Government needs to give treaty a harder look

OPINION:The Coalition’s argument for a Yes vote demands more scrutiny before Thursday

THE GOVERNMENT only has one argument in favour of the fiscal treaty: If we vote No, we will be unable to borrow money to fund public services. There will be no stability and so the ATM machines will seize up.

The Government’s case comes down to access to the European Stability Mechanism fund. This is a €700 billion firewall that euro zone governments can draw on if other borrowing costs are too high.

Until recently Fine Gael and Labour claimed that Ireland would not need a second IMF- ECB-European Commission programme of cuts. They argued that austerity would produce a recovery by giving confidence to investors. They are now saying though that Ireland may need “insurance” and the only way to guarantee access is by voting Yes.

This argument demands far more scrutiny. When terms such as a “second bailout” are used, it suggests that the IMF and commission are trying to help the Irish population. In reality, a second programme would involve even more stringent conditions.

The ESM treaty – which is due to be voted on in the Dáil after the referendum – states that the funds would come with “strict conditionality” that might include a “macro-economic adjustment programme”. The unelected European Commission and European Central Bank would be charged with negotiating that programme.

A recent report in the Irish Independent provided a clear example of what they might seek:

“Pensions, free travel and medical cards for the over-70s are being targeted for new cuts. The International Monetary Fund now has pensioners in its sights as it believes they have largely escaped the effects of austerity. The key provider of our bailout cash has told the Government to look at saving money by scrapping some free schemes for the elderly . . . Among the schemes are cheap electricity, gas and television licences, plus free travel passes and medical cards.”

So instead of a bailout, it will be moneylenders squeezing us for more sacrifices.

Ireland will be liable for more than €11 billion just to enter into the fund. It will have to make a down-payment of €1.47 billion which will have to be paid in five instalments of €225 million. These will start in July 2012 and continue until 2014. Strangely, the Yes side has often not been asked where this money will come from.

How can a country that is already paying out huge interest payments pay out even more? It gets worse. Article 9 of the ESM treaty states: “The board of governors may call in authorised unpaid capital at any time and set an appropriate period of time for its payment.”

In other words, Ireland could be told at any time to provide the remainder of its €11 billion. Again, no questions are asked of the Yes side where this huge amount will come from.