Treaty 'creates uncontrolled body'

Independent TD Thomas Pringle has told the High Court he is very concerned the European Stability Mechanism (ESM) treaty will permit an unregulated and uncontrolled new institution to bail out member states when the existing EU treaties prohibit any such bailout.

Mr Pringle also said he fears that if the ESM is called on to bail out Spain and Italy, Ireland could "very quickly" be called on to provide the full €11.14 billion amount of its required contribution to the ESM.

He did not know where Ireland would get those funds, and it might have to borrow them from the ESM itself and then pay them back, he told Ms Justice Mary Laffoy. Ireland had to raise some €1.3 billion for the ESM within the next 18 months, he noted.

He was also concerned the operation of the ESM would interfere with EU economic policy, place a huge burden on member states and encroach on their ability to govern their own economic affairs. The manner in which the ESM could call for capital placed a huge burden on the Irish State to raise that capital and infringed its right to decide policy, he said.

Mr Pringle said he had been concerned for some time about the proposed ESM and voiced those concerns in letters to the Taoiseach and Government ministers over several months. He had also proposed members of the Dáil and Seanad should petition President Michael D Higgins for a referendum on the treaty.

He had been advised the ESM treaty and the fiscal stability treaty, approved by a referendum here last month, were interlocked, and he felt the ESM treaty should also have been put before the people in a referendum.

Mr Pringle was concerned the ESM was outside the control of EU institutions and was formed via the "wrong procedure" in which Article 136 of the Treaty on the Functioning of the EU (TFEU) was amended to provide for the ESM by a European Council decision taken by simplified revision procedure rather than the ordinary revision procedure requiring involvement of member states' parliaments.

He agreed with his counsel, John Rogers SC, that Ireland is within an economic and monetary union (EMU) but said his concern was the ESM breaches the rules governing EMU set out in the EU treaties. Articles of the TFEU expressly prohibit bailouts, the ESM breached what was prohibited and it was "vitally important" the EU operates within its ground rules, the TD said.

Disregarding the ground rules "bodes very ill" for the future, he believed. Mr Pringle agreed some eight larger states of the EU could cause the ESM treaty to come into force and said this "skewed" the entire decision-making process within the EU and undermined the influence of the smaller states.

Today was the second day of the hearing of the action by the Donegal South West TD aimed at preventing the Government proceeding to ratify the ESM treaty without first putting it before the people in a referendum.

Mr Pringle claims the February 2012 ESM treaty - which provides for a €500 billion strictly conditional, permanent rescue fund for the 17 member states using the Euro currency - breaches the Irish Constitution, EU law and the treaties of the EU on several grounds.

The ESM Treaty dilutes the financial sovereignty of this State and confers excessive powers on the Minister for Finance and other officers of the State, he alleges.

Mr Pringle claims the ESM Treaty is inextricably intertwined with the stability treaty and with the March 2011 European Council amendment to Article 136 of the TFEU. He claims the Yes vote in the stability treaty referendum is being used by the Government to unlawfully push through the ESM Treaty and the amendment to Article 136.

Under the treaty, the new ESM institution being set up to provide bailout funding will have unlimited borrowing powers and will not be subject to any restrictions, regulations or control in carrying out its activities, Mr Rogers outlined today.

No institution of the EU, including the European Court of Justice, will have power to regulate the new ESM, the court heard. The ESM treaty states the new institution may provide funding to distressed states subject to "strict conditionality" which "may range from a macro-economic adjustment programme to continuous respect of pre-established eligibility conditions".

Such "strict conditionality" interferes with the economic and fiscal authority of affected member states and with the co-ordination of economic policy under the TFEU, Mr Pringle said.

Matters relating to Economic and Monetary Policy are within the exclusive competence of the EU under Article 3 of the TFEU, but the purported amendment of Article 136 of the TFEU to create an ESM purported to alter that exclusive competence, he argues.

The ESM Treaty is incompatible with the Constitution because it involves an impermissible transfer of fiscal and economic sovereignty to both the Government and the ESM institution, he also claims. The Irish people must be consulted where amendment of the EU treaties creates a mechanism at odds with the treaties themselves.

The Government, Ireland and the Attorney General dispute Mr Pringle's entitlement to the declarations sought, including that the ESM treaty violates the principles of the TFEU.

The decision adopting the amendment to Article 136 will come into effect in January 2013 if approved by all 27 member states. It is intended the ESM treaty comes into effect next month, but Mr Pringle argues that would be unlawful on several grounds including that the ESM Treaty is dependent on amendment of Article 136.

The case continues.