The referendum on approval of the European Fiscal Compact (“Treaty on Stability, Coordination and Governance in the Economic and Monetary Union”), required by the Irish constitution, yielded a vote of 60.3 percent for approval and 39.7 percent against, with only about half of eligible people voting.
This will be seen as a victory for those who are promoting austerity as the solution for Europe’s fiscal woes.
But rather, it shows that when you put a pistol to someone’s head and order them to “stand and deliver,” you usually can get your way.
The European Fiscal Compact was finalized and signed by all the European Union countries except the United Kingdom and the Czech Republic in March of this year. It is a toughening of the Stability and Growth Pact, approved in 1997, which had required that all countries keep their annual budget deficits at no greater than three percent, and their total national debt no higher than 60 percent of Gross Domestic Product. In practice, that pact had proved to be unenforceable: Countries big and small, including powerhouses like Germany were regularly out of conformity with those norms. While many on the left felt that the Stability and Growth Pact was too rigid to work, the right and the European ruling class came to the opposite conclusion, that it was not strict enough and lacked enforcement mechanisms.
So the new European Fiscal Pact made the criteria stricter: Now no country is to be allowed to run a deficit greater than 0.5 percent (half of one percent) annually. This must be enshrined in legislation in each country – that is, every country has to pass what we in the U.S. would call “balanced budget” legislation.
Further, not only must the national debt of each country not exceed 60 percent, but also in those countries whose debt already exceeds this amount, it has to be reduced by 5 percent each year.
There will be various monitoring mechanisms based in Brussels, the capital of the European Union, and countries out of compliance will be fined each year, by the European Court of Justice, an amount equivalent to 0.1 percent (one tenth of one percent) of that country’s Gross Domestic Product.
This will force the poorer countries to carry out even more drastic retrenchments of education, health care services and other forms of social welfare. And there is no sign it will produce either “stability” or “growth.” Many economists feel that one cannot grow an economy by impoverishing a large part of the population, and this pact guarantees political instability.
This pact is to come into force in January 2013 if only 12 countries’ legislatures have approved it, but it then will be enforceable on all. Those who don’t approve it will not get bailout loans.
Ireland is the only country whose constitution required a plebiscite to approve the pact. It has already been approved by the legislatures of Denmark, Greece, Latvia, Poland, Portugal and Sweden. Everywhere, this pact has been opposed by the communist parties, some others on the left, and a section of the socialists and of the labor unions.
The Irish government of Taoiseach (Prime Minister) Enda Kenny, of the Fine Gael Party and his coalition partners from the Labour Party stumped for the “yes” vote, which was demanded by the “troika” of the European Commission (governing body of the European Union), the European Central Bank and the International Monetary Fund.
In contrast, the Irish left, including the Communist Party of Ireland, the Socialist Party and Sinn Fein, as well as some but not all labor unions, pushed hard for the “no” option.
There was no enthusiasm for the “yes” vote. Rather, voters opted for it out of fear of what the powers that be in Europe would do to them and their country if they did otherwise.
A major argument for the “no” vote was the issue of national sovereignty. The Irish people have sacrificed their lives for centuries in order to become “a nation once again.” The European Fiscal Compact and the related European Stability Mechanism substantially curtail the right of the elected government of each member country to run its own economic affairs.
But Ireland is a small country with only 5.6 million inhabitants. In 2008, as part of the worldwide financial crisis, there was a crisis in Ireland caused by the collapsing real estate bubble, which in turn caused a massive bank crisis. The Irish government of the time went deeply into debt bailing out the banks, and sharply cut its social welfare budget. Unemployment and emigration skyrocketed amidst mass demonstrations and Prime Minister Brian Cowan’s coalition was driven out of power. This is what has put Ireland in a situation in which a significant loss of sovereignty seems a lesser evil to those who voted “yes” in the plebiscite compared to the damage that could be done to their country if they did not go along with the program.
The new French president, Francois Hollande of France’s Socialist Party, has said that he wants to renegotiate the European Fiscal Compact. It remains to be seen whether he will be able to accomplish this.
Photo: Irish Prime Minister Enda Kenny speaks to the media. Peter Morrison/AP