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James Downey: Surface is calm, but we're struggling to stay afloat

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TIME to ask a scary question. Can the political system stand the strain of never-ending austerity, a public and private debt burden that is growing, not decreasing, and banks that forgot how to conduct their affairs during the boom and have not relearned the art?

Let's look at the background.

The International Monetary Fund calculates that by 2015 our public debt will exceed €200bn. Some estimates put it at double that, but we must regard the IMF as authoritative and, in any case, €200bn is simply not bearable. We are in Greek territory, second bailout territory, possibly default territory.

But not according to the president of the European Council, Herman Van Rompuy. He says that Europe has turned the corner, which presumably means that we have turned with it.

For us, however, "turning the corner" is not a phrase to inspire confidence. We have lost count of how many times we have turned the corner since September 2008. Each time, we have come up against the proverbial blank wall, only stronger and higher.

And on the present occasion we have built a wall for ourselves in the shape of the referendum on the European fiscal pact.

I don't know how the Attorney General arrived at her conclusion that we had to hold this referendum. But it doesn't matter. The Government should have seen that a referendum could not be avoided. It should have been eager to put the issue to a vote, instead of letting us see that it was dismayed by the Attorney General's decision.

A refusal to hold it would have provoked an appeal to the Supreme Court. In all likelihood the court, following precedent, would have ruled for the appellants. The result then would have been a referendum in even less favourable circumstances.

Being stuck with holding the vote, can the Government turn the situation to its -- and our -- advantage? Can Enda Kenny and Michael Noonan use the referendum as a bargaining tool to persuade our "partners" to give us easier terms on the repayment, preferably partial forgiveness, of our debts: specifically, the looming payment of €3.1bn?

Morally speaking, we should be in a good position. This is not really "our" debt, but a liability we should never have assumed. But, in practical terms, our position is very weak. On previous occasions, we in effect vetoed European treaties. On this occasion, if we vote No, all but two other EU countries can and will go ahead without us.

So, it depends on goodwill, and goodwill is evidently lacking. Michael Noonan seemed to make useful progress at his meeting with Nicolas Sarkozy on Thursday. But that did not compensate for the insistence of the EU vice-president, Olli Rehn, that we must "meet our obligations".

He said it in Latin. Someone else found a suitable phrase in another classical language -- ancient Greek. Enda Kenny trumped both with an Irish proverb: "Is binn beal ina thost." Neat.

To use the English version of the proverb, silence is golden. Put another way, you don't show your cards, if you have any, in a negotiation. In the present case, to change the metaphor, you don't put a gun to your own head.

All very well, but our weakness can be a strength in its way.

What happens if we vote against the fiscal pact? At a mimimum, we will be denied access to the cheap money on which we depend for economic survival. We will forfeit our status as the "good boys" of Europe, though that might be no bad thing. At worst, we will be forced into a default, which will have unreckonable but appalling consequences for ourselves and grave effects on the whole of Europe.

And a Yes vote in the referendum is very far from certain. An angry and fearful populace can vote No to vent its frustrations. To think of the campaign makes me shudder. Every issue will be aired: septic tanks, turf-cutting, the household charge, whatever you're having yourself. The Government's "jobs and growth" mantra will sound hollow. Like the one about turning corners, we have heard it too often.

Win or lose, the event will be a gift for Sinn Fein and its raggle-taggle allies in the Dail; and for the faction, or factions, in Fianna Fail who oppose Micheal Martin's attempts at reform.

What, then, of those who dislike the fiscal pact itself? There are valid reasons for this dislike. On my own reading of it (see Chapter 3) it's not quite as tight a straitjacket as people think, but it does not address itself to the fundamental reason why we don't have jobs and growth. It offers no solution to the question of toxic debt.

Is that a sufficient reason for opposing it? Thus far, I am inclined to think not. Most of the proposals echo those of the Maastricht Treaty 20 years ago. A pity Maastricht wasn't obeyed by Germany and other culprits.

But there is no imaginable timescale in which Ireland can get the public debt down to 60pc of GNP and fulfil the rest of the pact's provisions. For now, we continue to face austerity without compensating benefits, and political factors in which the forces of instability can thrive.

For the sake of stability, we need two things on the Opposition side: a Fianna Fail recovery and a reverse in the rise of Sinn Fein. There is no obvious prospect of either.

On the Government side, the picture looks happier on the surface. The Fine Gael-Labour coalition has a colossal Dail majority. Ministers go about their work with considerable vigour and determination, if not with much success. But a couple of unfavourable opinion poll results could turn the rumblings in the Labour Party into real dissent. On the outside, the system looks pretty sound. So did the Titanic.

Irish Independent