Karen Coleman: Fiscal compact will pave the way for years of austerity
Remember Helmut from last week? He was the German plumber from Bavaria I mentioned who resented the tax increases he faced to fund the bailouts for failed entities like Greece and Ireland. And his disgruntlement deepened when he got clarification last week that the Irish had brought their current miseries upon themselves with their greed and over-spending.
There it was laid bare by Chancellor Enda Kenny: the Irish went mad and lost the run of themselves buying up all around them while he kept an eye on the purse strings and avoided the Gucci bags and the SUVs, the holiday homes in Turkey and the shopping trips to New York. No wonder Helmut was annoyed.
But things may be looking up for Helmut with the launch of the latest weapon from the arsenal of EU treaties. This particular missile -- codename, the fiscal compact -- is a short document that's been brokered in record time and it's due to come into force next year if ratified by 12 or more countries. The UK and Czech Republic are staying out of it.
From Helmut's perspective, it's not a bad deal. He's got what he wants: a commitment from his government that fiscal manners will be strictly imposed on the likes of Chancellor Kenny's squandering brigade who can't be trusted to manage their own affairs. Helmut doesn't care about cross-border solidarity and he's not that concerned if his comrades in Greece, Portugal and Ireland face years of financial penury. That's their problem. His main concern is they won't continue to bleed Germany dry to fund their reckless behaviour.
So, good for Helmut -- but what about the rest of us? Just how will this new treaty impact on our lives? Well, imagine for a moment that Ireland is John, a well-meaning entrepreneur who overspent during the boom years and now he's broke. He made some foolish mistakes; he invested in some dodgy projects, he blew a lot of his money, and now he's struggling to stay afloat. And, to top it all, he's weighed down with other debts he foolishly took on when he agreed to prop up a few zombie banks along the way.
The good news is, the fundamentals of John's business are sound. He's won a few tenders; prospective clients are set to commission more work from him; he's offering competitive prices and he's a nice guy. If he manages to stay afloat he'll survive and grow his business. That's the good news.
The bad news is that the noose is gradually tightening around John's neck. The bankers who lent him buckets of cash during the boom times are demanding repayments and the rest of his creditors are like wolves snapping at his heels for monies due. And the pressure's mounting with his masters in Brussels, Berlin and Paris set to impose even tighter restrictions on his spending powers.
They want to pull the plug on his overdraft facility and force him to run his business with a smaller margin of debt. And they're threatening to punish him with sanctions, fines and legal action in the European Court of Justice if he doesn't play ball. But without the lifeblood of a healthy overdraft facility, John's cash flow will dry up and his enterprise will contract. That will mean firing staff, cutting wages, reducing output and earning less. And he'll still be expected to meet any repayments due on those zombie bank debts.
That is effectively what this new fiscal deal means for Ireland. It imposes a so-called debt brake on us; that's Euro-speak for a severe restriction on how much money we can spend over and above what we actually bring in as a State. Simply put, our collective overdraft facility will be severely restricted despite the massive debt repayments we will still be expected to pay for the zombie banks we guaranteed. And that's the problem. Those debts are killing us. Otherwise, the rules preventing us from overspending might not be so bad.
This treaty is in danger of institutionalising austerity and paves the way for years of penalising budgets. With little flexibility to run up debts, the Government will be forced to raise money in whatever way it can from taxpayers to fund the daily costs of running the country. So the €100 household charge of today becomes a €1,000 property tax next year. The cost of fuel and electricity and other essential items will continue to rise even though our collective incomes may go down. And we can expect an ongoing decline in our public services with hospitals and other essential amenities strapped of public funds to run their operations. And, to cap it all, these draconian measures, embedded in this fiscal compact, can be ratified by just 12 of the 25 EU countries that will vote on it. And most of them are likely to do so in their parliaments and not by referenda.
Welcome to the new dawn of democracy in Europe 2012 where unanimity and citizen participation have been replaced by a narrower interpretation of equality and fairness. Instead of requiring the unanimous support of all 27 member states, less than half of the EU countries can endorse a set of rules that will have profound implications for all of us. This despite all the promises made during the Lisbon Treaty referendum that the EU would become more accountable, more democratic, more representative, and that more powers and responsibilities would be given to the European Parliament.
MEPs were not involved in any meaningful way in the construction of this treaty and many of them are hopping mad that it's being railroaded through without their participation. Labour MEP Nessa Childers and Independent MEP Marian Harkin told me in Brussels this week they had deep reservations about the treaty. Ms Childers said she would be in a very difficult position if a referendum was held on it as she would not support it.
I discovered the following extract from the Lisbon Treaty in a bookmark I've been using for Walter Isaacson's fascinating biography of Steve Jobs (a man who was well capable of deploying strict authoritarian controls himself when he wanted things done his way). The quote proudly declares that the EU is "founded on the values of respect for human dignity, freedom, democracy, equality, the rule of law and respect for human rights including the rights of persons belonging to minorities".
It goes on to boast that such values are common in a society ". . . in which pluralism, non-discrimination, tolerance, justice, solidarity and equality between women and men prevail".
Oh, for the halcyon boom times when we could aspire to such lofty ideals. Today's regime of austerity has brought with it a different set of goals with its bunker mentality propagating punishing rules and regulations that may be good for Germany and France but are unremittingly harsh for Ireland and other debtor states. And to make matters worse, countries that do not endorse this deal will not be entitled to further bailout funds in future.
We're being told we don't have a choice, that the price of our bailouts is to play by the rules set by those giving us our financial transfusion. They give us the money; they call the shots. So . . . good for Helmut, bad for John.
Irish Independent
