Fears of treaty magnifying austerity are all imaginary

OPINION:Opponents are battling with a non-existent threat. Solidarity will be the result of voting Yes

TWO OF the most important questions Irish voters have to consider on Thursday are: (a) what are the consequences in terms of austerity if Ireland ratifies the fiscal treaty; and (b) what will the consequences of a No be?

As regards the first question, one of the striking features of the referendum campaign has been the strenuous efforts made by the No side to persuade voters the fiscal treaty will exacerbate austerity levels. Cuts of €5 billion are regularly mentioned.

Large numbers of No votes will likely be cast on foot of such concerns. Remarkably, however, such fears are legally groundless. It is possible to put a precise figure in euro on the amount of extra cutbacks and tax increases the so-called “austerity treaty” will occasion. That figure is zero.

This is easily explained. The debt reduction obligation in article 4 of the treaty, which will bind Ireland from 2019 onwards, mirrors an existing, precisely similar obligation already found in a 2011 EU regulation (regulation 1175/2011).

As for the 0.5 per cent structural deficit target found in article 3 (1) of the treaty, that mirrors a similar target agreed with the commission under the excessive deficit procedure and that is legally binding on Ireland (a point that may be verified in the April 2012 Ireland stability programme update).

Thus a Yes vote will lead to no extra austerity – and a No vote aimed at preventing austerity constitutes no more than a sword swipe at an entirely imaginary threat. Since the existing rules will continue to bind Ireland regardless of Thursday’s outcome, their merits are not the central issue (although it may be remarked in passing that the debt rules are strikingly mild and the deficit rules strikingly flexible).

However, whether one takes the view they are good or bad, the fact remains they will continue to apply, unaffected by the vote.

Most of what the fiscal treaty involves ultimately simply reiterates existing legally binding debt and deficit rules in treaty form and tightens up (and switches to national level) their enforcement. If that seems a very minor legal matter to have a referendum or even a treaty about, that is because it is.

The real motivation for the fiscal treaty is political, not legal. It has been accurately described as a document for Angela Merkel to wave in the Bundestag to persuade her compatriots that financial solidarity with member states like Ireland will not involve pouring German taxpayers’ money into a bottomless pit.

Ironically, therefore – and notwithstanding the No side’s focus on austerity – the unstated aim of the fiscal treaty is really about facilitating the very opposite to austerity: cross-border financial solidarity in Europe. A Yes vote will facilitate that aim.

What then would the consequences of a No vote be? Unlike the consequences of a Yes, the consequences of a No vote are suffused in near-total uncertainty. This is because a rule in the recital 25 of the preamble of the fiscal treaty (repeated in recital 5 of the preamble to the European Stability Mechanism Treaty) legally precludes Irish access to new ESM bailout programmes from March 1st, 2013, for as long as Ireland fails to ratify the treaty.