On 31 May 2012 Ireland held a referendum - the only country to do so - as to whether or not its Government should ratify the Stability Treaty signed by 25 of the 27 European Union (EU) Member States in December 2011 and due to come into effect on 01 January 2013. This is the Treaty which Prime Minister David Cameron representing the UK famously refused to sign, along with the Czech Republic.
The Treaty on Stability, Coordination and Governance to give its full title, has four main clauses:
The Debt to GDP ratio should be 60 per cent or less.
Government deficits should be three per cent or less of GDP.
Government structural deficits should be 0.5 per cent or less of GDP.
If Government deficits are well below 60 per cent and there's low risk sustainability of public finances, then a structural deficit can reach one per cent of GDP.
In addition there is an "exceptional circumstances" clause and countries which have a national debt in excess of 60 per cent of GDP should initiate a reduction plan of one-twentieth of the debt per annum in order to bring that state into line. All very familiar?! Should be because it's in the Maastricht Treaty and included in other EU legislation in the run up to the introduction of the Euro!
Here we are then, over two years after the Eurozone went into crisis mode centred on Greece's travails, and David Cameron refused to sign a Maastricht clone that his predecessor, John Major signed back in 1993?
Well almost, but there are differences designed to bring and emphasize a rigour and compulsion so far lacking in the older legislation. It was there, but for the most part ignored, not least by the core member states, namely Germany and France when it suited their purposes and particularly after 2003 when both these countries decided to "kill" the three per cent deficit rule. Jean-Claude Trichet, President of the European Central Bank (ECB) between 2003 and 2011, told Robert Peston for a BBC2 programme in May 2012 that he had been deeply shocked by their action.
The current Irish Coalition Government of Prime Minister Enda Kenny (Fine Gael) and Deputy Prime Minister Eamon Gilmore (Labour) campaigned for a "Yes" vote in the Referendum and won with a very comfortable 60 per cent to 40 per cent majority. It's very possible that, proving to be such good Europeans, Ireland might have been able to broker an accommodation on its heavy EU/ECB/IMF bailout. Sadly, Mario Draghi, current President of the ECB, told the Irish Independent on 06 June that this was not so.
Speaking from Frankfurt, Mr Draghi welcomed the Yes result and praised Ireland for the (hard) fiscal measures it had taken to date but said a deal was never a given: "I don't think there was any ground or any statement of a quid pro quo for this."
Along with a Yes campaign, the Irish Government produced literature and other media blogs designed to help the electorate understand better what they were being asked to vote on. Admitting that some of the Articles are already European Law (Maastricht, but not mentioned) the Government did not emphasize the major legal point that the Treaty Articles are now to be enshrined in each Member State's national law
This point apart, the explanations were simple and straightforward and the Government summarized the main topic(s) of the Treaty's 16 Articles. "The Treaty Brief" is a useful guide in highlighting issues to all of us in the EU, not simply the Eurozone countries.
The tone is set in Article 1:
"...the Treaty aims to strengthen economic and monetary union by adopting rules to improve budgetary discipline and to strengthen coordination of economic planning."
Important aspects in other Articles which deserve attention for what they either say or imply, include:
Article 6 "...countries will share information when they plan to issue debt (to sell bonds to raise money).
Article 7 Makes it easier to bring countries that break the rules to account.
Article 8 Countries that don't run a balanced or surplus budget - no detail given on clauses as to how this will be applied - can be taken to the European Court of Justice and may be fined.
Article 9 Concerns "working together" to ensure the proper functioning of the Euro "so as to promote employment and economic stability." (The employment function of a currency? Could well be at odds with Germany's Central Bank and Basic Law.
And finally Article 10: "...the countries participating are ready to work together in groups on particular issues where not everyone in the EU wants to move forward together (enhanced cooperation). This would be done case-by-case and within existing EU rules." Any particular country in mind?
The underlying message: As Chancellor Merkel avows, this means MORE Europe, not less.
As the future of Eurozone, and the EU in its present form to a large extent, depends on the actions of Germany, it's worth taking a look at this situation from that perspective.
About 20 years ago now, I was having a chat and coffee with my friend Katerina mulling over the high unemployment figures that had just been reported from her native Germany. "Maybe a Keynesian injection to give the economy a boost?" I dared to suggest.
"Definitely not, Graeme. We can afford the unemployment but not the inflation."
Katerina, coming from Swabia, an area noted for its thrift, hard work and a high number of entrepreneurs, I really had not expected any other..er..rebuke, and I am certain there would be no change in her attitude today. This aversion to taking the apparent easy way out, was reflected recently in a speech Germany's Chancellor Angela Merkel gave to the Bundestag in which she reminded her audience that the Swabian housewife doesn't spend more than is in the pot and concluding:
"In the long run you cannot live beyond your means."
No doubt Chancellor Merkel was bracing her coalition and fellow parliamentarians for the heavy criticism Germany is continuing to receive for its determined course of austerity measures which she and her Finance Minister, Wolfgang Schäuble, insist are necessary to solve the Eurozone crisis, made all the more necessary since the defeat of Nicolas Sarkozy and his replacement as President of France by François Hollande.
As if predicting just such an event, Mary Dejevsky in an editorial for The Independent on 28 October 2011 entitled The coming Franco-German split, remarked that since Berlin "...is once again at the centre of German national consciousness (prompting) another re-evaluation of the past, which increasingly focuses on the heritage of Prussia." so one can expect little tolerance for back-pedalling from that quarter then!
A little earlier in the same article Ms Dejevsky seems to have judged the German mood precisely:
"In Germany, the eurocrisis has accentuated a natural frugality and brought a latent sense of national righteousness to the surface."
It's worth remembering that the first tranche of Greek aid amounted to €80 billion and of this €22 billion came straight from the German tax payer and tens of billions of the same tax payers' funds later it is understandable that the Germans, and their politicians, demand a quid pro quo, so:
The reckoning - Chancellor Merkel will save the Euro but this means more Germany not less.