Ireland’s fiscal treaty referendum: (More) fear and loathing in the eurozone? By Hugo Brady On May 31st, Ireland will hold a referendum on the EU’s ‘fiscal compact’. Among other things, the new treaty obliges eurozone countries to introduce balanced-budget amendments into national law. Many observers expect a Yes vote, because the Irish economy is ailing and its government is reliant on a multibillion euro loan administered by the EU and the IMF. But popular support for the governing coalition is in sharp decline. Voters are angry after three years of economic austerity and the No side is gaining support as public awareness of the poll increases. The balance of probability points to a close Yes, but – as opposition to austerity grows across the eurozone – an upset cannot be ruled out.
Why it may have to be Yes Ireland will hold the only popular vote on the fiscal compact. It requires countries that use the euro to introduce balanced-budget amendments into national law or face fines from the EU’s Court of Justice. The 1 The compact was signed by all EU European Commission will act as policeman, ensuring that countries keep to the euro area’s basic fiscal rules, which require governments to keep national countries, except Britain and the debt to below 60 per cent of GDP and run very small or no public deficits.1 Czech Republic, on March 2nd. These criteria appeared in previous EU treaties but were never enforced. It is formally known as the ‘Treaty Germany and the European Central Bank think that more credible rules on on stability, co-ordination and governance in the Economic and debt, along with a drastic reduction in public spending across the single Monetary Union’. currency area, will help end the euro crisis. Irish voters have rejected European treaties on the first attempt before, namely the Nice treaty in 2001 and Lisbon treaty in 2008. But they may yet pass this referendum if only because Ireland’s economic situation is so dire. It is financially dependent on an S85 billion bail-out programme co-financed by the eurozone, IMF, Britain, Denmark and Sweden. The programme has paid the country’s bills since 2010 when the then Irish government lost access to bond markets after assuming the colossal debts of its banks. (Anglo-Irish Bank, the worst culprit, lost over S45 billion following the collapse of the Irish property market.) Generally, referendums tend to favour the status quo because voters fear taking 2 risks. To win, either side needs to convince the Irish population that voting Yes Fianna Fáil, a moderate conservative and nationalist party, or No will best secure Ireland’s future prosperity. The coalition government – led the government for over a made up of Fine Gael (a Christian democratic party) and the Labour Party – is decade before 2011 and remains campaigning for a Yes. So too is the main opposition party, Fianna Fáil, along deeply unpopular. with IBEC, the largest business and employers’ 3 Red C poll, The Sunday Business organisation.2 Recent polls suggest that voters currently agree with them: 47 Post, April 28th 2012. Later polls per cent are estimated to be in favour of the fiscal compact, 35 per cent are are likely to show a higher against, and 18 per cent are undecided.3 percentage of Nos. If Ireland votes No, it can still draw on the S85 billion bail-out, scheduled to run out at the end of 2013. But its government would be denied access to its successor, the European Stability Mechanism (ESM), set up to lend up to S500 billion to euro countries in financial trouble. And Ireland may well need more
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