I thank the sub-committee for the invitation to address it on an issue in respect of which we are all going to talk ourselves to death during the next six weeks or so. I am one of the 16 Deputies who form the Technical Group. Five of those 16 are members of the United Left Alliance but I am not. I wish to make it clear that I do not speak on behalf of the other Independent Deputies who comprise the Technical Group. I would expect, however, that there is a wide range of views among those individuals.
I have been asked to comment on the reaction of Irish society to the treaty. I do not believe that any of us can judge what is the level of support for the various positions that have been articulated in respect of the treaty. It will not be possible to make a call in that regard until after 31 May next. After all, even if we do not have control of our finances, the people remain sovereign. I have some very grave concerns with regard to the treaty. I would be very surprised if there is one person in this room who does not have such concerns. It is important to have a robust and honest debate about the merits of that on which we are being asked to vote. Several people have expressed a number of concerns about the treaty and I share these. I will, therefore, endeavour to outline these concerns, which I believe are legitimate, in an honest manner.
The explanatory memorandum to the Referendum on the Thirtieth Amendment of the Constitution (Treaty on Stability, Coordination and Governance in the Economic and Monetary Union) Bill states: "With a view to securing economic recovery and sustainable growth, the key provisions of the Stability Treaty relate to a strengthening of rules underpinning the Stability and Growth Pact agreed by EU Member States in relation to the euro currency." The memorandum also states that "its core aims are improved stability, coordination and governance in the Economic and Monetary Union". At face value, the treaty is a relatively simple document. Under a purely literal interpretation, its several provisions will certainly achieve increased co-ordination and governance. However, I am uncertain with regard to the level of stability it will provide in the longer term.
The various signatories to the treaty are not starting from the same point. Essentially, Ireland is coming at it from the perspective of having a debt which is unsustainable. Therefore, the various states involved are not equal contracting parties. That is important to note, particularly when we are discussing stability. When I consider the background to how this treaty came into existence, particularly in the context of the intergovernmental approach that was taken - an approach about which I am quite appalled - I come to the view that the treaty is in fact an insurance policy aimed at giving the core euro states insurance in respect of the loans provided to the peripheral states. There was a great deal of money around in the not so distant past and countries such as Germany were undergoing a different economic cycle. These countries made more money during the period in question by taking a risk on lending to peripheral states. Now, they want a mechanism to be put in place to ensure that they get this money back. The treaty involves guaranteeing the money loaned to peripheral states. In the case of Ireland, the treaty relates, in particular, to the money that was loaned to our banks which, in turn, loaned it to those in the construction sector and so on.
The states at the core of the eurozone are the ones that this treaty, if passed, will benefit the most. If it is passed, it will have profound implications for everyone in this country but it will impact most on people on low to middle incomes and those who are most dependent in our State. It will eliminate the prospect of debt write-down because it is a contract we are entering into. It imposes a set of rules which include financial penalties for not adhering to the formula. It puts a gun to the head of states who may borrow under the ESM. It is provided in the fiscal compact treaty that if we do not ratify it, we do not have the option to seek funding from that source. It is interesting that the French Socialists abstained on the decision on this treaty within their parliament on the basis of that very provision. It seems Germany in particular wanted these rules applied at constitutional level because it believed it would copper-fasten the provisions to ensure they could not be watered down in the future. If there is any genuine plan to deal with the debt crisis, we must at this point have debt write-down. There must be some certainty and we cannot have certainty about the euro unless we have that.
We must acknowledge that terrible economic mismanagement was at the heart of the crisis and that this happened not only in the peripheral states but also at the core. Germany and France were the first two countries to break the rules of the Stability and Growth Pact. Size matters and it mattered when we voted against treaties irrespective of what position people took. The recklessness was not unique to the periphery.
A market analyst said on a number of occasions recently that the fiscal treaty has become unimportant, that the markets are not paying any attention to it and that it was a political sop to Germany. However, if we include it as part of our Constitution, all future Irish legislation must be in keeping with the treaty and that includes money Bills, which will mean that the Minister for Finance will frame his or her budgets with the treaty - which is a fairly open-ended measure - at the core. The treaty has serious consequences and we must anticipate what they will be in the context of a potential "Yes" vote.
I wish to move on to some of the legal issues, as the wording of what we put into our Constitution is important. The composition of wording of the amendment, on which we are being asked to vote, is dangerous in that it elevates this intergovernmental treaty to a level that is equal to previous European treaties and, in that context, I have suggested an amendment. Arguably, those treaties created and ceded powers to a supranational legal organisation which is democratically accountable to its people. We shared our sovereignty. I supported the sharing of it on some occasions and I voted against treaties on other occasions. This treaty contains no such democratic oversight, which is particularly worrying given that it seeks to impose direct fiscal obligations on the State. I propose the deletion of the following words: "No provision of this Constitution invalidates laws enacted, acts done or measures adopted by the State that are necessitated by the obligations of the State under that Treaty or prevents laws enacted, acts done or measures adopted by bodies competent under that Treaty from the force of law in the State". Under this treaty we are creating an intergovernmental organisation that is on a par with the European Union. In wording the amendment in the manner proposed, that is what we are doing. Our Constitution is slightly above such an intergovernmental organisation and the European Union, which would in effect be equal to each other.
I have serious concerns about the wording of the amendment. Simple ratification of the treaty, along the lines of the International Criminal Court Treaty, would be sufficient wording to achieve the Government's intent. I remain opposed to the treaty in principle and will vote against it. Nevertheless, I must query why the wording of the amendment is so explicit and why we are aiming to give it such superior elevation in our Constitution.
We should consider what the substance of the treaty means in practical terms. I am a great believer in examining the practical consequences of measures. The current general government deficit is of the order of 9.5% to 10% of GDP. We need to reduce it to close to 3% by 2015 and the Government has decided on the ratio of cuts to spending in terms of the way that will be achieved. That means that in the next four budgets we will close the gap between what we take in and what we spend by approximately €13 billion. I could be out regarding that figure but it is near enough. If we exit the current programme of external support, the provisions of the treaty would mean we would continue to make fiscal adjustments virtually at the same rate into the medium term.
I heard the Tánaiste state at the weekend that there are two very tough budgets to follow. It would be hopeful if we only had two tough budgets ahead of us. I say that with tongue in cheek, as people are looking for hope but I believe this treaty gives them no hope.
This treaty has profound implications for a country that is as indebted as we are. It has major implications for the way in which we seek to foster economic growth. Already, we have seen how restricted the Government was when it sought to bring in a jobs budget in that it was watered down to a jobs initiative. There was no wriggle room to deal with what is the fundamental issue here, that is, getting people back to work.
Exports are a natural means of generating growth for a trade-dependent country such as Ireland. Currently, we are relying almost solely on the export sector to grow the economy. That is not good enough. International markets remain weak. Yesterday or the day before, Spain's finance Minister admitted that the country had re-entered recession. Global demand is sluggish. I do not need to point that out to anyone in this room. The export-led recovery will not arrive quickly and while, undoubtedly, trade should make up an important element of Ireland's return to solvency, it cannot be the only element of the overall strategy. In saying that, I do not want to say anything in that respect in any way other than to endorse the efforts being made to try to generate growth in the global markets for Ireland.
We are locked into a fiscal adjustment plan that strips the Government of any means of stimulating the domestic economy. The treaty will extend that hardship well into the next decade. Over that period and under those circumstances, with what sort of an economy will we end up? We must think about that. If this plays out as it is stated in black and white, it will be dire. If we reach the 3% deficit target and we do not have the capacity to grow the domestic economy, the options will be down to a choice of two, namely, cuts in services and new and increased taxes. Moreover, this new treaty means that we must go beyond the 3% deficit and reduce it to 0.5%.
On the overall Government debt, under the terms of the treaty we will be signing up to reducing our debt to GDP ratio to below 60% by making the debt service payments one-twentieth of the excess in each year. Ireland's debt to GDP ratio will be 120% at the time when we exit the current bailout programme. Various amounts are being bandied about in terms of what that will amount to but even taking a conservative figure of between €3 billion and €4 billion annually, we can only anticipate the impact on this country in terms of where all the low hanging fruit has gone. It is not sustainable. Do I think it is desirable to have the budget in balance? Yes, I do. Do I think it is desirable to have a debt to GDP ratio of below 60%? It is absolutely desirable to have that. Do I think it will be achieved by this fiscal compact? Absolutely not. Those who say it is in our interest to balance our books need also to specify exactly what that means in real terms for people. When we say it is in our interest, or good for us, about whom, exactly, are we talking? The impact would be dramatically different for an old age pensioner and for a person on a very large salary. Our survival as a society will not be achievable with the fiscal compact. It is dishonest to sign up to something when we know we cannot achieve what is being asked of us in that contract. We cannot achieve it unless we get a debt write-down.
Our Minister for Finance was recently dismissed by the ECB when he sought to deal with the Anglo Irish Bank promissory notes. We had been told the remaining bondholders would be paid because there was a bigger prize. Where is it? There is certainly no obvious return for our compliance or our obedience. On behalf of the Technical Group I went to some of the briefings during the various stages of the fiscal compact work and at one of them I asked the Taoiseach if he had raised the issue of the unsustainability of the Irish debt. He told me the focus was on the euro and there was no mood for dealing with the problems of individual states. The focus was indeed on the euro but it must be acknowledged by even the most ardent supporters of this treaty that the interests of banks in Germany, France and the UK, the primary lenders in the creditor countries, are primarily served by this treaty. The outcome of this treaty clearly benefits them over and above the debtor states which are, in the main, though not exclusively, the peripheral countries. Spain and Italy are in serious trouble and France is not far behind. If we are looking for a European-level solution to this problem, at which level I agree it must be sorted, why are we not introducing institutional changes that would help to ensure we sort this crisis out and that it cannot recur? It cannot be a one-dimensional approach, as this treaty is.
Not only is this intergovernmental arrangement driven by and framed in the interest of Germany and France, which are the creditor countries, it is also driven by a conservative political view of the world. The vast majority of the Heads of State or Government in Europe come from a conservative or Christian Democratic background and this is reflected in this treaty. When something is added into a country's constitution it should have the benefit of longevity and be robust enough to withstand the kind of political and social changes that will happen over a protracted period. We are looking at this from a point in time dominated by a political philosophy. I believe that is the wrong approach for putting something into our Constitution.
The fiscal treaty is definitely a solution but it is not a solution for Ireland. I know that. It is a solution for creditor countries rather than debtor countries, for Germany and France as the principal creditors. It is a solution for the preservation of a particular economic philosophy. That was well articulated by a person whose work I have read a little of, the German philosopher, Jürgen Habermas. He stated that Europe has embarked on a kind of integration where intergovernmentalism takes the lead, which he calls "an arrangement for exercising a kind of post-democratic, bureaucratic rule". That sums up this intergovernmental arrangement very well.
The reality is there are consequences for voting "No" and we know that. However, there are consequences also for voting "Yes". Clearly, not being able to request emergency funding from the ESM is a major consequence and we must consider how that will affect us, both domestically and beyond. Just as we consider the domestic effects, however, we must also consider that it is not in the interests of the creditor countries for us not to be able to access credit. After all, they are lending us the money to pay them back. They are not lending us the money to pay for our public services but in order to get back their loan. There must also be scope to borrow to fund growth and to provide basic services and build infrastructure. There must be scope in this treaty for debt write-down.
I query whether, under this treaty, we will have any euro to spend within our domestic economy or on essential public services. We might achieve a more stable euro but for others, not for ourselves. We joined the European Union, with its evolving values and the evolving objective it has had since it was founded. It is underpinned by a certain set of values and objectives. These include: sustainable development based on balanced economic growth and price stability; a highly competitive social market economy aimed at full employment and social progress; a high level of protection and improvement of the quality of the environment; the promotion of economic, social and territorial cohesion; and solidarity among member states. Those objectives are underpinned by values such as respect for human dignity, democracy, liberty, the rule of law and equality. It seems that the collective member states have become a hostage to the money markets and have lost sight of the purpose and vision that underpinned the European Union. There has been an absence of a common vision and an absolute absence of leadership and of a common, workable solution. This is a one-dimensional approach and it is not a solution. It is very dangerous.
