Notes on a Treaty

The following are a few notes on the upcoming referendum from a frustrated expat who shall be unable to vote due to the lack of provision for overseas citizens. To add insult to injury, it appears I shall be unable to register for Belgian elections, despite Belgium having manifold levels of government and despite still being expected to pay for this extravagance via my taxes. I am still waiting for confirmation on this. I digress.

The Irish republic will vote on the new stability agreement at the end of next month. A tumultuous and hard campaign is imminent.

All commentary on the treaty must occur in context. This treaty does NOT provide a new set of rules; it merely provides a means of enforcing rules that were agreed and ratified by the nations of Europe in the Maastricht treaty (TEU) over 20 years ago.

Where these rules have been strictly adhered to (Denmark, Estonia, Finland, Sweden and Luxembourg have consistently stayed within the parameters) unemployment remains low and growth is steady. In short, the rules work.

Many on the hard left say that this treaty outlaws expansionist Keynesian economics through stringent borrowing controls. This overlooks in a broad stroke of breath taking general ignorance the fact that a sovereign state might be able to earn its own capital as opposed to perpetually borrowing and deferring payment until a later date. There is plenty of room for Keynesianism if one can pay for it. Running amok with the national credit card is no longer an option. One need only look at what happened when Fianna Fail won the 1977 General election with a manifesto dripping with fiscal lunacy to see the folly of such policies. The national debt sky-rocketed and in the following decade unemployment hit 20% as the economy faltered.

In a perfect world, all governments would spend counter cyclically. That is to say they would save money when times are good and spend it when times are bad. Had the Irish state saved a couple of hundred million in the recent boom and spent it on the construction industry this year think how many people they could employ. Furthermore, given the fall in labour costs in this sector, think how much further this money would go.

Put simply, as any good home maker knows, it is always preferable to save for something then it is to buy on credit.

The hard left, it would seem, can see no way of growing a state’s economy other than borrowing. 20^th century history shows where this extensive sovereign borrowing leads.

My former colleague, Brendan Halligan makes the very valid point that there shall be fiscal austerity in Ireland either way. Voting yes may not seem palatable in light of the above; it will allow smoother access to future bailouts and send a signal to the broader world that the republic still has a stable relationship with Brussels.

I dread what I fear may be an onslaught of jingoism and “them v us” rhetoric in this campaign. For reasons like the one I have outlined above I believe we should ratify this treaty. When I say “we” I of course mean we the people of Europe must put our shoulder to the wheel and protect our common currency.

I will end on a note of consensus. Unlike previous European agreements voted upon, this will be distributed to the populace in printed form, for free, and long in advance of the vote. It is essential that anyone wishing to make an informed decision read it in full.

Reporting the euro

This entry does not seek analyse the current crisis at the heart of the currency. Rather, it is a look at how the media are dealing with it.

The process of European integration, despite being decades old, has always been thought of as something ever so slightly mysterious by commentator and citizen alike. A knowledge of the workings of one’s system of government at a state level has always been a given but an understanding of how the European stage works is usually seen as expertise.  This obviously and very dangerously leaves room for some rather sloppy journalism. Combine it with your workaday hack’s inclination for hyperbole and ignorance shall always win.

In our current crisis, we are constantly being told that the euro currency area is both intellectually and financially bankrupt. This is not entirely accurate. Whilst it is true that the debt to GDP ratio of the eurogroup is 86%, a good 25% higher than it should be as stated in the Maastricht treaty, it is also notable that the same ratio for the US$ area is a whopping 101%. Whilst questions are occasionally raised about the US economy, one never encounters anything near the same level of scare mongering about the greenback. The problem even to the under initiated here is not the level of debt, per se but the structures in place to handle it.

Most shockingly of all in coverage is the near total lack of good news stories surrounding the euro. The fact that the Chinese are switching large amount of their investments from $ to € passed the Irish media by completely until the Chinese heir apparent visited in the past week. The currency’s continuing expansion continues to evade the press as well. Estonia had a very smooth transition from the Kroon earlier this year. Their neighbours Latvia and Lithuania remain committed to joining. Denmark’s new PM has said she is in favour of holding a referendum on membership whilst Iceland’s finance minister has said he is in favour of the Nordic isle joining soon after EU accession.

The current situation is unprecedented but should have been anticipated. The proposed solutions in the fiscal compact can go a long way towards finding stability but I must correct those that say it is a radical and new set of rules. Most of the provisions in the text are to do with the implementation of the existing rules in the Maastricht treaty, the currency’s founding document, signed and passed into law democratically 20 years ago this year.

“Doom porn” is popular in these tumultuous days. When I see headlines such as “10 days to save the euro” in reputable broadsheet newspapers, I fail to see how their assertions can either be accurate or helpful. Though I’m sure they sell papers. I find it interesting that a lot of the more balanced coverage I see comes from non-English language sources. The English language media, particularly in Britain and the United States may have an agenda here, particularly when the increasing lack of diversity in media ownership in these territories is taken into account.

To those that hold such an agenda, might I remind you that the overwhelming majority of economists see a lengthy future for the currency, even if Greece and other peripheral states are forced out. Propagating an idea that the whole thing shall go down the drain leaving 17 disparate economies all on their own all of a sudden for solely ideological reasons is ill informed and less than helpful.