With the gathering storm across the entire continent, the peripheral fillip of Ireland voting “Yes” to the Fiscal Compact is likely to be acknowledged by our EU partners and immediately forgotten. As Spain lurches to a multi hundred billion bailout, which in turn threatens to cut Italy’s prospects off at the ankles, our moment in the limelight is going to be very brief. And of course with a Greek election in two weeks which threatens to return another stalemate government, which in turn threatens the Greek bailouts and raises the spectre of a €1tn Greek exit from the euro plus a very messy default, the minor sideshow that was our referendum is as noteworthy as darts in the Olympics.
The Irish people have spoken, and all indications are now that we have said “Yes” to the Fiscal Compact signed by EU members in February 2012 and which is wending its way through national approval in all 25 countries which signed up – two EU members, the UK and Czech Republic are presently not signing up to the Compact, both members are not in the EuroZone. Unique amongst Europeans, the Irish had the opportunity to vote on the Compact, and the preliminary results of yesterday’s referendum suggest that it has been approved in the ratio 60:40.
People voted yes for the security of funding after 2013 in a country that four years after the financial crash still has a deficit of 9%, and we voted for the stability – the “Yes” side were probably on a winner with that moniker – promised by the Compact.
The Winners
Fine Gael, the party put in a solid performance in defending the Compact and given the nation is over a year into the new hurt of new austerity measures with the farce of the household charge still fresh in people’s minds, it is a credit to the party that it focussed attention on the main benefits of the Fiscal Compact and convincingly sold them. The party has suffered slightly in the polls, but it is astonishing that it has not suffered more. Fianna Fail, has been suffering from Post Traumatic Stress Disorder over the past year, but by plumbing for a position united with the Government’s and convincingly arguing it was putting the needs of the country above party politics, its standing has improved. The past four weeks have seen an unprecedented Love-In in the Dail where you’d almost expect Leaders’ Questions to throw up examples like “What’s An Taoiseach’s favourite colour”, such was break-out of love. If Labour ever decides that it is better to abandon government rather than face a wipe-out at the next election, it might be that Fianna Fail take its place.
Sinn Fein, the party plumbed for the “austerity” moniker for the Compact from the get-go, even though this country will need endure a contracted-for €8.6bn of austerity by 2015 under the current bailout, and even that figure depends on 9% economic growth between now and 2015 – to repeat, in 2015 the average household will be €5,000 worse off than today in that one year. The party picked up strong support amongst so-called “working class” voters and perhaps the “austerity” message hit the correct nerve. The party’s profile was certainly raised as it became the unofficial leader of the “No” campaign, though criticisms remain of the party leader’s grasp of economics and also the narrowness of the current Sinn Fein base of representatives. Might we be seeing the emergence of a substantial base for left wing politics in the country? With a vote-share of 24% if an election is called tomorrow, perhaps.
Bondholders, it’s business as usual for bondholders in bust Irish banks who can look forward to continued 100% repayment with interest of their bonds. Remember we will be paying €640m to unsecured, unguaranteed bondholders at Michael Fingleton’s Irish Nationwide Building Society – now part of IBRC – on 26th June 2012.
Micheal Martin, many expected a Fianna Fail leadership battle when Eamon O’Cuiv – party grandee and grandson of its founder – declared his opposition to the Compact (at this juncture) and went on to reiterate his opposition in high profile events. But the effective kid-glove management by Micheal Martin of what might have been regarded as insolence and mutiny by the former deputy party leader seems to have confirmed Deputy Martin in his leadership role which he won last year.
Ireland Inc, whether or not there will be anything left in the European Stability Mechanism (ESM) fund at the end of 2013 remains to be seen, with Spain teetering on the edge of a bailout which will likely pull Italy into the bailout zone also, but for all of that, Ireland can today say that it has theoretical access to the fund which presently looks like the cheapest source of funding at the end of 2013. The “Yes” vote will mollify any suspicion of radicalisation in the country, and foreign investment and domestic business should not be knocked off its previous trajectory.
Declan Ganley, is a modest winner in that he galvanised an alternative focus for support around a “No” vote which wasn’t based on the austerity argument. Bank debt and the 121% government debt in 2013, alongside political reform at EU level were the centrepieces of the Libertas founder’s shoestring campaign which may provide a springboard to ambitions for future elected office.
The Losers
Labour, Although the Labour party strongly supported a “Yes” vote in this referendum, the campaign has seen a further pincer-like erosion of Labour’s support, with Sinn Fein taking its traditional “working class” supporters and Fianna Fail taking its “middle class”. “Labour’s way or Frankfurt’s way” was flung back in party leader Eamon Gilmore’s face throughout, and his denials of the Wikileaks evidence of his previously confiding in the US ambassador that he would adopt a position at odds with his public pronouncements and privately support a second vote in a previous referendum weren’t 100% convincing. Labour’s deputy leader and Minister for Social Protection, Joan Burton who was the party’s referendum manager put in a workmanlike performance, which will probably enhance her standing.
Eamon O’Cuiv, the Galway West Fianna Fail TD set his face against the party support for the Compact from the beginning, and produced what seemed on here a considered stance on the Compact. Unfortunately for Deputy O’Cuiv, his party leader faced him down in a careful and calculated fashion, and the final kick in the gooleys comes today from the results of Deputy O’Cuiv’s home village of Corr na Móna where 121 people voted “Yes” and 119 voted “No”
Enda Kenny, he declined TV3’s invitation to debate the Compact with other leaders -there was a curt refusal when veteran journalist Vincent Browne was in the frame to moderate the debate. But when an alternative moderator was suggested, the response was still negative. And then it transpired that RTE’s come-hithers were rebuked also. Not very edifying but it started people thinking how An Taoiseach presents Ireland’s case behind the closed-doors of EU summits, and if the fault for the abysmal results of over a year of negotiations with our EU partners can be laid at the feet of An Taoiseach. “Bystander” and “Yellow Shirt” were insultingly thrown at him. Though an eminently decent man and a great chairman, he has taken a hit.
What next?
Government ministers have said the Fiscal Compact will be “immediately” ratified after a “Yes” vote. There is a legal challenge presently before the courts where Donegal Independent TD, Thomas Pringle is challenging the Government to hold another separate referendum on the ESM Treaty itself. The case is set to come before the High Court in two weeks, and the Government has apparently committed not to ratify the ESM Treaty until the case has been heard.Ireland is scheduled to pay €254m into the ESM fund at the start of July 2012, and it is unclear if this payment will be made whilst the court proceedings are ongoing, but the betting is it will be made.
But really there will be no change. We still have to find €3.5bn of budget adjustments in Budget 2013 which will be announced in December 2012, and indeed we’ll need find €3.1bn additionally in 2014 and €2.0bn in 2015, all of this is in the current bailout programme and this depends on 9% economic growth between 213-2015. Barring the possibility of a timely Government reshuffle, expect to see a lot more of Minister for the Environment, Community and Local Government Phil Hogan on your screens over the next few months – we’re expecting the report on the future framework of the property tax, the detail of the water metering proposals and you can expect some nasty debt-recovery action on the household charge and septic tank registration fees.
Will Ireland need a second bailout in 2013? Probably, given the turmoil in Europe and our own anaemic growth – the 2.2% real GDP growth projection for 2013 is looking more and more optimistic by the day as Europe including the UK stumbles along from one crisis to the next. We can but hope the ESM fund will have enough for us when we come to apply.
The phoney negotiations on our bank debt burden are likely to peter away, though there always remains the chance that events elsewhere in Europe will lead to a scrap falling off the table for us. Don’t expect technical papers or indeed anything else technical in the short term.
Overall, today is akin to the darts competition in the Olympics – of intense parochial interest here but overall it’s not what the Olympics is about, and we will now take our seats as spectators to the main competition events taking place in Europe.
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