From the emerald hills of Donegal to the shores of Cork, the Irish go to the polls Thursday in a referendum on a regionwide fiscal treaty inked in January that would impose strict limits on budget deficits and debt. European governments that ratify the treaty will effectively surrender a measure of sovereignty over two of their most sacred economic rights — how much they can borrow and how much they can spend — to the bureaucrats in the region’s administrative capital of Brussels.
The referendum, in many ways, is shaping up as a litmus test of the willingness of Europeans to more deeply link their economic fortunes. As the region’s crisis deepened, European Commission President Jose Manuel Barroso underscored the urgency on Wednesday, heightening calls for radical rule changes that would begin to make the 17 member nations of the euro zone act more and more like the 50 U.S. states.
A fund drawn from all euro-zone members, he said, should be used to rescue ailing banks throughout the region, shifting the burden away from national governments. In addition, he called for the adoption of a regional deposit-insurance program, similar to that of the FDIC in the United States, and the creation of a regional banking supervisor. He reiterated calls for eurobonds — or collective debt that could replace national bonds across the euro zone — under which the risks posed by
wobbly nations, such as Greece
, Ireland and Spain, would be offset by the might of the German taxpayer.
One of the biggest obstacles, however, is fiscally conservative Germany, the powerhouse of Europe. Germany is reluctant to use its financial clout to back weaker euro-zone countries that have disastrous finances. Thus, Berlin has called the new fiscal treaty essential. The Germans contend that the pact, by strictly limiting spending in profligate nations, will prevent a repeat of the credit-fueled decade that has brought the euro zone to the brink of breakup, while allowing Berlin to consider bolder steps toward integration.
Many fear the kind of timetable the Germans are working on — months on some measures, years on others — will not be fast enough to quell the current crisis. At the same time, concern that Europe’s woes could damage the already fragile global economy dramatically spiked Wednesday, with growing angst over Spain’s ailing banks — which might force Europe into its biggest bailout to date — sending Madrid’s borrowing costs soaring while investors drove stocks sharply down and sent yields of safe-haven U.S. Treasurys to record lows.
At the same time, some Irish are asking whether enshrining austerity in law is really a bright idea, given that France’s new president, Francois Hollande, is pressing for a pact that shifts the emphasis of Europe’s response from austerity to growth and with German Chancellor Angela Merkel facing tough opposition to treaty ratification in her own parliament. The Irish, in fact, are being asked to make that decision as waves of budget cuts aimed at meeting the terms of their $113 billion bailout from the European Union and the International Monetary Fund have already plunged the country back into recession.
One “Vote No” sign strung up this week on the streets of Dublin pulled no punches — depicting Ireland as the bather in the famous “Jaws” movie poster, with a great white shark representing austerity surging up from the depths to take a fatal bite. Treaty foes gathered near the entrances to this city’s medieval Temple Bar district, some handing out beer coasters printed with anti-austerity slogans and begging their countrymen to “vote no to the treaty, and yes for Ireland.” Two middle-aged men — one in favor, one against — exchanged arguments in lilting brogues near stately Trinity College Dublin, drawing a crowd of noisy onlookers just as eager to throw in their two cents.
The Irish government, led by Prime Minister Enda Kenny, meanwhile, is heading a powerful “Vote Yes” campaign, arguing that rejection of the treaty would cast Ireland adrift in Europe, panic foreign investors and lock Dublin out of any future financial rescues. The door-to-door “Vote Yes” campaign, however, has been marked by abuse hurled at government ministers by austerity-weary Irish, with Kenny’s car egged by protesters in the northern county of Donegal.
“You know, the Irish don’t want this treaty, but if we say yes, it will be because voters are scared and they’re being told this is the only way out,” said Michael Mannin, an unemployed project manager in the construction industry, which went bust after Ireland’s credit bubble burst in 2008. “The other reason is that we’re saddled with all this Catholic guilt that makes us Irish feel like we need to be punished for those good years we had before all this crisis stuff began.”
Vote is mandated
Nations linked by the new treaty — including Ireland, which won a hard-fought 20th-century war for independence from Britain — would lose at least part of their fiscal independence. They would have to advise E.U. officials before issuing new debt and face tough fines and orders to make fresh budget cuts should they exceed strict deficit limits.
Under Ireland’s constitution, the ceding of such powers requires a national vote — making this country of 4.5 million the only euro-zone member forced to put the treaty to the test at the ballot box. The most recent opinion polls show Thursday’s vote is up for grabs, with 39 percent in favor, 30 percent against and 31 percent undecided or inclined to stay home.
A rejection by Irish voters would not kill the treaty, which needs only 12 of the 17 nations that share the euro to ratify it in order for it to take effect. But a no vote in Ireland could deal the treaty a symbolically powerful blow, fueling even more opposition in countries such as France, where Hollande has insisted that it must be renegotiated to put more emphasis on growth. If the Irish do say no, a treaty provision would cut the country off from future bailouts, setting up a potential showdown with the E.U. late next year, by which time many analysts believe Ireland will require a second financial lifeline.
Nevertheless, in a country with a history of rejecting E.U. treaties, the Irish referendum has become an easy springboard for nationalists — who, as they have in Greece, are successfully tapping into the anti-austerity sentiment.
Inside a standing-room-only meeting hall in downtown Dublin this week, Gerry Adams — head of Sinn Fein, long seen as the political wing of the Irish Republican Army — held court as the man of the hour. With Sinn Fein the only major party to oppose the treaty here, Adams has surged in voter surveys to the point where he is now the most popular politician in Ireland. At 37 percent, his approval ratings best even those of Kenny. And even if Irish voters approve the treaty, political analysts say, one side effect of the referendum could be a new era of strength for Sinn Fein.
After a stirring performance by an Irish folk singer, Adams offered up a speech that seemed to associate the “bureaucrats in Brussels” with Ireland’s former British occupiers.
“We need to seize the moment,” he said to thunderous applause. “If something is bad for your country, you need to say ‘no’ to it.”