Wednesday, February 29, 2012

A scan of the fiscal compact

Yesterday, following advice from the AG, the government has decided that it needs to hold a referendum to ratify the Fiscal Compact, or to give it the more correct name the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union. That is quite the mouthful so I'm going to stick with the Compact from here on.
As I have repeatedly pointed out, I am no economist. In fact I'm fairly economically illiterate. But it came as a bit of a surprise to me that the Compact itself only runs to about 24 pages, mostly whitespace, written in fairly straightforward English. I would recommend that everyone grab a copy of the treaty and have a read of it. I'll hang on while you do that .... ok, are we done downloading? If so let's have a quick skim through.
Like all good documents, there are a lot of pre-amble qualifying clauses before we even get to Article 1. They set the scene for the treaty and also, like all good overtures, give us hints of the main themes that will crop up in the main text. For example page 1 mentions the "balanced budget rule" and at the top of page 2 we get the key point, the 3% limit of deficit and overall debt limit of 60% of GDP. Many of the "NOTING" and "RECALLING" clauses provide pointers to the legislation and treaties already in place that permit the implementation of the Compact. On page 6, we get an explicit statement that the Compact will have no impact on existing funding arrangements in place for Ireland and Portugal through the ESF, so our current bailout will remain in place.
Eventually, on page 11, we get to Article 3 which is the first important stopping point on our tour. Here we are told that by default countries will have to run balanced or surplus budgets or at most run a deficit of 0.5%. That's pretty stringent by any stretch of the imagination and it almost immediately rules out any Keynesian activity of spending money to make money. Section 1.c provides some respite, where due to external influences an economy is in shock, it can temporarily go beyond a 0.5% deficit. Of course, no definition is given of what temporary means - is it on a quantum or geological timescale?
The second major part of the Compact appears in section 1.d which defines the long term goal of a debt to GDP ratio of less than 60%. Dangling in front of us as a carrot to reach this goal, is the permission to run a 1% deficit if our ratio is below the target, so assuming growth of 2% we would still be reducing our ratio even in carrying out this deficit spending. Then the stick of section 1.e kicks in and forces automatic corrections if we deviate much from the plan outlined in sections 1.a through 1.d.
Section 2 is obviously the one that scared the AG into recommending the referendum. It forces countries to enact legislation "of binding an permanent character, preferably constitutional" enabling the terms of the Compact. Now to my mind the word constitutional can only be in there to force a vote in Ireland. After desperately trying for months to come up with a wording that wouldn't invoke a referendum, you'd think the smart people in the EU would have managed to avoid that phrase. But there it is in black and white and so we're having a vote.
Article 4 is our next port of call. This short little paragraph provides the timescale for reaching the requirements of 3.1.d (60% debt-GDP ratio). It says it should be reduced by 5% per year. Given that Irish debt is about €170B (and expected to reach €200B by 2015)  and our GDP is about €150B, our current ratio is about 115% and even allowing for some economic growth (say 2.5% pa) will top out about 120%. Reducing this by 5% per annum to the magic 60% will take a further 12 years, bringing us right the way out to 2027. That's 15 years of austerity and cuts ahead of us, unless the state discovers huge quantities of gold or oil somewhere in Laois.
Article 7 is a real doozy. Articles 5 and 6 outline how the Commission shall have oversight and the power to recommend actions for countries who break the pact. Then in Article 7 we have the get out of jail free card for the big four - Germany, France, Spain and Italy. Any recommendation can be rejected by a qualified majority vote and considering the big four pretty much have a qualified majority between them that effectively turns the Compact into a stick for the large countries to beat the little ones. So much for a union of equal sovereign states! We only have to think back to who were the first two countries to breach the previous attempt at a financial stability pact to see how this will play out.
In Article 8, the countries agree that the Court of Justice will be the final arbiter in disputes concerning the Compact which is probably a good thing. This article also quantifies the size of fines that can be issued to countries for breaking the Compact, putting an upper limit of 0.1% of GDP. It is not clear how often a country can be fined because sometimes it might just be easier to break the rules and be fined than to have to slash welfare or raise taxes.
The next few articles are somewhat housekeeping in nature as the put in place terms of reference for co-ordination of economic policy between the countries and how the Euro will be governed. These make sense if you agree that signing up to the Compact is a good idea - if you are tied to each other then you had best make sure you're all pulling in the same direction.
The treaty comes in to effect under terms outlined in article 14. This is 1st January 2013 assuming more than 12 countries have ratified it. Otherwise it will come in to effect as soon as the 12th country ratifies it. This means that Ireland's referendum does not hold a veto over the Compact so we can't do our usual Nice/Lisbon trick of demanding extra concessions. The core of the Eurozone can continue leaving up to five periphery countries behind. However, with only Ireland holding a referendum, it is most likely to be 16 countries driving ahead with the Compact if we vote no.
So that's it. We've covered the entire Compact. Where's the downside in voting no I hear you ask. Well that's hidden away in a different treaty that we've already signed up to covering the operation of the ESM. That is a very murky document that I might go through some other time, but the key point for now is that any state that doesn't sign up to the Compact will not be allowed access new funds from the ESM. If you believe the government that we are meeting all the troika's requirements and that we'll be back in the bond markets in 2014 then we shouldn't care about the ESM. But it would be a precarious position to be in without the ESM safety net below us.

Wednesday, February 22, 2012

The abortion post

I wasn't going to write this post. But then I watched Vincent Browne last night and followed the #vinb twitter feed. And it was ugly. Both of them. So here I am writing a post that I don't really want to because I feel I have to.
Yesterday evening a meeting was held in the Gresham marking the 20th anniversary of the X Case which has lead to the abortion laws, or lack thereof, in Ireland at the moment. I've mentioned this before, but the Irish Supreme Court, the ECHR and two failed referenda have made it pretty clear that the Oireachtas has to legislate in line with the X Case and the more recent C case as well. Following the meeting, Vincent Browne hosted a debate on his TV3 show on the topic, featuring two panelists from each side of the issue.
I'm never going to (can't) have an abortion, I'm not going to have to carry out an abortion, I'm not going to have to professionally council a women before or after having an abortion. But I do know people who have traveled abroad to have them and have understood their reasons for doing so.
I am firmly pro-choice. And that's the key word - choice. Nobody is looking to make abortion compulsory. If you don't want to avail of the service then don't have one. But people have the right to chose and the choice shouldn't have to be shrouded in some faux-medical emergency. We need to move away from the "I was going to kill myself" line of thinking and be open and honest about it. If a woman wants to terminate the embryo in her womb then that's her prerogative and neither the state nor conservative pressure groups should not be allowed control her uterus.
The argument is made that the other half of the equation isn't given a choice - ie the embryo, or baby depending on how emotive you want to make the discussion. this is true. But neither is the embryo when the morning after pill is dispensed. Or the potential embryo when a woman is prescribe the regular pill. Or the potential embryo when every teenage boy spends half an hour in the bathroom. So in having legislated for the contraception and the morning after, society has accepted that a chemical and biological reaction does not a legal person make.
Now all that's left to do is determine where the line is between a clump of cells and a fully fledged person. That change happens, by definition somewhere in the 40 weeks between the initial fertilization and birth and I don't know when that is. However, I would think that the line is somewhere around the time where the embryo becomes somewhat (say 30% survival) viable outside the womb with modern technology to help and I guess that's somewhere around week 20-25. If some knowledgeable medic has the figures I'd be only too happy to change my timetable.
The current scare mongering, to which I was repeatedly exposed last night, was that the X case could allow for full term abortion to occur. Now, having just gone along the pregnancy journey with my wife, there is no way that a woman would last 39 weeks and then say "Fuck it, I've had enough. Let's abort this thing." That is just an asinine statement and exposes the anti-choice campaign for the nutters they are.
The hypocrisy of the Irish abortion regime has to stop. All it is doing is keeping Ryanair and Stena in profits as we export the problem to another jurisdiction. I applaud Clare Daly for introducing her Termination of Pregnancy bill today and hope that the Labour backbenchers support her as they promised to do in both the Election Manifesto and the Programme for Government in introducing legislation for the X case. I will be writing to my local TDs asking them to do so.

Sunday, February 19, 2012

Labour members forum

Over the weekend I attended a meeting organized by Labour grassroots members entitled "What can Labour do in Government". With two panel sessions and a lot of time allocated for contributions from the floor, the event promised to allow a lot of disgruntled members to get things off their chest. Over the course of the day I would estimate that about 80-100 people attended, mainly from the Dublin area but with some from as far as Leitrim and Galway.
I was somewhat wary of attending for several reasons. Firstly, events like this can often turn into a forum for people to rant without being constructive. Secondly, specific issues (eg local hospital, septic tanks) can hijack the event and send if off on a tangent. Thirdly, there is the fear that those attending are seen as being seditious and trying to split the party or worse, join the SWP or Socialists. A couple of McCarthy-esque jokes were cracked at the event about spying on ourselves. Finally, there is the perverse situation at these sorts of events where everyone wants to watch and listen, but nobody wants to contribute. I was at such a meeting once and it was one of the most painful hours of my life.
The morning panel was badged as a "descriptive session" where the current state of play would be outlined. Speakers from Unite, ICTU and the Women's Council set the scene with brief presentations and then the debate was opened up. The key theme was obviously the economy and the failure of the austerity regime being implemented. Other topics included youth unemployment, IBRC promissory notes and the demise of the JLC system. I'm always a bit wary of the Trade Unions preaching at the Labour Party after their continued sucking up to Bertie throughout the boom and the farce of social partnership. But unions and the party are working towards the same ends and so we have to learn to get along again.
After a quick break for tea and sandwiches (no champagne or prawns!) we settled in for the afternoon's "proscriptive" session. It featured a panel of Mags Murphy from SIPTU, Michael Taft from Unite and Mary Murphy from NUIM. Between them the presented an alternative strategy to austerity, based on targeted state investment and a re-balancing of the tax burden. A long discussion followed with many detailed and comprehensive contributions from party members.
Towards the end, the debate moved towards what could be done to bring these ideas forward. The big problem is that if, like at the Irish Economy Conference, no policy makers are there to listen, what is the point in having a discussion. Unless a concrete proposal can be drafted and then accepted by the party leadership then the effort may be in vain. Several backbench TDs attended various parts of the day, and to be fair to them, they sat quietly and listened rather than dominating the discourse. Perhaps they will report at the next PLP meeting and a constructive dialogue can begin between the top and the bottom of the party. There are plans to hold further such events and I will certainly attend if at all possible.