Kill the blackmail clause

The Irish Government has the power to remove the 'blackmail clause' from the Fiscal Treaty. It should use it. By Paul Murphy.

The Government’s primary input into the referendum debate so far has consisted of scare mongering. Enda Kenny told us that we were really voting on whether we wanted to stay in the Eurozone and the EU. Brian Hayes implied that a ‘No’ vote would result in a mass exodus of multi-national companies. The most credible threat they have made is that should the Fiscal Treaty not be passed, then Ireland would find itself locked out of any future funding from the Economic Stability Mechanism (ESM).

This threat has become the centrepiece of the Yes campaign. Economist Karl Whelan wrote a piece in the Irish Times effectively damning the content of the Treaty, before concluding that because of the question of access to ESM funding, we have no choice but to vote Yes. Cuts guru Colm McCarthy similarly answers the question “Is this a good treaty for Europe?” with a no, saying the structural deficit target “makes no sense at all”, but favours a Yes vote too, with the question of ESM funding playing a large role in his argumentation.

The ESM is the new permanent fund for European countries that find themselves needing to access a bailout. There is an irony in the government using the argument about no access to a bailout to beat us with, given that Michael Noonan in January described the idea of Ireland needing a second bailout from the ESM as “ludicrous”. However, the reality, as recognised by many serious economists, is that with a continuation of the Government's policies, a second bailout will probably be required.

The ESM is not a charity. A second bailout for Greece has meant the reduction of the monthly minimum wage by 22%, leaving young people with a monthly minimum wage of €440 and older workers with a wage of €489 after tax. Another 150,000 public sector jobs are to be cut in the next three years. Pensions are to be reduced by more than €300 million annually. These are combined with many other assaults including the reduction of benefits and the savaging of public services with drastic cuts.

The Left is not in favour of a bailout on these terms from the ESM. There is an alternative to a bailout, namely policies pursuing the wealth and profits of the rich and engaging in major public investment to get people back to work and redevelop the economy. However, that is a subject for another article. Here, I want to expose the shameful role of the government in the insertion of this blackmail clause into the ESM Treaty and how it still has the power to remove it.

When the ESM Treaty was originally agreed and signed last July, there was no reference to the need for the Fiscal Treaty to be passed in order to access funding (not surprising considering the Fiscal Treaty had not been drafted yet). An additional clause, together with other amendments, was added to the treaty that was signed on 2 February of this year to create the link to the Fiscal Treaty. The key sentence of this clause reads:

"It is acknowledged and agreed that the granting of financial assistance in the framework of new programmes under the ESM will be conditional, as of 1 March 2013, on the ratification of the TSCG by the ESM Member concerned and, upon expiration of the transposition period referred to in Article 3(2) TSCG on compliance with the requirements of that article."

The TSCG (Treaty on Stability, Coordination and Governance in the Economic and Monetary Union) referred to is the Fiscal Treaty. In simple terms, this spells out that countries that do not sign up to this Treaty will not be able to access ESM funding. That this clause was inserted without any significant public debate or statements by the Taoiseach on the matter is outrageous.

This is blackmail pure and simple. Either we accept the perpetual austerity of this Treaty or we will not be able to access funding under the ESM.

The government has presented this clause as simply an unfortunate reality. This is disingenuous in the extreme. The new ESM Treaty was agreed unanimously by participating states in the ESM. In a best-case scenario, this means that the Taoiseach remained silent and did not voice any opposition to this clause. In a worst-case scenario, the Taoiseach actively collaborated with others to insert this provision, perhaps with an eye to the potential for a referendum in Ireland. Either way, the government is guilty of collaborating with Merkel and Sarkozy in the insertion of this clause that is being used as a stick to beat people with.

Regardless of how it got there, the Government is now presenting the blackmail clause as a fait accompli. Unfortunately for them, the reality is different. The Government has the power to remove the blackmail clause. This would create the environment in which a free and open debate could be had on the merits and de-merits of the Fiscal Treaty, without the threat of financial armageddon being wheeled out at every opportunity to browbeat the population into accepting it.

This power arises from the fact that two pieces of legislation relating to the establishment of the ESM have to be passed by the Dáil. One is a ratification of the ESM Treaty. The second is an amendment to the Treaty on the Functioning of the European Union (TFEU) to enable the ESM to be set up.

The amendment to the TFEU must be agreed unanimously by all EU member states. Therefore, if the Government was committed to a fair debate, without this threat hanging over us, it could refuse to pass the amendment to the TFEU until the offending clause is removed. Enda Kenny told us during the negotiations of the Fiscal Treaty that the Irish negotiators were trying to “get the best deal for Ireland”. Now, he has a clear opportunity to remove a clause that is extremely negative from the point of view of the democratic process in Ireland.

A massive campaign of political pressure needs to be built up demanding the removal of this clause. If Kenny and his Labour Party cohorts refuse to do so, the conclusion will be simple – they will have collaborated with the insertion of this clause, not once, but twice. {jathumbnailoff}

Paul Murphy is the Socialist Party and ULA MEP for Dublin.

This article is part of our Fiscal Treaty Files series. For more of our coverage of the Fiscal Treaty click here.