Fiscal Treaty Explained, Q&A, Vote No!

1.How would the existence of the fiscal compact have prevented the Irish economic collapse, given that we would (debt levels apart) have been pretty much within the terms of the criteria? Our problem on the fiscal side was that we were badly balanced in terms of the makeup of the tax base and client list in our expenditure.

Answer: Well actually thats the nail in the coffin for it right there, it wouldn’t have and due to the fact people would of believed their taxes went foreign more than they already do now they probably would’ve spent even less than they are now adding to the misery and causing a further fall in the economy.

2.How exactly will a structural deficit be estimated, given that there is no consistent method for so doing and that it is dependent on in essence a backcast of what the economy might have been at were it growing at capacity? What models and approved by whom will be used to estimate the economic dynamics? What if the ESRI say we are in balance, the ECB say we are not, the OECD say maybe, and the IMF say we might be if their model is right…? Who arbitrates..?

Answer: The European Commission will decide in a period defined by them or the contracting parties and will base it controversially on the market rates rather than the actual contract rates open possibility for falsifying the books making them look better at which point we end back up in the same position or worse at which point we end up under their(EC and Contracting parties) control with all government fiscal and anything that they deem to be related to common concern. It is up to the european commission and at his own choice the Eurogroup President to decide what action is taken on a medium-term plan lasting a period defined by the European Commission.

3.Given that the implied dynamics of the fiscal compact on sovereign debt are that it will radically shrink, what are the knock on effects and how will they be handled in terms of pension and investment funds which will now have to either move to other low risk assets with the danger of igniting bubbles therein or take more risk with the consequent dangers to pension funding (private and public).?

Answer:The economy will likely decline at a further pace for some time before recovering speedily causing the boom and bust scenario that helped cause this situation int he first place over and over as it is impossible due to the architecture of the treaty for the calculation of debt to stay within limits when investing in the required major new infrastructure projects putting more austerity on us every time which would be controlled by European Commission and contracting parties(at which meeting our government with have no vote) which only need a majority vote contrary to our current circumstances where all states must approve our budget. Our bailout prohibits this but only until we exit it at which point we are still in the treaty and have to cut down further to 0.5% debt to GDP at market rates.

4.Would the existence of the FC have prevented the taking on of the bank debts, in 2008, given the effect which that had on the fiscal side? If this is so how can the FC be squared with the evident desire by the ECB to not see banks fail?

Answer: No in fact it would have made it legally binding on us to rescue those banks as it says we must do what is the interest of the euro and our fellow contracting parties which obviously we did save the european banking system and some would say even a euro collapse from happening with the banking guarantee and this would of made us break the limits and hand over control to those mentioned in Answer 3. Signing up to this treaty puts us between a rock and a hard place.

5. Given that if you exceed the terms of the Fiscal Compact you will be fined up to 0.1% GDP, will that not lead to a exceeding-fine-exceeding spiral?

Answer: Yes because it states those in danger of becoming in trouble have to be fined it is very possible that the fine brings the limit over the requirement for foreign powers to take over our budget as explained in Answer 3.

6. Given that in general Fiscal policy is taken as the taxation and expenditure elements of government as they interact with the economy, and that this is in essence a state level spending side only treaty, when can we expect common movement on either state level taxation or community level transfer payments to offset the pro cyclicality of this pact ?

Answer:The treaty requires the deficit to be cut at one twentieth(5%) of GDP per year until books back in order with requirements of the treaty as soon as it comes into law which as per the treaty is exactly 1 month after a country has(if it does) ratified the treaty through the appropriate ratification instrument(in our case, exactly 1 month after the results of the referendum are formally declared). If this effects a countries bailout requirements they aren’t obliged by this however if it doesn’t they must proceed with this element of the treaty not contradicting a bailout along with all others exactly 1 month after ratification. Government is yet(at time of writing) to comment on this element of the bailout contract and the treaty raising serious suspicions. We just simply can’t trust government on this and this would cause a further economic decline as further foreign controlled austerity(which decreases consumer confidence more than nationally controlled austerity) is pushed on the people while Europe parties it up,with Irelands pocket of course.

7.If this is ‘a vote on the euro’ what mechanism will be used to remove us from the euro zone? What treaty, what section?

Answer: Likely the same conditions within Europe that applied to the UK upon their clever decision to opt-out of the euro will apply to us if it is a treaty on the euro which it is not(I’ll explain Lucinda’s remarks later in this answer) and we vote to remove ourselves. The mechanism will likely be to gradually change back over a few weeks or months time and a probable devaluation of the punt causing export prices to go down and encourage growth in that sector. The cheaper domestic prices and more expensive import prices would likely cause the domestic economy to grow which would help government tax revenue. Lucinda said it is essentially on our member ship of the euro. It is not on our membership of the euro but rather if we wish to have it controlled abroad, leave it or have it controlled nationally. For her convenience she avoided mentioned the option of controlling it nationally under a different plan.

8.Given that the government have already stated that the talk of a second bailout (aka being in the ESM) is ‘ludicrous’, and that the only sanction mentioned in the FC is not being able to access same ESM if one does not sign up, what is the downside of saying ‘hmm, no, not quite what we need thanks’?

Answer: There is no downside. Government are under the illusion that the ESM is the be all and end all for our funding should things go wrong. It’s not, there is the option to apply for a bailout solely to the IMF or to an alternative of the IMF. Also, if we handle things properly (scrap the bank guarantee which can’t be done if we say yes to the fiscal treaty)we shouldn’t need a second bailout which even if we did the ways they are presenting to us are the completely wrong way to go about things. That said, it is likely just scare tactics from government as per usual, history repeats itself.

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