Government needs to give treaty a harder look
OPINION:The Coalition’s argument for a Yes vote demands more scrutiny before Thursday
THE GOVERNMENT only has one argument in favour of the fiscal treaty: If we vote No, we will be unable to borrow money to fund public services. There will be no stability and so the ATM machines will seize up.
The Government’s case comes down to access to the European Stability Mechanism fund. This is a €700 billion firewall that euro zone governments can draw on if other borrowing costs are too high.
Until recently Fine Gael and Labour claimed that Ireland would not need a second IMF- ECB-European Commission programme of cuts. They argued that austerity would produce a recovery by giving confidence to investors. They are now saying though that Ireland may need “insurance” and the only way to guarantee access is by voting Yes.
This argument demands far more scrutiny. When terms such as a “second bailout” are used, it suggests that the IMF and commission are trying to help the Irish population. In reality, a second programme would involve even more stringent conditions.
The ESM treaty – which is due to be voted on in the Dáil after the referendum – states that the funds would come with “strict conditionality” that might include a “macro-economic adjustment programme”. The unelected European Commission and European Central Bank would be charged with negotiating that programme.
A recent report in the Irish Independent provided a clear example of what they might seek:
“Pensions, free travel and medical cards for the over-70s are being targeted for new cuts. The International Monetary Fund now has pensioners in its sights as it believes they have largely escaped the effects of austerity. The key provider of our bailout cash has told the Government to look at saving money by scrapping some free schemes for the elderly . . . Among the schemes are cheap electricity, gas and television licences, plus free travel passes and medical cards.”
So instead of a bailout, it will be moneylenders squeezing us for more sacrifices.
Ireland will be liable for more than €11 billion just to enter into the fund. It will have to make a down-payment of €1.47 billion which will have to be paid in five instalments of €225 million. These will start in July 2012 and continue until 2014. Strangely, the Yes side has often not been asked where this money will come from.
How can a country that is already paying out huge interest payments pay out even more? It gets worse. Article 9 of the ESM treaty states: “The board of governors may call in authorised unpaid capital at any time and set an appropriate period of time for its payment.”
In other words, Ireland could be told at any time to provide the remainder of its €11 billion. Again, no questions are asked of the Yes side where this huge amount will come from.
If a country does not pay up, it loses its voting rights, which begs the question, how exactly will this fund be used?
Article 15 states: “The board of governors may decide to grant financial assistance through loans to an ESM member for the specific purpose of recapitalising the financial institutions of the ESM members.”
In other words, Irish taxpayers’ money might be used to bail out banks in other countries. In addition to spending billions to bail out Irish banks, the ESM treaty commits us to bailing out others. This is an extremely dangerous provision.
According to the European Banking Authority, Europe’s 16 largest financial institutions hold €386 billion of potentially suspect credit market and property assets.
The Cypriot government has already pumped €1.8 billion into the Popular Bank of Cyprus while the Spanish bank, Bankia, stated that it will require €19 billion. Even after these moves, though, there was panic and a flight of capital.
Yet under the ESM treaty which is, remember, our supposed insurance, Irish taxpayers’ money could be called upon to fund Cypriot and Spanish government efforts to bail out their banks!
However, what if the governors of the ESM fund made the wrong decisions? What if there were reasons to suspect their motives? What recourse do the people of Europe have to punish those who did wrong?
The answer is absolutely none. Article 35 states that the governors and directors of the ESM fund “shall be immune from legal proceedings with respect to acts performed by them in their official capacity and shall enjoy inviolability in respect of their official papers and documents”. In other words, they cannot be touched. ESM decision-making is, in fact, subject to total secrecy. Article 32 states that “all documents belonging to the ESM, or held by it, shall be inviolable”. Directors of the ESM are sworn to “professional secrecy” – even after they resign from office.
Let us, therefore, come back to Enda Kenny’s analogy between voting Yes and taking out insurance on the family home.
Closer scrutiny reveals that the homeowner would be liable for an €11 billion insurance bill, that they would hand their money over to a secret fund that might be used to bail out speculators and they have no legal recourse to action should the fund managers not pay up when their house burned down.
If this is called “stability”, then black really is white.
The left has repeatedly answered the “show me the money” question by stating that we will halt payments on State debt and redistribute wealth through taxation on the rich.
Isn’t it time to ask the right a few questions about their odd insurance policies?