The main argument from the Yes side has been the threat that if we don’t vote Yes, the government will not be able to get a so-called ‘second bailout’ due to the ‘blackmail’ clause in the European Stability Mechanism Treaty (ESM).
The government present this clause as simply an unfortunate reality. However, the new ESM Treaty was agreed unanimously at the European Council – that means the government agreed to insert this provision, in order to blackmail us with now.
However, the votes in the Dáil establishing the ESM will not take place until after the 31 May vote on the Austerity Treaty. The government therefore have the power block the ESM Treaty and demand the withdrawal of the blackmail clause. ESM loans are not guaranteed even if the Austerity Treaty is passed. It will only be given if it is in the interests of the bankers and bondholders in the core euro countries, and at the cost of yet more austerity.
Government policies are pushing Ireland into a ‘second bailout’. We need to change course, burn the bondholders and launch a massive public investment programme to create jobs, wealth & growth and avoid the bankruptcy austerity inevitably will bring.
The 'Black Mail Clause' explained
The government’s main argument for a Yes vote has been the threat that if we don’t vote Yes, Ireland will not be able to access a so-called ‘second bailout’. This is because of a ‘blackmail’ clause in the European Stability Mechanism Treaty (ESM) that says that only countries that have signed up to the Austerity Treaty can access ESM funding.
This threat has become the centrepiece of the Yes campaign. The ESM is the new permanent fund for European countries that need to access a bailout. There is an irony in the government using the argument about no access to a bailout to beat us with, given that Michael Noonan in January described the idea of Ireland needing a second bailout from the ESM as “ludicrous”. However, the reality, as recognised by many serious economists, is that with a continuation of the Government’s policies, a second bailout will probably be required.
When the ESM Treaty was originally agreed and signed last July, there was no reference to the need for the Fiscal Treaty to be passed in order to access funding. An additional clause was added to the final version of the treaty that was signed on 2 February of this year to create the link to the Austerity Treaty. This spelt out that countries that do not sign up to the Austerity Treaty would not be able to access ESM funding.
This is blackmail pure and simple. The threat is that either we accept the perpetual austerity of this Treaty or Ireland will not be able to access funding under the ESM. The government has presented this clause as simply an unfortunate reality. This is disingenuous in the extreme. The new ESM Treaty was agreed unanimously at the European Council. This means that the government remained silent and did not voice any opposition to this clause or it actively worked with others to insert this provision, perhaps with an eye to the potential for a referendum in Ireland. Either way, the government is guilty of collaborating with Merkel and Sarkozy in the insertion of this clause that is being used as a stick to beat people with.
However, the government still has the power to block the blackmail clause and the ESM Treaty. The two votes in the Dáil on the ESM (one to sign up to the European Stability Mechanism and one to amend the Treaty on the Functioning of the European Union) will not take place until after the referendum. Because the establishment of the ESM requires a change to the Treaty on the Functioning of the EU, every member state has a veto over its establishment. That means it is within the power of the government to veto this Treaty and demand the withdrawal of this odious blackmail clause.
Even in the event of this clause coming into being with the ESM Treaty, the government’s argument that we would not be able to access funding from the ESM is far from watertight. An essential condition for any ‘bailout’ to be given is that it is “indispensable to safeguard the financial stability of the euro area as a whole and of its Member States.” This means indispensable to the interests of the bankers and bondholders in the core euro countries.
So even if Ireland signs the Austerity Treaty, it will only get access to funding if it is indispensable for the financial stability of the euro area. But if Ireland hasn’t signed the Treaty and it is still indispensable, a way would be found to provide it. In any case, ‘bailout’ funding could still be accessed from the European Financial Stability Facility (EFSF). Ireland has access to this funding by law and could access a second ‘bailout’ before July 2013.
The more fundamental point, however, is that a second ‘bailout’ would be disastrous and must be avoided. A ‘second bailout’ for Ireland would come with yet more onerous austerity measures that would further wreck the economy. A second bailout is currently destroying Greek society plunging whole sections of society into poverty.
The only way to avoid a second ‘bailout’ now is to reverse course immediately, with the implementation of radical socialist policies to redevelop the economy and create jobs. That means doing precisely the opposite of what the Austerity Treaty seeks to impose – refusing to pay the debt to the bondholders, taxing the wealth of the super-rich and increasing tax on the profits of the corporations, massive public investment to create jobs and democratic public ownership of the banks and financial institutions as well as the key sections of the economy in order to develop a plan to redevelop growth.