This site uses cookies to improve your experience and to provide services and advertising. By continuing to browse, you agree to the use of cookies described in our Cookies Policy. You may change your settings at any time but this may impact on the functionality of the site. To learn more see our Cookies Policy.
OK
Dublin: 6 °C Thursday 24 January, 2019
Advertisement

YOUR Fiscal Compact questions: Answers from ‘No’ side Sinn Féin Pearse Doherty

We asked TheJournal.ie’s users to put forward their questions about what the Fiscal Compact actually MEANS and we would get straightforward answers. Here they are.

Image: AP Photo/Peter Morrison

LAST WEEK, THEJOURNAL.IE issued a callout to you, our readers and fellow citizens and voters, on the question of the Fiscal Compact referendum.

We wanted to know what YOU wanted to know about the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union (official title).

First, we picked the most commonly-asked questions you submitted on points that you didn’t understand or wanted clarified in the wording of the treaty.

Then we posed those questions to two independent bodies here (the Referendum Commission) and in the EU (the European Policy Centre), as well as to a representative each of the ‘No’ and the ‘Yes’ side.

Click here for answers from all sides.

HERE: Finance spokesperson for Sinn Féin and ‘No’ campaigner, Pearse Doherty, answers your questions:

What is NEW in this treaty for Ireland?

The Austerity Treaty takes the existing debt and deficit rules from the Masstricht Treaty, adds new rules arising from the EU six pack legislation of 2011 and toughens these rules with a number of new enforcement mechanisms. It imposes a harsher structural deficit rule on national economies; gives the European Commission new powers to impose budgetary policies on countries deemed to be in breach of the rules; and gives the European Court of Justice the power to impose fines where states are deemed to be in breach of the obligations of the Treaty. It is a fiscal straight jacket which means more austerity and less democracy.

Can Ireland still access the EFS Fund regardless of what way the vote goes?

Contrary to the claims of the Government, emergency funding from the European Union will be made available to the Government if it requires it in 2014. This funding will come from the European Stability Mechanism.  Articles 3 and 12 of the ESM treaty state clearly that funding will be provided where it is indespensible to safeguard the financial stability of the Euro area as a whole. While the ESM contains the blackmail clause linking ratification of the Austerity Treaty to accessing emergency funds, the Government has the power to remove this clause if it so wishes.

It has chosen not to because it wants to use the blackmail clause to frighten people into voting for the Austerity Treaty. People should be very clear, if the Government requires emergency funding in 2014 that funding will be available from the ESM. Failure to provide such funding would be legally in breach of Articles 3 and 12 of the ESM Treaty. It would also jeapordise the financial stability of the Eurozone as a whole.

A figure of €11 billion has been suggested as Ireland’s maximum input into the ESM. Does the ESM have the power to increase this figure if required?

When the European Stability Mechanism is established the liability of the Irish state to the fund will be €11 billion euro. Initially €1.2 billion will be paid up front. Additional funds will be made available as requested by the ESM. It is also important to state that unlike the EFSF fund that is providing our emergency funding at present, there is no exemption for countries in a bailout programme. This means that even if we are in a second emergency funding programme from 2014 we will still have to contribute to the ESM.

If we do require funding can the ESM set additional austerity measures as part of the agreement to provide funding to Ireland?

The ESM treaty states that funds will be provided on the basis of strict conditionality. It does not state what these conditions would be but it is clear that they will be similar to the austerity conditions imposed by the troika under the current deal. These are the very same conditions that are blocking a return to economic growth. If a second round of emergency funding is required in 2014 it is incumbent on the Government to negotiate a better deal that they have done so to date.

If we vote Yes in this referendum, is the treaty being added to our constitution?

No, the referendum seeks to give the Austerity Treaty constitutional protection. If passed the legal obligations contained in the Austerity Treaty will have have precedence over our Constitution.

If we ratify the treaty and then the wording of the treaty is changed afterwards, will the same amendments apply to us?
This is very unclear. While the Government claims that the text of the Treaty will not change the negotiations in Europe are ongoing. We will not know until whether the Treaty is changed until after our referendum. What is clear is that a growing number of national parliaments including France and germany are refusing to ratify the Austerity Treaty as is. Clearly there is a demand for change and the final version of this Treaty may well be different to what we are voting on tomorrow.

The Taoiseach Enda Kenny said after the informal summit in Brussels this week that there can still be a growth deal among EU countries, completely separate to the fiscal compact. Is this possible?

No it is not possible. Austerity is blocking growth, in Ireland and across the EU. Our economy is now officially back in recession, as is the Eurozone. Unemployment remains at 14%, with Eurozone unemployment at a historic high. Austerity is making the crisis worse. You can not ride two horses at the one time. Tomorrow people have a clear choice, if you support austerity vote yes. If you want a new direction in favour of jobs and growth vote no.

What interest rate will the ESM charge? Is it ‘at cost’ as some in the ‘Yes’ campaign have claimed?

This has not been decided yet. During the negotiation of the ESM Treaty it was proposed that ESM funds would be provided at a 2% to 3% markup above the market interest rate. However this proposal was removed from the final version of the ESM treaty.  The claim by the yes side that ESM funds would be provided at ‘cost’ is entirely false.

The treaty refers to “Structural Deficit”, but it doesn’t define the term.  Some economists are worried that the term is undefined.  Could you please define “structural deficit” and provide a definitive explanation as to how exactly it is measured.

The structural deficit is not a measurement it is a judgment. It takes the actual deficit and adjusts it to take account of where it is believed the economy should be rather than where it is. There is no agreed definition of what a structural deficit is nor how it is to be calculated. It is also subject to constant revisions. In the context of the Austerity Treaty it will be the European Commission who determine what the structural deficit is and how it is measured.

The treaty says: “In the event of significant observed deviations from the medium-term objective or the adjustment path towards it, a correction mechanism shall be triggered automatically. The mechanism shall include the obligation of the Contracting Party concerned to implement measures to correct the deviations over a defined period of time.”

Who defines what a ‘significant deviation’ is; what are the “corrective measures”; who is to define the period of time?

The answer in each case is the European Commission. They will determine the extent to which a Government has breached the rules and the steps to be taken by the Government to “correct” what the Commission defines as the problems. The Treaty gives the European Commission significant new powers to impose detailed budgetary and fiscal policy prescriptions on member states deemed to be in breach of the rules. This will mean less power to the Oireachtas and more importantly less power to the citizens.

Is there provision for any circumstance that any individual or group of countries to opt out of this treaty in the future?

No, once ratified this Treaty places legally binding obligations on this Government and all future governments until such time as all of the signatory states agree to amend the Treaty.

Answers from the Referendum Commission>

Answers from the European Policy Centre’s chief economist>

Answers from Fine Gael’s Simon Coveney for the ‘Yes’ side>

  • Share on Facebook
  • Email this article
  •  

About the author:

Read next:

COMMENTS (25)