February 29, 2012 6:44 pm

Concessions will secure win in Irish vote

Sinn Féin to lead fight against eurozone treaty

When Greece announced plans last autumn for a referendum on the austere reforms its eurozone partners demand as the price for bailing the country out, so apoplectic was the European backlash, notably in Berlin, that the then prime minister, the socialist George Papandreou, was all but bundled out of office.

Ireland’s announcement it will be putting the German-designed fiscal compact for the eurozone to a plebiscite, by contrast, has been greeted in the chanceries of Europe with meticulously meaning-lite nostrums on sovereignty and democracy.

Some referendums are more equal than others – and, in Ireland’s case, maybe more valuable too.

Because unless Ireland is offered some relief from the huge debts its government has taken on as a result of the banking crisis – not just the Irish bank bust but the wider European banking weakness exposed by the financial crisis – Irish citizens are quite likely to say No.

Given the scale of this crisis – which has meant ripping out 15 per cent of current gross domestic product from the economy – Irish society, because of its cohesion and intimacy, has so far shown itself restrained, resilient and realistic about where the country is.

But Irish voters have form on European Union referendums. Two previous treaties, of Nice and Lisbon, were rejected by the electorate, before it was invited to reconsider and come up with the right answer in a second vote.

In this referendum, likely to take place in early June, the coalition government of Fine Gael and Labour will campaign hard for a Yes vote, alongside a demoralised Fianna Fáil, the traditional ruling party thrashed by voters who held it to account for the crisis a year ago. Irish employers, who have seen the economy become a magnet for foreign investment and an exports engine as a result of EU and euro membership, have come out strongly for the new treaty. The fight against will be led by Sinn Féin, the Republican party, along with clusters of socialists and independents.

While this might look like an unequal battle, it is not. Sinn Féin is starting to eclipse Fianna Fáil as the voice of Irish nationalism. One poll this week gives them 25 per cent against 16 per cent for the formerly almighty Fianna Fáil, with Fine Gael on 32 per cent and Labour down to 10 per cent. The pro-treaty camp will say the choice is between prosperity and suicide; their opponents will call for restored sovereignty against austerity – the pitch that has rocket-fuelled Sinn Féin’s rise. A poll last month on likely treaty sentiment was 40 per cent for, 36 per cent against and the rest undecided – a lot still to play for.

The government and its supporters will have to strike a balance: spelling out what isolation would mean for a vibrant but vulnerable economy, without blackmailing citizens who already feel the EU bullied Ireland into a bail-out 15 months ago.

Enda Kenny, the Taoiseach, has fought Ireland’s corner well over the past year – winning a cut in the rate of interest charged on the EU portion of the rescue package and resisting French pressure to raise Ireland’s 12.5 per cent rate of corporation tax. Now he needs more. There will be no second vote as there was with Nice and Lisbon; the sweeteners need to be front-loaded.

There is broad consensus in Ireland that not all its debts are fully payable. While the last government gave, and foolishly reissued, a blanket guarantee to its stricken banks, huge repayments for Anglo Irish Bank – the now defunct lender at the heart of the credit and property binge – are widely seen as a no longer justified and unpayable Irish contribution to the stability of the EU banking system. The promissory notes issued against ­Anglo Irish debt will cost Ireland €47bn after interest. Every government will have to burn €3.1bn each year until 2023 – and the next payment is due March 31.

Ireland has met all its austerity targets and, especially after the writedown of Greek debt, now expects relief on this part of its debt, probably by parking it in a long bond at low interest. If Ireland’s eurozone partners want a Yes vote, they had better take notice. Otherwise they might as well leave the field to Sinn Féin.

Copyright The Financial Times Limited 2015. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.

NEWS BY EMAIL

Sign up for email briefings to stay up to date on topics you are interested in

SHARE THIS QUOTE