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Comment: Austerity Treaty will only serve to deepen crisis across Europe

Comment: Austerity Treaty will only serve to deepen crisis across Europe

A profoundly sinister attack on the democratic rights of the Irish people is being perpetrated by the government and other proponents of the Austerity Treaty. We are being threatened that we have no choice but to vote ‘Yes’ or we will be shut out from all sources of funding in the event that, come the end of 2013, this State will need a new ‘bailout’.

What is being said in effect is that it doesn’t matter what the content of the Treaty is or what the straitjacket prescription of intensified austerity would mean in 2015. It doesn’t matter that the strict structural deficit and debt reduction rules would mean swingeing further cuts in public services and further crippling tax increases on low and middle income people.

Government representatives are refusing point blank to debate what the devastatingly serious consequences of further austerity would mean.

If the Treaty is passed in this State, the EU Commission has the power to insist on the ‘corrective action’ needed to reduce the structural deficit to 0.5% of Gross Domestic Product and to reduce the public debt each year by 5% of the amount of total debt that exceeds 60% of GDP.


Given that the Department of Finance predicts that the structural deficit in this State will be 3.7% of GDP in 2015, reducing this to 0.5% would mean cuts or tax increases of €5.7 billion. The EU Commission is given the power in the Treaty to set ‘the nature, size and time-frame of the corrective action to be taken’(Art.3) This could mean that the full amount would have to be dealt with in 2015 or, more likely perhaps, over a period of say three years which would mean cuts or tax increases of nearly €2 billion a year.

The mandatory schedule of accumulated debt reduction would mean more cuts or tax increases on top of those related to the deficit rules. It is estimated that Ireland’s debt to GDP ratio in 2015 will be about 120%. That ratio would be reduced automatically if the economy grew by significant amounts each year. However the current austerity regime has decimated growth. The estimated increase in GDP for this year has been revised downward to 0.7%. With continuing austerity the heart will continue to be torn out of the domestic economy and, unfortunately therefore, there will be no significant growth any time soon.

What this means is that a strict implementation of the debt reduction rules should see around a further €5 billion being paid to the bankers and bondholders each year. That’s on top of massive interest of up to €9 billion that will be due in 2015 and thereafter. This is simply unsustainable and any attempt to force these sums out of the Irish people would see wages, living standards and public services crushed on a Greek scale that would destroy the very fabric of a civilised society.

When we reflect on the seriousness of what is involved here we can see why the proponents of the ‘Yes’ vote are refusing to go there. They simply have no answers on the basis of the financial markets’ casino capitalism over which they preside. That is why the European Stability Mechanism was quietly changed in February this year to include the ‘blackmail clause’ threatening any Member State that does not sign up to the Austerity Treaty with being shut out of any participation in the bailout fund being set up. The Taoiseach participated in the inclusion of this threat in order to give himself a political gun to hold to the heads of the Irish people to coerce them to vote ‘Yes.’

Disgraceful as this perversion of the democratic right of the Irish people to vote free from menaces and threats is, it is made worse by the fact that the ESM Treaty is not yet enshrined in European Union law. That cannot happen until one of the two fundamental treaties of the EU – The Treaty on the Functioning of the European Union – is amended by inserting into Article 136 the following, ‘The Member States whose currency is the Euro may establish a stability mechanism to be activated if indispensable to safeguard the stability of the euro area as a whole.’

This amendment has to be agreed unanimously by all the Member States so the Irish Government could exercise a veto until the threatening clause was removed from the ESM Treaty. Taoiseach Enda Kenny could say, ‘Our people think it profoundly undemocratic that they are being forced to vote under threat rather than on the merits of the Fiscal Treaty and therefore we demand the removal of the relevant provision.’ If he does not he is guilty of a monstrous perversion of democracy.

Next week I will reflect on what a new ‘bailout’, and more austerity, would entail and the Left alternative to that.