Statement on Referendum on the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union

At 3 o’clock yesterday the eyes of Europe once more turned towards Ireland. Supported by the enduring strengths of our constitution, the Irish people, despite desperate government efforts to avoid it, have finally been given the opportunity to give their opinion on the future direction of the EU. It is a chance for the people of Ireland to affirm our role in a Union that has transformed a war torn continent into the most peaceful and prosperous community on the globe. Fianna Fáil will, as it has since we first guided Ireland into the European Community in 1973, support efforts to move Europe forward.

Since the agreement of the outlines of the Fiscal Compact in December, Fianna Fáil has consistently called for a referendum to be held. The democratic deficit that is gnawing away at the heart of Europe cannot be ignored. Desperate and ultimately failed government efforts to avoid a referendum have weakened it in the eyes of the electorate and our EU partners. We will vote in favour of the treaty as a step towards facing up to the fundamental challenge facing the euro zone. However we believe that it does not go far enough and that the ECB’s role needs to be reformed, Fiscal Union established and pan European banking regulation set out. The fundamental design flaws of the Euro need to be addressed in order to get Europe’s and Ireland’s economy moving again.

Our policy of constructive engagement with Europe has benefitted Ireland immensely and will continue to do so into the future. The benefits of free trade, infrastructural investment and unprecedented freedom of movement across the continent are central parts of Irish people’s lives today. The greatest assertion of Irish independence from Britain was the day we joined the EEC and broke the cords of economic reliance on the UK that had binded this country since 1922. Those who cynically play the nationalist card in the upcoming referendum should always recall that independence is more than mere slogans.

Our engagement with the EU is founded on shared values of solidarity, human rights and democracy. It is an engagement that involves, like any good friend, criticism where necessary. We are profoundly critical of the limits of the Fiscal Compact which is just one step in a far longer journey towards addressing the crisis we face. However as the proverb goes every journey starts with a single step. We will not however, indulge in crude populism, demagoguery and snake oil sales man solutions to problems that demand honest action. The responsibility that falls on us as public representatives demands more than that.

 

The Fiscal Compact Treaty

It is important that we look at the context of the Treaty, its details and the potential future repercussions on Ireland.

The European project stands at a crossroads. Internally it is assailed by a currency crisis, a stagnant economy and rising unemployment. Externally it faces a volatile globe with rising economic powers that threaten to sideline it and condemn Europe to increasing irrelevancy. Europe needs to take decisive choices on what direction to take in order to address these problems. This treaty is a step and just a step, towards the decisive action necessary. The economic future of our own country is bound up with the choices the EU on a whole makes over the next critical few months and years. Ultimately, no amount of Action Plans will solve the unemployment crisis if the broader European macro economic situation remains dire and all Pathways to Work will lead no where if the EU continues to lurch from crisis to crisis.

The 1992 Maastricht Treaty created the Common Currency after years of grave volatility in the markets and an utterly transformed Europe post 1989. It aimed to face up to the dramatic, seismic fall of the Berlin Wall and collapse of the Soviet Bloc that had been a dark shadow over free Europe since the end of the Second World War. It was envisaged by Jacques Delors, Helmut Kohl and Francois Mitterand as a core part of a new framework for a new Europe. However from the inception of currency it suffered from fundamental design flaws. Monetary Union requires Fiscal union. The Stability and Growth Pact of 1996 which aimed to establish rules to co-ordinate budgetary policies across the common currency area was wholly inadequate in this.

The Fiscal Compact Treaty that we will vote on in the coming months is basically a ramped up version of the Stability and Growth Pact of 16 years ago, which built on the Maastricht Treaty of 20 years ago. After the Stability and Growth Pact was consistently breached by Germany and France it was clear that it needed stronger enforcement rules. More recently the Economic Governance Six Pack passed by the Council and EU Parliament took steps towards this in December. The Fiscal Compact Treaty is not a radical departure, it is not a shocking loss of sovereignty and it is not the quantum leap required to solve the crisis at hand.

Essentially the treaty attempts to reduce the chances for poor fiscal policy in one country affecting another country, and the rules as well as the budgetary oversight and coordination and multi-year budgeting, are there to enshrine such good fiscal policy by making imprudent fiscal policies harder to enact.

The Compact is an international treaty outside of the EU Treaty framework. It will enter into force following ratification by at least 12 euro area member states and is open to the EU countries that are currently not members of the euro area. Unlike Lisbon or Nice however, it does not require the agreement of all EU member states, including Ireland, to go ahead. Ireland now has a choice, not a veto, on whether it wants to move forward with our EU partners. Fianna Fáil does not believe in a two speed Europe and look at the UK’s decision to step outside of this treaty with concern. The unity and solidarity of the EU across all member states is vital to its future success.

Verification of the Treaty is required to qualify for the European Stability Mechanism (ESM) which replaces our current funding arrangement the EFSF in January 2013. The ESM is the permanent funding mechanism designed to stave off future sovereign debt crisis. If Ireland decides to vote against this referendum and we are unable to return to the sovereign debt markets after the end of the EFSF we will not be eligible for the ESM. I believe that a no vote will be a self for filling prophecy in preventing a return to the markets. The bond markets will inevitably react harshly to the removal of the security net of the ESM.

 

Fianna Fáil’s View on what needs to happen to solve the Euro Zone Crisis

Fianna Fáil has set out clear views on what action needs to be taken to get the European and Irish economy moving again. This Treaty is not enough to solve the Euro zone crisis. It is one step towards a comprehensive set of policies and an overhaul of Euro Zone design framework that is needed to address the fundamental problems the Eurozone faces:

The three main problems are

-The limited mandate of the European Central Bank.

– The lack of uniform financial regulation including a pan-Eurozone bank resolution regime.

– The lack of a more ambitious fiscal union, in particular one which involves transfers between states.

Dr. Alan Ahearn correctly describes the Treaty as “an indispensible bridge” to the policies necessary to confront the crisis. Creating a framework to co-ordinate fiscal policy in countries sharing the Euro currency allows for greater macro economic policy efforts across the Eurozone.

Ultimately, a combination of fiscal and monetary measures is required to tackle the crisis by addressing the basic design flaws in the Euro.

Fiscal Union is the only real solution to the crisis and generating economic growth and job creation. Without financial transfers the dominance of Germany and other Northern European countries would be copper fastened and the Union placed under immense pressure due to the fact that weaker countries cannot devalue their currency to compensate.

Fiscal Union with Euro bonds that pool sovereign debt will strengthen all member states economic performance.

The ECB’s mandate needs to be reformed to a model similar to the US Federal Reserve where the ECB can expand monetary policy by buying debt from member states.

Strong unified financial regulation across the Union, reflecting the reality of international finance, under the remit of the ECB will be vital in ensuring the banking crisis that we have endured does not happen again in the future.

These changes are necessary to put the Euro on a solid footing and secure the future of the European Union in a rapidly changing, globalised world.

 

Government Attempts to Avoid a Referendum

The Government has wasted immense energy and political credibility in its desperate attempts to avoid a referendum. In the eyes of the electorate they are seen to be running away from going to the people on a difficult topic and only grudgingly accepting a referendum on legal advice. In the eyes of our EU partners their efforts to accommodate a government that consistently emphasized the need to avoid a referendum have been utterly useless.

No doubt a sense of shock and surprise spread across the corridors of Brussels yesterday evening. When the Tánaiste spoke last July to the IIEA about how the government wasdetermined to re-build our relationships, and restore our standing within the European Uniondid he mean haranguing other governments into changing the treaty in order to avoid votes only to find out they had to hold a referendum anyway?

Fianna Fáil, since the agreement of the outlines of the Treaty in December 2011, has called for a referendum. We believe that without democratic legitimacy, the steps necessary towards addressing the critical problems of the Union will be doomed to failure. The people need to be consulted and the democratic values that the Union was founded upon should always be at the heart of major policy decisions. In the long term, the European Project cannot survive if ordinary citizens do not have an active role in shaping its future.

After the initial defeat of the Lisbon Treaty in 2008 significant pressure was placed on the government to press ahead with other routes to advance the treaty without another referendum. That was the wrong route to take. Hiding from the people in the ivory towers of Merrion Street or the Berlaymont is no way for democratic states to work together. We took the right route and held another campaign. We made an effort to engage constructively with the people and ensure that it was the view of the people of Ireland that guided our way forward. The Government of the day should never avoid the people as any short term gain is always at the gravest of long term costs.

I am deeply concerned at the attitude taken by Cabinet Ministers towards the referendum. The views expressed by the Minister for Transport Deputy Varadkar that referendums were “not very democratic” or that “it would turn into a referendum on extraneous issues” is not the sort of positive open engagement that this campaign needs to win. The Irish people will not be impressed by a half hearted government forced into a referendum, fighting a rearguard action. The government must transform its negative attitudes towards referendums, a core part of Irish democracy and run a campaign of open engagement, easily accessible information and positive, but not uncritical, EU participation.

 

The Up Coming Campaign

Just as we called for a referendum to allow the people a choice we also call for a campaign that is not dominated by fear mongering on one side and charlatanism and conspiracies on the other. This is because Europe is more than a, Goldman Sachs conspiracy, as Deputy Mac Lochlain has previously stated from a party that claims to be pro-European yet has been against every EU treaty since 1972. The Irish people deserve honesty on all sides in this debate not self serving, cynical political points with no real interest in solutions.

This is a high stakes referendum for Ireland, one which will have profound repercussion both economically and politically. More importantly, it is also a chance at this juncture in history for a country on the geographical fringes of Europe to once more affirm its role at the heart of an unprecedented political community. A community, which has turned a continent ravaged by genocide and conflict between rival states into a transnational organisation unrivalled anywhere in the world. A community that has allowed Ireland to break free from our historic reliance on the UK and driven on immense social and economic progress.

Fianna Fáil will argue for a Yes Vote as a step towards the actions that we need to provide financial stability and establish a framework for jobs. We will argue for a yes vote to our continued role at the heart of Europe.

As is right and proper the Irish people will have the final say on whether we will move forward on this Treaty. I look forward to engaging them over the coming months.