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Article 136 TFEU amendment, the ESM and the Fiscal
Compact Tre
national | eu | opinion/analysis
Saturday April 21, 2012 10:35
by Sonya Oldham - People's Association Watchdog
pawireland at
hotmail dot com
Presently we are being given a
referendum on the 'Treaty on Stability, Coordination and Governance in
the Economic and Monetary Union', ( the Fiscal Compact Treaty), this
treaty lays out the 'conditions' of receiving a bailout from the
European Stabilty Mechanism, which so far we are not being given a
referendum on. These 3 aspects are inextricably intertwined, with the
ESM being the mechanism, the article 136 TEFU amendment the instrument
being used to enable the ESM to have a legal basis, while the fiscal
compact treaty sets out the conditions for accessing finance through the
ESM. There are in fact 3 different aspects, only the last of which we
are allowed a say on: 1. The article 136 TFEU amendment to the
treaties. 2. The ESM treaty 3. The Fiscal Compact
Treaty.
Presently we are being given a referendum on the 'Treaty
on Stability, Coordination and Governance in the Economic and Monetary
Union', ( the Fiscal Compact Treaty), this treaty lays out the
'conditions' of receiving a bailout from the European Stabilty Mechanism,
which so far we are not being given a referendum on. These 3 aspects are
inextricably intertwined, with the ESM being the mechanism, the article
136 TEFU amendment the instrument being used to enable the ESM to have a
legal basis, while the fiscal compact treaty sets out the conditions for
accessing finance through the ESM. There are in fact 3 different
aspects, only the last of which we are allowed a say on: 1. The article
136 TFEU amendment to the treaties. 2. The ESM treaty 3. The Fiscal
Compact Treaty. The Background The original
budgetary discipline code for the Eurozone, the so-called Stability and
Growth Pact, collapsed in all but name in the years leading up to 2005
over the unwillingness of the administrations in Germany and France,
respectively, to allow sanctions to be applied to their respective
countries. More recently with the multi-billion euro bailout of Greece,
the issue of economic governance in the Eurozone returned to the
agenda. By 29 September 2010, the Commission had already
proposed legislative measures in the field of economic governance,
followed on 21 October by the Final Report of the Von Rompuy Task Force,
concerning fiscal discipline, surveillance mechanisms, deeper
coordination, crisis management and stronger
institutions. Treaty reform featured nowhere on the agenda in
all this, however, until the meeting between German chancellor Angela
Merkel and French President Nicolas Sarkozy on 18 October 2010 produced a
declaration specifically calling for, inter alia, treaty changes in order
to set up a crisis mechanism (in effect, a bailout fund) for the
euro. It should be explained that up until now, the
possibility of the grant of financial assistance where needed to safeguard
the stability of the euro as a whole, has been governed by Article 125(1)
of the Treaty on the Functioning of the European Union with its provision
that; "the Union shall not be liable for or assume the
commitments of central governments, regional, local or other public
authorities, other bodies governed by public law, or public undertakings
of any Member State, without prejudice to mutual financial guarantees for
the joint execution of a specific project. A Member State shall not be
liable for or assume the commitments of central governments, regional,
local or other public authorities, other bodies governed by public law, or
public undertakings of another Member State, without prejudice to mutual
financial guarantees for the joint execution of a specific
project." This long-standing so-called 'no bailout' clause has until
now been balanced in the Treaty for the most part only by the provision in
Article 122(2) TFEU that: "...where a Member State is in
difficulties or is seriously threatened with severe difficulties caused by
natural disasters or exceptional occurrences beyond its control, the
Council, on a proposal from the Commission, may grant, under certain
conditions, Union financial assistance to the Member State concerned. The
President of the Council shall inform the European Parliament of the
decision taken." The ESFS bailouts were challenged in May 2010 by a
number of German economists who had commenced litigation before the Court
in which they argued that the assistance to Greece and the euro rescue
fund violated the ‘no bailout’ clause found in Article 125 of the Treaty,
and, further that Article 122 which had been used to justify both
initiatives - provided no legal justification for them. The considerable
risk that the Karlsruhe Court could well rule both measures illegal
constituted a considerable incentive for pre-emptive political
action. Beginning with the Brussels European Council of 28 - 29 October
2010 the need for Member States to establish a “permanent crisis
mechanism”, was agreed on, the stated aim of which was “to safeguard the
financial stability of the euro area as a whole”. By 28 November,
Euro-area finance ministers had reached agreement on a future European
Stability Mechanism to replace the existing European Financial Stability
Facility (EFSF). The idea of this new Mechanism was that it would
safeguard financial stability and complement a new framework for
reinforced economic surveillance in the European Union (Fiscal compact).
More specifically, the conclusions of the so-called 'Eurogroup' noted
that: “The [European Stability Mechanism] will complement the new
framework of reinforced economic governance, aiming at an effective and
rigorous economic surveillance, which will focus on prevention and will
substantially reduce the probability of a crisis arising in the
future.'' ''Assistance provided to a euro area Member State
will be based on a stringent programme of economic and fiscal adjustment
and on a rigorous debt sustainability analysis conducted by the European
Commission and the [International Monetary Fund], in liaison with the
ECB.” The next major step in the process of Treaty amendment
was the European Council meeting of 16 - 17 December 2010, which saw the
agreement of the heads of state and government on the precise content of
the proposed amendment. "This mechanism will replace the
European Financial Stability Facility (EFSF) and the European Financial
Stabilisation Mechanism (EFSM), which will remain in force until June
2013. As this mechanism is designed to safeguard the financial stability
of the euro area as a whole, the European Council agreed that Article
122(2) TFEU will no longer be needed for such purposes. Heads of State or
Government therefore agreed that it should not be used for such
purposes." The key provision of this Draft European Council
Decision amending Article 136 of the Treaty is Article 1. This provides
that the following paragraph shall be added to Article 136 of the Treaty
on the Functioning of the European Union. "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. The granting of any required financial assistance under the
mechanism will be made subject to strict conditionality." In
order to effect this proposed amendment, the European Council decided to
launch "immediately" the simplified revision procedure provided for in
Article 48(6) of the Treaty on European Union, the completion of which
should see national approval procedures by the end of 2012, and entry into
force on 1 January 2013. (1)1 So what is this article 136
TFEU amendment to the treaties? Article 122.2 was the
specific authority for the temporary fund (EFSF), but it limits “Union
financial assist finance” to situations where “a Member State is in
difficulty or is seriously threatened with severe difficulties caused by
natural disasters or exceptional occurrences beyond its control.” It is
for this reason that the European Council agreed that Article 122.2 of the
TFEU would not be the “appropriate Treaty Article for the permanent
European Stability Mechanism (ESM)” and “will no longer be needed for such
purposes.” To avoid having to organise referendums in Europe
once more, they used article 48.6 of the Treaty of the European Union,
which allows the European Council to decide changes in the articles of the
treaty, under condition they don’t constitute an extension of the
competences of the EU. Using the simplified revision
procedure, the European Council adopted Decision 2011/199/EU to amend
Article 136 TFEU to allow Eurozone states to create a permanent financial
support mechanism. The Decision states that it shall enter into force on 1
January 2013. (3) This amendment will give a long-term legal
basis in European law to the ESM, the permanent bail out fund. The
Government wants the Dáil and Seanad to approve this hugely important
Article 136 TFEU amendment to the EU treaties without any referendum even
though this amendment and its legal/political consequences would mark a
qualitative change in the direction of the EU. The amendment to Article
136 would extend the scope of the existing EU treaties significantly and
bears a huge weight of legal/political consequences. It reads: “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. The granting of any required financial assistance under the
mechanism will be made subject to strict conditionality.”
(2) The government would argue that the European Stability
Mechanism amendment is about iron-cladding existing competences rather
than about creating new competences. However, Amendment 136 replaces an
already extant but contested legal basis for rescue action with an
uncontested one clearly allowing for a permanent rescue mechanism. This
will be the first amendment to the actual text of either of the two
constitutive Treaties of the European Union since the Treaty of Lisbon.
(1) Questions Arising? If it is about iron
cladding, why was the actual text changed? Does it create new
competences? Does the Article 136 TFEU amendment to the EU Treaties
claim to give an assertion of, significant extension of EU powers, scope
and competences which cannot legally be brought into force in Ireland by
the “simplifed” EU treaty revision procedure of Art.48(6) TEU that was
used to adopt the amendment??? The European Stability
Mechanism (ESM) The treaty establishing the European
Stability Mechanism (ESM), a permanent bail-out fund for the euro zone,
was signed in Brussels on February 2nd. It now needs to be ratified by the
17 members of the single currency, with the aim of coming into force in
July. The ESM is designed to be a permanent successor to the European
Financial Stability Facility (EFSF), and goes hand in hand with a fiscal
compact designed to ensure budgetary discipline among euro-zone members.
(4) The ESM will be an intergovernmental institution
established under public international law by a treaty signed by the euro
area countries. (5) The European Stability Mechanism Treaty sets up the
European Stability Mechanism as an entity with legal personality, of which
Ireland would become a member. It sets out the institutional structure and
rights and privileges of this “Mechanism”. The Mechanism will
include a permanent €500 billion bailout fund and the treaty
stipulates the contributions which each of the 17 Eurozone Members must
make to it. The ESM Treaty provides that the fund may be increased later
by agreement and there is already talk of increasing it. Ireland must
contribute €11 billion to it “irrevocably and unconditionally” in
various forms of capital. The Dáil will need to approve
this in order to implement the ESM Treaty into Irish domestic
law. The ESM Treaty is to come into force once it is ratified
by signatories representing 90% of the initial capital of the fund, so
that Ireland has no veto on it. The preamble to the ESM
Treaty states that it is agreed that money from the permanent ESM fund
will only be given to Eurozone States which have ratified the later
“Fiscal Compact Treaty” and its permanent balanced budget rule or “debt
brake” and that the two treaties are complementary. (2) There
are some important preconditions for the establishment of a permanent
stability mechanism. In particular, the condition that the ESM can only be
activated “if indispensable to safeguard the stability of the euro area as
a whole” and there is strict conditionality attached to
assistance. ESM financial assistance will only be activated
by a request from a euro area country. Following this request, the
European Commission, together with the IMF and in liaison with the ECB,
will assess whether there is a risk to the financial stability of the euro
area as a whole and will undertake a rigorous analysis of the
sustainability of the public debt of the requesting country. If it is
concluded that an adjustment programme can realistically restore the
public debt to a sustainable path, the Commission, together with the IMF
and in liaison with the ECB, will then assess the actual financing needs
of the country concerned. On the basis of this assessment, an adjustment
programme would be negotiated, the details of which will be laid down in a
Memorandum of Understanding (MoU). Compliance with the
adjustment programme will be monitored and reported to the ECOFIN Council
and the Board of Directors of the ESM. On the basis of this report,
disbursement of further tranches of the loan would be decided. After the
completion of the adjustment programme, the EU Council may decide, on the
basis of a proposal from the Commission, to implement post-programme
surveillance, which can be maintained for as long as a specified amount of
the financial assistance has not been repaid. (5) So what's
the problem with it? The ESM may therefore provide stability
support on the basis of a strict conditionality, appropriate to the
financial assistance instrument chosen if indispensable to safeguard the
financial stability of the euro area as a whole and of its Member
States. As it states, this will be enacted to safeguard the
financial stability as a whole and not for the common good and people of
any of the nations. This funding will be made available under
strict conditionality. Article 3...The purpose of the ESM shall be to
mobilise funding and provide stability support under strict
conditionality. Article 13.3 The Board of Governors shall
entrust the European Commission – in liaison with the ECB and, wherever
possible, together with the IMF – with the task of negotiating, with the
ESM Member concerned, a memorandum of understanding (MoU) detailing the
conditionality attached to the financial assistance facility. The content
of the MoU shall reflect the severity of the weaknesses to be addressed
and the financial assistance instrument chosen. In parallel, the Managing
Director of the ESM shall prepare a proposal for a financial assistance
facility agreement, including the financial terms and conditions and the
choice of instruments, to be adopted by the Board of
Governors. The MoU shall be fully consistent with the
measures of economic policy coordination provided for in the TFEU, in
particular with any act of European Union law, including any opinion,
warning, recommendation or decision addressed to the ESM Member
concerned. This is where the Commission will be given its mandate to
enforce budgetary measures. Along with; Article 5.. (g) to
give a mandate to the European Commission to negotiate, in liaison with
the ECB, the economic policy conditionality attached to each financial
assistance, in accordance with Article 13(3). Article
12.1..1. If indispensable to safeguard the financial stability of the euro
area as a whole and of its Member States, the ESM may provide stability
support to an ESM Member subject to strict conditionality, appropriate to
the financial assistance instrument chosen. Such conditionality may range
from a macro-economic adjustment programme to continuous respect of
pre-established eligibility conditions. Compliance with the
conditionality will be monitered; Article 13..7. The European
Commission – in liaison with the ECB and, wherever possible, together with
the IMF – shall be entrusted with monitoring compliance with the
conditionality attached to the financial assistance facility.
(5) Questions Arising What if the budgetary
measures help the euro but damage the domestic economy? What
if the budgetary measures are not for the common good of the Irish
People? A major problem with this treaty is that along with
our initial contribution of €11 billion, monies can be requested at any
time and must be delivered within 7 days. Article 8. 4. ESM
Members hereby irrevocably and unconditionally undertake to provide their
contribution to the authorised capital stock, in accordance with their
contribution key in Annex I. They shall meet all capital
calls on a timely basis in accordance with the terms set out in this
Treaty. and also; Article 9..3. The Managing
Director shall call authorised unpaid capital in a timely manner if needed
to avoid the ESM being in default of any scheduled or other payment
obligation due to ESM creditors. The Managing Director shall inform the
Board of Directors and the Board of Governors of any such call. When a
potential shortfall in ESM funds is detected, the Managing Director shall
make such capital call(s) as soon as possible with a view to ensuring that
the ESM shall have sufficient funds to meet payments due to creditors in
full on their due date. ESM Members hereby irrevocably and unconditionally
undertake to pay on demand any capital call made on them by the Managing
Director pursuant to this paragraph, such demand to be paid within seven
days of receipt. (5) Questions Arising What
if we do not have the money? Where do we get the money from
to fullfill our obligations? Another disturbing factor of
this treaty is accountability - there is none, in fact it is immune and
inviolable! It cannot be brought before a court. Its
property, funding, assets, documents are immune from search, seizure or
scrutiny, its documents and building are inviolable. It is free from any
requirement to be authorised, regulated, free from all restrictions,
regulations and controls. All staff members will be immune from legal
proceedings with respect to their official work. ARTICLE 32
Legal status, privileges and immunities 1. To enable the ESM
to fulfil its purpose, the legal status and the privileges and immunities
set out in this Article shall be accorded to the ESM in the territory of
each ESM Member. The ESM shall endeavour to obtain recognition of its
legal status and of its privileges and immunities in other territories in
which it performs functions or holds assets . 2. The ESM shall have
full legal personality; it shall have full legal capacity to: (a) acquire
and dispose of movable and immovable property; (b) contract; (c) be a
party to legal proceedings; and (d) enter into a headquarter agreement
and/or protocols as necessary for ensuring that its legal status and its
privileges and immunities are recognised and enforced. 3. The
ESM, its property, funding and assets, wherever located and by whomsoever
held, shall enjoy immunity from every form of judicial process except to
the extent that the ESM expressly waives its immunity for the purpose of
any proceedings or by the terms of any contract, including the
documentation of the funding instruments. 4. The property,
funding and assets of the ESM shall, wherever located and by whomsoever
held, be immune from search, requisition, confiscation, expropriation or
any other form of seizure, taking or foreclosure by executive, judicial,
administrative or legislative action. 5. The archives of the
ESM and all documents belonging to the ESM or held by it, shall be
inviolable. 6. The premises of the ESM shall be
inviolable. 7. The official communications of the ESM shall
be accorded by each ESM Member and by each state which has recognised the
legal status and the privileges and immunities of the ESM, the same
treatment as it accords to the official communications of an ESM
Member. 8. To the extent necessary to carry out the
activities provided for in this Treaty, all property, funding and assets
of the ESM shall be free from restrictions, regulations, controls and
moratoria of any nature. 9. The ESM shall be exempted from
any requirement to be authorised or licensed as a credit institution,
investment services provider or other authorised licensed or regulated
entity under the laws of each ESM Member. ARTICLE 35
Immunities of persons 1. In the interest of the ESM, the
Chairperson of the Board of Governors, Governors, alternate Governors,
Directors, alternate Directors, as well as the Managing Director and other
staff members shall be immune from legal proceedings with respect to acts
performed by them in their official capacity and shall enjoy inviolability
in respect of their official papers and documents.
(5) Questions Arising Is it sensible to give
such control over a nation's budget to an unaccountable and inviolable
organisation? Is it Constitutional? Before
discussing the ins and outs of whether individual aspects or indeed the
treaty as a whole is in conflict with our constitution and therefore would
require a referendum, we should consider 'precedence'. Crotty
v. An Taoiseach 1987 established that significant changes to European
Union treaties required an amendment to the constitution before they could
be ratified by the state, thereby requiring a referendum. The
words of Mr. Justice Hederman in relation to the ratification of the
Single European Act: The court held that it is not within the
competence of the Government, or indeed of the Oireachtas, to free
themselves from the restraints of the Constitution, or to transfer their
powers to other bodies, unless expressly empowered so to do by the
Constitution. They are both creatures of the Constitution and are not
empowered to act free from the restraints of the Constitution. (9 April
1987, Supreme Court 1986 No. 12036P): “It appears to me that
the essential point at issue is whether the State can by any act on the
part of its various organs of government enter into binding agreements
with other states, or groups of states, to subordinate, or to submit, the
exercise of the powers bestowed by the Constitution to the advice or
interests of other states, as distinct from electing from time to time to
pursue its own particular policies in union or in concert with other
states in their pursuit of their own similar or even identical
policies. The States organs cannot contract to exercise in a
particular procedure their policy-making roles or in any way to fetter
powers bestowed unfettered by the Constitution. They are the guardians of
these powers not the disposers of them.” The court held that it is not
within the competence of the Government, or indeed of the Oireachtas, to
free themselves from the restraints of the Constitution, or to transfer
their powers to other bodies, unless expressly empowered so to do by the
Constitution. Mr Justice Walsh reminded
us: Article 6 of the Constitution refers to the powers of
government as being derived from the people, whose right it is to
designate the rulers of the State and, in final appeal, to decide all
questions of national policy, according to the requirements of the common
good. It must follow therefore that all the powers of
government are to be exercised according to the requirements of the common
good. The essential nature of sovereignty is the right to say Yes or to
say No. (6) Questions Arising Does the ESM
treaty transfer governmental powers to other bodies? Is the
state entering into binding agreements which will subordinate the powers
of the constitution to the interests of other states?? Is the
state disposing of its powers which have been bestowed upon them by the
Constitution? Will the ESM be exercised according to the
common good of the Irish people or for the 'Euro'? Will we be
able to exercise our sovereign right to say yes or no? Is it
Constitutional? Confer: to grant or
bestow. Power: the ability or capacity to do something or act
in a particular way--, the capacity or ability to direct or influence the
behaviour of others or the course of events: political or social authority
or control, especially that exercised by a
government. Increase: become or make greater in size, amount,
or degree. Competence: the legal authority of a court or
other body to deal with a particular matter: Does the ESM
grant or bestow the ability or capacity for political or social
authority?? Does the ESM make greater the legal authority of
another body to deal with particular matters? The answering
being Yes to either question would mean we need a referendum on the
ESM. Considering the above, we need to consider, does the ESM confer
more power to the EU, is it repugnant to any of the articles within the
Constitution? We would assert that the passing of this
Bill/treaty will prevent Ireland as a democratic constitutional republic
under; Article 1; The Irish nation hereby affirms its
inalienable, indefeasible, and sovereign right to choose its own form of
Government, to determine its relations with other nations, and to develop
its life, political, economic and cultural, in accordance with its own
genius and traditions. The Irish nation will not be
determining and developing its economy in accordance with its own genius
and traditions if subject to the conditionalities of the ESM which would
be beyond its control. Article 5; Ireland is a sovereign,
independent, democratic state. By handing over economic control of the
nations finances in adherence to the conditionality, we also hand over our
economic sovereignty. Article 6. 1.; All powers of
government, legislative, executive and judicial, derive, under God, from
the people, whose right it is to designate the rulers of the State and, in
final appeal, to decide all questions of national policy, according to the
requirements of the common good. 1. The ESM hands over the
power of the people to decide questions of national economic policy in
accordance with the common good to an undemocratically elected
organisation that is free from scrutiny and accountability.
Article 6.2.; These powers of government are exercisable
only by or on the authority of the organs of State established by this
Constitution. 1. The ESM organisation does not have the
authority established by the Constitution to exercise such controls.
By passing the ESM through the Dáil without referring to the
people for referendum this would be in violation of Article 15.4.1° The
Oireachtas shall not enact any law which is in any respect repugnant to
this Constitution or any provision thereof. I would like to
draw your particular attention to certain articles of the Treaty
Establishing the European Stability Mechanism (ESM) presented in Brussels
on July 11th 2011 which clearly show a loss of sovereignty to the people
of Ireland should it be ratified: ARTICLE 3 of the ESM
whereby, 'The purpose of the ESM shall be to mobilise funding and provide
financial assistance, under strict economic policy conditionality, to the
benefit of ESM Members which are experiencing or are threatened by severe
financing problems, if indispensable to safeguard the financial stability
of the euro area as a whole.' The strict economic policy conditionality
in reality allows for 'handing over' economic sovereignty to Brussels
repugnant to Articles 1, 5 and 6 of the Constitution. ARTICLE
9, Capital calls 1. The Board of Governors may
call in authorised unpaid capital at any time and set an appropriate
period of time for its payment by the ESM
Members. 2. The Board of
Directors may call in authorised unpaid capital by simple majority
decision to restore the level of paid-in capital if the amount of the
latter is reduced by the absorption of losses below the level established
in Article 8(2), as may be amended by the Board of Governors following the
procedure provided for in Article 10, and set an appropriate period of
time for its payment by the ESM Members. 3.
The Managing Director shall
call in authorised unpaid capital in a timely manner if needed to avoid
the ESM being in default of any scheduled or other payment obligation due
to ESM creditors. The Managing Director shall inform the Board of
Directors and the Board of Governors of any such call. When a potential
shortfall in ESM funds is detected, the Managing Director shall make such
capital call(s) as soon as possible with a view to ensuring that the ESM
shall have sufficient funds to meet payments due to creditors in full on
their due date. ESM Members hereby irrevocably and unconditionally
undertake to pay on demand any capital call made on them by the Managing
Director pursuant to this paragraph, such demand to be paid within seven
days of receipt. (5) Treaty on Stability, Coordination and
Governance in the Economic and Monetary Union (Fiscal
Treaty) The Fiscal Compact (formally, the Treaty on
Stability, Coordination and Governance in the Economic and Monetary Union;
also called the Fiscal Stability Treaty) is an intergovernmental treaty
that was finalised on 30 January 2012. All member states of the European
Union (EU) signed the treaty on 2 March 2012 except the Czech Republic and
the United Kingdom. The treaty will enter into force on 1 January 2013, if
at that time 12 of the 17 members of the euro area have ratified it. Once
a country has ratified the Treaty it has another year, until 1 January
2014, to implement a balanced budget rule in their binding
legislation. On 28 February 2012, following the advice of the
Attorney General Máire Whelan, the Irish Government announced that Ireland
would hold a referendum on the Compact. It was agreed to put strict
caps on government spending and borrowing, with penalties for those
countries who violate the limits. Only countries with such
rule in their legal code by 1 March 2013 will be eligible to apply for
bailout money from the European Stability Mechanism (ESM). The aim is to
incorporate it into EU law within five years of its entry into force.
(7) The fiscal pact contains the following
rules: General government budgets shall be balanced or
in surplus. The annual structural deficit must not exceed 0.5% of nominal
GDP. Countries with government debt levels significantly below 60 %
and where risks in terms of long-term sustainability of public finances
are low, can reach a structural deficit of at most 1.0 % of
GDP. EU's highest court will be able to fine a country
that does not adopt a standardised balanced budget rule in its
constitution - with a penalty equivalent to up to 0.1% of GDP. The money
goes either to the ESM (if a Euro country is fined) or to the general EU
budget (in case of fines imposed on non-eurozone signatories). (11)
At the moment only four EU countries have a deficit below
the magic threshold (Luxembourg, Finland, Sweden and Estonia. If you
are in financial trouble you will be fined to 0.1 % of GDP if the
national budget are not in balance or surplus. The Department
of Finance estimates that in 2015, Ireland will have a strucutral deficit
of 3.7%. Bringing that down to 0.5% would mean €5.7 billion worth of extra
cuts. (8) Ireland's debt to GDP ratio is likely to be around
120% in 2015 when we exit the bailout. Reducing the debt ratio by one
twentieth per year will therefore mean reducing it by 3% of GDP per year.
Without significant economic growth, that means paying back €4.5 billion
per year in principal to the bondholders on top of the €9 billion a year
we will be paying in interest rates. This debt will only be paid back on
the basis of yet more savage austerity imposed on working people, which
will in turn mean a worsening of the crisis. (9) Such a rule
will also be introduced in Member States' national legal systems at
constitutional or equivalent level. The rule will contain an automatic
correction mechanism that shall be triggered in the event of deviation.
All signing parties recognise the jurisdiction of the Court of Justice to
verify the transposition of this rule at national level.(11)
This enshrines the 'automatic debt brake' in our legal
system which will have a number of consequences, one being that austerity
measures will be legally automatically introduced and also worryingly will
also mean that engaging in expansionary fiscal policy will be effectively
made illegal. This is not only fundamentally undemocratic, by tying the
hands of future governments to continue the same economic policies and
removing the right of people to elect a government with socialist or even
Keynesian economic policies, but it is also bad economics from the point
of view of ordinary people across Europe. While it is the
case that often achieving a structural balance would be a worthwhile aim,
it also often makes sense for a state to engage in borrowing and deficit
spending in order to create employment and develop the economy.
(10) Member States whose government debt exceeds the 60%
reference level shall reduce it at an average rate of one twentieth per
year as a benchmark.(11) More austerity with more
money being taken from the budget. Member States in Excessive
Deficit Procedure shall submit to the Commission and the Council for
endorsement, an economic partnership programme detailing the necessary
structural reforms to ensure an effectively durable correction of
excessive deficits. The implementation of the programme, and the yearly
budgetary plans consistent with it, will be monitored by the Commission
and the Council. A mechanism will be put in place for the
ex-ante reporting by Member States of their national debt issuance plans.
Member States agree to take the necessary actions and
measures, "which are essential to the good functioning of the euro area in
pursuit of the objectives of fostering competitiveness, promoting
employment, contributing further to the sustainability of public finances
and reinforcing financial stability." They also ensure that all major
economic policy reforms that they plan to undertake will be discussed
ex-ante and, where appropriate, coordinated among themselves and with the
institutions of the European Union.(11) These actions will
be for the benefit of the euro and not of the people of an individual
nation, overseen by an unelected and inviolable, immune from any
investigation, organisation. 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. The
granting of any required financial assistance under the mechanism will be
made subject to strict conditionality.” (6) The
implementation of the programme, and the yearly budgetary plans consistent
with it, will be monitored by the European Commission and by the Council.
As soon as a Member State is recognised to be in breach of the 3% ceiling,
the Commission submits a proposal of counter-measures, concerning in
particular the nature, the size and the time-frame of the corrective
action to be undertaken, while taking into consideration country-specific
sustainability risks. Progress towards and respect of the medium-term
objective shall be evaluated on the basis of an overall assessment with
the structural balance as a reference, including an analysis of
expenditure net of discretionary revenue measures. A qualified majority of
Member States may reject these proposals. (7) Ireland however
will only have 1.6% of the vote. The
Economics, In Ireland's best Interest ? Would the ESM and
Fiscal Compact have prevented the recession? Not according to
the Economist: The pact’s rigidity would make recessions worse, and the
new fiscal rule would not have kept Ireland or Spain out of trouble.
(12) Not according to the Davy Report (Bloomberg: Conall
Mac Coille, Chief economist): The fiscal compact would have had no
bearing on the collapse in Ireland's public finances had it been adopted
at the inception of the euro. (13) Would it improve the
situation now? Not according to the Economist: If private
investors aren't taking losses, then other governments are stepping in to
make good on obligations. That, in turn, will worsen their fiscal outlook.
(14) Not according to Paul De Grauwe (Centre for
European Policy Studies Brussels): The ESM will apply a relatively high
interest rate, countries that apply for financing will be subjected to a
tough budgetary austerity program. Thus, with each recession, countries
will be forced to reduce spending and to increase taxes. Investors who
anticipate this will raise the interest rate on government bonds, thereby
making the recession worse. (15) Not according to Constantin
Gurdgiev, Economist: There is nothing within the Pact that would
facilitate either Portuguese or Irish economic stabilization and recovery.
When it comes to dealing with the current crisis, the new Pact contains no
tools for achieving structural reforms required to arrive at sustainable
public finances. No country has been successful in restoring fiscal and
external balances after a decade of twin deficits. (16) And
what about the future, will it solve the crisis? Not
according to the Davy Report (Bloomberg: Conall Mac Coille, Chief
economist): Markets are unlikely to be reassured by a target that cannot
be independently verified or agreed upon by official institutions.
(13) Not according to Paul De Grauwe (Centre for European
Policy Studies Brussels): Will the establishment of the ESM shield the
Eurozone from future crises? My answer is unambiguous. It will not. In
fact it is worse than that. Some of the features that have been introduced
in the functioning of the ESM will make it more difficult for a number of
countries, in particular Ireland, to attract funds in private markets.
These features will have the effect of increasing rather than reducing
volatility in the financial markets. (15) Not according to
Constantin Gurdgiev, Economist: In medical analogy terms, this week’s
Fiscal Pact signed by the 25 EU Member States, is equivalent to a
misdiagnosed patient (the euro area economy) receiving a potent cocktail
of misprescribed medicines. In other words, the Fiscal Pact is neither
a necessary, nor a sufficient solution to the ongoing crisis of the euro
area insolvency. Moreover, it saddles the euro area with a choice of only
two equally unpalatable alternatives. The first choice is compliance with
the Pact that will lead to a situation whereby a one-policy-fits-all
monetary framework will be coupled with an equally mismatched
one-policy-fits-all fiscal framework. The second choice is business as
usual, with continued reckless borrowing, internal and external imbalances
and ever deepening links between the sovereign finances, the ECB and the
banking sector balance sheets. In other words, there is a choice of either
pushing Euro area down the deflationary, stagnation-inducing deleveraging
spiral, or leaving it in the current modus operandi of reckless borrowing.
Crucially, the idea of the Fiscal Pact as a tool for resolving the
structural crisis faced by the Euro area is equivalent to doing more of
the same and expecting a different outcome. Both alternatives are
internecine for Ireland, and both increase the probability of an eventual
collapse of the euro over the next 5-10 years. (16) What
about the people? Will the most vulnerable be protected? Not
according to Paul De Grauwe (Centre for European Policy Studies Brussels);
The new financing mechanism that is being set up in the Eurozone will rob
countries of their capacity to protect those hit by the recession. This is
a major setback that will reduce the social and political basis that is
needed to keep the Eurozone alive. (15) Not according to the
Economist; If it grows at a depressed pace or declines, ask who is taking
the big real losses. Governments are trying to force losses onto
households in order to avoid a financial blow-up. (17) Will
it benefit Ireland economically? Not according to the
Economist; Countries now targeted by markets to reduce government spending
and raise taxes have been thrown into recession and are falling short of
targeted deficit reduction. The 'Fiscal Compact' treaty would penalise
this deficit to the tune of 1%of GDP, causing further economic pain.
(18) Not according to Constantin Gurdgiev, Economist; Ireland
will be one of the worst impacted economies in the group. In 2012, Ireland
is forecast to post a structural deficit in excess of 5.5% of potential
GDP. To cut our structural deficit to 0.5% will require reducing annual
aggregate demand in the economy by some €7-8 billion in today’s
terms. Debt reductions over the period envisioned within the pact will
take an additional €12 billion annually. For an economy with huge private
sector debt overhang, paying some 12% of its GDP annually to adhere to the
Fiscal Pact is a hefty bill on top of the already massive interest bill on
public debt. The Department of Finance estimates that in
2015, Ireland will have a structural deficit of 3.7%. Bringing that down
to 0.5% would mean €5.7 billion worth of extra
cuts. Constantin Gurdgiev, Economist; In short, the Pact our
Government so eagerly subscribed to is at the very best a continuation of
the status quo. At its worst, Ireland and other member states of the Euro
are now participants to a fiscal suicide pact, having previously signed up
to a monetary straightjacket as well. (16) Wynne Godley: If a
country or region has no power to devalue, and if it is not the
beneficiary of a system of fiscal equalisation, then there is nothing to
stop it suffering a process of cumulative and terminal decline leading, in
the end, to emigration as the only alternative to poverty or starvation.
(19) David Mc Williams: The theory of “internal
devaluation” says that the Irish economy and workforce are so flexible
that we will all take dramatic paycuts, this will drive down wages and we
will become competitive this way. Because we have no exchange rate and are
members of the euro, we will devalue by cannibalising our own wages — but
according to the present policy, even at these much lower wages we will be
able to service the huge debts built up in the credit bubble. How is that
possible? Well, it is not. There is a reason why no economy
in the world has ever emerged from a recession like ours without changing
its exchange rate. The reason is that it simply can’t be done. There is no
evidence anywhere, ever, that shows that a country can operate a
successful “internal devaluation” — particularly an economy carrying as
much debt as we have. It is not that the policy of internal devaluation
is not working, it can’t work. It has never worked anywhere, ever.
(20) Conclusions It is the sovereign right of
the Irish people to make an informed decision and have their say as to
whether we wish to confer more powers to the EU. This means we are
entitled to consider all aspects of this arrangement before any
ratification by the government. It is a complex arrangement
involving the Amendment 136 and two treaties but as each is interlinked
and empowers the other, they cannot be taken separately and must be put to
the people for their consideration in their entirety. Anything less would
be undemocratic. References 1.
First Amendment? The Treaty Change to Facilitate
the European Stability Mechanism by Dr. Gavin Barrett 2.
http://nationalplatform.org/2012/02/28/two-steps-to-a-fiscal-union-for-the-eurozone-a-third-step-to-distract-attention-from-the-first-two/ 3.
http://eutopialaw.com/2012/02/21/responding-to-the-economic-crisis-public-law-in-a-post-lisbon-age/ 4.
http://www.economist.com/blogs/freeexchange/2012/02/european-stability-mechanism 5.
The European Stability Mechanism, http://www.ecb.int/pub/pdf/other/art2_mb201107en_pp71-84en.pdf 6.
http://www.people.ie/eu/esmref2.pdf 7.
Wikipedia 8. http://notesonthefront.typepad.com/politicaleconomy/2012/01/the-government-in-signing-the-fiscal-treaty-has-effectively-committed-itself-to-introducing-up-to-6-billion-in-tax-incre.html) 9.
(http://brianmlucey.wordpress.com/2012/02/04/the-fiscal-compact-maybe-inevitable-hardly-sensible/) 10.
(http://socialistparty.net/campaigns-issues/34-campaigns/899-why-this-really-is-an-austerity-treaty) 11.
TREATY ON STABILITY, COORDINATION AND GOVERNANCE IN THE
ECONOMIC AND MONETARY UNION BETWEEN, http://european-council.europa.eu/media/639235/st00tscg26_en12.pdf 12.
http://www.economist.com/node/21541859 13.
Davy Report (Bloomberg: Conall Mac Coille, Chief
economist) 14. http://www.economist.com/blogs/freeexchange/2011/12/euro-crisis-2 15.
http://www.irisheconomy.ie/index.php/2011/04/17/paul-de-grauwe-on-austerity-and-the-implications-of-the-esm/#more-10186 16.
http://trueeconomics.blogspot.com/2012/02/622012-fiscal-compact-treaty-sunday.html 17.
http://www.economist.com/blogs/freeexchange/2012/01/euro-crisis 18.
http://www.economist.com/blogs/freeexchange/2012/01/euro-crisis 19.
http://www.levyinstitute.org/publications/?docid=1493 20.
http://www.davidmcwilliams.ie/2011/12/28/leaving-the-euro-may-be-our-least-extreme-option Further
Reading 1. DECISIONS EUROPEAN COUNCIL DECISION
of 25 March 2011, amending Article 136 of the Treaty on the Functioning of
the European Union with regard to a stability mechanism for Member States
whose currency is the euro (2011/199/EU), http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ%3AL%3A2011%3A091%3A0001%3A0002%3AEN%3APDF 2.
DRAFT EUROPEAN COUNCIL DECISION
of … amending Article 136 of the Treaty on the Functioning of the European
Union with regard to a stability mechanism for Member States whose
currency is the euro http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/118578.pdf 3.
The European Treaty Amendment
for the Creation of a Financial Stability Mechanism Swedish Institute for
European Policy Studies http://www.eui.eu/Projects/EUDO-Institutions/Documents/SIEPS20116epa.pdf 4.
TREATY ESTABLISHING THE EUROPEAN STABILITY MECHANISM http://www.european-council.europa.eu/media/582311/05-tesm2.en12.pdf 5.
TREATY ON STABILITY,
COORDINATION AND GOVERNANCE IN THE ECONOMIC AND MONETARY UNION
BETWEEN http://european-council.europa.eu/media/639235/st00tscg26_en12.pdf
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Comments (6 of 6)
Jump To Comment: 1 2 3 4 5 6Extractive Suction Mechanism....siphons out the services other treaties cannot reach....c'mon turkeys, get out there and vote for Christmas for the EUsual wuncha EUsorous bankers....
Give us your hositals, your schools, your pensions and your children...we'll pay you for our golden cushions in 24 carat austerity...we can spell it, we can shout it, we can praise it, we can even sell it...but not through anyone who will experience it themselves.....austerity for our menial minion mediot delivery boys 'n girls??...not this year...thats strictly for your one in five hungry children as we boom agribusness export profits to pay the gambling debts of the last posse of poseur pussies who fed you earlier neo-liberal bait.
Lie down croppies...Britannia and the offshore havens rule...you had your fifteen years of independence...Warhol only skimmed the surface.
TREATY ESTABLISHING THE EUROPEAN STABILITY MECHANISM
ARTICLE 35.1
Immunities of persons
"In the interest of the ESM, the Chairperson of the Board of Governors, Governors, alternate Governors, Directors, alternate Directors, as well as the Managing Director and other staff members shall be immune from legal proceedings with respect to acts performed by them in their official capacity and shall enjoy inviolability in respect of their official papers and documents."
The above excerpt is from:
http://www.european-council.europa.eu/media/582311/05-tesm2.en12.pdf
================
Impunity:
"Impunity means the impossibility, de jure or de facto, of bringing the perpetrators of violations to account - whether in criminal, civil, administrative or disciplinary proceedings - since they are not subject to any inquiry that might lead to their being accused, arrested, tried and, if found guilty, sentenced to appropriate penalties, and to making reparations to their victims." (From: http://www.derechos.org/nizkor/impu/principles.html )
"Once our grossly corrupt legal profession decides to deliberately ensure that the targets of government crime cannot get any legal representation of the kind which would stop the government crime they are being subjected to, then the targets of such crime are totally on their own, and their situation is completely hopeless at the present time: as far as 1) stopping the Government crime is concerned, and 2) also as far as receiving justice and reparations in connection with the government crime (and associated C-PTSD injuries) in question."
The excerpt immediately above is from an e-mail dated March 16th 2012 which was copied to (among several others) Republic of Ireland Chief Justice Susan Denham, Republic of Ireland Prime Minister Enda Kenny TD, and Republic of Ireland President Dr Michael D. Higgins (Principal Guardian of the Constitution of the Republic of Ireland). The full text of the e-mail in question can be viewed at:
http://www.humanrightsireland.com/InjuriesBoardIreland/16March2012/Email.htm
Shows you how the Legal Profession use long sentences to make money.
I'm waiting to see what good the loan of a further €1 trillion to the EU banks has done by voting day. The loan was paid in two stages at the back end of 2011.
If I see neighbours dancing in the streets and everyone smiling and honking their horns, then I'll know that our Masters in Brussels are clever people who had their finger on the pulse all along. Their paperwork is messy but I'll live with that. Inviolability - sure we should all embrace that. I'll vote Yes. I'll tug any forelock you put in front of me. I'll marry a son off to Michelle Mulkerin and vote for Innda next time.
If I see much the same as today, then I'll know that our Masters are not clever enough to run the financial system, never mind the tortuous legal process at the back of it. I'll vote No.
..that there is any question of their cleverness and ability to run the financial system effectively and highly efficiently...
The questions are about who's interests the system is designed to foster, and the escalating global collateral damage from their centripetal asset-stripping of the earth into their offshore reservoirs of liquidised resources and labour.
The trajectory of the program is unidirectional, and the managers have invested their egoistical existences in the program's furtherance of what they label as 'wealth creation'.
They have the population convinced that it is an inclusive general prosperity they serve, when it is, behind the Newspeak, the diametric opposite; an exclusive extraction of monetised and abstracted credit, a purely psychological numerological pseudo-scientific scam.
As the old chestnut puts it, when we've poisoned the last river and exterminated the last fish we'll realise we can't get nutrition from our coins and plastic cards. But in the meantime the system feeds its advocates. And the pro-ESM campaign has been running for months...with a unanimous consensus that we must get the right answer and there is only one right answer.
If they argued that we have to accept the shackles, but they are taking the case for fixing the problem to Brussells and other fora, and will demand reform and adjustments to ensure the now fading subsidiarity(anyone remember that carrot?)is ensured there would be some hope they give a shit about anything other than their petty careers. They are as happily in lockstep as Bertie ever was, and while they wont overtly say it, their sole wish is that all critics follow Bertie's suicidal prescription, and get gone.
"Not everyone despairs. Some argue that the Internet and social media may prompt a new era of transparency, raising the reputational risks for governments that fail to clean up their act."
"It's a bit like the beginning of an avalanche where it is very hard to predict where it will end up," said Tim Hardy, a left-wing blogger describing himself as a cheerleader for the officially leaderless group."
"It's not just Britain. A Reuters investigation this month showed how some U.S. states -- notably Wyoming and Delaware -- were failing to meet international standards, offering 'shelf companies' to help hide assets and avoid tax."
All three of the above excerpts are from a Reuters News Agency Article titled "Analysis: Is Britain more corrupt than it thinks?", which can be viewed at the following Internet location:
http://www.reuters.com/article/2011/07/20/us-pht-newscorp-britain-corruption-idUSTRE76J25L20110720
Related Link:
http://www.opednews.com/Diary/Truth-can-sometimes-be-str-by-William-Finnerty-120421-377.html