It’s been a month since we voted 60%:40% to give the Government permission to ratify the Fiscal Compact. The main basis on which the Fiscal Compact was sold to the nation was that it provided an “insurance policy” in the guise of the €700bn European Stability Mechanism (ESM) when our first bailout concludes at the end of 2013. The ESM doesn’t exist yet, and is not due to come into being until next Sunday 1st July, 2012. Minister Finance Michael Noonan is ready with his €250m cheque for Ireland’s first instalment in our initial contribution of €1.25bn to the €80bn capital of the ESM, but alas he faces at least two challenges which may prevent him handing over his cheque. In Ireland, Donegal South-West Independent TD, Thomas Pringle (pictured above) has been pursuing a case in Dublin’s High Court. The case was being heard last week and is understood to be ongoing – the latest update in the mainstream media was from Mary Carolan in last Thursday’s Irish Times, and Deputy Pringle sets out the background and updates to his case on his website here.
The case centres on whether or not a referendum is needed for the ESM treaty, as distinct from the Fiscal Compact which we voted on last month. The ESM binds Ireland to substantial funding commitments of up to €11bn, should the full €700bn be called up in future, and for this and other reasons Deputy Pringle thinks the nation should have its say on this funding.
The Government disagrees and is fighting the case. It was understood that the Government had given an informal commitment that it would not ratify the ESM treaty until the case was disposed of in the courts. Whether or not that commitment was given, it is now understood that an injunction will be sought this week forcing the Government to withhold ratification until the legal proceedings are concluded.
So Minister Noonan might have to wait a few weeks more before handing over his cheque, and he may have to tear it up. All of this might be rendered moot by goings-on in Germany. The ESM just needs 90% of its initial funding to operate and Ireland’s 2% contribution is not significant, but Germany’s 27% is.
And in Germany, it seems there are similar concerns to Deputy Pringle’s, which last week prompted a request by its courts to refer the ESM treaty to Germany’s special constitutional courts. The request was made to the German president, and he looks set to accede to that request, which would at the very least, delay Germany’s full embrace of the ESM for three weeks, taking it past the 1st July scheduled launch date. Ironically for Ireland, by the time we get to the end of 2013, the ESM cupboard may be bare if Spain and Italy get there first. So what was supposed to have been an “insurance policy” to which we are scheduled to contribute €1.25bn in initial capital, could conceivably turn out to be, instead, a scheme whereby an insolvent country pays over billions to other countries and can’t even access funding itself.
There is a blogpost on here which provides some background to Deputy Pringle’s challenge. If an injunction is indeed sought, and subsequently granted, it may presage the return of the Government to step 1 where another referendum is contemplated, and where the “insurance policy” and a “yes” vote improving Ireland’s negotiating position on bank debt, are unlikely to win over the nation a second time.
UPDATE: 6th July, 2012. In the event it seems that the Irish government held to its informal commitment not to ratify the ESM until the court handed down its judgment, which is understood will now happen at 10.30am on Monday next, 9th July 2012. It seems likely that the judgment will be appealed regardless of which side it favours, and should the Irish government win, an injunction may still be sought by Deputy Pringle.
UPDATE: 27th July, 2012. The Supreme Court hearing in Dublin has now concluded, at least for the time being. There are three matters to be decided by the courts, and in order of when we expect decisions, those three matters are (1) will the Court grant an injunction stopping the Irish government from ratifying the ESM Treaty until the European Court of Justice has ruled on what are now two sets of matters before it (2) will the Court uphold Deputy Pringle’s contention that the ESM Treaty is at odds with the Irish constitution and a decision on this is understood to be expected in September 2012 and (3) will the ECJ rule in Deputy Pringle’s favour on either the matters referred to it yesterday by the Supreme Court or the matter referred to it by the High Court, and a decision from the ECJ is understood to be expected by the end of this year. For the time being therefore, the Irish government is understood to be standing by its commitment not to ratify, but as soon as (1) and (2) are delivered, and assuming they are in the Government’s favour, ratification is expected then. Deputy Pringle has posted an update to his website, and the present outcome at the Supreme Court has been reported today by the Irish Times and by RTE.
UPDATE: 1st August, 2012. The ESM treaty will be ratified by the Government today following yesterday’s judgments by the Supreme Court which ruled that the treaty was in fact compatible with the Irish constitution – the judgment is here. The Court also refused Deputy Pringle’s application for an injunction preventing the ratification of the treaty pending the full consideration of the issues by the European Court of Justice – the Court’s judgment on the injunction is here. So a defeat for Deputy Pringle but many will regard him as courageous in taking this stand, and in essence he is right that this treaty may expose Ireland to many billions of euros of financial liability, though the courts seem satisfied that the Oireachtas will still have a final say on sums owing or paid. Minister for Finance, Michael Noonan has previously indicated that the Government will start handing over its contribution to the ESM fund, two weeks after the treaty is ratified which will mean that €250m is paid over, on 15th August 2012.