Certainty at heart of treaty has collapsed


Hollande’s victory tells us the fiscal treaty we are being offered is not ‘common sense’, writes FINTAN O'TOOLE

Do we have a government or a home rule administration? We now have a very simple test. After François Hollande’s victory in the French elections, any government with the slightest aspiration to leadership will postpone the referendum on the European stability treaty. A home rule satrapy, on the other hand, will carry on robotically, afraid to contemplate the possibility that there might, after all, be an alternative.

Ever since Hollande won the first round of the French presidential elections on April 22nd, it has been obvious the ground is shifting. The very prospect that the Socialists might win changed the nature of the European debate. The austerity treaty had been the only game in town. There was nothing to discuss – indeed, the point of the treaty is to delegitimise the social democratic tradition to which Hollande belongs, turning right-wing ideology into both “common sense” and law.

Yet, within a few days of the first round vote in France, the orthodoxy had changed. Suddenly, the need for growth – and the implicit acknowledgment that a single-track obsession with budgetary deficits will not solve Europe’s problems – was back on the agenda.

The two driving forces behind the treaty were Angela Merkel and the European Central Bank. Now, even Merkel is talking about the need for growth. And ECB president Mario Draghi admits that austerity programmes have managed to curtail growth without convincing markets that governments will be able to repay their debts: “What is most present in my mind is to have a ‘growth compact’.”

In itself, this shift tells us something highly relevant to the Irish debate on the austerity treaty: be very wary of turning one moment’s political whims into binding, fixed rules. The treaty is a panic measure, designed to avert a crisis by giving Merkel political cover to increase the bailout funds and to reassure financial markets. But Merkel’s situation has changed radically with her separation from her political Siamese twin Sarkozy. And attempts to appease the markets with austerity have proved to be futile. Markets are not rational: they demand austerity and then panic again because austerity alone means that there is not the growth to generate the income with which the books can be balanced.

The point about Hollande’s victory is not so much that it changes the terms of this debate as that it makes the very notion of a debate legitimate. The treaty is no longer “common sense”. It only looked that way because it was the result of an internal conversation among like-minded ideologues.

The right was so dominant that all it had to do was to talk to itself. With the victory of the left in France, the certainty at the heart of the treaty simply collapses. The treaty becomes one side of an argument – with the desperate need for economic growth to tackle mass unemployment being the other. Who in their right mind would want to give one side of a political argument the force of law and, in the case of Ireland, the full protection of the Constitution?

This shift in European discourse is entirely germane to the argument over the treaty in Ireland.

It is striking that the proponents of the treaty have given up suggesting we should vote for it on its intrinsic merits. The argument that the treaty is good because it would have prevented the current crisis has collapsed under the weight of its own fatuity. (Ireland and Spain would have looked very good under the treaty even while they were following ruinous economic policies.) Even those economists who think we should vote Yes acknowledge that the treaty is, at a technical level, close to absurdity, relying as it does on a concept (the structural deficit) for which there is no agreed definition. And no one at all (even the ECB) now seems to be arguing that the treaty is any kind of an answer to the major problems of depression and mass unemployment.

So what we’re left with is not so much an argument as an ultimatum: we have no choice because our gallant allies in Europe will destroy us if we don’t vote Yes. This was a powerful position – until Sunday. It assumed that European politics are exactly as they were when the treaty was drafted. They’re not – they’re fluid and uncertain. Hollande’s key slogan was “Budgetary responsibility? Yes. Austerity for life? No.” With his election an enormous argument about the right balance between fiscal responsibility and the need for growth is just beginning.

Carrying on with a referendum as if none of this was happening is a classic case of fighting the last war. It is all the more bizarre because Hollande’s team has openly suggested it sees Ireland as a potential ally in reopening the debate on a treaty whose meaning will be unclear until we see how it is to be balanced with the drive for growth.

The tide has turned and even leaders as weak as ours must see the folly of swimming against it. Stop the clock until the autumn, when we’ll know so much more.

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