lack of confidence has done to the economy and the lives of the people. The treaty is about putting in place common rules for those of us who use the common currency in order to ensure that whatever crisis we encounter in the future, it will not be the result of reckless overspending or overdependence on a property bubble or otherwise. If the markets are to have confidence in our currency, we must be able to demonstrate a commitment to fiscal responsibility and fiscal management. In fact, one wonders why we have to have a treaty at all. The reality is that fiscal responsibility is a requirement of a stable currency, no matter what that currency is, be it the euro, the punt, the pound or the yen. There are very few who question the benefits to Ireland of our participation in the common currency. It has given us huge advantages as a location for foreign direct investment, as well as enormous trading advantages for indigenous firms. We have seen huge export growth which is driven by the common currency.
Even at the peak of the greatest financial crisis, when the world media were speculating about the future of the euro, the value of stocks, shares, bonds and businesses were all evaporating, banks stopped lending to one another and even people in Ireland started queueing to withdraw their money from Irish banks, it is salutary to note that, against that background of a free fall, the value of the euro actually fluctuated very little. It held its value against other currencies and did so because of the inherent strength of the European economies and the commitment of the richer countries to support and express confidence in the currency in ways that really mattered to the markets. If we want to regain our sovereignty and cease dependence on the troika, we must be able to borrow on the markets at affordable rates. If the markets are to lend to us, they will want a reasonable certainty that they will get their money back. If we vote “No”, we will, in effect, be saying “No” to fiscal responsibility and “Yes” to more reckless spending. Whatever motivation people may have for voting “No”, the outcome would be, ironically and tragically, an inability to re-enter the markets and continued subjugation to the troika. We would then really experience austerity.
It is popular to blame the European Union for everything and easier to blame than to take responsibility. However, much as we might deny it and sometimes even resent it, the European Union has been good for us and good to us. We blame Germany for imposing its will on us and imposing decisions that we did not want. However, we also blamed it not so long ago for not showing leadership and taking stronger initiatives to stem the financial crisis. Sometimes we have to remind ourselves that Europe is a club and we all have to pull our weight in that club and show mutual solidarity. Some have complained, implausibly I believe, that we should vote “No” because we only get access to the ESM if we vote “Yes”. How could anybody expect different? How could anyone expect the German taxpayer to continue to dish out money if we continue to overspend? We are still overspending. We are not in a period of austerity in the way that others have suggested. We are still budget deficiting and the position here does not begin to approach austerity on the scale that we would and could face if we did not have access to the ESM in future. I am not willing to take that risk.
In addition to that, the European club every day, through the ECB, supports our banks and secures our deposits by replacing inter-bank lending while the banks repair their balance sheets because they simply do not have the money or the competence to lend to one another. Without that support from the ECB every single day our banks would simply and catastrophically collapse. The Government guarantee, which gives great comfort to people, is not worth a jot without the support of the ECB. Ireland would not have the money to meet the demands if deposits were to be withdrawn tomorrow and if we lost the support of the ECB.
The European club is now making new rules to protect its members. The club will continue irrespective of whether we agree to keep to the rules but it is not hard to envisage the kind of future facing a club member that decides it will not agree to the new rules, particularly when rejecting those rules jeopardises all members and even the very existence of the club.
I do not believe the Irish people will reject the treaty. I am confident they will vote “Yes” and send a strong signal of support for the protection of our currency that means so much to us. It would be foolhardy to think it is the solution to all our problems. It is a necessary but not a sufficient condition for recovery, but it will restore confidence which is a precondition for growth. We have to deal with the problem of ensuring we have better competitiveness in dealing with our debt. Perhaps it will not be a long-term solution and further integration will be required in the future and we will have to have greater integration of taxes, but that is a matter for another day. For now, we must deal with today’s problem of a crisis in confidence. Ireland above any other country must know what a loss of confidence means to its future. We will be to the forefront in welcoming and upholding the new rules.
Deputy Eoghan Murphy: The European Union is not perfect, neither is the euro, the Commission, the European Central Bank or even this treaty because if they were perfect we would be finished with them. Our enterprise would be over and we would move on to something else. They are human institutions and because they are they are flawed. They require constant attention, work and endeavours to improve them. Since they are political, there will not always be a right and a wrong but there will always be a need to engage constantly and work on these institutions because things change. If an institution cannot change and adapt it will become irrelevant because it will no longer meet the needs of the people or the time that it is there to serve.
I have been reading Fukuyama’s book on The Origins of Political Order recently and he talks about the concept of adaptability and when political institutions face decay. Politics and democracy face decay when political systems fail to adjust to new realities. That is what we are facing here at present, particularly when we consider the European context. The European Union and its member states have faced a massive economic shock. That shock has exposed flaws in the infrastructure and in the institutions — political, financial, economic and social. We are looking again at everything. The member states are now changing to try to meet the new changed circumstances, to try to adapt the European institutions and the tools available to us to better meet the needs and circumstances of the people in Europe. We are not quite sure where that adjustment will take us. We do not know what the final outcome will be and there will not be a final outcome because it will constantly keep changing. What we must hope is that we have the right leadership and that it is taking us in the right direction. However, mistakes will be made because that is human nature and political nature. Mistakes can sometimes be a good thing because through them we will learn and we will build better institutions but it is a work in progress and a process. We must continually put our best efforts not into constantly criticising and walking away but into critically engaging to try to improve.
In Ireland we are facing the exact same challenge. We have had a shock to the system and to the country. Recent history has exposed massively the need for our political institutions and our democracy to change and adjust. The big question facing us in government is whether we can meet that adjustment but I believe we can meet it. Then the question remains to what will we adjust and what will we become after this current period where so much is changing and so much needs to change. What will the outcome of that process be? We do not yet know. It is important that it happens. We must move to a different type of democracy, a more robust democracy, because what we have had before has not served us well and it will not serve us in the future because so much is changing.
The great difficulty for us is that we are not masters of our own fate at present. Part of our sovereignty has been suspended because of the bailout agreement. Because of the massive deficit and our inability to borrow aboard at affordable rates we remain too exposed to external events. Because we cannot borrow aboard on our own at present we are too exposed to dictation and direction from abroad, and that needs to change. If we are to be able to change the country, as we need to, then we need to regain our independence. One of the priorities, if not the foremost priority, of the Government is to regain our economic independence, our sovereignty and our ability to borrow abroad independently. While it might sound counter-intuitive we need access to a permanent bailout fund in order not ever to have need to use it. We need access to the European Stability Mechanism, either because we will not be able to borrow independently post-2013, and we hope that will not be the case, or that when we go to borrow, we can borrow on more favourable terms because those borrowings will be in effect guaranteed or insured by the European Stability Mechanism. That is why we need the stability treaty because it will give us access to the ESM. It does other things as well but those were things we were going to do anyway.
I would like to focus on that one aspect, that the treaty will give us access to the ESM. That is incredibly important if we are to return as a sovereign nation to the markets abroad. People will argue about the process involved, the treaty and the fact it contains that clause and let them argue about that but the fact remains this is where we are. We need to ratify this treaty to get access to the ESM and that is an important thing and no amount of debate will change that. This is the question that faces us and we must face up to it. People will use this referendum to talk about things such as fiscal union, debt sustainability, promissory notes and their renegotiation and the future of the euro but this is the wrong campaign for that. They will use this referendum to talk about water changes, property taxes, the household charge and everything else but it is the wrong referendum for that.
What is facing us is quite a simple choice, and Deputy Mitchell referred to this. It is a simple treaty. If we choose this treaty, we will have access to the ESM and in that scenario we should be able to return to the foreign markets as an independent sovereign at a closer date. In that scenario we should be able to exit the bailout agreement on favourable terms to this country and retain our independence. That is what we as a Government want to achieve. That is the kind of change we want to see and want to bring into our country and to our political institutions so we can move to a post-bailout scenario and have our independence again. That is what this is about.
Once the referendum is held and if it is passed successfully, and I believe it will be, we can move to the bigger questions and debates that must be held. We are in a period of such rapid change that we have constantly to keep going back to the table and re-evaluating where it is exactly we are going, not only with the European Union and the other structures that exist with it but with our own political institutions and our own democracy. Then we can have the big debates and answer the big questions about our institutions and about what needs to happen in this country to improve the circumstances for everybody. That, ultimately, is the goal of the Government, to improve the circumstances for everybody in this country because they are not great at present. That is the time to answer those bigger questions. Right now we have a simple question in front of us. Let us enter that campaign and let us talk about that and that only and then we can have a bigger debate around the bigger questions.
Deputy Mary Mitchell O’Connor: In the upcoming referendum we will be asked to vote “Yes” or “No” to a new EU treaty, a stark “Yes” or “No” to the EU fiscal compact treaty. Its title is a mouthful and quite uninviting. It gives the impression that the treaty is complex and that only PhD scholars can read it, debate it or reason its merits. However, when all the jargon is left to one side, the treaty is quite simple. It imposes rules on EU countries to ensure governments live within their means. Spending cannot be greater than what is taken in; it is simple economics. For the Government, this will mean that our spending on schools, hospitals and playgrounds cannot be greater than our income from taxes such as income and value added tax. This is not rocket science. Every student across the country knows we should not spend what we do not have.
We just need to consider the financial mess Ireland and other countries like Greece, Portugal, Italy and Spain are in to see the importance of strict spending rules. The European Stability Mechanism has €800 billion in reserves. That is significant insurance and it will provide reassurance to investors that the Irish economy is well funded. Eli Lilly, Microsoft, PayPal, Sky and Hewlett Packard recently invested in Ireland because we are a safe bet, we have access to funding and we are at the heart of Europe.
An Irish “No” vote will not stop the treaty from happening. For the Nice and Lisbon treaties, Ireland’s “Yes” vote was essential for them to come into effect. In those treaties, Ireland had negotiation powers because the other countries needed us to sign and agree to the terms. This new treaty is different. It only requires 12 eurozone countries out of 17 to ratify it before it comes into effect. In this sense, the train is leaving one way or the other.
We have no power to ask for changes to its terms as our signature is not needed. We must decide whether we want to be on that train or not. We cannot negotiate for a better fare; the train is full with or without us. If we vote “No”, we will still be members of the euro but the closeness of our relationship will be affected. Like a student that cuts himself off from his family, we will be left vulnerable and isolated. If we vote “No” we will still have to reduce our deficit to less than 3% of GDP by 2015. This funding is not under threat and the terms under which it is being provided will not change but if we vote “No”, we will not receive any support above what is currently agreed in our programme of support from the EU-IMF. However, like the student, we may face unexpected costs, and like the student that cuts himself off from the family, we might run out of money and options, and into risk.
If we vote “Yes”, the treaty will come into play when our programme of support ends in 2016. We will then be required to reduce our deficit from 3% to less than 0.5%. We will not be required to do this overnight. We will have a maximum of 20 years to do so and such spending control under the treaty is in our interest. It will prevent political parties buying elections. In recent years political success was often bought and such temptation will arise again. If we vote “Yes”, strict money spending controls will prevent this. A “Yes” vote will reduce political corruption because the Government will not be able to go mad spending before an election to win votes and run up debts. This treaty will ensure the Government makes long-term plans.
We cannot sustain an overspend of €10 billion annually. A wise parent would not bankroll a student who continually spends beyond what the household can afford. Likewise, the EU will not continue to support Ireland unless we live within the reality of our situation.
As a teacher I always advised students to read an exam question carefully. When they were finished I advised them to read it again and then again. The question we will be asked on 31 May is whether Ireland should adopt the EU stability treaty, not if we agree with septic charges or the household charge or whether we like this Government. If we answer the right question, the answer will be a resounding “Yes”. A “Yes” vote will not reduce us to a student’s diet of baked beans but a “No” vote might.
Deputy Pádraig Mac Lochlainn: I will start by taking us back a few steps. To understand where we are now, we must look at where we came from and how we got here. Sinn Féin’s criticism of the Maastricht treaty and the proposition of economic and monetary union related to the idea of a one size fits all policy working. We said having a single interest rate for all of the eurozone would not work. During our economic bubble, we could have done with raising interests to slow down the overheating of the economy that we are all paying for now in such a profound way. Unfortunately that was not within our gift. Economic policies served the interests of Germany, in particular, and other core states.
The free flow of money from the core European banking system out into the periphery was another factor. In Greece’s case, this was done with the assistance of false reporting by Goldman Sachs on the strength of the Greek Government’s sovereign capacity, and in Ireland’s case it was done through investment in private banks. The combination of artificially low interest rates and cheap credit in Ireland was like crack cocaine. The average person watching television at home was told he or she would be crazy not to buy property, that house prices were only going one way and he must get on the train and be quick about it. The practice of the old prudent bank manager, where he would lend three and a half or four times a person’s annual salary where that person could provide a 10% deposit to prove he had the capacity to save, was thrown out the window while the moral hazard of incentives for bank managers for approving 100% plus mortgages and further loans was introduced.
The crisis did not have its genesis in Irish folly and recklessness, although it was encouraged by the Government and economists and bankers whom we were told were prudent and sensible. This mess is of its nature a European one caused by the distortions created by economic and monetary union. When Europe was forced to face the reality that monetary union was failing badly, with a series of bailouts, it failed again. Rather than countering the recessionary — even depressionary — cycle, it has gone the other way to become pro-cyclical. It is an insane policy.
If debt brakes and deficit ceilings could have solved or prevented the Irish economic crisis, I ask those on the “Yes” side to explain why, for most of the years of our membership of the eurozone, we stayed within the Maastricht criteria of a 3% deficit ceiling and 60% debt to GDP ratio. It was only when we were saddled with the banking debt that we fell outside them. Even those mechanisms failed to identify a fundamental failure in our economy.
People have referred to the fact that 20% of our tax revenue came from construction alone. It was out of kilter. We were building 95,000 houses at the peak of the boom for a population of 4.5 million. It was almost the same number as was being built in Britain, with a population of 60 million. It did not take an economist to figure out that something was badly wrong, yet none of the Maastricht criteria succeeded in addressing those fundamental failures. How will they work now? If they had been the solution, we would not have had this crisis in the first place.
In an article in Monday’s New York Times, which was reprinted in yesterday’s The Irish Times, the Nobel Prize winning economist Paul Krugman commented on the crisis in Spain in particular and in the eurozone in general as follows:
Krugman went on to criticise the fiscal treaty as locking in “fiscal austerity as the response to any and all problems”. Another Nobel Prize winner for economics, Joseph Stiglitz, has described the European response to the crisis as a “mutual suicide pact”. That is very strong language for an eminent economist. Their comments were echoed by yet another world renowned economist, Nouriel Roubini, who correctly forecast the current crash:
Krugman, Stiglitz and Roubini reflect a widespread view that the EU has misdiagnosed the economic crisis. The proposed new treaty seeks to assign that misdiagnosis the status of constitutional law. It is akin to a doctor prescribing an inappropriate treatment to a patient and then legally debarring the patient from exploring any alternative treatments. This is why opposition to the treaty is growing across the eurozone, and it is those voices of opposition that I principally wish to draw to the attention of the House, not least because the voices from the rest of Europe that the House and its committees have heard from so far have all been in support of the treaty. There is serious concern internationally and across Europe about the direction being taken.
I wish to respond to some of the comments from the other side of the House about Sinn Féin’s historical analysis. It is as if Sinn Féin was on the margins of Europe in its constructive criticism of the direction Europe has been taking. I argue that we are in the mainstream of social democratic or left wing thinking in Europe. At times that is in the majority but currently it is in the minority. However, in the near future it will be back in the majority again, and we are right at the centre of it in our analysis of the dismantling of social Europe. Those who have a very right wing analysis believe in light-touch regulation, privatisation, liberalisation, breaking down public services and driving back workers’ rights and entitlements. That approach has led to this crisis. We let the financial markets and the banks roam free and we now have this catastrophe in Ireland and in Europe.
I will now focus on some of the commentary from across Europe. Before doing so, however, I remind the House of the background to the first Lisbon treaty referendum in Ireland. It did not come out of nowhere. There was a proposition to have a European constitution, drafted by the mandarins and the elite in the corridors of Brussels and Strasbourg. It was put to the people of France and meetings were held across that country in town halls, libraries and public buildings, but the people rejected the proposition. It was not for xenophobic or regressive reasons but for progressive reasons. They wanted to reclaim the vision of Europe that Francois Mitterand, Jacques Delors and others had, so they rejected the European constitution in the referendum. The people of Holland did likewise. It was only afterwards that Europe closed down the constitution and repackaged 98% of it into what was to become the Lisbon treaty. The Irish people were the third to reject the proposition, and Sinn Féin was not alone on the fringes of Europe but at the centre of it in constructively and critically taking on those who were stealing the dream that was social Europe.
With that in mind I will turn to some of the commentary in Europe on this treaty. It is clear that when Sinn Féin calls on the Irish people to vote “No” to the treaty it is not to isolate Ireland from Europe but to strengthen our bonds with people across Europe who are sick and tired of austerity, unemployment and their public services being systematically dismantled. There is a very good chance that François Hollande will be the next President of France. We are familiar with the term “Merkozy”, the partnership of Angela Merkel and Nicolas Sarkozy and how it has pushed forward and pushed everybody else aside. That will come apart if François Hollande is elected. Interestingly, the BBC reports today that he outlined a number of reasons for opposing the treaty and what he would seek to renegotiate. It included dropping plans to anchor deficit reduction rules in countries’ constitutions. That is a huge statement. He is making clear, among other things, that to attach these arbitrary draconian targets, particularly to countries that are in a programme, are struggling and are saddled with banking debt, is insane. This is possibly the next President of France, somebody with whom we will seek to build strategic alliances.
Dr. Herta Daubler-Gmelin, a former Minister for Justice in the German Government, is pursuing a constitutional case for a referendum on the treaty, saying: “I am all for Europe, just not one determined by political elites”. Dr. H. J. Witteveen, a former Minister for Finance in the Netherlands and a former director of the IMF, calls the treaty “unreasonable and dangerous”. Again, that is strong language. The Social Democratic Party in Sweden has argued that, “Sweden should not transfer power to decide on financial policy from Riksdagen [the national parliament], nor give the European Court of Justice the possibility to decide on sanctions on the basis of the Fiscal Compact”. Also in Sweden, the EU legal expert of the national trade union confederation has said:
The Swedish trade unions are in line with the European Trade Union Confederation which has, for the first time ever, opposed a treaty. Of course, this is not an EU treaty but a number of member states have signed up to it, if not yet ratified it. Does this not say everything? The European Trade Union Confederation whose members passionately believe in a social Europe now sees that the dream could be lost if this direction is taken. The confederation says:
A wide swathe of opinion is opposed to the treaty. I could talk about the Dutch labour party and German social democrats. There is widespread concern across Europe at the implications of this treaty.
Our people should have the freedom and capacity to look at this treaty on its merits or demerits and make their decision. I appeal to the Government to cut out the nonsense about conditionality of access to European Stability Mechanism funding, the blackmail clause. The Government has not ratified the European Stability Mechanism. It holds a veto in terms of the amendment to Article 136. Sinn Féin brought forward a Private Members’ motion asking the Government not to introduce the ESM legislation until the people had their say on the austerity treaty. I commend the Government on having done that.
The Government must now allow the people decide on the capacity of the treaty for stability, as the Government claims, or austerity, as we argue, and make up their own minds without this threat. The Government can undertake not to implement the ESM treaty and the conditionality that comes with it if the people reject this treaty. It should defend the Irish people’s interest and state that this is wrong.
Ministers and Deputies from the Government parties have said the austerity treaty is not a big deal and that we already have its measures in the six pack. If we are meeting the commitments of the six pack, are the poster boys for austerity and are complying with the requirements of the troika, which is in Ireland at present to make another tick on our score card, how can we be refused access to ESM funding? This is an empty threat, but a threat none the less. I appeal to the Government to remove that threat, which it has the power to do, and give the people capacity to make up their own minds. The Government cannot say to the Irish people that they will be isolated within Europe if they reject the proposition when I have just read out the range of public opinion across almost every member state that is stacked against the treaty.
People are disgusted and disillusioned. They believe the political institutions of Europe have failed them and have moved away from the promise of a social Europe and the positive achievements of the European Union towards a big business dominated agenda. Mario Draghi, president of the European Central Bank, Mario Monti, the technocratic Prime Minister of Italy and Lucas Papademos, the technocratic Prime Minister of Greece all come from the Goldman Sachs stable. This is insanity. Our people see those at the higher echelons who caused this crisis being rewarded. There are those in the trade union movement across Europe who refer to this treaty as proof of a right-wing coup. Is that what we want? Do we want more Thatcherism or more equality? Do we want more of the promise of social Europe? That is our challenge.
Our people should not have this threat hung over them with the compliance and assistance of our Government. If that threat is removed we can have a proper debate with space for the Irish people to have their say.
Deputy Bernard J. Durkan: I am glad to have an opportunity to speak on this important watershed issue in Irish politics and economics. I will not take the advice of my colleague across the House to heed the words of Paul Krugman or of any other world expert. This is one for us. The ordinary people of this country must come to a judgment on this matter. Do we want to look to the future alone and with a tear in our eye, or be resolute, take our responsibilities seriously, stand up and be counted, assert ourselves as real members of the European Union and take our place proudly without fear or favour among the nations of the European Union? Do we want to ape those who have made mistakes and take the advice of people who followed those who were wrong, and there were many of them?
There are as many diverse economic opinions as there are blades of grass in Croke Park. For the last ten years we have been entertained by those who said we were going great and that this was the way to go. They said everything was easy and that we were making a bag of money. They said it was a great time to be here and we should take these opportunities. No one wanted to hear reality. This is reality. This is real time. We face it in the clear knowledge that the decision we take will have a serious impact on where we go in the future.
We talk about austerity as though it were an end in itself. It is not. It is a means to an end and it must be a means to recovery. There is no sense in spending more money if we are still sliding down the tunnel. In 1977, economic experts decided that we needed economic stimulus and to spend more money and generate consumer demand. That is what the people voted for, because it was easy. We must get away from easy. This is not about easy. This is about responsibility. The most important thing about the 1977 stimulus package was that within 18 months the country was broke. People seem to have forgotten that we have not repaid that debt.
We are paying it back and will still be paying it back ad infinitum. The only thing that happened in the intervening years was, particularly in regard to property — as property prices imploded — that inflation took control and relative to our borrowings our economic growth overtook it and they were that much less. However, it has not gone away. Like everyone else in this House I have dealt with as many serious debt situations as anyone in Europe. There is a golden rule that when one owes money that one must face the reality in the first instance and accept that it is a fact. I do not care who did it. It is easy for us on this side of the House to say we know who is responsible but there is no sense in trying to pretend that what happened did not happen under the auspices, approval and aegis of the agencies in this country. I refer to the Central Bank, the Financial Regulator, the Department of Finance and others. That carries the sovereign stamp and when we say we will not pay and that we will walk away, what we are saying is that our stamp means nothing in the future. We do not mean what we say. We must accept responsibility for whatever has happened. We must do that as a people. If we do not do so, although I am not an expert, I predict serious problems in future if we go down the road of pretending that someone somewhere is going to be very nice to us, will lift us up by our bootstraps, pat us on the head, hose us down and say “Come on, are you not Irish? Don’t we love you all and sure we could not leave you out there in the cold.” This is the real world. This is real time.
Austerity is not an end; it is a means to economic recovery. It is not forever, nor should it be, but there must be a recognition and realisation that we could not continue the way we were. If anyone in this House is suggesting — Professor Krugman or anyone else — that we should continue the way we were and spend money the way we did for the past ten or 15 years and think we are going to recover, they should think again. One of the solutions that has been put forward from the United States — by Professor Krugman — is that full integration of economic and fiscal policy is the only way it could work. They have that in the United States and let us look at what happened there. Some of the banks did not work out all that well and the economy is heavily borrowed.
I do not think we need to take advice from anybody. We must judge it for ourselves. The people in this country who are about to vote in the referendum must judge it for themselves. What they must consider is what is the safest bet if in doubt on this occasion. It used to be said in previous referenda that if in doubt one should vote “No”. The reverse is the case this time. If there is any doubt people must vote “Yes” in their own interest because it is in the interest of the people of this country that they take the right decision. It is not for politicians to make the decision for them. My colleague across the House, Deputy Mac Lochlainn, is correct; we must let the people decide. It is now their turn to take responsibility and they must remember that the result will be on their heads. On our heads will be the result as well. If the people of this country make the wrong decision we will all pay for that too.
I would love to be able to blame Fianna Fáil for where we are but the fact is that whatever happened got some approval from the people. People voted for it. The reason they voted for it is because people vote for something that sounds easy. Politically, it is a great thing to do. They would be fools not to, on the basis that the rewards would be to the people. However, the rewards were not to the people; the cost was to the people. We are paying for it, which is a sad thing. In my time in this House — I am here a couple of years — I saw all of that happen. I am ashamed to say that I was unable to convince anyone as to what might happen, and it happened. Our worst fears were realised.
People have asked why the Lisbon Agenda did not succeed. It was said that low interest rates were the cause of the problem. They were not. There was plenty of scope to introduce credit controls, as is the case now. Interest rates are low now but there is no difficulty with them since recognition dawned. Economic lunacy was what happened. There is nothing better than low interest rates to generate employment and economic growth, but one must put them to the right use. Unfortunately, in this country we decided to spend the money. We were supposed to be the richest country in the world. Does the Acting Chairman, Deputy Mathews, remember that? We might have been the richest country in the world but we put our money into property. One could ask where it is now. The property has devalued so we are no longer the richest country in the world. I appeal to the people in this country, in the interests of the country and of future generations to vote “Yes”.
Deputy Dan Neville: I welcome the opportunity to speak in the debate on the referendum and to say how important it is to our future economic activity and opportunities to ensure that people stay and work in this country and that we have a vibrant, developing, progressive economy. We are one of the 17 members of the eurozone. We are part of a market of 500 million people. That market is vital to trade and future growth. Unfortunately, because of decisions made by the previous Government we are now dependent on international institutions to pay our pensions, salaries to the public service to keep hospitals open and pay for doctors, nurses and other services, education, schools and public services in general.
Unfortunately, we have seen living standards drop. They depend on our reputation as a strong and stable place to do business. The treaty will give that message which will attract business and investment to this country. The euro is the currency of the Republic of Ireland. Previously we had the Irish pound or the punt as it was known. It is the money with which we trade and have in our pockets. It is the currency we save, spend and with which we purchase services. The future health of the euro matters personally to each one of us. It is our currency and we want nothing more than is due to people, namely, to live in this country where we can find decent work, have a home, take care of our families, watch our children grow up in the company of their friends, see our children educated and have a livelihood in the country and as the cycle of life continues that in our elderly years we receive proper treatment and have a quality of life we deserve having contributed to the State through our lives.
A crucial tool available to us at present for which the treaty has implications is the firewall in the European Stability Mechanism. Any country which ratifies the stability treaty will have access to it. If any country does not ratify the stability treaty it will not have access to the European Stability Mechanism.
This is a treaty on stability and is about ensuring a stable currency for Ireland; ensuring a stable euro. It is about confidence abroad and maintaining and enhancing the influence which we have built up with many investors. We have seen progress in that area in recent weeks and months in international companies looking to invest in the country but we must enhance our influence to attract those companies and to influence our European partners.
Deputy Dan Neville: The treaty itself is important. What we are asked to do is reduce the underlying Government deficit to no more than 0.5% of everything produced in the economy in any year. It asks for countries to abide by a common set of rules, but there is flexibility in times of crisis. When the economy weakens, the country can support spending and jobs by borrowing and when the economy grows strongly, the Government repays public debts.
The treaty also asks countries to bring, over a period of 20 years, their total government debt, including money borrowed in previous years, down to a safe level of 60% of the total output and if countries are in exceptional circumstances, these rules are suspended and governments can borrow more to support jobs.
If that formula had been in existence and honoured over the past 15 years, we would not be in the present crisis, we would not be cutting back services, we would not have our tax going abroad to service a debt to ensure a reduced level of services, we would not have our people leaving the country as is happening and we would not have the level of unemployment that we are sustaining. If the formula which this treaty puts into existence was in existence, we would not be in the present crisis.
Deputy Brian Walsh: I thank the Acting Chairman, Deputy Mathews, for affording me the opportunity to contribute briefly to the debate on this important Bill. No doubt this is one of the most important pieces of legislation which has come before the House during my brief time as a Member.
On 31 May we will seek direction from the people as to the course this country must navigate, not only during the lifetime of this Government but for that of many generations to come. As we embark on the campaign ahead of the vote next month, it is important that we foster reasoned debate and engage with the electorate in a responsible manner, not on the basis of empty rhetoric or misinformation.
What is at stake in this referendum is far too important to constitute a playing field for self-interested partisan political games, and yet elements of the Opposition — we heard it here today and yesterday — have already begun propagating untruths in an effort to mobilise against this treaty the very sections of society that stand to suffer most if the treaty, and its safeguards and assurances, are rejected.
It was interesting to hear earlier Deputy Mac Lochlainn refer to this as an austerity treaty. If Ireland does not have access to the ESM which would severely weaken our ability to borrow funds in future at affordable interest rates, and if the Government is unable to borrow these funds, the budget deficits that we incur, most likely, would have to be eliminated immediately through cuts in public expenditure and an increase in taxation. In a way, rejecting the treaty could lead to even more austerity and job losses than accepting the treaty.
It has also been falsely claimed, for instance, that the stability treaty represents a further concession in our sovereignty to the European Union. I agree in certain respects in that regard because it compromises our sovereign ability to be reckless and to be irresponsible, as has been demonstrated by previous Administrations. It is simply a solemn agreement among independent democratic states to conform with principles of fiscal rectitude and good governance for the good of their people.
The concept that fiscal and economic criteria must be adhered to by member states of the European project is nothing new. We saw it in Maastricht and in the six pack reforms which were introduced last year. We have seen it on a number of the treaties that have already been approved. Given our calamitous recent economic history, no nation more than the Irish should appreciate the potential benefits of enforceable fiscal guidelines that this treaty will introduce.
The auction politics engaged in by our predecessors have seen Governments espouse reckless unsustainable policies with a view only to the next general election and with a view to a return to office in subsequent elections. State coffers have been grievously abused in order to purchase short-term electoral success without the slightest regard for the long-term national interest.
Far from benefitting from these give-away budgets, it is the taxpayer who is now paying the price. The nation’s purse has been bled dry and the politicians who emptied it have retired from this House on their colossal pensions with the exception of a notable few, Deputy Martin and my constituency colleague, Deputy Ó Cuív. It is difficult to assess where Deputy Ó Cuív stands in this regard — his comments yesterday would suggest he is opposing it.
Perhaps, if these controls were in place when Deputies Martin and Ó Cuív were sitting around the Cabinet table, we would not find ourselves in the position that we are today. The disastrous economic policies pursued by the previous Administrations would have been flagged early in the form of the macroeconomic imbalances that would have shown up had these controls been in place.
Deputy Clare Daly: We are against the fiscal treaty for the economic reasons outlined already in this debate by some of my ULA colleagues, but also on the grounds of the attack that it represents on democracy. Quite a fundamental shift is taking place. It is really a fundamental attack on the basic democratic right to elect a Government and have that Government decide on budgetary and economic strategy.
Of course, we are not naive enough to think that democracy is wholesome in our economy. We live in a society which is not very democratic at all and which is run, as the Occupy protesters correctly pointed out, for the 1%, not the 99%, and the power of the 1% flows from their ownership of the key resources in the economy.
We have a system of so-called parliamentary democracy where people can elect Members once every five years and put them under a certain amount of pressure. At European level, there is not even this level of parliamentary democracy because we have a system where real power lies with the unelected European Commission and the European Council.
Limited and all as it is, the process that is unfolding with the fiscal treaty makes it even worse, and it is part of a process. The six pack economic governance shifted important powers away from elected governments to the unelected European Commission, made changes in how voting rights were carried out etc. This treaty takes that a step further and is a significant attack on basis democratic rights. I will explain those points with reference to a couple of the articles in the treaty.
First, there is the balanced budget rule, which effectively ties the hands of future Governments to the same economic policies as this one. In essence, we are being wedded to neoliberalism and austerity. It rules out Governments having the ability to run structural deficits, which could be used for investment in vital public works to engage in necessary public spending to reinvigorate the economy. We must ask ourselves whether surely one of the most basic requirements of a democracy is that people would be free to vote for a Government and free to vote for different economic policies. In essence, what we are getting here is the old Ford phrase — you can have any colour as long as it is black. Now, you can have any government you like as long as it is neoliberal.
It is true that this treaty is not unique in that regard. It is part of a process where economic policy is being handed over to technocrats. What we see is a conscious attempt to use the crisis that is unfolding to move economic policy out of the sphere of democratic discussion and turn it into a so-called technical question. What we are being told is that neoliberalism should not be a policy choice as it is really about responsible behaviour. That is the excuse we got to justify the removal of elected governments in Italy and Greece and to have them replaced by bankers, which is an absolutely retrograde step.
The second key proposal which diminishes democracy is the mechanism for countries to be effectively placed into administration. This comes under Article 5 of the treaty, which states that countries in an excessive deficit procedure have to put in place a budgetary and economic partnership programme, including a detailed description of the structural reforms which must be put in place and implemented to ensure an effective and durable correction of their excessive deficits. These programmes will have to be endorsed and monitored by the European Commission and Council and, in essence, it is a surrender of budgetary powers to the Commission and to the Council.
While we do not have the time today to develop the points, similarly, Article 7 in essence creates a bloc for austerity within the EU. It creates, if one likes, a sort of caucus of the austerity club where people are required to come together in advance and sign up to the idea of austerity. It is an extension of the new form of voting which was introduced under the six pack, reverse majority voting, which means the Council——
Deputy Sean Sherlock: Would the Deputy acknowledge that the Commission is comprised of Commissioners who are there by virtue of mandates they received from their respective Governments? If the European Union member states keep electing right wing or centre right governments in the main, then there will be a right-wing or neoliberal agenda in terms of how the Commission does its business. Would the Deputy also acknowledge we now have a co-decision procedure where directly elected parliamentarians in the European Parliament co-decide with the Council of Ministers and with the Commission, and more and more of that agenda is done on a co-decision procedure in terms of the competences of the European Union? Would she not agree also that the Stability and Growth Pact is something we have already signed up to, is laid down and was agreed by the citizens of Europe?
Deputy Clare Daly: I would not. I would require considerably more than two minutes to unravel the undemocratic mess that is the European Commission and Council, and how people end up there. The fact that a number of governments across Europe may be slightly more dominated by right wing elements is neither here nor there. What we are talking about is enshrining the policies of those right wing governments that are currently in place in perpetuity in a new treaty by signing up to their very policies of neoliberalism itself. That is, in essence, what is happening by signing up and handing over in that regard. Obviously, the Minister of State disagrees but we do not have time in this debate to deal with that.
Article 7 of the austerity treaty tries to create a caucus of the austerity club where countries within the EU structures support the Commission’s proposals for sanctions or fines on non-performing countries. While I do not have a chance now to go into the detail of that, the new methods of voting which have been introduced, such as reverse majority voting and so on, are inherently undemocratic. What it means is that the Council is presumed to agree with the sanctions unless a qualified majority vote against it. What it really means is that the sanctions are presumed to be implemented and one would need a huge majority to overturn them. If the peripheral nations still had their votes, they would not have a chance of defeating it if the major northern Governments were not in favour of it.
We do not have the time to develop the points now. The key decision making is being taken out of the hands of the European Council, to which the Minister of State referred, and put into the hands of this so-called austerity club. It extends the process too far. For that reason and the other economic ones, we will be opposing the treaty.
Deputy Mick Wallace: I too have serious questions about the lack of democracy in the European set-up at the moment. I am afraid I cannot help having the impression that the Germans, who pay most into it, also have the most say. One might say that is fair enough but they seem to have all the say at the moment. It was interesting yesterday to hear that a strong member of the Bundesbank, Dr. Andreas Dombret:
It would be great if it does fuel domestic demand in Germany and if the Germans are encouraged to spend a bit more, as it would address some of the imbalances that exist in Europe, which are a huge problem for us.
The sooner we realise that it is not all about money and economics, the better. Only then might we have a better chance of getting back to a decent level. Those in the Government can talk all they wish about exports surviving through these times but they should hold up their hands and admit that they have done nothing for the domestic economy, where most of the population work and on which most of the population depends.
Deputy Joan Collins: It is difficult to offer a detailed alternative when during the past year we have continuously raised alternatives to the policies dealing with wealth, public spending, creating jobs and the national jobs plan. I wish to deal with some points made during the debate. Deputy Donohoe summed up the argument for the “Yes” side when he said, “Show me the money.” Are we to see posters in the campaign stating “Vote Yes for a second bailout”, with the phrase “even though we will not need it” in small print? I remember the posters from previous campaigns on EU-related referendums calling on voters to “Vote Yes for jobs” and those which stated “Europe is working”. However, Europe is not working. Unemployment in the European Union is approaching 25 million. In Greece the unemployment level is 24% and at an outrageous level of 60% among young people. In Spain, unemployment is 23% and at an outrageous level of 50% for young people.
These figures are comparable to the mass unemployment at the height of the 1930s great depression. Ireland and Greece have suffered an economic slump of 1930s proportions. There has been a 6% fall in output in Greece year on year, totalling between 16% and 20% from peak levels. The position of Ireland is worse with national output down by 24% from the peak, ten times the level during normal recessions. We are committing ourselves to a binding fiscal treaty. We need a proper, adult discussion on the crisis and its possible solutions.
People have lost their jobs and their homes. Among the most vivid images from this recession and the attendant austerity are the pictures we saw in the newspapers this morning taken in an affluent area of the city. A man of 71 years and a woman of 63 years were dragged from their home by representatives of a bank that we own. This was done by four burly bailiffs while the Garda protected the property for the Irish Bank Resolution Corporation. These images will cause outrage among the people in the coming period because they are the images of austerity and recession. I do not envisage the Government resolving the problems the images illustrate in respect of insolvency for homes etc. The families who have virtually nothing left to live on after paying bills deserve a serious discussion on the pros and cons of the treaty.
I call on Deputy “show me the money” Donohoe to reflect and question whether the options and alternatives were carefully weighted up when the previous Government adopted the blanket guarantee of the banks. They were not. We heard nonsensical views, including the view that there would be no cash in the ATMs unless we took action. That poorly informed, inadequate discussion condemned and burdened the State with an unsustainable level of debt and disastrous consequences. In addition we have been subject to four years of austerity which have collapsed demand, activity and jobs in the domestic economy.
The fiscal treaty will enshrine into enforceable rules a policy that is not working and that will prolong and deepen the slump in countries such as Ireland, Greece, Spain and Portugal. It will prolong and deepen the recession and the levels of unemployment in the eurozone as a whole. Austerity is not a solution; it is part of the problem. Voting “No” is not an act of insanity since what the Government is doing is not working. A sane person would stop and begin to examine seriously the alternatives. I will campaign vigorously for a “No” vote in my constituency, Dublin South-Central, in the coming six weeks and I am confident the people there will vote “No” against this austerity fiscal treaty.
Deputy Luke ‘Ming’ Flanagan: I will campaign and vote against the fiscal compact treaty because I believe the long-term interests of the country are best served by running our own affairs. My opinion is not driven by nationalism or a dislike of Europe. It is driven by the fact that I believe power should rest as closely as possible with the people. The treaty is a further erosion and distancing of this power. It will take more power away from the ordinary citizen and put it in the hands of unelected officials in the commission and judges in the European Union Court of Justice.
In the past I have been a fan of the European Union but this was only until the leaders of France and Germany became the de facto leaders of the EU. The reality is that no matter what system of rules are introduced into the European Union, Germany and France will do whatever they wish regardless of what suits peripheral states such as Ireland. Germany broke the rules related to the Maastricht treaty at will. Now, in order that it does not occur again, the same country that was most persistent in breaking these rules is putting the gun to our head so that future offenders will be punished. As far as sticking to treaties is concerned, Germany and France do not give tuppence. A French Minister, Pierre Lellouche, has stated that the bailout funds were expressly forbidden in treaties but that did not matter at all. Germany will always do what is best for Germany. When Ireland needed higher interest rates to cool down our over heating economy, the Germans needed low interest rates. Which got its way? Germany did. As a result Ireland was flooded with money which, along with light touch regulation, inflated prices and knocked our economy completely out of sync with reality. It remains there. This should come as no surprise since many people, including Anthony Coughlan, warned from the outset that this would occur. There is now talk of putting another belt on the straitjacket which has largely strangled this economy.
We are informed that we will face vast cuts in living standards if we do not vote for the treaty. It is clear that if we vote for the treaty we will face even greater cuts. As part of the treaty we are expected to reduce our debt to GDP ratio to 60%. This is to be achieved by reducing debt by 5% per year over a 20 year period. We must get our budget deficit down to 0.5% of GDP as well. The only way we can achieve this without destroying our economy is by a vast write-down of debt, debt which was not ours in the first instance. Unfortunately, this is something the Taoiseach will not consider. To achieve this we must run the equivalent of budget surpluses of between €3 billion and €4 billion per year for the next 20 years.
We are informed that the alternative to voting for the treaty is that funding would be cut off from the country and the banking system would collapse. If someone puts a gun to my head, my instinct is to say, “Pull the trigger”. I do so on the basis of life experience which tells me that bullies are in fact cowards. Pulling the trigger has consequences on both sides. If funding is withdrawn from our banking system and our country collapses, many people throughout Europe would stand to lose tens of billions of euro. This is a risk I do not believe those in Europe are willing to take. Instead of working out how one can save the unsalvageable, Europe should work towards helping countries such as Ireland to exit the eurozone. It does not suit anyone in Europe for Ireland to crash and burn under a mountain of unsustainable debt. However, that is what will occur if we do not take radical action.
This treaty will not create stability; it will create the opposite. It will create the very thing that Angela Merkel is afraid of, that is, an environment where extremism will thrive and desperation will become the main motivation behind people’s actions. I will conclude with a recent observation by Paul Krugman, an excellent economist respected all over the world: “Rather than admit that they’ve been wrong, European leaders seem determined to drive their economy — and their society — off a cliff.” Between now and referendum day I will do my damnedest to make sure the Government does not let that happen.
Deputy Alex White: I have found colleagues’ contributions to the debate this evening both interesting and informative. I was not aware, for example, that it was the view of Deputy Luke ‘Ming’ Flanagan that we should leave the euro.
Deputy Alex White: I respect his view although I disagree with it. I would be interested to hear Deputies Flanagan and Joan Collins say whether they would consider us to have a better chance of running our affairs if the treaty is accepted or if it is rejected. Does Deputy Collins believe we will have more or less austerity if it is defeated? Many articles have been quoted from colleagues on that side of the House to support their case. Mr. Krugman’s ears must be very red. In an article of his on 11 March to which rather less reference was made, Mr. Krugman said: “You may ask what alternatives countries like Greece and Ireland had, and the answer is that they had and have no good alternatives”. In other words, while he has offered a major critique of the strategy in the eurozone, he has formed the view that Ireland, among others, has little choice in regard to where it finds itself. I do not accept that we are without choices, but I am strongly of the view that if this referendum is defeated, we will have more austerity, not less. That is absolutely clear and without question. We have a deficit of €15 billion and nobody willing to lend to us. Were we to decide, as Deputy Flanagan advocates, to leave the currency, we would simply isolate ourselves from any prospect of recovery.
It is not for the optics that I acknowledge that the treaty is not perfect. In fact, I do not accept it is the solution to the problems in the eurozone. Moreover, I very much agree with some of the points made by Deputy Mick Wallace and others in regard to the huge economic imbalances that exist across the eurozone countries. That is a major issue that must be addressed. It may even be more at the heart of the collapse in Ireland than fiscal indiscipline ever was. I agree with Deputy Pádraig Mac Lochlainn that if the rules set out in the stability treaty had been in place for the past ten years they would not, on their own, have addressed or solved the problems that have arisen. They would not have tracked the bubble which was, in fact, an indirect or perhaps even a direct result of the imbalances to which I referred. The explosion of credit that emerged in the core of Europe after 2000 and the introduction of the euro was bound to have a differential impact on different countries given their varying economic circumstances. Our economy simply was not in a position to withstand and should never have been exposed to that type of influx of credit in the uncontrolled manner in which it occurred. I absolutely agree that fiscal rules alone would not have prevented the crisis. However, that is not an argument against fiscal rules. Rather, it is an argument that fiscal rules are not enough, that the fiscal discipline that is advocated is necessary but not sufficient. It is certainly not a case for throwing out the rules as something that is not required.
It is not difficult to ascertain the impetus behind this treaty. The design of the euro currency in the early part of the last decade was incomplete and arguably flawed. Member states thought they could have monetary union without any type of fiscal co-ordination, but there is no currency in the history of the universe that ever could survive in those types of circumstances. Rules were set out in the Stability and Growth Pact, but they were ignored by many countries, not so much those on the so-called periphery but by France and Germany, among others. What is now being proposed is, first, to take the rules from the shelf, dust them down and strengthen them, which is what was done last year. The provisions contained in the treaty are the strengthened rules that were reintroduced last year. Indeed, they are largely the same rules that have been in place since 1997, which have merely been dusted off and strengthened. In addition, a decision was made to introduce corrective mechanisms where the rules are not applied.
This is the main response the European Union has had to the crisis in the eurozone. To reiterate, while I am of the view that it is necessary that this should be done, it is not sufficient because we have not yet addressed the macroeconomic imbalances that continue to exist. Europe made a start on addressing those imbalances in the six-pack last year and made additional progress in this new two-pack set of regulations, but it has not done enough to address the risk that the same type of explosion of price bubbles could recur in periphery countries. It is moving in the direction of addressing the issue, but it should be given just as much attention as is being given to fiscal discipline. Unfortunately, that is not being done. Nor is sufficient attention being given to the necessity for a growth strategy in Europe. It will probably never be possible, despite what colleagues have argued, for a Keynesian, stimulus-type approach to be taken in one country within the eurozone. It will be possible for it to be done in the eurozone as a whole, and I support that, but given the configuration of a system where there is monetary union and fiscal union, no single country will be in a position to stimulate its own economy without the co-ordination and co-operation of other member states.
That is not to say that Keynes is dead, as some have claimed. Nor does it mean that neoliberalism is in the ascendant, as Deputy Clare Daly claimed, and there is no room for any other politics. I strongly disagree with that. However, when we have 23 essentially right-wing or centre-right Governments out of 27 in the European Union, there is a large political job to do. One will not do that political job by cutting oneself loose from the currency or choosing not to engage in politics in Europe. One will not succeed by abandoning any interest in whether the elections in France at the weekend, for example, will change the Government in that country. We will not achieve our objectives by deciding not to make common cause with other Governments, whether on the left or centre-left, in other member states. Instead we should be in Europe arguing with people, co-operating with people and making common cause with people. There are many people elsewhere in Europe who are interested in hearing the type of debate that is taking place in this Chamber. However, Deputy Flanagan and others are arguing that we should just look after ourselves. He claims that is not a nationalistic position to adopt but I would contend, with respect, that he is being the very essence of a little Irelander.
There is no future for this country on its own. I have made the point to Sinn Féin Deputies in the past that sinn féin as a concept — ourselves alone — is ludicrous in the modern world. We cannot solve all the major problems in the world, economic, financial and environmental, ourselves alone. Deputy Flanagan might believe it can be done but that does not make it so. What we must do is, for example, mutualise debt and deal with the necessity for restructuring it where countries have an overhang of debt. I am strongly of the view that the debt must be restructured in some considerable respect. That is a political fight in Europe. It is a political fight with countries and institutions that do not want to see it happen. If one believes in eurobonds and the mutualising of debt, let us go and argue for them. Let us go and fight for them, talk to other people who might agree with us and talk to other countries in similar positions. However, my colleagues across the House do not want that. Instead they say we should forget about neoliberalism, that we will turn our backs and paddle our own canoe. That will not work. Let us be serious politicians, as I am sure my colleagues on that side of the House are. As I said, I accept that fiscal discipline is necessary but I do not agree it is sufficient. We must employ other economic instruments that promote growth. The European Union has not, despite some welcome initiatives recently, been anything like as forthcoming or robust on the growth side as it has been on the fiscal discipline side. Therefore, it is a considerable challenge to build a new strategy in Europe in that regard.
One could ask why the new rules are being introduced. The rules were strengthened and corrective mechanisms were put in place, but one might still ask what the treaty is about. Again, there is much misinformation about this and perhaps genuine misunderstanding. The treaty is about taking a different approach from simply sending the Taoiseach to Brussels to sign on the line to the new agreement, along with the leaders all of the other countries. It proposes an additional step, whereby countries would anchor these rules in their domestic laws. That is the difference because although the rules already are in place, the proposal is that they be agreed to in this House. In other words, the Government does not simply agree to them when in Brussels, at some point after the referendum is passed, the Oireachtas will put them into domestic law through legislation. The rules will not be inserted into the Constitution, although people thought that would be the case. They will be put into law in our Parliament and the people will be asked to agree this should be done at some point in the future.
There has been much misinformation and misunderstanding about the rules. For example, I refer to the notion that the corrective mechanism which would be invoked were the deficit rule, or debt brake, to be breached would be a deeply draconian regime that would be imposed on us without consultation and so on. The Minister of State, Deputy Sean Sherlock, intervened briefly on that point — I agree with him — because the idea that the Commission will come in as a——
Deputy Alex White: I would not have allowed the Minister of State to interrupt me. It was someone else he interrupted. Of course, it is completely untrue that the corrective mechanism is the draconian regime suggested. The obligation is that Ireland would support and implement proposals with which the Commission would come forward. Such proposals would be country-specific, based on the particular conditions in an individual country. Moreover, there would be a timeframe for the implementation of such proposals. The Commission does not operate in the manner characterised by Members on the other side of the House. There must be a high degree of consultation, as there always has been and as I believe there will be in the future. The treaty states specifically, “Such correction mechanism shall fully respect the prerogatives of national Parliaments”. Consequently, Members will also have a responsibility in this regard. Their role is set out clearly in the treaty and they must step up to the plate. One might ask what this Parliament is doing about budgetary discipline. Obviously, the Government brings forward the budget, but what responsibilities are Members, as parliamentarians, taking on? They need to engage in self-criticism on how quickly, how carefully and in what detailed way they become involved in budgetary assessment as parliamentarians.
On the 3% target, I again remind colleagues that Ireland is already committed in this regard. I acknowledge Members opposite disagree with this and I certainly disagreed strongly with the decision taken in 2008 to provide the guarantee that led inevitably and inexorably to what happened last year in respect of the bailout. However, the State has made a solemn commitment to reduce its deficit to 3% by 2015. Moreover, the treaty provisions will not kick in for Ireland until at least 2015 because the programme of assistance will be in place until then. It is true that Ireland would then be obliged to go further than the figure of 3%. Were it to get out of the programme by 2015, it would be obliged to reduce the deficit further to comply with the new rules. However, if one considers the proportionate reduction that would be needed beyond 3%, it pales somewhat when compared with what we have been asked to do and are obliged to do up to 2015.
In respect of the debt brake, in a genuine spirit of debate I seek to discover the origin of the annual 5% reduction cited by Deputy Luke ‘Ming’ Flanagan, as well as the source of his figures of €2 billion or €3 billion per year. On the reduction of the debt, Members should consider a country with a debt-to-GDP ratio of 100% — I acknowledge that Ireland’s debt is somewhat higher. As one is obliged to reduce the debt by one twentieth of the amount above 60% of GDP, in the aforementioned case one would be obliged to reduce it by one twentieth of 40%, which is 2%. If such a country experiences growth of 2%, it is covering it. Historically, the manner in which countries have dealt with debt and the way in which one eats into it is through growth. One may argue that Ireland may not experience growth, but if that is the case, we will be back in the same position in 2015. Ireland will not get out of the programme of assistance without growth. Moreover, the European Union and the world economy will not get out of its problems without growth. Consequently, no matter how one approaches the future, it is a given that growth is a necessity.
On sanctions, there is a belief abroad that the treaty states the European Court of Justice can impose sanctions on countries that do not implement the rules. This is completely untrue. The involvement of the European Court of Justice is confined to a circumstance in which a country has failed to put the rules into law. A country cannot be brought to the European Court of Justice under the treaty for breaching the rules, it can only be brought before it for failing to put the rules into law. This point is not well understood. People are suggesting Ireland will be brought to the court and fined unless it does this, that and the other. However, the treaty does not provide for this. The sanction in this regard would only apply were the referendum to be passed and Ireland then to fail to bring forward the legislation in, say, June. That might occur, but it seems highly unlikely that were the treaty to be ratified by the people, the Government would not then proceed with the legislation.
The treaty is about more than stability. It is also about solidarity and trust between the peoples and governments of Europe. I state to Deputy Luke ‘Ming’ Flanagan and other Members that just occasionally Deputies may need to think about the perspectives of other peoples in Europe apart from thinking, as they must, about our own. They represent the people and have a duty to them principally before anyone else. While I accept this point, occasionally, they might think about how the world in which they live looks from the perspective of German, Finnish, Belgian or Dutch taxpayers and how they perceive what has happened. It might be worthwhile to consider how they perceive what they have been called upon to do and why they might require a certain amount of mutual trust. In this context, one might consider it to be not at all surprising that in response to further calls on their resources and them to vote in parliament to fund bailouts, they would seek to have people take the rules seriously by incorporating them in their own laws. I repeat that this is all the treaty asks us to do. It does not bring in new rules, but it commits countries to putting the existing rules into domestic law.
As for the imbalances and all the other crucial issues that must be addressed, Deputy Mick Wallace referred to uneven development. He is absolutely right in this regard and has put his finger on the real problem in Europe. It is absolute necessary for the countries of the eurozone and the wider European Union to address now and in the future the question of how to deal with the fact that different countries have different levels of economic development and how to have in place a system and a strategy for growth that simply does not direct itself towards meeting the needs of the so-called core countries but that genuinely serves all the states of the European Union. I have mentioned these are political questions of huge importance. The outcome of the French presidential election at the weekend and the subsequent second round is of massive importance also. These are big political questions and people are thinking about such issues in Europe. The way to approach this issue is not to walk away and suggest the people concerned will only bring trouble to us. I refer to the attitude that suggests it is all trouble, that we do not want it and, consequently, should vote “No”. It reminds me of the little boy holding back the flood with his finger in the dyke. It is as though we can walk away from it and that such things will not matter to us, which is ludicrous. I apologise, as I have tried to avoid using phraseology that sounds as though I am suggesting people are ludicrous. However, one must be serious in this regard.
If people are not convinced, they will be by the following point. There is uncertainty almost everywhere one looks in the world, certainly in Europe. Consequently, one should apply a test and balance risk. One should ask oneself whether voting “Yes” or voting “No” is the riskier course of action. It appears the Irish people will not take a punt on the idea that we should simply cut ourselves loose, sail out into the ocean in choppy waters, in the expectation someone will turn up to save us.
I am of the view that we should remain at the heart of both the European Union and the eurozone. We should also work hard — by means of the rules contained in the treaty and also through other instruments which need to be introduced — in order to strengthen the opportunities for growth in the European Union and those that exist for this country if it remains within the latter. We must fight alongside those in Europe whose views are the same as ours. We must argue in favour of our political beliefs and we must never give up. The strongest argument in respect of this matter is, quite literally, a comparative risk analysis. In other words, we must ask which course of action is more risky or uncertain. If people apply a basic, rational level of thought to this matter, then it is obvious that there is only one way to vote.
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