Sunday

17th Dec 2017

Opinion

Another treaty, another Irish referendum

  • The significance of the Irish referendum seems also to have escaped Ireland's EU partners. (Photo: James Stringer)

Another European treaty. Another Irish referendum. Once again the main political parties, somewhat battle weary, join forces to argue Yes. Sinn Fein and Declan Ganley, the maverick federalist, campaign for a No.

Most voters evince no or little knowledge about what the referendum is officially about ‑ the Treaty on Stability, Co-ordination and Governance in the Economic and Monetary Union, or fiscal compact treaty for short. Come polling day, 31 May, many may not vote.

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

The significance of the Irish referendum seems also to have escaped Ireland's EU partners.

Pierre Moscovici, France's new minister of finance, speaks blithely about changing the treaty. The German Bundestag has postponed its own ratification of the treaty from 25 May until after the Greek elections on 17 June. For the moment, the SDP and Greens are happy to play domestic electoral politics with ratification by depriving Chancellor Angela Merkel of the two-thirds majority she needs.

These second thoughts about the treaty in Paris and Berlin are distinctly unhelpful to the Irish Yes cause. Such cavalier treatment of the Irish voter is rightly resented in Ireland.

The rest of Europe should have learnt by now that Ireland's verdict is very important. The opinion polls give the Yes side a lead but, as always in referendums, the gap narrows. What is really at stake?

The fiscal compact treaty was conceived at the December European Council in the teeth of British opposition. It is not, of course, another European Union treaty, but works by explicit analogy with them, respecting EU competences and seeking to deploy EU institutions.

It is an archetypal confederal treaty, committing the governments which sign it to a course of action which, in the event, they may choose not to pursue without formal penalty. The price of confederacy is high moral hazard.

The European Commission may help to implement the fiscal compact treaty, but cannot use its full powers vested under the EU treaties.

The European Court of Justice (ECJ) is enjoined to act at the behest of one member state against another according to Article 273 of the Treaty on the Functioning of the EU in a dispute "which relates to the subject matter of the [EU] Treaties."

Here the vessel of the fiscal compact sails into uncharted seas: Article 273, which postulates the ECJ as a federal supreme court, has never been used. At the very least, as the UK government already made clear in a letter on 22 February to the EU Council, EU institutions will act under the fiscal compact treaty beneath the shadow of hostile litigation from the UK if EU law is breached.

Ironically, the fiscal compact treaty will only work at all if the general principle of EU law that enjoins sincere co-operation among member states and between the institutions is strictly respected.

Despite its portentous title, the new treaty does not go all the way to remedy the flawed structure of European Monetary Union (Emu) as handed down by the Treaty of Maastricht.

But it does consolidate the many reforms put in place by the EU since 2008 to strengthen regulation and supervision of the financial sector and to tighten the nuts and bolts of the Stability and Growth Pact. The treaty makes it much more difficult for states, even large ones, to evade their mutual responsibility to observe fiscal rectitude. Ireland, which saw Germany and France get off scot free when they broke the rules in 2003 and 2004, should be chuffed.

An important innovation of the fiscal compact treaty is that signatory states commit to passing cardinal laws to install a debt-brake on national budgets if structural deficits rise above 0.5 percent of GDP. The contracting parties also agree to use reverse qualified majority in the Council of Ministers throughout the excessive deficit procedure.

The full effect of the corrective provisions of the new treaty will only be felt in a number of years time, once the present austerity regime has reduced current deficits (and possibly increased sovereign debt).

The immediate impact of the treaty falls on any eurozone state which by not ratifying it will be unable to access bail-out funding from the European Stability Mechanism (ESM).

Worst of both worlds

The link between the two intergovernmental treaties on the fiscal compact and the ESM is critical and for that reason alone the significance of an Irish Yes cannot be underestimated. If Ireland were to say No it would lower its credibility in the financial markets, raising the probability that it would need a second bail-out. But the No vote would cut it off from ESM funds ‑ the worst of both worlds indeed.

The treaty commits its signatories to using the enhanced co-operation provisions of the Treaty of Lisbon to go further and faster in the many sectors of the EU's non-exclusive competence.

Also significant is the institutional innovation of the twice yearly summit meetings of the eurozone, which will discuss Europe's competitiveness, the modification of the global architecture of the euro and its fundamental rules ‑ that is, the euro convergence criteria, the Stability and Growth Pact and budgetary and taxation policy. The Taoiseach had better be there.

Like all good confederal pacts, the treaty will come into force before all signatory states complete their ratification process ‑ indeed, when only 12 of the 17 eurozone states have done so. By itself, therefore, an Irish No will not stop the fiscal compact in its tracks. The nay-sayers are deprived of the (somewhat misplaced) importance they attached to themselves in earlier referendums on EU treaties proper when an Irish No would block all Europe.

All in all, the fiscal compact treaty, if not an entirely good thing, is a necessary expedient, and adds to the pressure of market discipline and continual peer assessment to which all EU states are now subjected to a greater or lesser extent.

What is really needed now is faster economic growth to make palatable to a sceptical democracy the inevitably painful process of structural reform. The Irish, who are making impressive efforts to return to fiscal rectitude, certainly need to hear the language of Italian leader Mario Monti and French President Francois Hollande about growth.

Article 16 of the new treaty foresees its substantive incorporation within the EU legal framework "within five years at most" following entry into force.

It thus predicates a situation five years from now in which the United Kingdom (and the Czech Republic) have changed their mind and are prepared to concede what in 2012 they blocked.

Naturally, such incorporation of the fiscal compact will trigger a general revision of the EU treaties under the ordinary revision procedure (Convention plus Intergovernmental Conference). Other matters, some of them rectifying aspects of Lisbon, will crowd the agenda.

Big push coming

But the big push will be on fiscal union, involving both discipline and solidarity, where the states will be expected to accept joint and several liability for a portion of sovereign debt. This fiscal union will need a federal economic government, including a treasury, a widening of the remit of the European Central Bank, and, at last, the issuance of eurobonds.

Such a mighty step towards turning the EU into a truly federal polity is unlikely to be attempted before 2015 at the earliest. But attempted it must be if the project of European unity has a chance of lasting success on a sound financial and democratic basis.

The first item of business at the new Convention will have to be how to deal with the British problem. It is only realistic to assume that the British people in their own inevitable referendum are not going to be ready to take the federal step. That means that a form of associate membership will have to be crafted to park the UK.

Other countries may join the British, temporarily or permanently, in their semi-detached status. But it is not immediately obvious how such a detachment by Ireland from mainstream mainland European politics would serve the Irish national interest.

After all, the true significance of the December European Council was not the British prime minister's veto of EU treaty change but, rather, the decision by his EU partners to call his bluff by proceeding in any case without him. An Irish No on 31 May would indeed be sweet revenge for Cameron.

Andrew Duff is a British MEP with the Liberal Alde group in the European Parliament. He is the group's spokesman on consitutional affairs

Germany's free borrowing is 'destroying Europe'

European Parliament chief Martin Schulz has launched a scathing attack on the German chancellor for promoting policies he says drive the borrowing costs of other euro-countries up, while Germany has just hit a record zero-percent interest rate on its bonds.

Irish referendum: anger, fear and some hope

There is no way back to the old, protective (and often even corrupt) national structures. But this does not mean, that we have to give up the principles, procedures and practices of modern democracy. In contrary, writes Bruno Kaufmann.

Iceland: further from EU membership than ever

With fewer pro-EU MPs in the Iceland parliament than ever before, any plans to resume 'candidate' membership of the bloc are likely to remain on ice, as the country prioritises national sovereignty and a more left-wing path.

News in Brief

  1. EU adopts 'track-and-trace' tobacco system
  2. Luxembourg appeals Amazon tax decision
  3. EU leaders agree to open phase 2 of Brexit talks
  4. Juncker: May made 'big efforts' on Brexit
  5. Merkel took 'tough' line on Russia at EU summit
  6. EU leaders added line supporting 'two-state' solution
  7. EU leaders agree to 20 European Universities by 2024
  8. Belgian courts end legal proceedings against Puigdemont

Stakeholders' Highlights

  1. Dialogue PlatformThe Gülen Community: Who to Believe - Politicians or Actions?" by Thomas Michel
  2. Plastics Recyclers Europe65% plastics recycling rate attainable by 2025 new study shows
  3. European Heart NetworkCommissioner Andriukaitis' Address to EHN on the Occasion of Its 25th Anniversary
  4. ACCACFOs Risk Losing Relevance If They Do Not Embrace Technology
  5. UNICEFMake the Digital World Safer for Children & Increase Access for the Most Disadvantaged
  6. European Jewish CongressWelcomes Recognition of Jerusalem as the Capital of Israel and Calls on EU States to Follow Suit
  7. Mission of China to the EUChina and EU Boost Innovation Cooperation Under Horizon 2020
  8. European Gaming & Betting AssociationJuncker’s "Political" Commission Leaves Gambling Reforms to the Court
  9. AJC Transatlantic InstituteAJC Applauds U.S. Recognition of Jerusalem as Israel’s Capital City
  10. EU2017EEEU Telecom Ministers Reached an Agreement on the 5G Roadmap
  11. European Friends of ArmeniaEU-Armenia Relations in the CEPA Era: What's Next?
  12. Mission of China to the EU16+1 Cooperation Injects New Vigour Into China-EU Ties

Latest News

  1. Catalonia, Brexit, and Uber on EU agenda This WEEK
  2. Macron and Merkel take tough line on Poland
  3. Eurozone future needs structural reforms, EU leaders told
  4. Showdown EU vote on asylum looking likely for next June
  5. EU stresses unity as it launches next phase of Brexit talks
  6. Polish PM ready for EU sanctions scrap
  7. Dutchman to lead powerful euro working group
  8. EU mulls post-Brexit balance of euro and non-eurozone states

Stakeholders' Highlights

  1. EPSUEU Blacklist of Tax Havens Is a Sham
  2. EU2017EERole of Culture in Building Cohesive Societies in Europe
  3. ILGA EuropeCongratulations to Austria - Court Overturns Barriers to Equal Marriage
  4. Centre Maurits CoppietersCelebrating Diversity, Citizenship and the European Project With Fundació Josep Irla
  5. European Healthy Lifestyle AllianceUnderstanding the Social Consequences of Obesity
  6. Union for the MediterraneanMediterranean Countries Commit to Strengthening Women's Role in Region
  7. Bio-Based IndustriesRegistration for BBI JU Stakeholder Forum about to close. Last chance to register!
  8. European Heart NetworkThe Time Is Ripe for Simplified Front-Of-Pack Nutrition Labelling
  9. Counter BalanceNew EU External Investment Plan Risks Sidelining Development Objectives
  10. EU2017EEEAS Calls for Eastern Partnership Countries to Enter EU Market Through Estonia
  11. Dialogue PlatformThe Turkey I No Longer Know
  12. World Vision7 Million Children at Risk in the DRC: Donor Meeting to Focus on Saving More Lives

Stakeholders' Highlights

  1. EPSU-Eurelectric-IndustriAllElectricity European Social Partners Stand up for Just Energy Transition
  2. European Friends of ArmeniaSignature of CEPA Marks a Fresh Start for EU-Armenia Relations
  3. Nordic Council of MinistersNordic Energy Ministers Pledge to Work More Closely at Nordic and EU Level
  4. European Friends of ArmeniaPresident Sargsyan Joined EuFoA Honorary Council Inaugural Meeting
  5. International Partnership for Human RightsEU Leaders Should Press Azerbaijan President to End the Detention of Critics
  6. CECEKey Stakeholders to Jointly Tackle the Skills Issue in the Construction Sector
  7. European Friends of ArmeniaLaunch of Honorary Council on the Occasion of the Eastern Partnership Summit and CEPA
  8. EPSUStudy Finds TUNED and Employers in Central Governments Most Representative
  9. Mission of China to the EUAmbassador Zhang Ming Received by Tusk; Bright Future for EU-China Relations
  10. EU2017EEEstonia, With the ECHAlliance, Introduces the Digital Health Society Declaration
  11. European Jewish CongressEJC to French President Macron: We Oppose All Contact With Far-Right & Far-Left
  12. ACCASmall and Medium Sized Practices Must 'Offer the Whole Package'