Solving the euro crisis will severely hit our economy
Centralising fiscal policy in Europe will be done in a less than democratic way, writes Marc Coleman
Published 16/10/2011 | 05:00
Back in the Nineties, a joke used to do the rounds amongst new recruits to EU institutions like the Commission and ECB: What's the difference between good Europe and bad Europe? In good Europe the policemen are British, the Germans make cars, the Italians cook, the Dutch run the banks and the Irish organise parties. In bad Europe the Germans do the cooking, the policemen are Italian, the Dutch organise the parties, the British make cars and the bankers are Irish.
Which of these Europes we are headed for isn't certain. But we are headed somewhere in that spectrum, that's for sure. Last week eurozone heads of state issued a clear statement of intent about solving the euro crisis by further integration. Temporary firefighting is no longer enough. On that everyone agrees.
But to recapitalise Europe's banking system and prevent further crisis, the Lisbon Treaty may need to be radically changed, ending unanimity -- the power of small states like Ireland to block adverse changes. Some decisions are already moving against us: plans to raise core capital ratios from six per cent to nine per cent are not just bolting the stable door after the horse has bolted but could prolong Ireland's credit famine. The Commission's call to "Frontload" fiscal correction -- echoed by our own Fiscal Advisory Council -- could push the forthcoming budget adjustment from €3.6bn to €4bn. Incidentally, as Irish academics, all five members of the Fiscal Advisory Council enjoy the highest academic salary scale in the EU. With their pay and pensions protected from cutbacks via the Croke Park deal, inflicting more austerity on lower-income taxpayers and welfare dependents is rather bizarre.