Thursday, 26 April 2012

LET'S GET FISCAL


LET’S GET FISCAL

A FEW HOME TRUTHS ABOUT THE FISCAL COMPACT

ARGUMENTS FOR

1.       If we don’t vote YES we won’t have access to the cheap money in the ESM for the second ‘bailout’ (we never got a first).
2.       It will prevent a recurrence of what happened over the last decade.
3.       If we don’t vote YES we won’t have access to the cheap money in the ESM for the second ‘bailout’ (we never got a first).
4.       It will ensure stability of the Euro and the Eurozone.
5.       If we don’t vote YES we won’t have access to the cheap money in the ESM for the second ‘bailout’ (we never got a first).
6.       It will provide jobs.
7.       Finally, and most crucially, if we don’t vote YES we won’t have access to the cheap money in the ESM for the second ‘bailout’ (we never got a first).
ARGUMENTS AGAINST THE ABOVE

1.       The ECB will NOT isolate Ireland, which would risk contagion that would bring down the Euro.
2.       Through all the bubble years of the 00s we met every provision of the Fiscal Compact; conversely, through the years of real growth in the 90s, we didn’t.
3.       A disorderly Irish default would threaten the stability of the European banking system.  An ECB intervention to restabilize the system would be considerably more expensive than giving us access to those funds. The ECB would not ignore its self-interest in order to spite the Irish electorate. Funds would be found outside of the ESM (Prof. T McDonagh, NUIG)
4.       According to the European Commission, reducing structural deficits to the target levels in 2013 would mean at least €166 billion worth of cuts and extra taxes. Europe is on the verge of a double dip in the recession, the treaty’s provisions could contribute to pushing Europe over the edge (Prof. McDonagh).
5.       We could burn the Promissory Notes, we could borrow from IMF, we could, we could…
6.       Jobs is it? Normally in a recession the biggest investor in job creation is the government – this Fiscal Compact ties the government’s hands on that option.
7.       Remove this Blackmail Clause from the ESM Treaty; Fine Gael and Labour agreed AFTER the fact of that Treaty being negotiated, to its insertion, it can tell the EU now that it won’t sign that Treaty unless that clause is removed; failing that, in the event of a NO vote, it should certainly tell that to the EU, or betray the Irish people. Again.

Remove the Blackmail Clause however and let's just take the compact on its merits -
WHAT ARE THE EXPERTS SAYING?

Dr Constantin Gurdgiev: In medical analogy terms this Fiscal Pact signed by the 25 EU Member States is equivalent to a misdiagnosed patient (the euro area economy) receiving a potent cocktail of misprescribed medicines. In other words the Fiscal Pact is neither a necessary nor a sufficient solution to the on-going crisis of the euro area insolvency. Ireland will be one of the worst impacted economies in the group courtesy of our excessively high structural deficits, debt to GDP ratio and cyclical deficits. In 2012, Ireland is forecast to post a structural deficit in excess of 5.5% of potential GDP – the highest structural deficit in the entire Euro area. To cut our structural deficit to 0.5% will require reducing annual aggregate demand in the economy by some  €7-8 billion in today’s terms.
Tom McDonnell, TASC: There is no consensus among economists about how best to manage budgetary policy, particularly over the short-term, and there is certainly no consensus that legally binding targets are superior to more discretionary and flexible fiscal policy. Experience suggests that fiscal policy requires flexibility in the short-term, and would be unduly restricted by ‘rigid targets’. At best, the fiscal compact is incomplete and there are various other ‘jigsaw pieces’ needed at Euro zone level to resolve the crisis. At worst it will damage recovery in the Irish and other European economies.
Paul Krugman (Nobel Prize-winning economist): When the bubble burst the Spanish economy was left high and dry; Spain’s fiscal problems are a consequence of its depression, not its cause. Nonetheless the prescription coming from Berlin and Frankfurt is, you guessed it, even more fiscal austerity. This is, not to mince words, just insane… Rather than admit that they’ve been wrong European leaders seem determined to drive their economy – and their society – off a cliff. And the whole world will pay the price.
Joseph Stiglitz (Nobel Prize-winning economist): has described the European response to the crisis as a “mutual suicide pact”.
Dr Nouriel Roubini (world-renowned economist, correctly forecast the current crash): Thanks to the fiscal compact even the EuroZone’s core will be forced into front-loaded recessionary austerity…The trouble is that the EuroZone has an austerity strategy but no growth strategy. And without that all it has is a recession strategy that makes austerity and reform self-defeating, because if output continues to contract, deficit and debt ratios will continue to rise to unsustainable levels. The social and political backlash eventually will become overwhelming.

Who do we listen to, whose opinions do we trust, those of the eminent economist above or those of Enda Kenny, Michael Noonan, Leo Varadkar, Eamon Gilmore, Pat Rabbitte, RuarĂ­ Quinn? I ask you...

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