Referendum challenge for the government

Just as the country prepares to start seriously debating the pros and cons of the EU's Fiscal Stability Treaty, two political events in different parts of Europe have thrown the cat among the pigeons and have caused many to ask whether we should be having this referednum at all at this time given the uncertainties posed by the political events of the past few days. The first seismic event has been Francois Hollande's victory in the first round of the presidential election in France and the second has been the collapse of the Dutch government over agreeing an austerity package. The Dutch government had strongly backed the treaty and even lectured Greece on what it needed to do to get its house in order. The ongoing concerns about the ailing Spanish economy, the potential change of president in France - who has vowed to renegotiate aspects of the treaty - and a brewing Dutch political crisis are further complications which make the international backdrop to the treaty vote in Ireland all the more difficult and dangerous. At home, the government's plan to sell the treaty to the Irish public also got more difficult earlier this week with several unions refusing to back it and recommending their members to vote 'no'. If the country's voters were to reject the treaty on 31st May, Ireland would be blocked from accessing emergency funding from Europe. With some economists like Colm McCarthy believing we will need a second bailout when the current EU/IMF programme runs out, having access to the backstop of a further financing round from Europe and from the IMF becomes very significant indeed. In the most recent opinion poll, some 42 per cent said they would vote 'yes' while 27 per cent would vote 'no'. Don't knows were 31 per cent. A concern for the government must be that, at a similar point in the first Lisbon Treaty referendum campaign in 2008, the 'yes' side had a bigger lead but the referendum ended up being rejected by the electorate by the time polling day came around. The 'yes' campaign appears to have strong backing from middle-class voters and farmers but those describing themselves as working-class are strongly opposed to it. It is clear the government will need to seriously up its game in the coming weeks to sell this treaty to an austerity-weary populace. With the eurozone having remained mired in crisis for the past four years, the EU has responded by introducing a series of rigorous and robust rules to guarantee that what has taken place in Europe will not be permitted to happen again, and to attempt to get the economies of the EU back to functioning normally. This has resulted in the Intergovernmental Treaty on Stability, Co-ordination and Governance in the Economic and Monetary Union, or simply the Fiscal Treaty. Ratifying it is intended to bring about stability within the eurozone. This, in turn, should help Ireland and the rest of the Union regain economic competitiveness and send the right signals to international lending markets that this country is on the right track and is continuing to take the necessary steps to put its house in order. This is considered necessary for countries seeking to borrow internationally at sustainable rates. A key feature of the treaty is to ensure that eurozone countries implement policies that will work towards balancing their budgets. Countries that ratify the treaty will have access to funding under the European Stability Mechanism (ESM). At the moment, Ireland has no need to turn to this fund but it is considered extremely important that we do have the option to tap this funding safety net should a second bailout be required. It would be very difficult for Ireland to re-enter international financial markets if the country cannot access funding under the ESM, if such an eventuality were to occur. The treaty is certainly not a panacea for all of Ireland's problems, but rules of economic discipline - along with growth-enhancing measures - must be considered a critical starting point. It is in the country's interests that stability returns to the eurozone and that Ireland remains a key player in EU affairs, particularly when it comes to securing more international job-creation investment. It is difficult at this stage to see any benefit in voting 'no'.