Irish head to polls on fiscal treaty
31.05.12 @ 02:45
BRUSSELS - Irish voters are heading to the polls on Thursday (31 May) to decide on the budget-balancing fiscal discipline treaty, amid a stark warning by Prime Minister Enda Kenny that to reject the document would see the country's borrowing costs soar.
Unlike Ireland's numerous previous referendums on other EU treaties, the outcome will not determine whether the document comes into force. This will happen if 12 of the 17 eurozone countries ratify it.
But this fact has not removed the heat from the domestic debate.
The Yes camp, including the government, point out that a rejection would mean that Ireland will not have access to the permanent eurozone bail-out fund, the European Stability Mechanism (ESM).
They also say that when Ireland returns to the markets late next year, its borrowing costs are likely to be high if the treaty has been turned down.
"Countries that ratify this have access to the ESM, countries that don't, won't and the difference between 3 percent and 7 percent, or even 8 percent or 9 percent, is enormous in the context of availability of funding, were that ever to be necessary," Prime Minister Enda Kenny said on Wednesday (30 May).
The No side argue that this is scare-mongering and the country could, if necessary resort to funding from the International Monetary Fund (IMF). Their main argument is that the treaty will condemn Ireland to continued austerity.
"Don't be fooled. Be wise. Join with the millions across Europe who are demanding an end to austerity," said Gerry Adams, the leader of Sinn Fein party, for which support has just hit a record 24 percent.
The Yes side has been in the lead since campaigning began. The latest poll suggested 53 percent in favour to 47 percent against. But the government is nervous about the mood of the austerity-weary public. Irish citizens have been subjected to large public spending cuts as well as tax hikes since the country received an €85 billion EU-IMF bail-out in 2010.
The 11-page treaty, pushed by Germany as a way of ensuring more fiscal discipline in fellow EU member states, says signatories must keep their budgets balanced or in surplus. The annual structural budget deficit should be kept to 0.5 percent of GDP.
It also imposes strict monitoring and automatic correction mechanisms - such as raising taxes - to ensure deficit targets are kept.
Some of the Irish debate has centred on the fact that a structural deficit and how it is measured is not defined in the treaty, with critics saying this means it is not clear what the country is signing itself up to.
Advocates of a Yes say the fiscal compact is necessary both to ensure the country's stability and to counteract years of imprudent spending by former governments.
Polling stations open at 7am local time on Thursday and close at 10pm with around 3.1 million people eligible to vote. Results are due late on Friday.