EU referendum is a bad Irish joke

Published in Business Spectator (Melbourne), 22 March 2012

John Maynard Keynes once warned, ‘The inevitable never happens. It is the unexpected always’. It is less well known that he had borrowed this phrase from the 19th century classicist Sir John Pentland Mahaffy.

And what is even more obscure is that it originally referred to Mahaffy’s native Ireland.

Even back then, the Emerald Isle had its own laws of logic. More recently, Ireland’s relationship with Europe has followed a similarly erratic path.

For a long time, the Irish were one of the most pro-EU countries. Little wonder, considering there are plaques on every other corner reminding the Irish that vital pieces of new infrastructure have been funded through EU regional development programs. In economic terms, Ireland’s EU membership made it a net beneficiary of EU spending.

But as a small country that once fought hard for its independence, Ireland also carefully guards its sovereignty. This naturally put the Irish on a collision course with Europe on a number of occasions. Thanks to a 1987 ruling of the Irish Supreme Court, changes to EU treaties have to be confirmed by referendum.

Twice the Irish rejected such treaties. In 2001, the Treaty of Nice on the EU’s expansion to Eastern Europe failed, as did a 2008 referendum on the Lisbon Treaty. Both times, Ireland was given a second chance the following year, and it eventually voted the way the EU demanded. Sometimes the inevitable happens in Ireland after all.

But this time may be different. Once again, a new European agreement, the Fiscal Compact, needs popular support in a referendum. Thanks to its European architects, the Irish have been presented with a false choice. What looks like a referendum is just a farce akin to holding a referendum as many times as necessary until you get the desired outcome.

The Fiscal Compact, demanded by the German government to subjugate Europe under strict spending rules, was designed to be a multilateral agreement, not an EU treaty. This legal distinction made it possible to go ahead without the support of every single EU country. Treaties need EU-wide unanimity, compacts don’t.

For EU policymakers, compacts have another advantage. To come into force, they do not even need to be ratified by every single country. As soon as 12 countries ratify the compact, it is passed. However, to encourage ratification, the compact links ratification to eligibility for payments from the European Stability Mechanism. The message is simple: If you don’t ratify, you will receive no support.

Initially, EU politicians, and the Irish government too, had hoped that the specific legal design of the compact would make it possible to bypass the Irish people and ratify it without a referendum. After receiving legal advice on the validity of such a procedure, which would have almost certainly been a breach of the Irish constitution, the government gave up the plan. A referendum will be held in May or June.

Even though there is no way around the referendum on the compact, the EU has ensured that the Irish decision does not matter to its endgame anyway. Should they approve it, the compact comes into force as planned. If they don’t, it will still come into force thanks to the more than 12 other countries that have already ratified the compact. The only difference: Ireland will have ruled itself out as a potential beneficiary of future EU bailout packages.

Given this choice, the Irish have no better option but to vote ‘Yes’, because with a ‘No’ vote they will only be punishing themselves. That is not to say that they would not rather want to vote ‘No’ if only to punish the increasingly unpopular EU. Be that as it may, the vote is futile as it is not even clear whether the new Fiscal Compact will, strictly speaking, be enforceable or whether the rules and sanctions of the old Stability and Growth Pact will prevail.

Clearing the Irish path for the Fiscal Compact thus looks inevitable, at least in a Mahaffian sense, but even if it unexpectedly fails, it will not matter much to Europe, only to Ireland. And given previous experiences with failed referenda, another referendum could still be held yet again a year later.

Economically, whatever happens in Ireland will not be decisive for the future of the euro. That is more likely being decided in Berlin, Frankfurt, Paris, Athens and Lisbon. But to the rest of Europe watching the farcical march towards a pseudo-referendum on a pseudo-significant agreement, it is a reminder of the anti-democratic tendencies of the EU.

‘In Ireland the inevitable never happens and the unexpected constantly occurs.’ Perhaps the farcical Irish referendum will prove Mahaffy right once again.

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