Irish soldiers are participating in an Austro-German battle group, beginning on 1 July. There are 175 personnel involved, and they will be on standby at Cathal Brugha Barracks, Dublin.
The Dáil will be asked to approve a memorandum of understanding covering Ireland’s participation. The memorandum will be between Germany, Austria, the Czech Republic, Ireland, Croatia and the former Yugoslav republic of Macedonia and will set out principles in relation to the operation, deployment and management of the battle group. It defines Germany as the framework state and Austria as the logistic lead state.
The standby costs are €380,000, and the estimated additional cost for a maximum 120-day deployment of the group is €10.7 million.
The purpose of the EU battle groups is to undertake operations as outlined in the Amsterdam treaty —the Treaty on European Union. These operations, known as the Petersberg Tasks, include tasks of combat forces in crisis management, including peacemaking. In the Lisbon Treaty these tasks were expanded to include joint disarmament operations, military advice and assistance tasks, conflict prevention, and post-conflict stabilisation.
In the words of Alan Shatter, “Ireland’s active engagement in EU battle groups enhances our capacity to influence the ongoing development and evolution of the rapid-response capacity of the EU.”
So much for our policy of neutrality!
News From The People's Movement Éire - People.ie
Monday, 5 March 2012
The "Fiscal Compact" has an equally obnoxious brother—the European Stability Mechanism (ESM) Treaty
A massive No, and No again if necessary!
From now to the forthcoming referendum we should be informing and organising ourselves; organising our neighbours and friends, trade unions, social and community groups about what the grandly named “Treaty on Stability, Coordination and Governance in the Economic and Monetary Union“ means. For the future of this country, and about the antidemocratic and anti-social dangers that it poses.
The treaty has been quite properly renamed the “Permanent Austerity Treaty.” It provides for a permanent balanced-budget rule or debt brake of 0.5 per cent of GDP in any one year to be inserted in euro-zone members’ constitutions or the equivalent.
But it has an equally obnoxious brother—the European Stability Mechanism (ESM) Treaty—which the Government will not be holding a referendum on and will be trying to push through the Oireachtas in the next few weeks with an absolute minimum of public scrutiny. It is in fact a virtual coup, with equally disastrous consequences for the country.
Democrats of all political persuasions should be very concerned.
Yet, as the preamble to the ESM Treaty states, it and the Permanent Austerity Treaty are “complementary in fostering fiscal responsibility and solidarity within the economic and monetary union.” So why a referendum on one and not on the other?
This treaty sets up the European Stability Mechanism.
This also includes a permanent €500 billion bail-out fund and the contributions each of the seventeen euro-zone members must make to it.
In Ireland’s case this will amount to €11 billion, “irrevocably and unconditionally,” in various forms of capital.
The changes represented by the two treaties would make euro-zone member-states permanently into regimes of economic austerity; involving deeper and deeper cuts in public expenditure, increases in indirect taxes, reductions in wages, sustained liberalisation of markets, and the privatisation of public property.
The European Commission and the European Central Bank are obsessed with “economic governance,” which would require smaller euro-zone states in particular to make themselves permanently amenable to a regime under which the larger EU states would, regularly and permanently, vet members’ fiscal policies and impose punitive fines on those failing to observe deflationary budget rules.
It should not be forgotten that after 2014, by courtesy of the Lisbon Treaty, the voting arrangements for making EU laws as well as voting on eurozone matters will see a doubling of Germany’s vote in making EU laws, from its present 8 per cent to 16 per cent. While France’s and Italy’s vote will go from their present 8 per cent each to 12 per cent each, and Ireland’s vote will be halved, to 1 per cent.
We should work for a powerful No vote in the referendum on the Permanent Austerity Treaty, but we should also not be distracted from the anti-democratic process that the Government is using to bring the European Stability Mechanism into being.
The ESM Treaty was signed by EU ambassadors on 2 February—replacing an earlier ESM Treaty. The seventeen euro-zone states have agreed that this ESM Treaty No. 2 will be ratified so that it can to come into force by July.
This ESM Treaty must therefore be brought before the Oireachtas for approval of its ratification in the next few weeks before Easter. There will also be an accompanying European Communities Amendment Bill to implement the amendment of article 136 of the Treaty on the Functioning of the European Union, as well as the provisions of the ESM Treaty in Irish domestic law.
The “decision” of the twenty-seven prime ministers and presidents to give permission under EU law to the seventeen euro-zone member-states to set up a permanent bail-out fund for the euro zone must be agreed by all twenty-seven EU member-states in accordance with their respective constitutional requirements.
This means that the European Council “decision” to make this amendment requires approval either by the Oireachtas or by the people in a referendum.
For the European Council to purport to authorise under EU law the setting up of a permanent bail-out fund for a sub-group of EU states can arguably be said to be a significant claim to increased powers for the EU as a whole, as hitherto the EU treaties provided for no such fund, either directly or indirectly.
Arguably, therefore, this amendment would put the Economic and Monetary Union that Ireland signed up to when the people ratified the Maastricht and Lisbon Treaties on a new and different basis, which entails a significant move towards a fiscal union for the euro zone as well as an Irish commitment to a framework of accompanying supranational controls over national budgetary policy.
Therefore, the People’s Movement believes that it would be unconstitutional for the Oireachtas to attempt to give the necessary approval of such a European Council decision without a referendum of the people in Ireland, especially when the Government is prepared to hold a referendum on the Permanent Austerity Treaty.
The EU member-states adopted the rules regarding 3 per cent and 60 per cent of GDP to ensure that euro-zone member-states would avoid excessive deficits and consequent borrowing, for that would affect all euro-zone states using the same currency.
But the excessive-deficit articles were not enforced once Germany, France and other states broke the excessive-deficit limits in the early 2000s.
When Germany and France broke the rules of the EMU by running big government deficits in 2003, the EU treaty sanctions for enforcing the deficit rules were not applied against them, and they were thereafter effectually dropped for everyone else. Ireland did not break these excessive-deficit rules, however.
Now Germany and France are seeking to change the whole basis of the Economic and Monetary Union that Ireland signed up to by including, in addition to establishing a framework of controls over national budgetary policy, the permanent balanced-budget rule (0.5 per cent deficit rule) through the Permanent Austerity Treaty.
The ESM Treaty is to come into force once it is ratified by signatories representing 90 per cent of the initial capital of the fund; and the preamble to the ESM Treaty states that money from the permanent ESM fund will be given only to euro-zone states that have ratified the Permanent Austerity Treaty and its permanent balanced budget rule or “debt brake.
Sunday, 4 March 2012
On the hundredth anniversary of the 1916 Rising!
The EU commissioner for justice, fundamental rights and citizenship, Viviane Reding, has said that twenty years after the Maastricht Treaty, Europe is in need of “democratic rejuvenation,”, and she has proposed a five-point plan for 2020. The plan includes convening “a convention to draft a treaty on European political union.” Such an agreement should ensure that the European Parliament becomes a true European legislature, with the right to initiate legislation and the exclusive right to elect the Commission.
From 2016 to 2019 the treaty on political union would be subject to ratification in all member-states by way of referendums. It would enter into force once two-thirds of member-states had ratified it.
Citizens should be given two alternatives: either to accept the new treaty or to reject it and remain in a close form of association, notably by continuing to participate in the single market.
So if Reding’s kite flies higher we may have the ultimate referendum on independence and sovereignty in 2016!
From 2016 to 2019 the treaty on political union would be subject to ratification in all member-states by way of referendums. It would enter into force once two-thirds of member-states had ratified it.
Citizens should be given two alternatives: either to accept the new treaty or to reject it and remain in a close form of association, notably by continuing to participate in the single market.
So if Reding’s kite flies higher we may have the ultimate referendum on independence and sovereignty in 2016!
Saturday, 3 March 2012
Shhhhh! They signed!
The treaty establishing the European Stability Mechanism, a permanent bail-out fund for the euro zone, was quietly signed in Brussels on 2 February.
In an outstanding display of what passes for transparency, there wasn’t a word from the Government about this handmaiden of austerity.
The treaty now needs to be ratified by the seventeen members of the euro zone, with the intention that it will come into force in July. The ESM is designed to be a permanent successor to the European Financial Stability Facility and goes hand in hand with the EU Permanent Austerity Treaty.
The People’s Movement pamphlet on the treaty is at www.people.ie/eu/esmref2.pdf.
In an outstanding display of what passes for transparency, there wasn’t a word from the Government about this handmaiden of austerity.
The treaty now needs to be ratified by the seventeen members of the euro zone, with the intention that it will come into force in July. The ESM is designed to be a permanent successor to the European Financial Stability Facility and goes hand in hand with the EU Permanent Austerity Treaty.
The People’s Movement pamphlet on the treaty is at www.people.ie/eu/esmref2.pdf.
Friday, 2 March 2012
Same man—different message
Speaking in Paris last week, Leo Varadkar said that Ireland has paid a high price for being in the euro in not being able to inflict losses on bank bond-holders, and that if this country had not been in the euro such bond-holders in Irish banks would have been “burned.”
“Without the backing and restraints of the ECB we would certainly have had to embark on more aggressive bank resolution policies, which would have meant passing on major losses to financial institutions here in Paris and elsewhere,” he continued, obviously feeling that it was safe enough to spell out in Paris a reality that he would not dare tackle at home.
It’s straightforward enough, really. As he said. “Being part of the euro also prevented the Government from devaluing our currency, which would have enabled us to ease the burden of the financial crisis.
“Had it not been for our membership of the euro and the constraints that go with it, Ireland would have pursued, and would have had to pursue, very different policies. We would certainly have devalued our currency, giving us an unfair competitive advantage over our neighbours.”
But surely if one’s loyalty is to ones own country, whose people elected you to government, you would act in their interest first? Instead we are treated to this outstanding example of Europhilia in a government minister. Needless to remark, devaluation is all about competitive advantage, so Leo wasn’t really serious.
But he was serious enough when he said last month that he is concerned that a referendum on the planned EU Permanent Austerity Treaty would focus not on its content but on domestic issues. He said he did not think referendums are “very democratic,” and that, by and large, referendum campaigns in the past were never about what they are supposed to be about. He would be concerned that a vote on the EU plan would focus on extraneous issues, such as septic tanks, bond-holders, the banking crisis, or Government cut-backs.
Enough!
“Without the backing and restraints of the ECB we would certainly have had to embark on more aggressive bank resolution policies, which would have meant passing on major losses to financial institutions here in Paris and elsewhere,” he continued, obviously feeling that it was safe enough to spell out in Paris a reality that he would not dare tackle at home.
It’s straightforward enough, really. As he said. “Being part of the euro also prevented the Government from devaluing our currency, which would have enabled us to ease the burden of the financial crisis.
“Had it not been for our membership of the euro and the constraints that go with it, Ireland would have pursued, and would have had to pursue, very different policies. We would certainly have devalued our currency, giving us an unfair competitive advantage over our neighbours.”
But surely if one’s loyalty is to ones own country, whose people elected you to government, you would act in their interest first? Instead we are treated to this outstanding example of Europhilia in a government minister. Needless to remark, devaluation is all about competitive advantage, so Leo wasn’t really serious.
But he was serious enough when he said last month that he is concerned that a referendum on the planned EU Permanent Austerity Treaty would focus not on its content but on domestic issues. He said he did not think referendums are “very democratic,” and that, by and large, referendum campaigns in the past were never about what they are supposed to be about. He would be concerned that a vote on the EU plan would focus on extraneous issues, such as septic tanks, bond-holders, the banking crisis, or Government cut-backs.
Enough!
Thursday, 1 March 2012
Does he think we’re complete idiots?
The Taoiseach says that Ireland’s acceptance of the EU Permanent Austerity Treaty will not condemn the country to further years of austerity. In the same breath he also rejected the suggestion that Ireland had lobbied the EU to draft the text of the fiscal compact in a manner that would avoid a constitutional referendum in Ireland.
Even the Irish Times has reported extensively on the shenanigans in Brussels as the EU civil servants struggled to give the Fine Gael-Labour coalition a dig-out.
Kenny, flying in the face of all the evidence, and knowing that he had agreed to a debt reduction of 3 per cent per year over the next twenty years, predicted that Ireland would experience growth, not recession.
It seems that he is either incompetent, a liar, or a fool; but then maybe we’re being a bit too kind and he is simply a tool of Brussels, big business and the Bundesbank. In any case he is doing inestimable damage to the country and the people he purports to “lead.”
Even the Irish Times has reported extensively on the shenanigans in Brussels as the EU civil servants struggled to give the Fine Gael-Labour coalition a dig-out.
Kenny, flying in the face of all the evidence, and knowing that he had agreed to a debt reduction of 3 per cent per year over the next twenty years, predicted that Ireland would experience growth, not recession.
It seems that he is either incompetent, a liar, or a fool; but then maybe we’re being a bit too kind and he is simply a tool of Brussels, big business and the Bundesbank. In any case he is doing inestimable damage to the country and the people he purports to “lead.”
Wednesday, 29 February 2012
The EU Permanent Austerity Treaty (Fiscal Compact Treaty & Irish referendum)
The Government seems determined to push ahead in the next few months with the ratification of two important treaties: the “Treaty on Stability, Coordination and Governance in the Economic and Monetary Union” and the revised “Treaty on the European Stability Mechanism” (ESM).
The two treaties would make member-states of the euro zone into regimes of economic austerity, involving deeper and deeper cuts in public expenditure, increases in indirect taxes, reductions in wages, a sustained liberalisation of markets, and the privatisation of public property.
It would really be more accurate to call the first treaty the EU Permanent Austerity Treaty and the second the Conditional Support Treaty. Whatever they are called, the two treaties represent a seriously dangerous threat, and democrats should be mobilising to resist them.
The cumulative effect of being bound by both treaties would be an obligation to insert a balanced-budget rule
The European Commission and the European Central Bank are obsessed with “economic governance,” which would require smaller eurozone states in particular to make themselves permanently amenable to a regime under which Germany and its allies would regularly and permanently vet members’ fiscal policies and impose punitive fines on those failing to observe deflationary budget rules.
When politicians like Enda Kenny urge us to stomach a particular draconian measure, claiming that it would help us to ultimately “restore economic sovereignty,” they conveniently fail to mention that this is the sort of “economic sovereignty” they have in mind. For them, permanent austerity plus the IMF is “national shame”; permanent austerity minus the IMF is “national recovery.” The latter is what is on offer through the EU Permanent Austerity Treaty and the Conditional Support Treaty.
Of course it is totally irrelevant to this Euro-fanatical mindset that the draconian fiscal measures imposed on Greece have only worsened the problems of that country. Also conveniently ignored in this version is the fact that Ireland in the euro zone had to adopt unsuitably low interest rates in the early 2000s, because this suited Germany at the time. In the immortal words of Bertie Ahern, this made our “Celtic Tiger” boom “boomier.” And of course it inflated the property bubble.
The former Taoiseach John Bruton and others have contended that the failure of the ECB to supervise adequately the credit policy of central banks in relation to the commercial banks in Ireland and various other euro-zone countries was significantly responsible for the emergence of asset bubbles in those countries in the early and middle 2000s, and thereby contributed hugely to the financial crisis they are now in.
And the then head of the European Central Bank, Jean-Claude Trichet, was probably engaging in a variety of “economic governance” when he told Brian Cowen and Brian Lenihan on 29 September 2008, at the time of the criminally irresponsible blanket bank guarantee, that Anglo-Irish Bank must on no account be allowed to go bust and that the foreign creditors and bond-holders must be paid every penny.
When the Irish people ratified the Maastricht Treaty in 1992, setting up economic and monetary union, and when they ratified the Lisbon Treaty, establishing the European Union on a new constitutional basis, in 2009, they approved membership of an economic and monetary union whose member-states would follow rules that would be enforced by a system of surveillance by the Commission and formal recommendations and warnings for delinquent states, followed by sanctions in the form of compulsory deposits and fines of an appropriate size in the event of a member-state persisting in breaches of these provisions.
The member-states adopted the rule that the annual budget deficit would be no higher than 3 per cent of GDP and national debt no higher than 60 per cent of GDP to ensure that member-states of the euro zone would avoid excessive deficits and consequent borrowing, for that would affect all euro-zone states using the same currency.
But the excessive-deficit articles were not enforced once Germany, France and other states broke the limits in the early 2000s.
Recommendations of measures to repair excessive deficits were made by the European Commission to a number of member-states, including Ireland, in the early 2000s; but when in 2003 France and Germany found themselves in violation of the excessive-deficit criteria the European Council failed to take any of the other steps set out in the rules to remedy their breaches.
No proposal to impose sanctions for breaking the rules was ever put by the Commission to the Council of Ministers, and no sanctions were adopted against countries violating the rules. As a result, several member-states ran up huge annual government deficits and national public debts that were near to, or in some cases well over, 100 per cent of GDP.
Is debt always a bad thing ?
The two treaties would make member-states of the euro zone into regimes of economic austerity, involving deeper and deeper cuts in public expenditure, increases in indirect taxes, reductions in wages, a sustained liberalisation of markets, and the privatisation of public property.
It would really be more accurate to call the first treaty the EU Permanent Austerity Treaty and the second the Conditional Support Treaty. Whatever they are called, the two treaties represent a seriously dangerous threat, and democrats should be mobilising to resist them.
The cumulative effect of being bound by both treaties would be an obligation to insert a balanced-budget rule
“through provisions of binding force and permanent character, preferably constitutional or otherwise guaranteed to be fully respected and adhered to throughout the national budgetary processes.”It would put Irish budgets under permanent and detailed supervision by the euro zone; make the existing subordination of Ireland’s interests to those of the “stability of the euro area as a whole” even more systematic and pronounced; impose conditions of “strict conditionality,” without limit, for ESM “solidarity” financial bail-outs; and require Ireland to contribute some €11 billion to the ESM fund when it is established later this year.
The European Commission and the European Central Bank are obsessed with “economic governance,” which would require smaller eurozone states in particular to make themselves permanently amenable to a regime under which Germany and its allies would regularly and permanently vet members’ fiscal policies and impose punitive fines on those failing to observe deflationary budget rules.
When politicians like Enda Kenny urge us to stomach a particular draconian measure, claiming that it would help us to ultimately “restore economic sovereignty,” they conveniently fail to mention that this is the sort of “economic sovereignty” they have in mind. For them, permanent austerity plus the IMF is “national shame”; permanent austerity minus the IMF is “national recovery.” The latter is what is on offer through the EU Permanent Austerity Treaty and the Conditional Support Treaty.
Of course it is totally irrelevant to this Euro-fanatical mindset that the draconian fiscal measures imposed on Greece have only worsened the problems of that country. Also conveniently ignored in this version is the fact that Ireland in the euro zone had to adopt unsuitably low interest rates in the early 2000s, because this suited Germany at the time. In the immortal words of Bertie Ahern, this made our “Celtic Tiger” boom “boomier.” And of course it inflated the property bubble.
The former Taoiseach John Bruton and others have contended that the failure of the ECB to supervise adequately the credit policy of central banks in relation to the commercial banks in Ireland and various other euro-zone countries was significantly responsible for the emergence of asset bubbles in those countries in the early and middle 2000s, and thereby contributed hugely to the financial crisis they are now in.
And the then head of the European Central Bank, Jean-Claude Trichet, was probably engaging in a variety of “economic governance” when he told Brian Cowen and Brian Lenihan on 29 September 2008, at the time of the criminally irresponsible blanket bank guarantee, that Anglo-Irish Bank must on no account be allowed to go bust and that the foreign creditors and bond-holders must be paid every penny.
When the Irish people ratified the Maastricht Treaty in 1992, setting up economic and monetary union, and when they ratified the Lisbon Treaty, establishing the European Union on a new constitutional basis, in 2009, they approved membership of an economic and monetary union whose member-states would follow rules that would be enforced by a system of surveillance by the Commission and formal recommendations and warnings for delinquent states, followed by sanctions in the form of compulsory deposits and fines of an appropriate size in the event of a member-state persisting in breaches of these provisions.
The member-states adopted the rule that the annual budget deficit would be no higher than 3 per cent of GDP and national debt no higher than 60 per cent of GDP to ensure that member-states of the euro zone would avoid excessive deficits and consequent borrowing, for that would affect all euro-zone states using the same currency.
But the excessive-deficit articles were not enforced once Germany, France and other states broke the limits in the early 2000s.
Recommendations of measures to repair excessive deficits were made by the European Commission to a number of member-states, including Ireland, in the early 2000s; but when in 2003 France and Germany found themselves in violation of the excessive-deficit criteria the European Council failed to take any of the other steps set out in the rules to remedy their breaches.
No proposal to impose sanctions for breaking the rules was ever put by the Commission to the Council of Ministers, and no sanctions were adopted against countries violating the rules. As a result, several member-states ran up huge annual government deficits and national public debts that were near to, or in some cases well over, 100 per cent of GDP.
Is debt always a bad thing ?
Commentary on the EU Permanent Austerity Treaty (Fiscal Compact Treaty & Irish referendum)
After they had agreed the final wording of the intergovernmental agreement—the "Treaty on Stability, Coordination and Governance in the Economic and Monetary Union"—the member-states of the euro area pronounced that the treaty “represents a major step towards closer and irrevocable fiscal and economic integration and stronger governance in the euro area,” which they claimed “will significantly bolster the outlook for fiscal sustainability and euro area sovereign debt and enhance growth.”
According to the German chancellor, Angela Merkel, the euro-zone member-states have set themselves on an “irreversible course towards a fiscal union.” She told an international gathering at Davos:
The Government seems determined to push ahead in the next few months with the ratification of this treaty and its partner, the revised Treaty on the European Stability Mechanism (ESM).
The two treaties would make euro-zone member-states into regimes of economic austerity, involving deeper and deeper cuts in public expenditure, increases in indirect taxes, reductions in wages, sustained liberalisation of markets, and privatisation of public property.
The cumulative effect of being bound by both treaties would be an obligation to insert a balanced-budget rule
In other words, the EU Permanent Austerity Treaty will make a permanent feature of that external interference in our economic governance that was so obnoxious when Fianna Fáil surrendered sovereignty to the European Central Bank and the International Monetary Fund. But if it’s bad in the short term—and it is—it’s even worse when it’s made permanent.
The fact that the British and Czech governments are not going to ratify the treaty is clear evidence that an EU member-state can stay outside it and still remain within the European Union. So the Irish Government cannot avoid holding a referendum by claiming that signing it is, in the words of article 29.4.10 of the Constitution, “necessitated by the obligations of membership of the European Union .”
And from a democratic and sovereignty point of view the treaties represent an abject surrender of governmental powers clearly vested by the Constitution exclusively in the democratically accountable organs of the state. This places a clear obligation on the Government to seek the consent of the people in a referendum before it makes any attempt to ratify these treaties.
Below is an annotated version of the treaty, which the Taoiseach, Enda Kenny, hopes to sign at a meeting of the European Council in March and which his Government hope to be able to ratify by the end of the year.
There is a fundamental division between those who advocate that euro-zone member-states should abandon more and more control over their financial and economic affairs and those who see a solution to our crisis in establishing genuine national independence and democracy. Central to the latter position is winning back for this country, and the other countries of Europe, the fundamental state powers that have been surrendered and using them intelligently for the benefit of the majority of the people, rather than for the social and economic elite.
The treaty has been drafted in such a way as to hoodwink the gullible into believing that the institutions of the European Union will not be involved in actions and procedures beyond those that they have already been involved in and that they will act only within the framework of EU treaties. However, the fact is that the EU institutions will be used in new procedures and would exercise new powers created by the treaty.
What is involved is further EU integration through an intergovernmental agreement that confers new powers on the EU institutions outside the EU legal framework and changes the rules concerning the powers of the EU institutions. The main issue during the negotiations on the treaty was whether the contracting parties should be allowed to use the EU institutions to implement, monitor and enforce compliance with the proposed new set-up.
The EU institutions were created by the EU treaties, which conferred upon them powers and duties. The role of the EU institutions is not only dened by the European Treaties fi but is limited by those treaties, and it would be unlawful for an institution to operate beyond the powers granted to it by the treaties.
TREATY ON STABILITY, COORDINATION AND GOVERNANCE IN THE ECONOMIC AND MONETARY UNION
Annotated version
THE CONTRACTING PARTIES [. . .]
According to the German chancellor, Angela Merkel, the euro-zone member-states have set themselves on an “irreversible course towards a fiscal union.” She told an international gathering at Davos:
“We have to become used to the European Commission becoming more and more like a government.”
The Government seems determined to push ahead in the next few months with the ratification of this treaty and its partner, the revised Treaty on the European Stability Mechanism (ESM).
The two treaties would make euro-zone member-states into regimes of economic austerity, involving deeper and deeper cuts in public expenditure, increases in indirect taxes, reductions in wages, sustained liberalisation of markets, and privatisation of public property.
The cumulative effect of being bound by both treaties would be an obligation to insert a balanced-budget rule
“through provisions of binding force and permanent character, preferably constitutional or otherwise guaranteed to be fully respected and adhered to throughout the national budgetary processes,”put Irish budgets under permanent and detailed euro-zone supervision, make the existing subordination of Ireland’s interests to those of the “stability of the euro area as a whole” even more systematic and pronounced, impose conditions of “strict conditionality” without limit for ESM “solidarity” financial bail-outs, and require Ireland to contribute some €11 billion to the ESM fund when it is established later this year.
In other words, the EU Permanent Austerity Treaty will make a permanent feature of that external interference in our economic governance that was so obnoxious when Fianna Fáil surrendered sovereignty to the European Central Bank and the International Monetary Fund. But if it’s bad in the short term—and it is—it’s even worse when it’s made permanent.
The fact that the British and Czech governments are not going to ratify the treaty is clear evidence that an EU member-state can stay outside it and still remain within the European Union. So the Irish Government cannot avoid holding a referendum by claiming that signing it is, in the words of article 29.4.10 of the Constitution, “necessitated by the obligations of membership of the European Union .”
And from a democratic and sovereignty point of view the treaties represent an abject surrender of governmental powers clearly vested by the Constitution exclusively in the democratically accountable organs of the state. This places a clear obligation on the Government to seek the consent of the people in a referendum before it makes any attempt to ratify these treaties.
Below is an annotated version of the treaty, which the Taoiseach, Enda Kenny, hopes to sign at a meeting of the European Council in March and which his Government hope to be able to ratify by the end of the year.
There is a fundamental division between those who advocate that euro-zone member-states should abandon more and more control over their financial and economic affairs and those who see a solution to our crisis in establishing genuine national independence and democracy. Central to the latter position is winning back for this country, and the other countries of Europe, the fundamental state powers that have been surrendered and using them intelligently for the benefit of the majority of the people, rather than for the social and economic elite.
The treaty has been drafted in such a way as to hoodwink the gullible into believing that the institutions of the European Union will not be involved in actions and procedures beyond those that they have already been involved in and that they will act only within the framework of EU treaties. However, the fact is that the EU institutions will be used in new procedures and would exercise new powers created by the treaty.
What is involved is further EU integration through an intergovernmental agreement that confers new powers on the EU institutions outside the EU legal framework and changes the rules concerning the powers of the EU institutions. The main issue during the negotiations on the treaty was whether the contracting parties should be allowed to use the EU institutions to implement, monitor and enforce compliance with the proposed new set-up.
The EU institutions were created by the EU treaties, which conferred upon them powers and duties. The role of the EU institutions is not only dened by the European Treaties fi but is limited by those treaties, and it would be unlawful for an institution to operate beyond the powers granted to it by the treaties.
TREATY ON STABILITY, COORDINATION AND GOVERNANCE IN THE ECONOMIC AND MONETARY UNION
Annotated version
THE CONTRACTING PARTIES [. . .]
Kenny promised “constructive engagement”!
The French minister of finance, François Baroin, and his German counterpart, Wolfgang Schäuble, have unveiled a “green paper” describing plans for Franco-German tax convergence. According to the document, France and Germany will aim to harmonise their corporate tax rates by 2013.
Remember before the election that Fine Gael was not going to put a cent into Anglo-Irish Bank?
Well, would you give our corporation tax rate much chance?
This week the finance ministers of all twenty seven EU member-states will meet to discuss economic governance legislation put forward by the Commission, which would give it greater powers in assessing and correcting financial instability. There will also be a Franco-German presentation on plans for a common consolidated corporate-tax base. It will be interesting to hear Noonan’s take on the event!
Meanwhile the EU commissioner for taxation and customs union, Algirdas Šemeta, has assured the British House of Lords that the implementation of a financial transaction tax would “minimise the risk of relocation,” saying that it is expected to raise €60 billion throughout the region every year.
Remember “own resources” in the Lisbon Treaty?
Remember before the election that Fine Gael was not going to put a cent into Anglo-Irish Bank?
Well, would you give our corporation tax rate much chance?
This week the finance ministers of all twenty seven EU member-states will meet to discuss economic governance legislation put forward by the Commission, which would give it greater powers in assessing and correcting financial instability. There will also be a Franco-German presentation on plans for a common consolidated corporate-tax base. It will be interesting to hear Noonan’s take on the event!
Meanwhile the EU commissioner for taxation and customs union, Algirdas Šemeta, has assured the British House of Lords that the implementation of a financial transaction tax would “minimise the risk of relocation,” saying that it is expected to raise €60 billion throughout the region every year.
Remember “own resources” in the Lisbon Treaty?
Tuesday, 28 February 2012
Does Enda Kenny know about this? (Parte Dois) "Sonnets to the Portugeuse"
The German minister of finance, Wolfgang Schäuble, was caught by a cameraman at the euro-zone ministers’ meeting promising Portugal an adjustment to its programme after a deal with Greece is concluded—the first time an EU minister has publicly spoken of such plans.
EU Observer reported that Schäuble is telling his Portuguese counterpart, Vítor Gaspar, that after the Greek deal is done the German government will approve a loosening of the conditions attached to Portugal’s €78 billion bail-out programme.
“If at the end we need to make an adjustment to the programme, having taken large decisions about Greece . . . this is essential. But then, if necessary, an adjustment of the Portuguese programme will be prepared,” he says.
The Portuguese minister, not unexpectedly, says,
“Thank you very much.”
“No problem,” Schäuble replies.
And we thought the “independent” European Central Bank made these decisions!
And Kenny, on his own admission, didn’t even ask.
EU Observer reported that Schäuble is telling his Portuguese counterpart, Vítor Gaspar, that after the Greek deal is done the German government will approve a loosening of the conditions attached to Portugal’s €78 billion bail-out programme.
“If at the end we need to make an adjustment to the programme, having taken large decisions about Greece . . . this is essential. But then, if necessary, an adjustment of the Portuguese programme will be prepared,” he says.
The Portuguese minister, not unexpectedly, says,
“Thank you very much.”
“No problem,” Schäuble replies.
And we thought the “independent” European Central Bank made these decisions!
And Kenny, on his own admission, didn’t even ask.
Monday, 27 February 2012
Does Enda Kenny know about this?
A group of nine euro countries, led by France and Germany, has asked the Danish EU presidency to fast-track plans for a financial transactions tax—a move indicating that they will forge ahead on their own in the absence of an EU-wide consensus.
“We strongly believe in the need for a financial transactions tax implemented at European level as a crucial instrument to secure a fair contribution from the financial sector to the costs of the financial crisis and to better regulate European financial markets,” the letter says. The nine signatories are the finance ministers of France, Germany, Austria, Belgium, Finland, Greece, Spain and Portugal and the prime minister of Italy, Mario Monti.
Meanwhile in Ireland the Finance Bill contained twenty-nine measures to assist the International Financial Services Centre—an offshore money-laundering operation—while piling taxes, levies and cuts on the overburdened people of this country.
The group of nine asks the Danish presidency “to accelerate the analysis and negotiation process” of a proposal by the EU Commission to introduce a 0.1 per cent tax on shares and 0.01 per cent on trading in derivatives—the larger and riskier financial market, widely held responsible for the 2008 financial crisis.
The Fine Gael-Labour coalition fiercely opposes the tax, continuing that fine Fianna Fáil tradition of looking after the wealthier in our society.
“We strongly believe in the need for a financial transactions tax implemented at European level as a crucial instrument to secure a fair contribution from the financial sector to the costs of the financial crisis and to better regulate European financial markets,” the letter says. The nine signatories are the finance ministers of France, Germany, Austria, Belgium, Finland, Greece, Spain and Portugal and the prime minister of Italy, Mario Monti.
Meanwhile in Ireland the Finance Bill contained twenty-nine measures to assist the International Financial Services Centre—an offshore money-laundering operation—while piling taxes, levies and cuts on the overburdened people of this country.
The group of nine asks the Danish presidency “to accelerate the analysis and negotiation process” of a proposal by the EU Commission to introduce a 0.1 per cent tax on shares and 0.01 per cent on trading in derivatives—the larger and riskier financial market, widely held responsible for the 2008 financial crisis.
The Fine Gael-Labour coalition fiercely opposes the tax, continuing that fine Fianna Fáil tradition of looking after the wealthier in our society.
Sunday, 26 February 2012
The ghost of “Social Europe” returns
Remember Delors?
In speeches to mark the twentieth anniversary of the Maastricht Treaty, signed on 7 February 1992, which led to the creation of the euro, both Jacques Delors, former president of the European Commission, and José Manuel Barroso, in a fit of federalist zeal regretted the national “resistance” and “lack of spirit of co-operation” among the leaders of the twenty-seven EU countries.
Delors said that the Maastricht anniversary provided lessons for the future, and gave his support to Barroso for heralding the community approach in the face of the recourse to intergovernmental arrangements. “I would like to express my full support to the Commission, in a moment when others take distance from the community method,” he said.
Delors was asked by journalists to comment on the social dimension of the Commission’s action, which, they argued, was less present in the present Commission, headed by Barroso; but he dodged any mention of his vaunted concept of “Social Europe,” putting the markets first, saying that the issue today was to restore the financial situation of EU countries while maintaining economic growth. “On these problems, governments should do the effort to cooperate more and to listen more to the Commission in this regard,” he said.
Asked about the present trend towards austerity, Delors said: “I was the first to use the term when I was finance minister. When it’s necessary, I talk about it. And I remain popular. See, it’s curious.”
Perhaps he has always been delusional!
In speeches to mark the twentieth anniversary of the Maastricht Treaty, signed on 7 February 1992, which led to the creation of the euro, both Jacques Delors, former president of the European Commission, and José Manuel Barroso, in a fit of federalist zeal regretted the national “resistance” and “lack of spirit of co-operation” among the leaders of the twenty-seven EU countries.
Delors said that the Maastricht anniversary provided lessons for the future, and gave his support to Barroso for heralding the community approach in the face of the recourse to intergovernmental arrangements. “I would like to express my full support to the Commission, in a moment when others take distance from the community method,” he said.
Delors was asked by journalists to comment on the social dimension of the Commission’s action, which, they argued, was less present in the present Commission, headed by Barroso; but he dodged any mention of his vaunted concept of “Social Europe,” putting the markets first, saying that the issue today was to restore the financial situation of EU countries while maintaining economic growth. “On these problems, governments should do the effort to cooperate more and to listen more to the Commission in this regard,” he said.
Asked about the present trend towards austerity, Delors said: “I was the first to use the term when I was finance minister. When it’s necessary, I talk about it. And I remain popular. See, it’s curious.”
Perhaps he has always been delusional!
Saturday, 25 February 2012
Canny Scots!
An independent Scotland would be one of the wealthiest parts of Europe, but it would stay out of the euro, the deputy first minister of Scotland, Nicola Sturgeon, told EU Observer.
Friday, 24 February 2012
Permanence of debt brake “may not be constitutional"
A “debt brake” that sought to be “permanent and binding,” as envisaged in the proposed EU Permanent Austerity Treaty, could be unconstitutional, according to the professor of constitutional law at TCD, Gerry Whyte.
The Government has referred the proposed treaty to the attorney-general for her opinion on whether it will require a referendum, and has said that if not it will legislate to give effect to it.
Prof. Whyte told the Irish Times that any assumption that ordinary legislation would be sufficient to meet the terms of the proposed treaty should be “stress-tested.” “Legislative provisions do not have a ‘permanent character’,” he said, “inasmuch as it is always open to the Oireachtas to amend legislation and, in my opinion, it is not constitutionally open to the Oireachtas to put any Act beyond amendment.”
He pointed out that article 3 (1) of the proposed treaty required measures to reduce the structural deficit to 0.5 per cent of GDP “through provisions of binding force and permanent character, preferably constitutional, or otherwise guaranteed to be fully respected and adhered to throughout the national budgetary processes.” However, he said that a majority of the Supreme Court in the Crotty case in 1987 (which found that a referendum was necessary to ratify significant changes to EU treaties) held that an organ of the state cannot agree to circumscribe or restrict any unfettered power conferred on it by the Constitution.
In the judgement Mr Justice Walsh said that the freedom to form economic policy was an aspect of the state’s sovereignty. This meant that article 3 (1) of the treaty would have to be protected by article 29.4 of the Constitution, which ratified the Maastricht Treaty, if it was to be constitutionally valid. However, article 29 refers to treaties of the European Union, whereas the proposed treaty will only be a treaty agreed between 25 of the 27 member-states, so it will not be covered by article 29.
“Given the UK and the Czech Republic have opted out of the proposed treaty, it would seem very difficult to argue that the treaty is ‘necessitated’ by our membership of the EU,” Prof Whyte said.
Dr Gavin Barrett of UCD agreed that the proposed treaty was not protected by article 29, but he pointed out that all legislation, when passed, is “of binding force and permanent character.” If the Government tried to make the proposed treaty more permanent than any other law, it would run into constitutional difficulties, he said.
The Government has referred the proposed treaty to the attorney-general for her opinion on whether it will require a referendum, and has said that if not it will legislate to give effect to it.
Prof. Whyte told the Irish Times that any assumption that ordinary legislation would be sufficient to meet the terms of the proposed treaty should be “stress-tested.” “Legislative provisions do not have a ‘permanent character’,” he said, “inasmuch as it is always open to the Oireachtas to amend legislation and, in my opinion, it is not constitutionally open to the Oireachtas to put any Act beyond amendment.”
He pointed out that article 3 (1) of the proposed treaty required measures to reduce the structural deficit to 0.5 per cent of GDP “through provisions of binding force and permanent character, preferably constitutional, or otherwise guaranteed to be fully respected and adhered to throughout the national budgetary processes.” However, he said that a majority of the Supreme Court in the Crotty case in 1987 (which found that a referendum was necessary to ratify significant changes to EU treaties) held that an organ of the state cannot agree to circumscribe or restrict any unfettered power conferred on it by the Constitution.
In the judgement Mr Justice Walsh said that the freedom to form economic policy was an aspect of the state’s sovereignty. This meant that article 3 (1) of the treaty would have to be protected by article 29.4 of the Constitution, which ratified the Maastricht Treaty, if it was to be constitutionally valid. However, article 29 refers to treaties of the European Union, whereas the proposed treaty will only be a treaty agreed between 25 of the 27 member-states, so it will not be covered by article 29.
“Given the UK and the Czech Republic have opted out of the proposed treaty, it would seem very difficult to argue that the treaty is ‘necessitated’ by our membership of the EU,” Prof Whyte said.
Dr Gavin Barrett of UCD agreed that the proposed treaty was not protected by article 29, but he pointed out that all legislation, when passed, is “of binding force and permanent character.” If the Government tried to make the proposed treaty more permanent than any other law, it would run into constitutional difficulties, he said.
Thursday, 23 February 2012
People’s Movement rejects EU Permanent Austerity Treaty and demands a referendum
At a People’s Movement meeting on the EU Permanent Austerity Treaty held in the Town Hall Theatre, Galway, last week, a capacity audience heard Robert Ballagh, Prof. Terence McDonagh and Cllr Catherine Connolly reject its terms and demand a referendum. A follow-up meeting is planned.
Wednesday, 22 February 2012
Thought for the day
“Germany offers assistance—yet is demonised by people who swindled their way into the monetary union and have driven it to the edge of the abyss. They are using the fine principle of solidarity as a means for extortion. The EU has no future as such an extortion community.”—Frankfurter Allgemeine Zeitung (Frankfurt), 14 February 2012
Tuesday, 21 February 2012
The EU Permanent Austerity Treaty
The Government seems determined to push ahead in the next few months with the ratification of two important treaties: the “Treaty on Stability, Coordination and Governance in the Economic and Monetary Union” and the revised “Treaty on the European Stability Mechanism.”
The two treaties would make member-states of the euro zone into regimes of economic austerity, involving deeper and deeper cuts in public expenditure, increases in indirect taxes, reductions in wages, sustained liberalisation of markets, and the privatisation of public property.
It would really be more accurate to call the first treaty the EU Permanent Austerity Treaty and the second the Conditional Support Treaty. But whatever they are called, the two treaties represent a seriously dangerous threat, and democrats should be mobilising to resist them.
The cumulative effect of being bound by both treaties would be an obligation to insert a balanced-budget rule “through provisions of binding force and permanent character, preferably constitutional or otherwise guaranteed to be fully respected and adhered to throughout the national budgetary processes,” to put Irish budgets under permanent and detailed euro-zone supervision, to make the existing subordination of Ireland’s interests to those of the “stability of the euro area as a whole” even more systematic and pronounced, to impose conditions of “strict conditionality,” without limit, for ESM “solidarity” financial bail-outs, and to require Ireland to contribute some €11 billion to the ESM fund when it is established later this year.
The European Commission and the European Central Bank are obsessed with “economic governance,” which would require smaller euro-zone states in particular to make themselves permanently amenable to a regime under which Germany and its allies would regularly and permanently vet members’ fiscal policies and impose punitive fines on those failing to observe deflationary budget rules.
When politicians like Enda Kenny urge us to stomach a particular draconian measure while claiming that it would help us to ultimately “restore economic sovereignty” they conveniently fail to mention that this is the sort of “economic sovereignty” they have in mind. For them, permanent austerity plus the IMF is “national shame”; permanent austerity minus the IMF is “national recovery.” The latter is what is on offer through the EU Permanent Austerity and Conditional Support Treaties.
Of course it is totally irrelevant to this Eurofanatical mindset that the draconian fiscal measures imposed on Greece have only worsened the problems of that country. Also conveniently ignored in this version is that Ireland in the euro zone had to adopt unsuitably low interest rates in the early 2000s, because these suited Germany at the time. In the immortal words of Bertie Ahern, this made our “Celtic Tiger” boom “boomier.” It of course inflated the property bubble.
The former Taoiseach John Bruton and others have contended that the failure of the European Central Bank to supervise adequately the credit policy of the national central banks in relation to the commercial banks in Ireland and various other euro-zone countries was significantly responsible for the emergence of asset bubbles in those countries in the early and middle 2000s, and thereby contributed hugely to the financial crisis they are now in.
And the then head of the European Central Bank, Jean-Claude Trichet, was probably engaging in a variety of “economic governance” when he told Brian Cowen and Brian Lenihan on 29 September 2008, at the time of the criminally irresponsible blanket bank guarantee, that Anglo-Irish Bank must on no account be allowed to go bust and that the foreign creditors and bond-holders must be paid every penny.
When the Irish people ratified the Maastricht Treaty in 1992, setting up economic and monetary union, and when they ratified the Lisbon Treaty, establishing the European Union on a new constitutional basis in 2009, they approved membership of an economic and monetary union whose memberstates would follow rules that would be enforced by a system of Commission surveillance, formal recommendations, and warnings for delinquent states, followed by sanctions in the form of compulsory deposits and fines of an appropriate size in the event of member-states persisting in breaches of these provisions.
The EU member-states adopted the rule regarding 3 per cent and 60 per cent of GDP to ensure that member-states of the euro zone would avoid excessive deficits and consequent borrowing, for that would affect all euro-zone states using the same currency. But the excessive-deficit articles were not enforced once Germany, France and others states broke the excessive-deficit limits in the early 2000s.
Recommendations of measures to repair excessive deficits were made by the Commission to a number of member-states, including Ireland, in the early 2000s, but when in 2003 France and Germany found themselves in violation of the excessive-deficit criteria the Council failed to take any of the other steps set out in the rules to remedy their breaches.
No proposal to impose sanctions for breaking the rules was ever put by the Commission to the Council of Ministers, and no sanctions were adopted against countries violating the rules. As a result, several member-states ran up huge annual government deficits and national public debts that were near to, or in some cases well over, 100 per cent of GDP.
Is debt always a bad thing? Obviously not in the private sector, as corporations regularly borrow money for expenditure they don’t want to meet out of retained earnings, while most households aim to have a long-term mortgage.
Public debt is not a burden passed on from one generation to the next. The stock of public debt is a problem only when its servicing—i.e. the payment of interest—is unaffordable, such as when, in times of recession, growth is nil or negative, or when the interest rates demanded by the financial market are soaring.
The question is, when is the debt sustainable?
Sustainability means keeping the ratio of debt to GDP stable in the longer term. If GDP at the beginning of the year is €1,000 billion and the Government’s total stock of debt is €600 billion, the debt ratio is 60 per cent. The fiscal deficit is the extra borrowing that the Government makes in a year, so it adds to the stock of debt. But although the stock of debt may be rising, as long as GDP is rising proportionately the ratio of debt to GDP can be kept constant, or may even be falling.
The rule is that as long as the real economy is growing by at least as much as the real rate of interest on debt the debt-GDP ratio doesn’t rise. This holds true irrespective of whether the debt ratio is 60 per cent or 600 per cent.
But there’s a catch. In a modern economy the public sector accounts for about half the economy. If a country panics about its debt ratio and cuts back sharply on public-sector spending, this reduces aggregate demand and may lead to stagnation or even recession. When a country stops growing, financial markets decide that its debt ratio may rise and so become more cautious about lending and may demand a higher bond yield, i.e. interest rate.
The gloomy prophecy of growing public indebtedness becomes self-fulfilling. The way out cannot be greater austerity.
What works for a single household or firm doesn’t work for the economy as a whole. A household can tighten its belt by spending less, saving more, and thus “balancing the books”; but an economy cannot. If everybody saves more, national income falls. As no euro-zone country can devalue, to ask each member-state to balance the books by running an export surplus is empirically and logically impossible.
The way out of the “debt trap” is the same as the way out of recession: if the private sector won’t invest, the public sector must become the investor of last resort. It doesn’t matter whether new investment is financed by more government borrowing, quantitative easing, or redistribution (some combination of the three would be optimal). What matters is growth.
Why there must be a referendum
The contracting parties must apply the balanced-budget rule “through provisions of binding force and permanent character, preferably constitutional or otherwise guaranteed to be fully respected and adhered to throughout the national budgetary processes.”
A majority of the Supreme Court in the Crotty case in 1987 (which found that a referendum was necessary to ratify significant changes to EU treaties) held that an organ of the state cannot agree to circumscribe or restrict any unfettered power conferred on it by the Constitution.
In the judgement Mr Justice Walsh said that the freedom to form economic policy was an aspect of the state’s sovereignty. This meant that article 3 (1) would have to be protected by article 29.4 of the Constitution, which ratified the Maastricht Treaty, if it was to be constitutionally valid.
However, article 29 refers to treaties of the European Union, whereas the proposed treaty will only be a treaty agreed between 25 of the 27 member-states, so it will not be covered by article 29.
These rules and policy conditions in turn provide considerable scope for financially hard-pressed member-states to be pressured to take steps against their national interest, including in relation to harmonising corporate taxes. Establishing this permanent enhanced fiscal architecture would be a major step towards an EU fiscal and political union—something that has been recognised in statements by leading EU politicians.
This implies a significant diminution of national state sovereignty, going well beyond the scope of the existing European Union and the monetary union that it embodies, which only the people themselves can agree to.
The absence of limitations on the “strict conditionality” that will mark financial disbursements from the proposed ESM fund—such as might have been set out in an accompanying protocol, for instance—emphasises further the dangers to the state’s interests that could arise from harsh or excessively onerous conditions attaching to financial assistance that might be offered to member-states seeking assistance from the fund.
From PEOPLE’S NEWS
News Digest of the People’s Movement
www.people.ie | post@people.ie
No. 64 18 February 2012
The two treaties would make member-states of the euro zone into regimes of economic austerity, involving deeper and deeper cuts in public expenditure, increases in indirect taxes, reductions in wages, sustained liberalisation of markets, and the privatisation of public property.
It would really be more accurate to call the first treaty the EU Permanent Austerity Treaty and the second the Conditional Support Treaty. But whatever they are called, the two treaties represent a seriously dangerous threat, and democrats should be mobilising to resist them.
The cumulative effect of being bound by both treaties would be an obligation to insert a balanced-budget rule “through provisions of binding force and permanent character, preferably constitutional or otherwise guaranteed to be fully respected and adhered to throughout the national budgetary processes,” to put Irish budgets under permanent and detailed euro-zone supervision, to make the existing subordination of Ireland’s interests to those of the “stability of the euro area as a whole” even more systematic and pronounced, to impose conditions of “strict conditionality,” without limit, for ESM “solidarity” financial bail-outs, and to require Ireland to contribute some €11 billion to the ESM fund when it is established later this year.
The European Commission and the European Central Bank are obsessed with “economic governance,” which would require smaller euro-zone states in particular to make themselves permanently amenable to a regime under which Germany and its allies would regularly and permanently vet members’ fiscal policies and impose punitive fines on those failing to observe deflationary budget rules.
When politicians like Enda Kenny urge us to stomach a particular draconian measure while claiming that it would help us to ultimately “restore economic sovereignty” they conveniently fail to mention that this is the sort of “economic sovereignty” they have in mind. For them, permanent austerity plus the IMF is “national shame”; permanent austerity minus the IMF is “national recovery.” The latter is what is on offer through the EU Permanent Austerity and Conditional Support Treaties.
Of course it is totally irrelevant to this Eurofanatical mindset that the draconian fiscal measures imposed on Greece have only worsened the problems of that country. Also conveniently ignored in this version is that Ireland in the euro zone had to adopt unsuitably low interest rates in the early 2000s, because these suited Germany at the time. In the immortal words of Bertie Ahern, this made our “Celtic Tiger” boom “boomier.” It of course inflated the property bubble.
The former Taoiseach John Bruton and others have contended that the failure of the European Central Bank to supervise adequately the credit policy of the national central banks in relation to the commercial banks in Ireland and various other euro-zone countries was significantly responsible for the emergence of asset bubbles in those countries in the early and middle 2000s, and thereby contributed hugely to the financial crisis they are now in.
And the then head of the European Central Bank, Jean-Claude Trichet, was probably engaging in a variety of “economic governance” when he told Brian Cowen and Brian Lenihan on 29 September 2008, at the time of the criminally irresponsible blanket bank guarantee, that Anglo-Irish Bank must on no account be allowed to go bust and that the foreign creditors and bond-holders must be paid every penny.
When the Irish people ratified the Maastricht Treaty in 1992, setting up economic and monetary union, and when they ratified the Lisbon Treaty, establishing the European Union on a new constitutional basis in 2009, they approved membership of an economic and monetary union whose memberstates would follow rules that would be enforced by a system of Commission surveillance, formal recommendations, and warnings for delinquent states, followed by sanctions in the form of compulsory deposits and fines of an appropriate size in the event of member-states persisting in breaches of these provisions.
The EU member-states adopted the rule regarding 3 per cent and 60 per cent of GDP to ensure that member-states of the euro zone would avoid excessive deficits and consequent borrowing, for that would affect all euro-zone states using the same currency. But the excessive-deficit articles were not enforced once Germany, France and others states broke the excessive-deficit limits in the early 2000s.
Recommendations of measures to repair excessive deficits were made by the Commission to a number of member-states, including Ireland, in the early 2000s, but when in 2003 France and Germany found themselves in violation of the excessive-deficit criteria the Council failed to take any of the other steps set out in the rules to remedy their breaches.
No proposal to impose sanctions for breaking the rules was ever put by the Commission to the Council of Ministers, and no sanctions were adopted against countries violating the rules. As a result, several member-states ran up huge annual government deficits and national public debts that were near to, or in some cases well over, 100 per cent of GDP.
Is debt always a bad thing? Obviously not in the private sector, as corporations regularly borrow money for expenditure they don’t want to meet out of retained earnings, while most households aim to have a long-term mortgage.
Public debt is not a burden passed on from one generation to the next. The stock of public debt is a problem only when its servicing—i.e. the payment of interest—is unaffordable, such as when, in times of recession, growth is nil or negative, or when the interest rates demanded by the financial market are soaring.
The question is, when is the debt sustainable?
Sustainability means keeping the ratio of debt to GDP stable in the longer term. If GDP at the beginning of the year is €1,000 billion and the Government’s total stock of debt is €600 billion, the debt ratio is 60 per cent. The fiscal deficit is the extra borrowing that the Government makes in a year, so it adds to the stock of debt. But although the stock of debt may be rising, as long as GDP is rising proportionately the ratio of debt to GDP can be kept constant, or may even be falling.
The rule is that as long as the real economy is growing by at least as much as the real rate of interest on debt the debt-GDP ratio doesn’t rise. This holds true irrespective of whether the debt ratio is 60 per cent or 600 per cent.
But there’s a catch. In a modern economy the public sector accounts for about half the economy. If a country panics about its debt ratio and cuts back sharply on public-sector spending, this reduces aggregate demand and may lead to stagnation or even recession. When a country stops growing, financial markets decide that its debt ratio may rise and so become more cautious about lending and may demand a higher bond yield, i.e. interest rate.
The gloomy prophecy of growing public indebtedness becomes self-fulfilling. The way out cannot be greater austerity.
What works for a single household or firm doesn’t work for the economy as a whole. A household can tighten its belt by spending less, saving more, and thus “balancing the books”; but an economy cannot. If everybody saves more, national income falls. As no euro-zone country can devalue, to ask each member-state to balance the books by running an export surplus is empirically and logically impossible.
The way out of the “debt trap” is the same as the way out of recession: if the private sector won’t invest, the public sector must become the investor of last resort. It doesn’t matter whether new investment is financed by more government borrowing, quantitative easing, or redistribution (some combination of the three would be optimal). What matters is growth.
Why there must be a referendum
The contracting parties must apply the balanced-budget rule “through provisions of binding force and permanent character, preferably constitutional or otherwise guaranteed to be fully respected and adhered to throughout the national budgetary processes.”
A majority of the Supreme Court in the Crotty case in 1987 (which found that a referendum was necessary to ratify significant changes to EU treaties) held that an organ of the state cannot agree to circumscribe or restrict any unfettered power conferred on it by the Constitution.
In the judgement Mr Justice Walsh said that the freedom to form economic policy was an aspect of the state’s sovereignty. This meant that article 3 (1) would have to be protected by article 29.4 of the Constitution, which ratified the Maastricht Treaty, if it was to be constitutionally valid.
However, article 29 refers to treaties of the European Union, whereas the proposed treaty will only be a treaty agreed between 25 of the 27 member-states, so it will not be covered by article 29.
These rules and policy conditions in turn provide considerable scope for financially hard-pressed member-states to be pressured to take steps against their national interest, including in relation to harmonising corporate taxes. Establishing this permanent enhanced fiscal architecture would be a major step towards an EU fiscal and political union—something that has been recognised in statements by leading EU politicians.
This implies a significant diminution of national state sovereignty, going well beyond the scope of the existing European Union and the monetary union that it embodies, which only the people themselves can agree to.
The absence of limitations on the “strict conditionality” that will mark financial disbursements from the proposed ESM fund—such as might have been set out in an accompanying protocol, for instance—emphasises further the dangers to the state’s interests that could arise from harsh or excessively onerous conditions attaching to financial assistance that might be offered to member-states seeking assistance from the fund.
From PEOPLE’S NEWS
News Digest of the People’s Movement
www.people.ie | post@people.ie
No. 64 18 February 2012
Friday, 14 October 2011
Ireland requests protocols in line with second Lisbon Treaty referendum undertakings
It seems that the treaty changes will be implemented under Article 48(2) the self-amending clause.
Thursday, 13 October 2011
Fascinating overview of the financial crisis - An American viewpoint
Fred Magdoff presented a view of the European financial crisis at the Desmond Greaves Summer School in Dublin.
www.irishleftreview.org/2011/09/11/fred-magdoffdesmond-greaves-summer-school-2011/
This podcast is from the web site of Conor McCabe, author of Sins of the Father, his book on the background to the Irish financial crisis.
Conor will deliver the Raymond Crotty Memorial Lecture for 2011 in the Pearse Centre (27 Pearse Street), Dublin, at 2:30 p.m. on Saturday 15 October.
www.irishleftreview.org/2011/09/11/fred-magdoffdesmond-greaves-summer-school-2011/
This podcast is from the web site of Conor McCabe, author of Sins of the Father, his book on the background to the Irish financial crisis.
Conor will deliver the Raymond Crotty Memorial Lecture for 2011 in the Pearse Centre (27 Pearse Street), Dublin, at 2:30 p.m. on Saturday 15 October.
Wednesday, 12 October 2011
Emerging Economies to rescue Europe?
The emerging economies of Brazil, Russia, India, China, and South Africa—the so-called BRICS countries—which hold huge international reserves, are planning to come to the EU’s aid!
The Brazilian minister of finance, Guido Mantega, said that the BRICS states held a meeting on 22 September to discuss the co-ordination of an EU rescue plan. “We met in Washington to decide how to help the European Union to get out of this situation,” he said. The countries are considering substantially boosting their holdings of euro-denominated bonds in their foreign exchange reserves.
The Brazilian minister of finance, Guido Mantega, said that the BRICS states held a meeting on 22 September to discuss the co-ordination of an EU rescue plan. “We met in Washington to decide how to help the European Union to get out of this situation,” he said. The countries are considering substantially boosting their holdings of euro-denominated bonds in their foreign exchange reserves.
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