‘The treaty is about more than stability. It is also about solidarity and trust between the peoples and governments of Europe.’
Last week, the Dail debated the Fiscal Stability Treaty and I told the House that solidarity is the key to recovery. Below is a transcript of my speech.
The website for the Stability Treaty is now live and available on www.stabilitytreaty.ie
I have found colleagues’ contributions to the debate this evening both interesting and informative. I was not aware, for example, that it was the view of Deputy Luke ‘Ming’ Flanagan that we should leave the euro.
Deputy Luke ‘Ming’ Flanagan: I have expressed that view on previous occasions in the House.
Deputy Alex White: I respect his view although I disagree with it. I would be interested to hear Deputies Flanagan and Joan Collins say whether they would consider us to have a better chance of running our own affairs if the treaty is accepted or if it is rejected. Does Deputy Collins believe we will have more or less austerity if it is defeated? Many articles have been quoted from colleagues on that side of the House to support their case. Mr. Krugman’s ears must be very red. In an article of his on 11 March to which rather less reference was made, Mr. Krugman said: “You may ask what alternatives countries like Greece and Ireland had, and the answer is that they had and have no good alternatives”. In other words, while he has offered a major critique of the strategy in the eurozone, he has formed the view that Ireland, among others, has little choice in regard to where it finds itself. I do not accept that we are without choices, but I am strongly of the view that if this referendum is defeated, we will have more austerity, not less. We have a deficit of €15 billion and nobody willing to lend to us. Were we to decide, as Deputy Flanagan advocates, to just leave the currency, we would simply isolate ourselves from any prospect of recovery.
I acknowledge that the treaty is not perfect. In fact, I do not accept it is the solution to the problems in the eurozone. Moreover, I very much agree with some of the points made by Deputy Mick Wallace and others in regard to the huge economic imbalances that exist across the eurozone countries. That is a major issue that must be addressed. It may even be more at the heart of the collapse in Ireland than fiscal indiscipline ever was. I agree with Deputy Pádraig Mac Lochlainn that if the rules set out in the stability treaty had been observed for the past ten years they would not, on their own, have addressed or solved the problems that have arisen. They would not have tracked the bubble which was, in fact, an indirect or perhaps even a direct result of the imbalances to which I referred. The explosion of credit that emerged in the core of Europe after 2000 and the introduction of the euro was bound to have a differential impact on different countries given their varying economic circumstances. Our economy simply was not in a position to withstand and should never have been exposed to that type of influx of credit in the uncontrolled manner in which it occurred. I absolutely agree that fiscal rules alone would not have prevented the crisis. However, that is not an argument against fiscal rules. Rather, it is an argument that fiscal rules are not enough, that the fiscal discipline that is advocated is necessary but not sufficient. It is certainly not a case for throwing out the rules as if they were not required at all.
It is not difficult to ascertain the impetus behind this treaty. The design of the euro currency in the early part of the last decade was incomplete and arguably flawed. Member states thought they could have monetary union without any type of fiscal co-ordination, but there is no currency in history that ever could survive in those types of circumstances. Rules were set out in the Stability and Growth Pact, but they were ignored by many countries, not so much those on the so-called periphery but by France and Germany, among others. What is now being proposed is, first, to take the rules from the shelf, dust them down and strengthen them, which is what was done last year. The provisions contained in the treaty are the strengthened rules that were reintroduced last year. Indeed, they are largely the same rules that have been in place since 1997, which have merely been dusted off and strengthened. In addition, a decision was made to introduce corrective mechanisms where the rules are not applied.
This is the main response the European Union has had to the crisis in the eurozone. To reiterate, while I am of the view that it is necessary, it is not sufficient because we have not yet addressed the macroeconomic imbalances that continue to exist. Europe made a start on addressing those imbalances in the six-pack last year and made additional progress in this new two-pack set of regulations, but it has not done enough to address the risk that the same type of explosion of asset price bubbles could recur in periphery countries. It is moving in the direction of addressing the issue, but it should be given just as much attention as is being given to fiscal discipline. Unfortunately, that is not being done. Nor is sufficient attention being given to the necessity for a growth strategy in Europe. It will probably never be possible, despite what colleagues have argued, for a Keynesian, stimulus-type approach to be taken in isolation in one country within the eurozone. It will however be possible for it to be done in the eurozone as a whole, and I support that, but given the configuration of a system where there is monetary union and fiscal co-ordination, no single country will be in a position to stimulate its own economy without the co-ordination and co-operation of other member states.
That is not to say that Keynes is dead, as some have claimed. Nor does it necessarily mean that neoliberalism has finally triumphed, as Deputy Clare Daly claimed, or that there is no room for any other politics. I strongly disagree with her on that. However, when we have 22 or 23 essentially right-wing or centre-right Governments out of 27 in the European Union, there is a large political job to do. One will not do that political job by cutting oneself loose from the currency or choosing not to engage in politics in Europe. One will not succeed by abandoning any interest in whether the elections in France at the weekend, for example, will change the Government in that country. We will not achieve our objectives by deciding not to make common cause with other Governments, whether on the left or centre-left, in other member states. Instead we should be in Europe arguing with people, co-operating with people and making common cause with people.
There are many people elsewhere in Europe who are interested in hearing the type of debate that is taking place in this Chamber. However, Deputy Flanagan and others are arguing that we should just look after ourselves. He claims that is not a nationalistic position to adopt but I would contend, with respect, that he is being the very essence of a little Irelander.
There is no future for this country on its own. I have made the point to Sinn Féin Deputies in the past that sinn féin as a concept – ourselves alone – is ludicrous in the modern world. We cannot solve all the major problems in the world, economic, financial and environmental, ourselves alone. Deputy Flanagan might believe it can be done but that does not make it so. What we must do is, for example, mutualise debt and deal with the necessity for restructuring it where countries have an overhang of debt. I am strongly of the view that the debt must be restructured in some considerable respect. That is a political fight in Europe. It is a political fight with countries and institutions that do not want to see it happen. If one believes in eurobonds and the mutualising of debt, let us go and argue for them. Let us go and fight for them, talk to other people who might agree with us and talk to other countries in similar positions. However, my colleagues across the House do not want that. Instead they say we should just forget about it all on the basis that it is neoliberalism, and that we should turn our backs and paddle our own canoe. That will not work. Let us be serious politicians, as I am sure my colleagues on that side of the House are. As I said, I accept that fiscal discipline is necessary but I do not agree it is sufficient. We must employ other economic instruments that promote growth. The European Union has not, despite some welcome initiatives recently, been anything like as forthcoming or robust on the growth side as it has been on the fiscal discipline side. Therefore, it is a considerable challenge to build a new strategy in Europe in that regard.
One could ask why the new rules are being introduced. The rules were strengthened and corrective mechanisms were put in place, but one might still ask what the treaty is about. Again, there is much misinformation about this and perhaps genuine misunderstanding. The treaty is about taking a different approach from simply having the Taoiseach go to Brussels to make an agreement, along with the leaders all of the other countries. It proposes an additional step, whereby countries would anchor these already agreed rules in their domestic laws. That is the difference because although the rules already are in place, the proposal is that they be agreed to in this House in the form of legislation. In other words, the Government does not simply agree to them when in Brussels, but rather at some point after the referendum is passed, the Oireachtas would put them into domestic law through legislation. The rules will not be inserted into the Constitution, although people thought that would be the case. They will be put into law in our Parliament and the people will be asked to agree this should be done at some point in the future.
There has been much misinformation and misunderstanding about the rules. For example, I refer to the notion that the corrective mechanism which would be invoked were the deficit rule, or debt brake, to be breached would be a deeply draconian regime that would be imposed on us without consultation and so on. Of course, it is completely untrue that the corrective mechanism is the draconian regime suggested. The obligation is that Ireland would support and implement proposals with which the Commission would come forward. Such proposals would be country-specific, based on the particular conditions in an individual country. Moreover, there would be a timeframe for the implementation of such proposals. The Commission does not operate in the manner characterised by Members on the other side of the House. There must be a high degree of consultation, as there always has been and as I believe there will be in the future. The treaty states specifically, “Such correction mechanism shall fully respect the prerogatives of national Parliaments”. Consequently, Members will also have a responsibility in this regard. Their role is set out clearly in the treaty and they must step up to the plate. One might ask what this Parliament is doing about budgetary discipline. Obviously, the Government brings forward the budget, but what responsibilities are Members, as parliamentarians, taking on? We all need to engage in self-criticism on how quickly, how carefully and in what detailed way we become involved in budgetary assessment as parliamentarians.
On the deficit target, I remind colleagues that Ireland is already committed in this regard. I acknowledge Members opposite disagree with this and I certainly disagreed strongly with the decision taken in 2008 to provide the guarantee that led inevitably and inexorably to what happened last year in respect of the bailout. However, the State has made a solemn commitment to reduce its deficit to 3% by 2015. Moreover, the treaty provisions will not kick in for Ireland until at least 2015 because the programme of assistance will be in place until then. It is true that Ireland would then be obliged to go further than the figure of 3%. Were it to get out of the programme by 2015, it would be obliged over time to reduce the deficit further to comply with the new rules. However, if one considers the proportionate reduction that would be needed beyond 3%, it pales somewhat when compared with what we have been asked to do and are obliged to do up to 2015.
On the reduction of the debt, Members should consider a country with a debt-to-GDP ratio of 100% – I acknowledge that Ireland’s debt is somewhat higher. As one is obliged to reduce the debt by one twentieth of the amount above 60% of GDP, in the aforementioned case one would be obliged to reduce it by one twentieth of 40%, which is 2%. If such a country experiences growth of 2%, it is covering it. Historically, the manner in which countries have dealt with debt and the way in which one eats into it is through growth. One may argue that Ireland may not experience growth, but if that is the case, we will be back in the same position in 2015 in any event. Ireland will not get out of the programme of assistance without growth. Moreover, the European Union and the world economy will not get out of its problems without growth. Consequently, no matter how one approaches the future, it is a given that growth is a necessity.
On sanctions, there is a belief abroad that the treaty states the European Court of Justice can impose sanctions on countries that do not implement the rules. This is completely untrue. The involvement of the European Court of Justice is confined to a circumstance in which a country has failed to put the rules into law. A country cannot be brought to the European Court of Justice under the treaty for breaching the rules, it can only be brought before it for failing to put the rules into law. This point is not well understood. People are suggesting Ireland will be brought to the court and fined unless it does this, that and the other. However, the treaty does not provide for this. The sanction in this regard would only apply were the referendum to be passed and Ireland then to fail to bring forward the legislation in, say, June. That might occur, but it seems highly unlikely that were the treaty to be ratified by the people, the Government would not then proceed with the legislation.
The treaty is about more than stability. It is also about solidarity and trust between the peoples and governments of Europe. I state to Deputy Luke ‘Ming’ Flanagan and other Members that just occasionally Deputies may need to think about the perspectives of other peoples in Europe apart from thinking, as we must, about our own. We represent our own people and have a duty to them principally before anyone else. While I accept this point, occasionally, we might think about how the world in which we live looks from the perspective of German, Finnish, Belgian or Dutch taxpayers and how they perceive what has happened. It might be worthwhile to consider how they perceive what they have been called upon to do and why they might require a certain amount of mutual trust. In this context, one might consider it to be not at all surprising that in response to further calls on their resources and requests on them to vote in parliament to fund bailouts, they would seek to have people take the rules seriously by incorporating them in their own laws. I repeat that this is all the treaty asks us to do. It does not bring in new rules, but it commits countries to putting the existing rules into domestic law.
As for the imbalances and all the other crucial issues that must be addressed, Deputy Mick Wallace referred to uneven development. He is absolutely right in this regard and has put his finger on the real problem in Europe. It is absolute necessary for the countries of the eurozone and the wider European Union to address now and in the future the question of how to deal with the fact that different countries have different levels of economic development and how to have in place a system and a strategy for growth that simply does not direct itself towards meeting the needs of the so-called core countries, but one that genuinely serves all the states of the European Union. I have mentioned that these are political questions of huge importance. The outcome of the French presidential election at the weekend and the subsequent second round is of massive importance also. These are big political questions and people are thinking about such issues in Europe. The way to approach this issue is not to walk away and suggest the people concerned will only bring trouble to us. I refer to the attitude that suggests it is all trouble, that we do not want it and, consequently, should vote “No”. It reminds me of the little boy holding back the flood with his finger in the dyke. It is as though we can walk away from it and that such things will not matter to us, which is ludicrous.
If people are not convinced, they will be by the following point. There is uncertainty almost everywhere one looks in the world, certainly in Europe. Consequently, one should apply a test of the “balance of risk”. One should ask oneself whether voting “Yes” or voting “No” is the riskier course of action. It appears the Irish people will not take a punt on the idea that we should simply cut ourselves loose, sail out into the ocean in choppy waters, in the expectation someone will turn up to save us.
That is the sort of proposition that is being put forward.
I am of the view that we should remain at the heart of both the European Union and the eurozone. We should also work hard – by means of the rules contained in the treaty and also through other instruments which need to be introduced – in order to strengthen the opportunities for growth in the European Union and those that exist for this country. We must fight alongside those in Europe whose views are the same as ours. We must argue in favour of our political beliefs and we must never give up. The strongest argument in respect of this matter is, quite literally, a comparative risk analysis. In other words, we must ask which course of action is more risky or uncertain. If people apply a basic, rational level of thought to this matter, then it is obvious that there is only one way to vote.