The Fiscal Stability Union Treaty

Amtmann

I suppose that's what it will be called.

At this stage I think we all know how it might go.
The treaty will be signed by the plenipotentiaries of the compliant twenty-six.

Then, we're likely to have a referendum, not only in Ireland, but also, perhaps, in the following countries:

• Netherlands
• Austria
• Denmark
• Romania
• Latvia

From that list, one could easily foresee no votes in the first three. Here, Sinn Féin, Shane Ross, and a few celebrity economists will probably canvass for a no vote.

And in the end, the 'average Joe', who is typically incapable of evolved, deep thought, will get to decide on something he is comfortably ignorant about and disinterested in.

A no vote in one country could mean turmoil once again for the currency.

I am not optimistic. I certainly think that if multiple referendums are to be held, then they should be held on the same day.

R P McMurphy

Tremelo wrote: »

I suppose that's what it will be called.

At this stage I think we all know how it might go.
The treaty will be signed by the plenipotentiaries of the compliant twenty-six.

Then, we're likely to have a referendum, not only in Ireland, but also, perhaps, in the following countries:

• Netherlands
• Austria
• Denmark
• Romania
• Latvia

From that list, one could easily foresee no votes in the first three. Here, Sinn Féin, Shane Ross, and a few celebrity economists will probably canvass for a no vote.

And in the end, the 'average Joe', who is typically incapable of evolved, deep thought, will get to decide on something he is comfortably ignorant about and disinterested in.

A no vote in one country could mean turmoil once again for the currency.

I am not optimistic. I certainly think that if multiple referendums are to be held, then they should be held on the same day.

"Incapable of evolved deep thought" - arrogant comment, am sure you will offer a beacon of enlightenment

Amtmann

R P McMurphy wrote: »

"Incapable of evolved deep thought" - arrogant comment, am sure you will offer a beacon of enlightenment

It might seem arrogant, and it's a provocative statement, but it's generally true.

carveone

Tremelo wrote: »

It might seem arrogant, and it's a provocative statement, but it's generally true.

I thought we voted in a government to make the hard decisions for us, not drop it in the public's court so that, no matter what happens, they can point to us and say "they made us do it".

If it's a replay of the Lisbon treaty, then we can expect those with vested interests from both sides to lead the populace around with stick and carrots while noone reads the treaty itself. (Sorry. Bit grumpy at this time of night. Too late to read treaty documents).

limklad

The difference between this treaty and the Lisbon treaty. If we vote no, it does not kill the Treaty. It is an opt in Treaty only.

Amtmann

R P McMurphy wrote: »

"Incapable of evolved deep thought" - arrogant comment, am sure you will offer a beacon of enlightenment

Just on this, you need only watch the first few minutes of yesterday's Frontline to witness the ignorance that I'm talking about. All are complaining of a "lack of information". But the information is there. They are just unwilling or unable to seek it out and absorb it. These things are not simple and many people clearly have no intention of doing the few hours of research that would be necessary to ensure that they are informed.

davekel

Tremelo wrote: »

I suppose that's what it will be called.


From that list, one could easily foresee no votes in the first three. Here, Sinn Féin, Shane Ross, and a few celebrity economists will probably canvass for a no vote.

and then on the yes side you'll have pat cox again with maybe robbie keane , seamus heaney , and some rugby player like before .

mike65

It'll get waved through, Lisbon 2 was with help of the threat of "the unknown", right now enough people are scared of being caught on the wrong side of the Franco-German argument they'll sign up.

Scofflaw

limklad wrote: »

The difference between this treaty and the Lisbon treaty. If we vote no, it does not kill the Treaty. It is an opt in Treaty only.

That's an important point - if a country says no, it doesn't get to keep the status quo as it would if this were an EU Treaty. This is a new inter-governmental arrangement, and we can be in or out.

cordially,
Scofflaw

OS119

Scofflaw wrote: »

That's an important point - if a country says no, it doesn't get to keep the status quo as it would if this were an EU Treaty. This is a new inter-governmental arrangement, and we can be in or out.

cordially,
Scofflaw

ok, serious question: the FSU is designed to provide future stability for the Eurozone - what happens if a Eurozone country either doesn't join the FSU, or does join, and then leaves?

Scofflaw

OS119 wrote: »

ok, serious question: the FSU is designed to provide future stability for the Eurozone - what happens if a Eurozone country either doesn't join the FSU, or does join, and then leaves?

...we don't know yet. And, really, we wouldn't ever know unless it happened.

Speculating, though, it seems to me that being in the euro but outside the 'stability zone' would give you the worst of both worlds. You'd be, I think, more exposed to the markets than if you were inside - the extent depends somewhat on the details of what the stability zone agreement does - and you'd also be in an ambivalent position. The markets dislike uncertainty and ambivalence, so it's probable that it would create pressure for you to go one way or the other by raising the bond rates. Being in the euro would mean that you wouldn't have control over enough fiscal policy instruments to resist that pressure, so I think you'd quite quickly have to jump one way or the other, or find yourself unable to borrow from the markets and under troika control.

Essentially, then, I can see that it would be possible to be inside the euro but outside the stability zone, but I can't see that that would be stable for any length of time.

By the way, I call it a "stability zone agreement" because the one thing that definitely appears not to be happening is fiscal union.

cordially,
Scofflaw

Chips Lovell

AFAIK, there's no mechanism to boot us out of the Eurozone. But is there a possibility that we could be forced out through other means, e.g. withholding bailout payments because we aren't play ball on the stability pact?

Scofflaw

Vladimir Kurtains wrote: »

AFAIK, there's no mechanism to boot us out of the Eurozone. But is there a possibility that we could be forced out through other means, e.g. withholding bailout payments because we aren't play ball on the stability pact?

There's neither any way to force us out of the euro, nor any need to do so. We remain exactly where we were, the others move towards greater integration. Since the point of euro membership is the benefit provided by being part of an integrated group, we probably lose most of the upside of being in the euro while retaining the downsides simply by not moving while everyone else does.

The result isn't stable for Ireland, unless there's a lot of countries in the same group as us - market pressure will force us either further in or entirely out. We're not big enough to fight market pressure if we're not backed up by the others, so our only way of avoiding such pressure is opting out of the markets and continuing under troika management, like Greece. In Greece's case, it's an inevitable outcome of their debt dynamics, in our case it would be voluntary.

cordially,
Scofflaw

View

Vladimir Kurtains wrote: »

AFAIK, there's no mechanism to boot us out of the Eurozone. But is there a possibility that we could be forced out through other means, e.g. withholding bailout payments because we aren't play ball on the stability pact?

Nothing as awful as that. Instead we all get to exercise our sovereignties.

We exercise ours and don't become a party to the FSU Treaty.
They exercise theirs and decide to confine future bailout loans to member states of the FSU zone.

We then get to exercise even more sovereignty when we try to borrow some more money from someone else.

And apparently, "exercising your sovereignty" will cause people to queue up to lend money to you...

Scofflaw

View wrote: »

Nothing as awful as that. Instead we all get to exercise our sovereignties.

We exercise ours and don't become a party to the FSU Treaty.
They exercise theirs and decide to confine future bailout loans to member states of the FSU zone.

We then get to exercise even more sovereignty when we try to borrow some more money from someone else.

And apparently, "exercising your sovereignty" will cause people to queue up to lend money to you...

We know the answer to this one, I think. We'll vote No, leave the euro, default, and print as much money as we need. And that will be cool, and everything will be just super.

cordially,
Scofflaw

Chips Lovell

Scofflaw wrote: »

There's neither any way to force us out of the euro, nor any need to do so. We remain exactly where we were, the others move towards greater integration. Since the point of euro membership is the benefit provided by being part of an integrated group, we probably lose most of the upside of being in the euro while retaining the downsides simply by not moving while everyone else does.

The reason I was wondering about it was that since the new deal is intended to strengthen the eurozone, if members opt out, then it weakens its impact. Admittedly, we are small potatoes in the greater scheme of thing, but I'm wondering if the incentive was there to try nudge us out. Although, as you say, that might be irrelevant since the markets could force the issue before anyone else.

cyberhog

Looks like the French have no desire to be locked into a clammy embrace with Germany.

BRUSSELS - A majority of French people are opposed to the recently agreed EU plans for a fiscal compact treaty, with opposition Socialist presidential candidate Francois Hollande calling for a renegotiation of the text.

...

On Monday (12 December), Hollande announced that he would renegotiate the document.

"If I am elected president, I will renegotiate the agreement to put what it lacks today," he told RTL.

He said that he would “add what is missing”, mentioning he would push to include intervention from the European Central Bank, the creation of eurobonds and a financial relief fund.

...

The Frenchman attacked the core concept of the new agreement, a ‘golden rule’, or balanced budget amendment that should be inscribed into constitutions, in effect preventing future governments from exercising expansionary fiscal policies.

Asked about the golden rule, the candidate said he would not vote for it “under this logic”.

http://euobserver.com/19/114648

Scofflaw

cyberhog wrote: »

Looks like the French have no desire to be locked into a clammy embrace with Germany.



http://euobserver.com/19/114648

If it comes to it, observers suggest that Sarkozy didn't really want this new stability treaty either - or at least not in any form where it would actually be enforced:

Myth: French President Nicolas Sarkozy was indignant at British behavior.

He may have pretended to be, argues David Marsh, an author and expert on the euro, but Mr. Cameron helped him out of a tight spot. France never wanted a treaty enforced by the European Commission and the European Court of Justice that was backed by Germany, preferring governments to police their own affairs.

Beyond that, France has made no secret of its desire for decision-making among the 17 euro-zone members and sidelining the British.

"Sarkozy can now cast Britain as the scapegoat for blocking a treaty he never wanted. Vive David Cameron! Give that man the Legion d'Honneur!" Mr. Marsh wrote in a commentary for the Official Monetary and Financial Institutions Forum, a private organization that brings together sovereign-wealth funds and central bankers.

cordially,
Scofflaw

Dr.Emma

Tremelo wrote: »

And in the end, the 'average Joe', who is typically incapable of evolved, deep thought, will get to decide on something he is comfortably ignorant about and disinterested in.

if you were to follow that logic then people would never get to elect their politicans or have a say in their affairs, you seem to be promoting an authoritarian regime?

Tremelo wrote: »

A no vote in one country could mean turmoil once again for the currency.

what do you mean by turmoil once again, the currency is still in turmoil and won't get any better unless the ECB have a change of mind.

McDave

limklad wrote: »

The difference between this treaty and the Lisbon treaty. If we vote no, it does not kill the Treaty. It is an opt in Treaty only.

And that's the essential point. It's cleverly designed to require positive engagement. When a critical mass gets on board, it's up and running. It also means that in short order there'll be core a group of states which the ECB can plan to provide support for.

I would guess that those who do not ratify will not benefit from measures designed to support the fiscal compact economies.

For the record, I think all 17 EZ members will opt in, ourselves included.

McDave

Scofflaw wrote: »

Essentially, then, I can see that it would be possible to be inside the euro but outside the stability zone, but I can't see that that would be stable for any length of time.

My guess is that members who sign up to the new treaty provisions will benefit from ECB support. If you're in you'll be ring-fenced against attack from the markets. Those outside the compact will be open to speculators.

For that reason, my guess is that the EZ-17 will all ratify. That will enable the ECB to back-stop sovereign debts. And more importantly free them up to concentrate on supporting banks. Which is how recapitalisation and eventually renewed investment will be facilitated.

carveone

Scofflaw wrote: »

That's an important point - if a country says no, it doesn't get to keep the status quo as it would if this were an EU Treaty. This is a new inter-governmental arrangement, and we can be in or out.

Sorry to go back a few days but do you think that the current posturing by Brian Hayes (it would be difficult for a referendum to be passed on the new EU budget plans if a better deal on our debt burden isn't struck) means that he doesn't get this point?

In other words, he and others in the Dail don't understand that this isn't a situation where the government can threaten* to stymie the fiscal stability treaty unless they get compo.

Unless, as you say, the French don't really want this new stability treaty and it all goes up in smoke...

* before I get objections - the government could easily sabotage itself by wanting compo and then not getting it, thus misleading the public into thinking we could have gotten something when we couldn't. If that makes sense. At which point a No vote is a possiblity regardless of treaty content.

Scofflaw

carveone wrote: »

Sorry to go back a few days but do you think that the current posturing by Brian Hayes (it would be difficult for a referendum to be passed on the new EU budget plans if a better deal on our debt burden isn't struck) means that he doesn't get this point?

In other words, he and others in the Dail don't understand that this isn't a situation where the government can threaten* to stymie the fiscal stability treaty unless they get compo.

Unless, as you say, the French don't really want this new stability treaty and it all goes up in smoke...

* before I get objections - the government could easily sabotage itself by wanting compo and then not getting it, thus misleading the public into thinking we could have gotten something when we couldn't. If that makes sense. At which point a No vote is a possiblity regardless of treaty content.

I think there's a genuine card in our hand there. I don't think anybody wants a two-speed euro, and the government aren't really stating anything but the truth when they say that a referendum would be a really uphill struggle here without a major sweetener.

But yes, it's also quite possible for those who have ratified to say "sorry, we can't afford to just give you umpteen billion, we're all strapped too, and they were your banks - we didn't get to tax them or their employees, so I think we'll keep our taxpayers' money at home". After that, if we say No, we can just see how we like it on the outside. For the first while, it won't really make any difference, since we're not in the markets anyway, but I can see the referendum getting a re-run when it becomes clear that bond rates are going to be a lot lower inside the stability pact.

So I think there's a possibility we might get a sweetener, but it won't be debt write-off. It's more likely to take the form of extended maturities.

I'd also agree that there's a risk of over-promising - but there I think the government is already backing away from the position espoused by Hayes, creating as thick a haze of uncertainty over the possible options as possible. If they have to have a referendum, they'll try their best to get a sweetener - if they don't, they don't have that card, so if they can't get a sweetener, they'll look harder at avoiding the necessity for a referendum on the fiscal compact itself.

cordially,
Scofflaw

carveone

Scofflaw wrote: »

I think there's a genuine card in our hand there. I don't think anybody wants a two-speed euro, and the government aren't really stating anything but the truth when they say that a referendum would be a really uphill struggle here without a major sweetener.

Thank you Scofflaw. I think I'd like to believe that for a relatively straightforward treaty (in comparison to Lisbon) that voters wouldn't need an actual carrot, a reason to care whether or not the treaty passed. But then plenty of extremely tedious legislation is passed every year without a referendum for each one. Nor does anyone reasonably demand them - that's why it's a democracy after all...

For the first while, it won't really make any difference, since we're not in the markets anyway, but I can see the referendum getting a re-run when it becomes clear that bond rates are going to be a lot lower inside the stability pact.

Oh goody. An interesting situation where, for the electorate to understand the advantages, there needs to be enough of a delay for the disadvantages to become apparant?!

if they don't, they don't have that card, so if they can't get a sweetener, they'll look harder at avoiding the necessity for a referendum on the fiscal compact itself.

I'd hope this is a situation where we, the hoi polloi, get to actually hear the AG herself's opinions on the subject rather than it being the usual case of "we're not telling you what she actually said, we're just going to tell you our interpretation of what she said". Which always annoyed the hell out of me, especially during the 30th amendment referendum...

dublinman1990

I here to tell you that the text of the treaty has been released a for few days now. When you going to click on the link, you going to be in shock, because is it of upmost scant detail I have seen in ages.

http://www.european-council.europa.eu/media/579087/treaty.pdf

I have got this link now and the treaty itself is of dire quality and detail. It has only 11 pages to give you that shock, which is seriously not enough detail to be considered legally binding.

I going to read this and save it on my desktop. I hope you enjoy the reading of this treaty as I certainly won't IMO.

Good luck to You!

McDave

The coverage of the proposed treaty in today's IT was IMO not particularly illuminating.

Gavin Barrett's article was little more than an attempt to play down the issues: http://www.irishtimes.com/newspaper/opinion/2012/0203/1224311174906.html

This country has enough problems without risking such dire consequences over a treaty whose significance is largely symbolic. If we create sound and fury, we should find better-chosen targets than this fiscal treaty.

Arthur Beesley's immature stab at authoritativeness fell flat, as usual: http://www.irishtimes.com/newspaper/opinion/2012/0203/1224311174894.html

ENDA KENNY and his lieutenants would do well to tell the truth about Europe’s new fiscal treaty.

As I see it, there are real issues surrounding the proposal. They concern the 'permanent' or otherwise nature of the debt brake. There can be little doubt that the treaty is designed to minimise legal challenges in Ireland *and in other states*. The idea is not to radically overhaul European law, but to lay down effective economic confidence building provisions.

But as far as Ireland is concerned, one of the real issues is do the provisions defining adequate secondary legislation contravene our constitution or our (ill-defined) concept of sovereignty. Personally I don't think it does. But it really is a matter for the Supreme Court to decide. Where it is almost certain to end up.

IMO neither Barrett's simplistic obfustication nor Beesley's superficial appeals gives due regard to the actual details which will define the ultimate outcome. By all means offer arguments. But please do try not to patronise those of us who see a considerable amount of 'grey' on this issue and are happy to see the matter take its proper course through our political and constitutional system.

meglome

McDave wrote: »

IMO neither Barrett's simplistic obfustication nor Beesley's superficial appeals gives due regard to the actual details which will define the ultimate outcome. By all means offer arguments. But please do try not to patronise those of us who see a considerable amount of 'grey' on this issue and are happy to see the matter take its proper course through our political and constitutional system.

It's seem to be always the way with any European agreements. If there is a referendum you can pretty much guarantee the debate will be shockingly rubbish. The rabid, and usually way off base, comments online about this don't bode well.

ressem

Will this permanently rule out future bank nationalisations by the state? And what methods will the ECB use to prevent contagion from failing institutions.

It's obvious that the ECB has no problem with gifting ~5% of 500 billion per year to bank shareholders, so will there be a procedure set up for winding down and stabilising banks. It's not in this treaty. Is it elsewhere?


Will this treaty, if signed, permanently rule out megaprojects that are for the long term benefit of the Irish people? Will they all have to be wholly EU / private funded?

Ardnacrusha was at the time budgeted at 20% of GDP, and Ireland's economy was a mess at the time.

I would imagine that governments will just start creating special purpose vehicles for the projects they favour, with state guarantees covering off-the-books debt.

There's nothing here to restrict spending in the boom times (which is meant to be the flip side of austerity) or restricting credit flows from low growth areas to high growth bubbles.

stantom

It's obviously a stroke of genius for Irish politicians to sign up to a treaty which allows our "european partners" to impose legally binding fines on us in the future.

Ireland seems to have forgotted that countries have no friends, countries only have shared interests.

Scofflaw

stantom wrote: »

It's obviously a stroke of genius for Irish politicians to sign up to a treaty which allows our "european partners" to impose legally binding fines on us in the future.

Ireland seems to have forgotted that countries have no friends, countries only have shared interests.

And some people forget that treaties apply to all their signatories.

regards,
Scofflaw

View

stantom wrote: »

It's obviously a stroke of genius for Irish politicians to sign up to a treaty which allows our "european partners" to impose legally binding fines on us in the future.

Ireland seems to have forgotted that countries have no friends, countries only have shared interests.

ALL EU Treaties (and many international treaties) allow for fines to be legally imposed on us - this is nothing new.

What the treaty does is - if you mismanage your economy - you'll in future get the equivalent of an "on the spot" speeding fine (and have to appeal it in court if you think it was handed out unfairly) whereas the current system is like our old system where you were brought to court months after your speeding offence and the court had to hand down the speeding fine to you then.

Obviously though if you manage your economy properly the issue of fines is not going to arise for you.