30-minute guide to the ESM and Fiscal Compact treaties

The mainstream media in Ireland hasn’t exactly covered itself in glory this week. RTE kept on reporting on Thursday a claim by An Taoiseach Enda Kenny that the text of the Fiscal Compact would not change following talks at the EU summit. Yet in France, there was no such admission from the French president Francois Hollande. Did RTE bother to check An Taoiseach’s claim, a claim which is very important indeed to our country about to go to the polls on Thursday next, and a claim you might have expected to therefore have featured in the EU summit communiqué but it didn’t? No, RTE seemingly got un-named sources at the EU to say the text would not be changed, but it seems it was beyond RTE to pick up the phone to the Elysee Palace to check the French position. The meme has since died away in the media. Reminds me of RTE’s “Georgia moment” when it illustrated the Russian incursion into south Ossetia and Georgiain 2008 with a map of Georgia,USA!

And today, Ireland’s main broadsheet newspaper the Sunday Independent exposes its own failings and hypocrisy. We have a well-written article in favour of the Treaty from Labour’s Minister for Social Protection Joan Burton, but because the Independent has a particular stance towards the party leading the “no” vote, we have no real political response in balance. The hypocrisy is that the Independent claims to have complete editorial independence but apparently that stops when it comes to one political party, a party which seems to be consistently securing high teens and low twenties in the opinion polls. Instead we have the Sunday Independent’s current editor Anne Harris rambling on about some “underbubble” in an opinion poll. If anyone knows what an “underbubble” is, please share, but for the time being it looks as if the Sunday Independent is illiterate as well as hypocritical, and instead of pursuing exclusives it is pursuing exclusions. Rival newspaper, the Sunday Business Post has a contribution from Sinn Fein’s finance spokesperson Pearse Doherty here, which is balanced with contributions from the chairman of Enterprise Ireland, Hugh Cooney and Antoin Murphy of Trinity College Dublin.

There has been precious little reporting or analysis of the European Stability Mechanism (ESM) in the mainstream media and remember a “yes” vote on Thursday allows the Government to sign Ireland up to the full provisions of the ESM – a €700bn fund which you and I are funding to the initial tune of €1.27bn but that may grow to €11.1bn and beyond – these are big numbers, €11bn is about one third of the State’s annual income. The ESM brings potential costs and benefits to Ireland. Although one TD has taken legal action against the Government to force a referendum on the ESM Treaty itself in addition to the Fiscal Compact, it will be later in the year when Deputy Thomas Pringle has his day in court. And meantime in July 2012, that is to say, five weeks away this country will hand over €254m to the ESM and the betting is that Spain will have first dibs on this money and the borrowing it secures in a matter of months. Deputy Pringle says these commitments should be put to the people in a vote, the Government disagrees, the matter is set to have an initial hearing in June 2012 and the understanding is that the Government has given an undertaking not to ratify the ESM Treaty until the court case has been disposed of, though that undertaking might need be enforced with an injunction.

A member of this blog’s audience has gone through both the Fiscal Compact and the ESM treaties in some detail and produced a 30-minute guide to both. Now there are guides to the Fiscal Compact available from the Referendum Commission and others, but I have yet to see an official guide to the ESM treaty, so this guide tries to fill a void.

The regular audience on here will be familiar with the balance observed in most debates, and this guide has balance though it is ultimately cautioning about the new treaties, and that might be interpreted as advocacy of a “no” vote. Regardless, it is a well-presented guide to both treaties with plenty of references and facts. If you get a spare 30 minutes, I recommend it – you can download it here.

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Fiscal Compact referendum – final weekly review

This time next week, it will be all over bar the shouting. The referendum is set to take place on Thursday and we should know by Saturday at latest how we have voted. The position on here is to advocate a “no” vote and if the referendum is rejected, it is hoped that next weekend the Department of Finance can contact the ECB, explain that the country faces a sovereign default in 2014 without access to the ESM, and accordingly the country is in no position to sanction the payment of €640m to senior unsecured unguaranteed bondholders at what was Michael Fingleton’s Irish Nationwide Building Society on 26^th June 2012. “We’d like to help, but it would be lunacy to pay a bank debt when a sovereign default may loom” – see how long it takes the ECB to start meaningful negotiations on the extant bank debt, promissory notes and bonds, after that exchange.

This is the last weekly review before polls open on Thursday and this

The Economics
Minister for Finance Michael Noonan transmitted a message from the National Treasury Management Agency to the Dail and said it was the professional view of the NTMA that if Ireland rejected the Fiscal Compact and consequently did not have access to the ESM, then the NTMA believed that the traditional bond markets would not be available as sustainable alternative sources of funding.

The Politics
Having kept us waiting for weeks, Dublin North-Central Independent TD, Finian McGrath announced on Friday that he would be voting “no”. I believe we still wait to hear how Deputy Shane Ross will vote – Deputy Ross was angling for a deferral of the vote at this stage, but given it is going ahead, perhaps he might let us all know his voting intentions. Deputy Eamon O’Cuiv has kept his word and not publicly campaigned for a “yes” vote though you can still read his position in some detail here. In the Dail 80%-plus of TDs support a “yes” vote and beyond Deputy O’Cuiv, if there is dissent, we haven’t heard it – has anyone heard from Fine Gael TD, Peter Mathews in recent weeks?!

The Opinions Polls and Betting
We’ve had a four opinion polls this week which seem to show the “yes” side in the lead, but with less than 50% and surprisingly a large number of voters who are still “undecideds” An Ipsos MORI poll for the Irish Times shows “yes” with 39%, “no” with 30% and “undecideds” at 22%. A Red C poll for the Sunday Business Post puts “yes” at 49% and “no” at 35% and “undecideds” at 16%.  There is also a Millward Browne Lansdowne and a Sunday Times polls which project 42-45% for “yes”, 28-30% for “no” and 25-31% for “undecided” You’d have to say the “yes” side has the edge but with four days remaining, with younger voters comprising most of the “undecideds”, it’s all to play for.

Paddy Power is betting the farm on a “yes” vote and its odds show a solid view that “yes” will prevail.

The Endorsements
The country’s most prominent economist, David McWilliams hasn’t seemingly entered into the advocacy game for this referendum, but he states on his website that he will “of course” be voting “no”.

 

The View from outside the Pressure Cooker
In what seems like another failure at our national broadcaster, it appears that the claim reported by RTE from An Taoiseach Enda Kenny that the text of the Fiscal Compact would not change following the EU summit in Brussels during the week, may not have been absolutely accurate. The main voice of dissent, France’s new president, Francois Hollande said after the summit that he COULD renounce his demand for a new text IF he got satisfaction on a growth agreement, which seems highly conditional. And indeed, despite RTE claiming to have un-named EU sources saying the text would not change, it would seem to be political suicide for Mr Hollande to throw in the towel on a key French election demand, without having any solid concession on growth.

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