Ireland gets to vote on Europe

What are the implications of the Irish having a referendum on the European fiscal compact treaty?

The folk who drafted the fiscal compact treaty made sure that it couldn’t be brought down by one country voting against it in a referendum. They actually made sure that wouldn’t happen if several countries voted it down. They lowered the hurdle to 12 countries having to ratify for the fiscal compact to come into force. If it had been a normal EU treaty there would have needed to be unanimity so the Eurozone countries have David Cameron to thank for the fact that this treaty is put together on different, inter-governmental terms and has a lower threshold.

But where dies that leave Ireland if they don’t sign up?

Ireland would NOT be thrown out of the Euro for not signing up to this compact – that is the emphatic guidance from the European Council (the European Commission insists it doesn’t have a locus on this because this is not an EU treaty). What Ireland would be in for is potentially a rough time from the markets and the credit ratings agencies and, if it wanted another dip into the bail-out fund, a great big “non.” The current arrangements with the ECB and the IMF are safe and take Ireland to the end of 2013. Ireland is at great pains to emphasise that it is doing a lot better than anyone thought possible economically and is not expecting to go back asking for more bail-out money.

Not surprisingly, to minimise the pressure from the markets, Ireland is trying to call the referendum soonish. It’s expected before the summer holidays, possibly as early as June.

Ireland is not automatically thrown out of the Euro as a result of a “no” vote in the referendum but if the markets turned on Ireland as they turned on Greece… that would be a different story.

Ireland will sign the Fiscal Compact treaty along with 24 others in Brussels at the EU summit on Friday morning. But whether it is able to deposit the instrument of ratification by the January 2013 deadline is now in doubt. And so too, some will worry, is Ireland’s recovery.

The other main challenger to the Fiscal Compact treaty has been the front-runner in the French Presidential elections, Francois Hollande. But EU sources seem a touch sceptical about whether he would actually press the nuclear button and demand a substantial rewrite of the treaty or ask for some lower level additional commitments to growth. Monsieur Holland is in London tomorrow but not seeing the PM – he sees Ed Miliband instead.

Number 10 will no doubt be saying this is a protocol matter but the protocols on whether you support an election contender seem more breached or nuanced than Whitehall sometimes likes to pretend and the clear implication is that Mr Cameron, as he’s already hinted, is backing Sarko.

And fresh back from a couple of days in Brussels, Bill Cash has managed to smash up the timetable for the parliamentary week and win himself a three hour debate tomorrow on whether the Fiscal Compact treaty is illegal.

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