Forex Market Commentaries - Ireland Takes The EU To A Vote

Ireland Takes The EU To A Vote

Mar 12 • Market Commentaries • 715 Views • Comments Off on Ireland Takes The EU To A Vote

Last week, the Irish Prime Minister announced that Ireland would be holding a vote on the European Union’s Financial Pact before the year’s end. The news came as a surprise in both Dublin and Brussels. The news was issued by the Irish Prime Minister, Edna Kenny, without warning.

Enda Kenny’s party had been objecting saying that the decision must be put to a vote, as needed by the Irish constitution and had been very vocal insisting that everyone should have a chance to be heard and know about the Pact and accords even though the government had been trying to avoid a public vote as needed by the Irish constitution.

The difficulty is the Irish citizen have history when talking about EU referendums, having voted in 4 of them in the last 11 years, at first rejecting and then commending both the treaties but only under difficult circumstances.

As a consequence, many Irish  remain opposed to the European Union, therefore threats of Irish isolation in Europe or withdrawal of foreign direct investment could occur, but this is an emotional issue for the Irish.

If anything, the electorate is much more likely to vote ‘No’, realizing the government will then be forced to come back to its EU partners to find concessions. In that case, Irish citizens have regularly been shown to be better negotiators than their own administration.

This time, the struggle to pass the deal may be different. For one, unlike each prior Pacts and Treaties put before the electorate, this one does not need all 27-member states to confirm it, just 12- members of the 17-member eurozone.

Kenny already stated that the ballot will be a “once-off event”. The government also will be excluding itself from assist and also participation from the rescue fund. This would be a serious problem were the government not also disagreeing that its economic reforms are going well and so a second rescue won’t be  required anyhow.

 

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This week Moody’s recommendation that a second rescue may be required, as it doubted the upcoming return by Ireland to the bond markets in 2013. A public vote to not support the treaty and to withdraw from the union would have dire consequences on the economy of Ireland.

Lawmakers  hope they have one additional card to play, and that’s the issue of getting debt consolidation on the supposed “promissory notes” issued by the governing body to cover the liabilities of Ireland’s defunct Anglo Irish Bank.

From left to right, the assumption that taxpayers had to bail out the banks and their bondholders is the issue that aggravates more than any other, and if Kenny can return before polling day with a deal to cut back the cost to taxpayers of funding that debt, it could be enough to calm the objections and get the deal approved.

Kenny has said that there isn’t any question the Irish citizens need to be bribed or sweet talked into voting yes on the EU Fiscal Pacts. The IMF reported this week that it assumed that a deal should to be done on the banking debt, and it’s now up to Kenny to persuade his euro-zone partners this is the simplest way to make things happen, and get a Yes vote on the referendum, otherwise it will all go down the tubes.

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