Ireland may get concessions in exchange for 'yes' on EU fiscal treaty

Ireland's approval of the EU fiscal treaty passed in January is dependent on a public referendum, the attorney general said today. Ireland might demand concessions in exchange for approval. 

The Irish government today announced it would green-light a public referendum on the fiscal union treaty the European Union agreed to at a special summit last month. Should the Irish public reject the treaty – a poll last month says opinion is divided: 40 percent say they would vote yes, 36 percent no – it could find itself isolated from the rest of the eurozone.

The uncertainty presents Ireland with the opportunity to demand concessions from the EU on debt repayments in order to ensure that the public approves the treaty, which the EU is desperate to see passed.  

Irish Attorney General Máire Whelan today ended a vociferous debate over whether the EU treaty had to be put to a vote. Whelan decided that EU treaties constitute changes to the Irish Constitution and therefore have to be put to a public vote.

Many in Ireland's governing coalition, nervous about the possibility of a rejection, sought to avoid a referendum – with some support from the EU. Prime Minster Enda Kenny said today that passing the measure would be in Ireland's national interest and that he was "very confident" of a yes vote. 

"It gives the Irish people the opportunity to reaffirm Ireland’s commitment to membership of the Euro, which remains a fundamental pillar of our economic and jobs strategy," he said in a speech to parliament, interrupting scheduled business. 

The compact imposes stringent budget controls on eurozone members. It requires that structural deficits not exceed 0.5 percent of GDP and that debt-to-GDP ratios be lowered to 60 percent and kept at or below that level. Countries that run up excessive deficits will be subject to direct EU intervention in their economic policies. 

The electorate in Ireland has a history of rejecting EU treaties, most recently in 2008, with the Lisbon Treaty on reformed Europe-wide governance. The treaty eventually passed in a repeat referendum, but only after concessions to Ireland.

In theory an Irish rejection could damage the treaty, but it is more likely to hurt Ireland. If the country is kept outside the deal agreed to by the other EU members (25 including Ireland, which agreed provisionally), any future funding from the EU and European Central Bank would be frozen.

The euro dipped against the dollar as news broke, but has since recovered. 

An opportunity to demand concessions

The content of the referendum question has not been announced — and confusion reigns. In December, Irish Finance Minister Michael Noonan said the question would come down to whether or not Ireland would stay with the euro currency. 

Ireland being ejected from the euro is unlikely, however. The Irish Independent reports, citing an EU official, there is "no question" of Ireland leaving the euro, regardless of the outcome of the vote.

Economists and lawmakers have called for debt forgiveness in return for agreeing to sign this latest treaty.

Brian Lucey, an economist at Trinity College Dublin says the Irish economy will continue to struggle as long as it has to pay debts incurred by Anglo Irish Bank. The bank lost billions in property speculation and was subsequently nationalized by Ireland's last government, which issued more than €30 billion ($47.5 billion) worth of promissory notes on the bank's outstanding debts.  

"Economically the promissory notes are a drag on Ireland's regaining fiscal control. If the government wanted to, they could use this [referendum] as a bargaining tool to renegotiate the payment of the Anglo promissory notes," he says.  

Speaking in parliament, independent lawmaker Shane Ross, a former stock broker and journalist, echoed this view, demanding a "quid-pro-quo" debt write-off in return for a "yes" vote. 

Graham Finlay, a lecturer in politics at University College Dublin, says the opportunity for the Irish government to extract concessions on debt repayments is a real one.

"I can see people voting no unless there are concessions. Things would be extremely problematic if we rejected it, losing top-table access, but crushing us would not be in the interests of the EU. It's playing with too much fire," he says.

Opposition parties welcomed the decision to hold the vote. Micheál Martin, leader of the Fianna Fáil party that governed Ireland until March 2011, said, "I think it's the right decision and one that shouldn't have required legal advice in my view." 

Fianna Fáil will support a yes vote, as will ruling coalition parties Fine Gael and Labour, but socialist lawmakers in Sinn Féin and the United Left Alliance will campaign for a "no" vote. 

Paul Murphy, a member of the EU parliament for the United Left Alliance representing Dublin, welcomed the referendum but warned a straight question on the EU compact was necessary.  

"Politically, they'll load the question, linking it to membership of the euro [currency] but legally they may not be able to do so. It's the fear card they'll go for, primarily," he says. 

Everything remains up for grabs in the vote: an opinion poll conducted for the Sunday Business Post newspaper in January found that 40 percent of voters would vote yes to the treaty and 36 percent would vote no, with 24 percent undecided.

This story was edited after posting to correct Mr. Lucey's affiliation. He teaches at Trinity College.

Get daily or weekly updates from CSMonitor.com delivered to your inbox. Sign up today.