referendumThe Irish government, in a surprise move, announced yesterday that it would be putting the EU “fiscal compact” to a referendum. This comes as EU heads of state and government are preparing to meet in Brussels on Thursday for a two-day summit. European leaders are then expected – with the exception of the Prime Ministers of the UK and the Czech Republic – to sign the treaty for a fiscal compact on Friday.

Debating Europe will be focusing on the question of the fiscal compact in our posts today and tomorrow. Is this new treaty the answer to the Eurozone’s current round of problems? Should the Irish vote “yes” in their referendum? Protesilaos, a blogger from Cyprus, sent us the following video comment about the fiscal compact:

We put this question to Frank Engel, a Member of the European Parliament (MEP) from Luxembourg sitting in the centre-right European People’s Party, and asked him to respond.

I would say the fiscal compact is no remedy to anything. I am radically opposed to it, for the reason that it doesn’t even solve the debt problem, let alone the problem in the real economy.

This cannot but remind me of the “good old days” of Idi Amin, worried about inflation, who convened his parliament and made inflation illegal. The fiscal compact is no solution, because what it requires in term of debt reduction happens entirely within completely sovereign budgetary frameworks. It will have a negative effect for generations to come, until it either leads to massive social upheavels or the rules are broken and suspended again.

As an alternative or compliment to the fiscal compact, we’ve had a number of comments sent in supporting the idea of a common “Eurobond” mechanism. Michael, for example, argues that “we have to move fast with the first issue of [Eurobonds] before Germany gets downgraded too. If that happens then I would not like to see the next scenario.

Eurobonds are not a solution. A financial transactions tax is not a solution. Those are instruments to complement or fill in a future European fiscal policy. We continue to live in the fallacy that nation-states can solve this crisis whilst still preserving separate fiscal frameworks.

The solution to the crisis is to mutualise debt, but to ensure that finally the EU acquires an independent budget that is sufficient for managing a currency; a currency can function without a state, but never can a currency function without a budget of a significant size.

What you are proposing would be a fairly radical step for Europe to take. We’ve had others argue that, politically, there is simply no mandate for this kind of integration. When we interviewed Alex Stubb, EU Minister of Finland, for example, he suggested a much more cautious approach. We’ve also had many comments sent in (such as this one from Marcel in the Netherlands) from people who say they simply cannot accept fiscal union in the EU. Are the people of Europe really ready for this kind of leap?

I am absolutely certain that the people of Europe are ready. The politicians better stop hiding behind the people. We are led by people who are, without exception, political cowards. These are not the Europeans leaders that people need.

What do YOU think? Do you think the fiscal compact is a step in the right direction? Or does the EU need to take much more radical steps to finally end the crisis? Should more countries hold referendums on the fiscal compact, or is it a mistake even for Ireland to offer one? And would it be better for the Irish to accept or reject the new treaty? Let us know your thoughts and comments on the fiscal compact in the form below, and we’ll take them to policy-makers and experts for their reactions.

11 comments Post a commentcomment

  1. avatar
    Patrick Leneghan

    It has become apparent that the EU have evolved way beyond what most would have voted for or will vote for and evolved in a very non-transparent way at that, I ask for, that the EU mark time (stop but perform basic function), immediately suspend the EEAS and request that all member nations hold referendums in their respective nations, as to whether their citizens wish to be part of the EU or not. Then proceed from there. I see failing to do so, is deliberately manufacturing an artificial implied consent.

  2. avatar
    Michael Tsikalakis

    Referendum? No. People today are confused ( panic) from all these bad events and this may lead to a wrong decision. Ireland and every European country should synchronize its financial polices with EU policies for mutual benefit. The question is “is there any EU (not only German) fixed financial policy?” There will be no long term financial solution, if there is no political solution.

  3. avatar
    David Platt

    The dream of a united Europe in the eyes of the EU is clearly a failed one! What needs to happen is each country given back its fiscal sovereignty.

  4. avatar
    Christos Mouzeviris

    While I am not 100% certain that this is the ideal solution myself, I am pleased that at least we have any plans at all.. You would think that after years in recession and one of the worst crisis of the past few decades, our leaders could do better than that.. But knowing how things work in EU and Europe I am not surprised that we have another mash up again.. As I said, it is better than nothing!

    As for the referendum..well what can I say..I witnessed the last referendum about the Lisbon treaty in Dublin.. Confusion, misinformation from both sides, threats, populist arguments and a very bad run campaign in the first run… People were definitely not adequately informed and a lot of them just voted NO because they were not happy with the quality of information, others because they wanted to get back at their Government for all the (then) recent scandals and others did not even bother voting..If it happens again, well brace yourselves for more waves and turbulence..Especially if external bodies (from Britain- conservatives but also from USA and other European eurosceptic groups) get involved just to cause problems…

    If it was me I wold vote yes, but only with the condition that it won’t stop to this only…We need all the above tools and conditions that Mr Engel and others mentioned so I would vote yes in trust that this is only the beginning and the first step.. I do not like standing in the way of any move forward, even if it is a tiny one or a not so adequate one..It is better than what we got right now, unless Mr Engel can elaborate further about any serious downsides or consequences that we must be aware of….Overall I stand with Protesilaos on fiscal union and as the times are dire I think that we need to keep moving, keep experimenting, keep trying solutions so that we can get Europe and its economy back on its feet again….

  5. avatar
    Leonardo Baggiani

    “The politicians better stop hiding behind the people”
    I do think that every solution of the socializing kind (one single debt, one single policy, one single fiscal entity…) are the wrong ones, but the EU centralisation is a political project and politicians won’t ever let their project (which is their job and source of wage) go waste; they’ll go on untill EU becomes the continental version of the soviet union.
    Anyway, I agree with the quote above: do the mess you like, but be personally responsible for this.

  6. avatar
    Christos Mouzeviris

    The latest from Ireland are: Mr Eamon O’ Cuiv quits as a deputy leader for the opposition party Fianna Fail, after a disagreement with the party’s leader Mr Martin over the new Treaty..

    “To me, this whole issue is about the fundamental future of Ireland and I believe it’s much bigger than any one individual,” said O Cuiv. “Therefore, it would be impossible for me to stay as deputy leader and not have my heart and soul in what I would consider to be an absolutely fundamental decision that we have to make,” he noted…

    The disagreement came when he opposed the party’s line to support a YES vote on the referendum, as in his opinion it would be bad for Ireland!

    Others who oppose the treated are starting their campaign, and they claim that this treaty is going to make small countries be forced into austerity and recession for the benefit or under the control of the richer and bigger states..They claim that this treaty is unfair to the small countries and benefits again the bigger ones…

    The debate is just heating up in Ireland.. Again the NO side gets a head start!! They are starting to get organized and raise their voice before any arguments or campaigns begin from the supporters of this treaty!!

    Are those who oppose the treaty correct..? Is this treaty something bad for the small states..?? Or are they playing the populist nationalist card to gain votes, but in fact they want to protect the status quo and the sovereignty of their country because they feel that is the best thing or they want to protect the interests of some people/groups in their country…??

    Will be watching the debate with interest… ;o)

  7. avatar

    Economist Andy Storey of University College Dublin explains convincingly here what the economic costs will be for Ireland…and I quote, “austerity stretching out into more or less the limitless future”.

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