OPINION:We have to reject the European fiscal stability treaty. It will do us economic harm
AUSTERITY HAS failed. Some €24 billion of cuts and extra taxes in Ireland have devastated people’s lives and resulted in a return to recession. Across Europe, unemployment is at its highest since the introduction of the euro and the euro zone economy contracted at the end of 2011.
Now Angela Merkel, Nicolas Sarkozy and the Irish Government want us to enshrine permanent austerity across Europe. The outcome would be disastrous. It also represents a serious attack on democracy – by removing the basic right of people to elect a government to decide on economic policy.
Tánaiste Eamon Gilmore argued that the referendum is an opportunity to “vote for economic stability and economic recovery”. Others have suggested that if this treaty had been in place, we could have avoided the worst of the crisis. But Ireland in 2007 was in compliance with all of the rules of this treaty – and the government would therefore have been patted on the back.
This treaty will not provide stability, it will dramatically worsen the crisis. The synchronised institutionalised austerity across Europe imposed to meet the structural deficit target will increase unemployment and further reduce the market for goods across Europe.
According to the European Commission, in 2013, 18 countries out of 25 will have a structural deficit greater than their target (most having a target of 0.5 per cent, some with a target of 1 per cent), with an average deficit of 2.6 per cent.
Reducing these deficits to the target levels in 2013 would mean at least €166 billion worth of cuts and extra taxes. That would have a devastating impact on the European economy. If a longer timeframe is given by the commission, this will simply mean the same savage austerity, but drawn out over years.
In Ireland, the target could apply from 2015, when the Department of Finance estimates a structural deficit of 3.7 per cent. That would mean another round of cuts of €5.7 billion or more – that’s the equivalent of 11 times the cuts from the health service in 2012 or 36 years of the household tax. These cuts would reduce gross domestic product by about €3 billion, making it harder to meet the deficit targets – and therefore requiring yet more cuts.
By removing the ability to engage in deficit spending, the treaty is eliminating the right to engage in significant public investment. But public investment is exactly what is needed right now. Private investment has collapsed and continues to decline despite an increase in profits. Massive public investment is needed to get people back to work and redevelop the economy.
The Government has disgracefully used the blackmail clause contained in the European Stability Mechanism (ESM) to try to beat people into voting Yes. It is arguing Ireland may not get funding for a second “bailout” if we don’t ratify the austerity treaty. The Government is complicit in the insertion of this clause, having outrageously agreed to it at the European Council without any public debate. It also has the power to have this threat removed by vetoing the amendment to the EU treaty needed to allow the ESM to be established.
This scaremongering must not be allowed to distort the process of a genuine democratic debate about the content and meaning of this treaty. According to the treaty, any funding will only be granted “if indispensable to safeguard the financial stability of the euro area as a whole and of its member states”. This is the case if Ireland has signed the austerity treaty. If we have not signed it, and a “bailout” is deemed to be “indispensable” for euro area stability, the funding will be provided in one way or another.
However, the Socialist Party and the United Left Alliance are not in favour of a second “bailout” and the stringent conditions that would come with it. Instead, we need an immediate and radical change of economic policy. The cuts and attacks on working people must be stopped.
Instead, we need significant public investment to create jobs, increased taxation of the assets of the super rich, corporate profits and high earners to fund this investment, and a democratic plan based on public ownership of the key sections of the economy to create sustainable growth.
Rejecting the treaty in Ireland will not lead to isolation in a Europe that is already debating this treaty. Pressure from below has resulted in the likely next French president saying he will renegotiate it, and the Dutch government seems unlikely to be able to ratify it. Voting No in Ireland will be a blow to the neoliberal bankers’ Europe being shaped by the European Commission and right-wing governments. It will open up the prospect of a united struggle of working people for a different Europe, a socialist Europe, where the vast resources and wealth are used for the millions, not the millionaires.
Paul Murphy is the Socialist Party/ United Left Alliance MEP for Dublin