On 31 May last, Ireland overwhelmingly voted in favour of ratifying the proposed Treaty on Stability, Coordination and Governance in the Economic and Monetary Union, more commonly referred to as ‘the Fiscal Treaty’. Over 60% of voters approved the Treaty, with only five of Ireland’s 43 parliamentary constituencies voting ‘No’.
The Treaty is an intergovernmental agreement between 25 of the 27 EU member states, with the aim of promoting economic recovery and preventing a repeat of the financial crisis we have seen in recent years. The United Kingdom and the Czech Republic opted not to support the new arrangements set out under the Treaty.
Ireland’s Taoiseach (i.e. Prime Minister), Mr Enda Kenny, described the Yes vote as another step on the road towards economic recovery. The President of the European Commission, José Manuel Barosso, also welcomed the outcome of the referendum emphasising that without stability economic growth is not achievable.
What the Treaty Does?
The Treaty aims to strengthen the Economic and Monetary Union by adopting strict rules to improve both budgetary discipline and the coordination of economic policies.
Nothing in the Treaty changes the conditions under which Ireland currently receives financial assistance from the EU/IMF/ECB. However, from 1 March 2013, in order to be eligible for financial assistance from the European Stability Mechanism (ESM), the new permanent rescue fund, a country must have ratified the Treaty. Therefore, following the Yes vote, Ireland will now have access to emergency ESM funding in the future, if indeed it is needed.
Calling a Referendum
Ireland is the only country to hold a referendum to determine ratification. A referendum was necessary in Ireland as the Treaty was considered to be outside the existing EU architecture and thus not subject to the general constitutional protection given to other EU treaties. In the absence of a referendum, Ireland’s ratification of the Treaty would likely have been subject to constitutional challenge before the Irish courts. In the event that such a challenge was successful, the Irish Government would have been obliged to hold a referendum.
The ‘Yes’ and ‘No’ Campaigns
In general, supporters of the Treaty focused on the goal of bringing stability to the euro and clarity to Ireland’s position within the Eurozone, not least regarding its ability to access emergency funding in the future. The “Yes-side” strongly argued that ratifying the Treaty would renew confidence and keep Ireland on the path to recovery.
Opponents of the Treaty argued for the most part that, in ratifying the Treaty, Ireland would completely transfer its fiscal sovereignty to the European institutions and copperfasten current austerity policies, thus further hindering economic growth.
The debate on the Treaty also covered many issues regarding the Eurozone crisis in general, though access to funding under the ESM proved to be one of the more decisive elements.
Next Steps
At the time of publication, Ireland is one of nine EU member states to have ratified the Treaty, of which, four are Eurozone countries. The Treaty will come into force in January 2013, provided a total of 12 of the 17 Eurozone countries ratify the Treaty.
Contributed by Cormac Little.
