Fiscal Compact: Why I’m Voting “Yes”

The following has been a long time in the writing, but I never considered not writing it. The post I wrote on my decision to vote “No” in the previous two referendums was among the most popular I have ever written, and I can only hope that the following reaches as many people.

I am going to vote “Yes” in the Fiscal Compact referendum. This has not been an easy choice to come to, and I erred towards both sides in equal measure at separate times during the campaign so far. But I have now planted my flag firmly in the “Yes” camp and I would like to elaborate on just why brought me to that decision. In so doing, I am going to outline the objections that I and many others have with this treaty, and counterbalance that with the given solutions, if they exist. Some of the objections are refuted as such, some of them are not. At the end, I will elaborate on my final decision and that what drove me towards it. Apologies if this seems a bit haphazard, it was written over the course of the last three weeks.

Disclaimer: I don’t claim and have never claimed to be on expert on financial affairs. I have tried, in the following, to address such matters in a general sense, avoiding the more precise details since it would be foolish for someone of my inexperience to attempt to tackle them with no knowledge base. That being stated, I stand by everything I say.

Article Three

Article Three, the one that outlines the new deficit rules that effect all nations subscribing to the treaty, is something that many in the “No” side have a problem with. It will limit Ireland, in the event of a “Yes” vote, to running a “structural deficit” of not more than 0.5 of GDP.

Why is this a problem? Ireland ran a deficit of 11% in 2011, and 18.7% in 2010. The answer to the obvious concern is that the new deficit rules will be introduced only gradually, not immediately, but that is little comfort: I am no way convinced that Ireland, on the form of its current and previous governments, the current state of our economy and our future prospects, would be able to maintain its finances to the degree that the Fiscal Compact Treaty is insisting upon. I think many countries in the EU will struggle with it. I fear Ireland will run afoul of these rules at some point, and we will then be liable for the fines discussed in Article Eight.

In that regard, I think the financial restraints that the Fiscal Compact will enforce are too harsh, unrealistic, at least without drastically worse cuts in the future. There is wriggle room in the event of “exceptional” circumstances. Vague and unhelpful. I suppose, at the present course and with future budgets, we might get to the point Europe wants. Will we stay there? Should we? I’m not convinced on any of it.

The Deficit Clause

Isn’t such a deficit clause a good thing though? That is something that could be debated (and I will, in a mo). For now, I dispute the necessity of the EU creating and enforcing such a rule on that level. This is an opt-out piece of legislation, an option that two members of the EU took. If Fine Gael and Labour are so in love with the idea of this deficit stricture, then they can surely legislate for it here, at home, in our own parliament. At least that way it is easier to change, amend, or repeal if necessary. And it is done without the distinct impression of the big bad EU controlling our fates, controlling precise figures in such a law. It is done without the threat of a fine if our elected government dares to do anything not strictly in line with the rest of the EU.

In fact, we kind of already do have such a policy on the books, but it isn’t enshrined as part of the constitution. This ties into an oft stated point, that the Compact is merely repeating laws and guidelines already in effect. But this is different. It will insert language into the constitution and it is a case of the Irish people deciding whether these rules are worthwhile, not just the Dail. Just because those 166 TDs think they’re a good idea (and of course, many don’t) doesn’t mean the electorate should just put concerns over the deficit laws aside. The question is this: are you happy with having such a “balanced budget” rule in perpetuity, not just for the short term future? I cannot say that I am.

Perpetual Austerity?

Is the Compact “perpetual austerity” by another name? I don’t think so. It means a continuation of austerity policies, but I can see that the long term goal for the thing is for “living within means”, not just stringent cuts forever. Does “living within means” equate to austerity forever? I think it equates to a lack of growth and a lack of spending during “good times”. That’s not something I like the sound of. This is a bad crisis, but it will not be the case forever.

Deficits don’t have to be bogeymen. They can be higher than 0.5% GDP and not mean financial calamity. This financial crisis is a substantial scare, but we should not let it scare us from spending money (when we have it) forever.

But this treaty makes a deficit, and excessive government spending (as defined by people outside Ireland) as a bad thing. This Compact is about tightening belts, not just for this crisis, but for forever and a day. This is a long term plan, and it should be viewed and judged, like any law, on its long term implications, one of my key issues when discussing any insertions or changes to the Irish constitution. If Ireland recovers from the slump and gets its budget to a “balanced” state, we will be stuck at that point under the terms of this treaty. Like the referendums that I discussed last year, we must think about what this Compact will mean 5, 10, 20 or more years from now, how it might stifle our future economic policies.

Merkel and Hollande have murmured about “growth options” and “Eurobonds”. When concrete details emerge about those options, I’ll consider them. Right now, they don’t exist. At time of writing, France is refusing to ratify the Treaty as it stands, meaning two of the EU’s “big three” are not signing up to the Compact. So, it will either go ahead without the significant financial muscle of Great Britain and France to add to it, perhaps making it a lame duck in terms of reforming Europe’s finances, or it will be changed, probably after it has been either accepted or rejected by the Irish electorate.

Stifling of the Left

The terms of this treaty will be a check on government spending in the future, and is a clear blow against the theory of Keynesian economics, a policy usually advocated by left-wing parties. Is the Fiscal Compact a power grab by the right wing, an attempt to neuter future left-wing governments, preventing them from doing anything other then follow the policies put in place by Europe current generation of conservative governments? Current governments that are being turfed out of office and rejected by electorates all throughout Europe?

I really dislike this aspect of the Compact, that essentially outlaws the idea of Keynesian economics. I am not a “leftie” but if a left-wing government is elected to power, they should have the option, given their popular mandate, of introducing economic policies of their choice. This Compact is a message that “our way” – that of cuts, austerity policies to the point of “balanced budgets” and anything being fair game for sacrifice to the great God of “stability” – is the only way. Anything else is dangerous and cannot be contemplated. That’s wrong, a panic-induced rejection of any other option, a declaration that this current financial crisis is a result of fixed, never-changing circumstances that can always be countered by one set of policies.

I suppose this Treaty can be altered in future, repealed by referendum. Maybe it will just collapse in time, become a series of broken promises as so many EU treaties have become. I don’t think the terms of this Compact have the capability of lasting, or being adhered to by those who have signed up for it. I think it is reactionary and in terms of long term survival, not fit for purpose. I suppose, with that belief, I should not be so worried about the long term prospects of this Treaty, but this being a referendum, with effects on the constitution, it has to be something to consider. If the Compact lasts, it will reduce the economic options that future governments can choose, regardless of circumstances.

The “Gun To The Head”

The EU will have the legal right to fine Ireland in the event that we cannot achieve the goals laid out in Article Three. Should this organisation have the right to do that? To go beyond recommendations, meddling and insistences on “balance”, and punish us for not following the rules? To react to spending more than we have by…taking more money off us?

The argument here is simply that such a clause will mean a greater attempt, by all parties, to actually follow the Compact to the letter, with serious consequences if they do not, unlike some other treaties. It’s the security clause, the one that makes everyone take it seriously. I suppose I can understand that viewpoint. But on a personal level I don’t think the EU should have the legal right, and I don’t think they have the moral right, to fine this country and punish its peoples in the event that it runs a deficit in future. It shouldn’t be a crime.

But that all brings me to the unpleasant reality of the “gun to the head” objection, the idea that the EU/IMF/Germany/All and sundry are blackmailing the Irish electorate into signing up to this treaty, and are being heavy handed about it. Tying access to the ESM with ratification. Vote “Yes”, ratify, or you don’t get more funds to keep your economy going. Don’t even think about voting the other way, because free democratic choice, without a sword hanging over your head anyway, is not in the interests of the Euro bloc.

What can I say to this? I’ve turned against the EU big-time over the last few years. I think its higher placed leaders have become more and more prone to bullying tactics and more and more prone to a very concerning attitude towards democracy, here and in other financial basket cases like Greece. The blackmail part of the Compact – because it is there and acting like it isn’t is just obstinacy – is just the latest part of that, insuring that pesky things like votes have as little likelihood of messing the plan up. Scare the electorate, with talk of no money, no support, no way of paying back the debts that the people never agreed to take on their shoulders.  I say “talk”, when I of course mean “making scary stuff an inherent part of the Treaty for this very purpose”. You want the hospitals, fire brigade, the guards to still get paid? Vote “Yes”, or else the ESM won’t do it. The IMF won’t do it. You won’t get the money and then where will you be, with a government that promised to look after the debts of your banks?

The counter-argument here revolves around the oft heard phrase “reasonable conditions”, which claims that, as the EU is going to be lending us increasing piles of cash on top of the large amounts of cash they have already lent, it is perfectly reasonable for them to tack on conditions that will insure that the borrower is a sound investment. Want access to the ESM? Enshrine the deficit clauses into law.

That is, treating the nation of Ireland like an individual applying for a bank loan who will have to stay the course for as long as it takes, rather than a sovereign nation of four million citizens who can vote in different governments if they want, and whose role in the process is being marginalised as much as possible as a result. “Stability” crows the “Yes” side. Stay the course. Keep agreeing. Reasonable conditions. Friends in Europe. Yes for jobs. Harsh but fair.

Can you get how angry I am becoming?

The Fine Gael/Labour/Fianna Fail triumvirate has only been too happy to play this up – Minister Noonan talking about a referendum on Euro membership and a harsher budget in the event of a “No” vote spring to mind.  I detest the blackmail tactics surrounding this compact, but it isn’t just campaign tactics, it’s in the actual Treaty. The actual Fiscal Compact contains the blackmail element within its very wording. Reasonable conditions are one thing. What we are being presented with is another. That is, a blunt attempt to fundamentally strangle our economic policies in the long term, by threatening to pull the plug today, dooming the Irish people to a financial oblivion that is not of their doing.

If I sound uncharacteristically populist- it’s rare you’ll find me talking about the injustice of the bank guarantee and what the Irish electorate signed up for by voting in Fianna Fail, then Fine Gael/Labour – then it is only because I find the conditions surrounding the Fiscal Compact, tying its ratification into the access of the ESM, to be brutally unfair on the individual citizens of the Irish nation and their inherent right to reject such a treaty without worrying whether doing so will cost them the roof over their heads in time.

Oh, and I imagine the next “reasonable condition” will be to do with the issue of corporation tax, which the EU will do everything in their power to take out of our control.

The Wrong Side Of History

Another objection is the events outside Ireland, how the architects of this Treaty and the austerity policies that are at its heart are falling to votes left, right and centre. Local elections in Britain and Italy, general elections in Greece, Presidential election in France, the government in the Netherlands. They are swings against current governments that are likely to continue in Germany next year, in Spain and elsewhere. Why should we vote “Yes” to this Compact, when the tide of European politics, the expressed wishes of its vast electorate, is against those who have brought it into being?

I suppose you could argue back that it is immaterial. We can only vote on what is put in front of us, and should only vote on how it affects us. Everyone else in Europe is looking out for themselves after all, and the time for a change of government is not here in Ireland yet. Voting “No” to this treaty will not make the economic crisis disappear, and it will not automatically result in a better option being presented to Ireland anymore then the rejection of government parties in Greece has done. If the austerity policy and its makers are on the “wrong side of history” then nothing will save them from the wrath of the ballot box, but such concerns are more long term then the immediate question of how to vote on this Compact.

The ESM’s Powers

The Treaty is also bound to the ESM’s immunity to legal prosecution and its powers to increase, on its own authority, the amount that each member state will be required to pay into it over time. This is certainly concerning, as it indicates that a great degree of legal and political power is being bound into the institution.

The legal problem is one of personal interpretation – the usual safeguards of the EU bureaucracy remain and Ireland does have the power to exercise a veto at the ECB governor level. The other aspect of the ESM’s powers and responsibilities is more concerning and not something I am especially happy with.

The Other Options

What are the other options? Reject, default, leave the Euro, devalue, and move from there. Painful but not without some merit: Iceland is the oft quoted example of this course. But Iceland was not part of a single currency: Ireland volunteered for that situation and our economy is tied to many others in a way that Iceland’s is not. Moreover, we have already gone beyond an Icelandic solution, thanks to the bank guarantee, easily signed up for, not so easily cast aside.

In such an Icelandic course, perhaps the markets would become open to us again, but the interim is so hard to fathom, so difficult to contemplate in terms of the cuts that would have to take place, the level of distress, pain and financial oblivion that would have to be endured, with no firm guarantee that it would be short lived or temporary in any respect. The idea that we can deal with our crisis like we are removing a band-aid – quick and painful, but better after – is a comforting vision, but one with as much basis in reality as thinking that the Fiscal Compact will solve all our problems in perpetuity.

Vote as Protest

You could vote “No” as a protest, something that I think everyone has a moral right to. The claims from some on the “Yes” side, that such thinking is dangerous as “now is not the time”, is moronic to me as I have previously outlined. This government is standing by this Compact, and it is tied to their economic policies. If you are dissatisfied with the government and their performance thus far in office, then you can find a reason to vote “No” if you consider that an important enough point to be a major part of your mindset. Why facilitate a government you don’t like, with financial policies you don’t like, in continuing those polices by green lighting their relationship with the EU, their approach to the EU?

Oh, and that extends to the EU. Nice didn’t work, Lisbon didn’t do what they said it would, now we have this. The EU is not an organisation I have much faith in, not to adequately look after my interests as one of its 500 million citizens, not to deal with this financial crisis in the most competent way possible. If you don’t like the EU, don’t like the way it operates, then perhaps you should vote “No” regardless of the individual merits and demerits of this Treaty. I do not consider that an illogical way to vote, as it is increasingly rare that the higher echelons of the EU ever have to face up to the democratic reality of Europe: if you have the chance to send the EU a message, to effect it in a practical way, then a “No” vote is the option to do so, to have an impact on Europe you will not get again for a while.

In Conclusion

Overall, I think this is a very bad deal of a treaty. I do not like its deficit conditions, I do not like the threat of withholding future funding in order to aid the campaign for its ratification. I do not like the dismissive attitude the EU has towards expressions of democracy, I do not like the attempt to dismiss and illegalise Keynesian economics. I do not like giving the EU the power to fine us for our own economic choices, I do not like the legal powers being given to the ESM.  I do not like the scare tactics, the negative message. I do not like this government, and I do not like the EU.

Stability? Confidence from the markets? Do not make me laugh. This treaty will give us, will give me, no stability. It will not increase confidence in the bloated, disorganised EU or in our own mess of an economy anymore than any treaty can in the face of democracy and anti-government choices being made in the same. This is, very much so, an imperfect solution to our problems.

But, for all of that, I am still going to vote “Yes”.

Why? Because I am being blackmailed, pure and simple.

I like to think myself a realist, having abandoned my idealist days back in the time of Nice and Lisbon. I pride myself on a cold, logical approach to politics and that is the course I must maintain, even if it leaves me with some uncomfortably negative feelings swirling around my head.

There are idealistic, emotional responses to this treaty, those based on issues of sovereignty, dissatisfaction with Europe, national pride. There are not illegitimate feelings. There are also realistic, sterile responses, those based on economic reality, the survival of the state.

I would love to play the patriotism card, give the EU and its awful Compact the finger, and go on with my life. I would love to be able to say, legitimately, that Ireland defaulting, leaving the Euro and moving on from there would be the better course.

But the amount of pain and damage that could cause, in terms of finances for hospitals, public services, education, long term depression, would be catastrophic. I cannot think solely of myself. I have a sister who is having her first child within the next three months, two parents edging towards retirement age. Am I supposed to act like Ireland leaping into the worst kind of financial uncertainty is in their best interests? Can I do that with a straight face?

I cannot. Ireland will likely need bailout funds in the future (the attitude of the government parties in this campaign has convinced me of that), or at least the possibility of accessing them if it is to recover. The best option for that is the ESM.

And we will not be allowed to access the ESM without saying “Yes” to this treaty. It is blackmail, and is sickens me, but there it is. The road back to prosperity is long, and will be filled with pitfalls. I don’t believe this treaty can be adhered to by its strict rules or that it will be lasting, but I do think that Ireland will need access to the ESM.

Let me be even more clear on that point: I can see this Treaty collapsing amide a haze of non-compliance and “exceptional” circumstances at some point, but for now and the next few years, the ESM is something we will need the option of accessing.

So, I will vote “Yes”. I will not tell others to do so. I will not champion its cause. I will do the same for the “No” vote. I will not celebrate a “Yes” victory, anymore then a “No” one. I will look on those that celebrate a positive response with contempt, as they seem willing to grin about what is a national humiliation, a situation that is leaving a burning sensation in my gut, a further surrender of sovereignty to a bureaucratic nightmare that has lost all my confidence.

And further to that, this is it. The next time the EU and the Irish government throw another Treaty at me, another solution to the crisis, another bid to save the Euro, another pathetically sad attempt to get me to vote “Yes for Jobs”, I might not even listen to their arguments. I may just shut the door in their faces and vote “No” on sheer principle, having been lied to, disrespected, blackmailed and burned by the EU and subservient Irish political parties one too many times. The EU and the Euro are dying beasts, not totally beyond saving just yet, but there are only so many times that you can push me.

So, I am voting “Yes”. I do not say that is what you should do, I have merely explained that is what I shall do. The rest is up to history.

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7 Responses to Fiscal Compact: Why I’m Voting “Yes”

  1. Anthony says:

    I appreciate your writeups on the referenda – Even when I don’t agree with the conclusion, they’re always well researched and helpful in making my own decision.

    I think I’m leaning towards No myself – I can’t bring myself to abandon idealism in the face of such blatant blackmail. I’m also increasingly sure that the Treaty and the Right in Europe are on the wrong side of history. A lot of that, admittedly, is hope. The deficit clause being enshrined into law will cripple economic growth. So will a No vote, thanks the penalties. It’s a whole lot of bad either way. So… “If you can’t do something smart, do something right.” If it’s going to be awful either way, I’d rather lose in a cause that will someday win. (Or so I hope…)

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