It was no surprise last week when it was announced that Ireland would hold a referendum on the fiscal compact treaty on 31st May. Prime Minister Enda Kenny had already astonished the Irish parliament with his initial announcement back in February; however, as more national parliaments prepare to debate the treaty, all eyes will be on the Irish to see which way the vote goes.
The Irish public has a knack of upsetting the European Union. In 2001 and 2008 the Irish public rejected the Nice Treaty and Lisbon Treaty, respectively. These did not go according to plan and in a slight to the democratic process both referenda were held again, with the vote going in the EU’s favour the second time around. This time around the ‘yes’ corner seems to be confident; however, this was the case in 2001 and 2008.
Ireland is currently being held up as a model of austerity policy. The government has continued to pursue their austerity programme despite protests over hospital closures and around half the population refusing to pay a new flat-rate housing tax. There has been a significant group lobbying against this tax led by nine members of parliament. If this issue continues to lurk in the background then the Irish may feel that they are voting on a different issue when it comes to the formal referendum.
The stakes are seemingly higher for this vote. If Ireland votes against the pact then it will lose its right to access loans from the European Stability Mechanism (ESM), the successor to the eurozone’s current rescue fund. This would be a disaster for Ireland as it would not have the financial support that is currently complimenting its austerity package. On the other side, it would enable Ireland to alter its economic policies and drive growth rather than pursue austerity.
The announcement of the referendum upset Germany and they saw it as somewhat of an irritant as they try to convince the eurozone that austerity is the right path to follow. If François Hollande succeeds in the French Presidential election, which he is currently tipped to do, he has promised to renegotiate the fiscal treaty. If this is not just electoral posturing on Hollande’s part and he can renegotiate the treaty, an Irish ‘no’ vote would certainly strengthen his position.
The risk for Ireland in rejecting this is extremely high. Most other countries appear to be relying on their national parliaments for ratification. The treaty also only requires twelve eurozone countries to ratify it. If Ireland were to reject the treaty it is unlikely that it would be able to justify holding a second referendum to reverse the result as it would not be required for overall ratification of the treaty. It would be purely to gain access to the ESM.
So the question has to be asked; why did Enda Kenny call this surprise referendum in the first place? Is it a piece of political genius or an act of anxiety?
If Kenny is able to secure the public’s backing for the fiscal treaty then he can argue that he has their support to continue with the austerity programme. It would be tacit acknowledgement that this is currently the only direction that Ireland can travel in. It does appear to be somewhat of a risk in order to gain a comforting nod from the Irish people. If this vote does go the wrong way for Kenny then he may find himself out of office somewhat quicker than he first thought.