'No' vote will not stop the treaty - but it will hurt us

Mon, Apr 16, 2012, 01:00

OPINION:AT THE heart of any currency system is a precious commodity; more precious than gold. That commodity is confidence. Take away confidence and no currency is safe. The collapse of a currency or the rapid destruction of its value has profoundly negative consequences for any country.

We in Ireland have been very privileged. We have always been members of a stable currency union except for a brief period when we floated as part of the European Exchange Rate Mechanism.

In 2010 and part of 2011 the spectre of a euro collapse made an unwelcome presence. Uncertainty, fear and panic began to spread like a dangerous virus across Europe. Confidence began to ebb away, inter-bank lending stalled and capital began to fly to perceived safe havens. Banks began to see a run on deposits and many ordinary citizens showed more confidence in their mattress than in their local bank. People in Ireland felt a new kind of fear for the first time in their lives. We don’t want to bring it back.

Having looked into the abyss, euro zone leaders and European institutions stepped back from the brink and set about saving our common currency. And let us not forget that basic point. The euro is Ireland’s currency. It is our currency. It is in Ireland’s national interest to strengthen its defences.

The economic crisis exposed serious weaknesses in the design and management of the euro system. European leaders have been involved in an effort to retrofit the euro system and make it fit for purpose.

It’s been a bit like carrying out major heart surgery while the heart is still beating.

The Fiscal Stability Treaty is just one part of the major reconstruction of the euro system. Other elements include the European Financial Stability Fund, the European Stability Mechanism, the European Banking Authority, the Six Pack programme, a more flexible approach by the ECB – which saw two massive injections of liquidity into the banking system – and ever-closer co-ordination of euro zone economic policies.

Strengthening the euro system of itself will not restore the euro zone to robust economic health, but it is an absolutely necessary condition for a return to sustainable growth in Europe.

At the centre of the current Irish debate on Europe is the issue of debt and the interest rate burden associated with that debt. And let me challenge those who say this Government is pursuing some kind of harsh austerity programme. A government deficit of 8.6 per cent of GDP in 2012 is not austerity. No reduction in basic social welfare rates; taking 320,000 people out of the universal social charge; no increase in income tax rates; staying with the Croke Park deal; restoring the minimum wage to €8.65. Show me the austerity in any of these measures?

And let us look at the most basic point of all. Leaving aside all interest charges on government debt we still need to borrow in the order of €10 billion to balance the books in 2012. Where is the austerity in that?

The dilemma we face is this: the property price bubble also inflated a bubble in central government and local authority revenues. The property bubble burst. There is no going back to the fantasy world of the final years of the Celtic Tiger. We have to live and pay our way in the world as it is now. Wishing it different will not make it so.

That real world is the troika providing Ireland with the resources and the time to sort our financial problems.

That real world is also the fact that the Irish banking system is highly dependent on ECB support for its very survival.

And any objective commentator will accept the fact that this Government has shown persistence, determination and firmness of purpose in renegotiating the bailout programme. A measure of success has been achieved. The work continues.

But we face a basic choice now. We can choose to bring our finances into better balance or we can choose to remain under the control and in the permanent care of the troika.

And central to the debate about debt is the question of inter-generational equity. Borrowing for current spending is in effect this generation taking from the future to maintain today’s lifestyle.

It is the workers of tomorrow who will have to pay back this debt and the interest payments on it. Equity demands that we not shackle our children with an unjust burden of debt. We have an obligation to live within our means.

Those who advocate even higher levels of spending must answer some very simple questions. Who will lend us the money and how will we pay it back? And if we cannot borrow the money what new taxes and what extra cuts will they impose?

A Yes vote on May 31st will be another step on the road to recovery, towards making the future more stable and more secure. A Yes vote will be a major confidence-building measure for Ireland and the euro.

A No vote will increase uncertainty, will introduce new risks and will cause a return of instability.

A No vote will undermine the international confidence in Ireland, which this Government has fought so hard to restore.

A No vote will certainly increase borrowing costs for Ireland when we do return to the markets and it could even fatally undermine our capacity to return to those markets.

Voting No will not stop this treaty going ahead. And it will make it more difficult for Ireland to access European Union funding if we need it in the future.

Why throw away that insurance policy? Voting No would be like shooting ourselves in the foot.

We must not take for granted what has already been accomplished.

Government finances are on track to a better balance and a sustainable path. The economy is showing some signs of growth. People are longer afraid of losing their deposits. That most precious of commodities, confidence, is making a comeback.

Those who always say No have no real solutions. They think we can sail away in a leaky currach to some kind of Tir na nÓg where the sun always shines and credit always flows. If we listen to their siren voices Ireland will find itself on the rocks.

We need to be realistic. We need to be pragmatic. We are being asked to make a choice on May 31st. And before we make that choice we must ask ourselves a simple question. Which choice will make this country, this economy, safer, more secure?

If we ask ourselves that question I believe the overwhelming response will be a Yes vote.


Brian Hayes TD is Minister of State for Finance