I thank the committee for its invitation to address it this morning. Writing in Monday's New York Times and reprinted in yesterday’s The Irish Times, the Nobel prize-winning economist Professor Paul Krugman commented on the crisis in Spain in particular and in the eurozone in general. He stated:
When the bubble burst, the Spanish economy was left high and dry; Spain's fiscal problems are a consequence of its depression, not its cause. Nonetheless, the prescription coming from Berlin and Frankfurt is, you guessed it, even more fiscal austerity. This is, not to mince words, just insane... Rather than admit that they've been wrong, European leaders seem determined to drive their economy - and their society - off a cliff. And the whole world will pay the price.
In the same article, Krugman criticised the fiscal treaty as locking in "fiscal austerity as the response to any and all problems".
Another Nobel prize winner for economics, Professor Joseph Stiglitz, has described the European response to the crisis as a "mutual suicide pact". Their comments are echoed by yet another world renowned economist, Dr. Nouriel Roubini, who is probably most famous for having correctly forecast the economic crash. He stated:
[T]hanks to the fiscal compact, even the eurozone's core will be forced into front-loaded recessionary austerity... The trouble is that the eurozone has an austerity strategy but no growth strategy. And, without that, all it has is a recession strategy that makes austerity and reform self-defeating, because, if output continues to contract, deficit and debt ratios will continue to rise to unsustainable levels. Moreover, the social and political backlash eventually will become overwhelming.
Krugman, Stiglitz and Roubini reflect a widespread view that the EU has misdiagnosed the economic crisis. The proposed new treaty seeks to assign that misdiagnosis the status of constitutional law. It is akin to a doctor prescribing an inappropriate treatment to a patient and then legally debarring the patient from exploring any alternative treatment. This is the reason that opposition to the treaty is growing across Europe.
It is important that I draw the committee's attention to some of the voices of opposition, given the fact that the voices heard by the committee to date have been broadly supportive of the treaty. The most high profile of these oppositional or partially oppositional voices is the likely winner of the French presidential election, Mr. François Hollande, who wants to renegotiate the treaty in some way or other. A former Minister of Justice in the German Government is pursuing a constitutional case for a referendum on the treaty and has stated: "I am all for Europe, just not one determined by political elites." A former Minster for Finance in the Netherlands, who is also a former director of the IMF, has called the treaty "unreasonable and dangerous". From the other side of the political spectrum, the Social Democratic Party in Sweden has argued that "Sweden should not transfer power to decide on financial policy from Riksdagen [the national parliament], nor give the European Court of Justice the possibility to decide on sanctions on the basis of the Fiscal Compact". Also in Sweden, the legal expert of the national trade union confederation has stated:
Budget policy and financial policy is being dragged out of legitimate democratic institutions in favour of a supranational technocracy. Democracy at the national level is being hollowed out, and it's not replaced by a new supranational democracy.
The stance of the Swedish trade unions is in line with that of the European Trade Union Confederation, ETUC, which has notably supported every previous EU treaty but is opposed to this one. It stated:
The new Treaty is only stipulating more of the same: austerity and budgetary discipline. It will force member states to pursue damaging pro-cyclical fiscal policies, giving absolute priority to rigid economic rules at a time when most economies are still weak and unemployment intolerably high.
This trade union intervention is pertinent for Labour Party Deputies and Senators.
Likewise, the Portuguese campaign for a debt audit, representing a group of civil society organisations with which I work closely on another issue, has called for a "No" vote. The Corporate Europe Observatory, a highly respected watchdog group that monitors the impact of big business on EU policy agendas, argues:
The Fiscal Compact would transfer excessive new powers to the European Commission, an unelected body with strong links to corporate lobbies. National parliaments would lose control, while no democratic control mechanism is foreseen at the EU level. Thus the Fiscal Compact spells out an authoritarian form of economic governance at EU level.
The last quote from colleagues in Europe to which I will draw the committee's attention is from Heikki Patomåki, a professor of politics in Helsinki, Finland. He stated:
The exceptional provisions allowed for under the terms of the Fiscal Compact are hostile to the basic principles of democracy, as is the fact that the Compact gives rise to legal norms which override EU member states' own constitutions, and which cannot be changed by democratic means. In a democracy no rule or principle can ever be set in stone.
That last is a vital point because, according to Professor Patomåki, "unending budgetary discipline is anti-democratic". He also stated: "It is clear that voices all across Europe and beyond, and from all across the political spectrum, are opposed to this treaty."
Of the issues highlighted by the voices in question, the most fundamental is democracy. After the agreement of the treaty's wording, Chancellor Merkel stated: "The debt brakes will be binding forever" and "Never will you be able to change them through a parliamentary majority". Elsewhere, she has spoken of the new fiscal rules as having "eternal validity" and of how "Europe would not function anymore if it changed course after every election". Perhaps it is because we are approaching the 100th anniversary of Bram Stoker's death, but this language calls to mind the creation of a vampire, which is an apt metaphor. We are trying to create an immortal creature that aims to enshrine permanently a particular set of economic policies across the eurozone. In another allusion to the undead metaphor, the treaty remarkably contains no provision for its own amendment or termination.
Regardless of one's view of the efficacy of the particular policies being set in stone - I would argue that they are regressive and likely to lengthen and deepen the recession - putting them in place in treaty form is profoundly debilitating for democratic deliberation and practice. Even if one favours these policies, would one not prefer to win the argument by virtue of persuasion on a level playing field instead of having the rules rigged in one's favour? Does one want to grant the European Court of Justice, but not the European Parliament, a role in supervising economic policy choices?
This committee represents a welcome initiative to subject Government policy to democratic oversight. In this sense, it is the polar opposite to a treaty that would take crucial aspects of Government policy out of the realm of democratic debate and into the hands of unelected technocrats and judges.