Time to play hardball in Europe on treaty change
Last week's summit that was meant to solve the crisis in the eurozone has singularly failed to do so, like so much that has gone before.
Fundamentally, little has changed as a result of the eurozone's new treaty commitments on debts and budgets and huge questions remain unanswered over the firepower that can be brought to bear by the European bailout funds, the EFSF and the ESM, to stem the crisis engulfing the single currency. Essentially, there has once again been a failure to address the substantive issues of dealing with large countries' debt.
However, the impatience of the markets and the media for a solution is likely to be tested further into 2012 as there will be no silver bullet that is going to magically absolve Europe of its debt woes. It is now clear that solving the financial crisis will be done in a gradual way and not by one single measure or summit.
This was a point made this week in the European Parliament by Irish MEP Mairead McGuinness who said Europe was dealing with a crisis that took 10 years to develop, and would take careful, co-ordinated and effective management over a reasonable period of time to deal with in order to re-stabilise the currency and the economies of individual member states.
"The notion that any one measure or meeting will deliver a miraculous recovery is unrealistic," she said. "People are being mislead with inferences or suggestions that any one meeting or summit can deal comprehensively with the issue," she said.
Last week's EU summit deal in Brussels actually only afforded a brief respite from the markets, as ratings agency Moody's declared the crisis talks had failed to produce "decisive policy measures" and threatened to review the credit ratings of all EU states within the next three months. The hopes of leaders that a move towards a fiscal pact to eradicate public deficits, under close EU supervision, would reassure markets which fear countries' massive debts cannot be repaid, came to nought. The decision of Britain to stay out of the deal has further created a concern that the EU is headed for a split, two-speed Europe.
The markets and the rating agencies believe the only truly credible firewall against the solvency crisis in Europe is to allow the European Central Bank (ECB) to start buying up Spanish and Italian debt, but the bank itself, and Germany in particular, has trenchantly opposed this since the crisis began. Many have hoped the ECB would step in and purchase Italian and Spanish bonds at an aggressive pace, just like what happened in the US during the 2008 financial crisis.
As for Ireland's part in all this, one of the big questions is whether or not a referendum will be needed so that the treaty changes proposed at last week's summit can become law. Taoiseach Enda Kenny has said no decision will be taken on this before next March. Irish citizens are entitled to vote on any major transfer of power to Brussels but the chances of such a referendum being passed in this country at the present time are, at best, 50:50.
Almost everyone agrees that saving the euro and Ireland remaining part of the eurozone is crucial to this country's survival, but attention is now turning to how concessions can be wrung from our European paymasters in return for a 'yes' vote. The electorate here has twice rejected European referendums before, eventually passing them once concessions were offered. It will surely be no different this time, and the price will be a cut in the country's bailout costs.
Ireland will thus be in a relatively strong bargaining position when it comes to negotiating with the EU on ensuring treaty change and a deal on this contentious area would certainly be helpful in persuading the electorate to vote 'yes' in any new referendum.
The idea of reducing the burden on taxpayers of bailing out defunct lender Anglo Irish Bank has already been raised in Brussels, and the government estimates a deal could reduce this cost by up to €20 billion if the eurozone's rescue fund could be tapped to recapitalise Anglo. It would be an audacious and bold move were the Taoiseach able to carry it off - and then deliver a 'yes' in a referendum - but right now this crippled country has nothing to lose by adopting such a stance.
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