Economists say Yes vote in interests of State

Sat, May 26, 2012, 01:00

ECONOMISTS:NINE OUT of 10 respondents to a survey of economists said that, on balance, ratifying the fiscal treaty in next week’s referendum would be in the State’s best interests.

Some 81.4 per cent of participants in the survey, by Indecon International Economic Consultants, said a Yes vote would likely increase business and investor confidence in Ireland.

However, just under three out of five (59.1 per cent) of the economists believed a Yes vote would have a positive effect on the stability of the euro currency, with 38.6 per cent saying it would have no impact and 2.3 per cent believing it would result in further instability for euro area members.

“There is a serious issue here as to whether we should be even having a referendum on this issue,” said Antoin Murphy, a survey participant based in the Trinity College Dublin department of economics. “It is really just strengthening further commitments already made in the Maastricht Treaty and the Stability and Growth Pact.”

Ninety per cent of respondents said that the potential consequences of a Yes vote were, on balance, in Ireland’s best interests. Two-thirds (67.4 per cent) said a No vote would likely reduce the prospect of Ireland returning to the international bond market at the end of 2014.

Some 14 per cent said a No vote would increase the possibility of returning to the markets, with 18.6 per cent saying it would make no difference.

The survey – in which 44 economists from seven third-level institutions, Indecon and the Economic and Social Research Institute participated – found that 84 per cent believe that, even if funding could be secured elsewhere, the State would face higher borrowing costs in the event of a No vote.

Some 70 per cent of those surveyed said a Yes vote would reduce the perceived risk of Ireland defaulting on its sovereign debt, with 11 per cent saying ratification could increase the notion.

More than three-quarters of respondents (77.3 per cent) said a Yes vote would result in a greater commitment to fiscal sustainability in Ireland, with 22.7 per cent saying it would have no impact.

John O’Hagan, an economist at Trinity College Dublin, said linking a Yes vote to austerity was a “highly disingenuous electoral ploy” as fiscal correction was required regardless of the result.

“To argue that this amounts to scaremongering reminds one of the last government’s similar claims, when people warned of the pending disaster about to unfold on the banking front,” he said.

Separately, The Irish Times has invited four economists to outline their views on the fiscal pact. These include UCD economist Prof Colm McCarthy, who argued it was “in Ireland’s narrow national interest to accede to the fiscal treaty”.

Earlier in the campaign, Sinn Féin was accused of selectively quoting and misrepresenting comments from a number of economists in a leaflet advocating a No vote in the referendum.

Prof McCarthy was quoted as having said: “As an exercise in addressing the euro zone’s twin banking and sovereign debt crises, the fiscal compact makes no worthwhile contribution.” The quote is taken from an opinion piece in the Irish Independent, in which Prof McCarthy went on to say: “If there has to be a referendum, the electorate would be well advised to swallow hard and vote Yes, notwithstanding the inadequacies of the proposed treaty.”