Ireland and European Integration

by Henry on November 30, 2010

I’m a bit surprised not to have seen anyone making this point, but one obvious consequence of the current situation in Ireland is that European integration (to the extent that it is driven by Treaty change) is dead for the foreseeable future. New Treaties – if they are to be passed, not only require unanimity, but have to pass through two veto points.

First, they have to get a majority vote in a referendum in Ireland. This is thanks to a legal ruling (the Crotty ruling) that Treaty texts which have constitutional implications (which any Treaty involving significant further integration obviously would have) require popular assent in a referendum. Given popular anger at the way that the bailout has been structured, I imagine that the chances of Ireland voting ‘yes’ to any new European initiative are close to zero.

Yet even if somehow the Irish people could be persuaded to say yes to some initiative – perhaps because it put in place a more equitable system of fiscal transfers in the case of crisis – it would have to pass through the second veto point – the German Constitutional Court. The Court has made it clear in recent rulings that it is not prepared to countenance major new initiatives that might e.g. shift responsibility for decisions over fiscal policy to the EU level. In other words – any more equitable system of economic governance is likely to be vetoed.

It is extremely hard to envisage Treaty changes that could get a yes vote in Ireland. It is next to impossible to imagine any new Treaty that could both get a yes vote in Ireland, and survive scrutiny in Karlsruhe. Hence – the process of ‘ever closer union’ through Treaty change is effectively dead. One can imagine other mechanisms of change (drift, policy incrementalism, ECJ rulings) coming into play, but they are unlikely to result in any very obvious changes except over the very long run.

{ 27 comments }

1

Kevin Donoghue 11.30.10 at 5:00 pm

IANAL, but isn’t it possible that the Irish Supreme Court could simply reverse the Crotty ruling? I know that doesn’t seem likely just now, but then a few years ago Ireland didn’t seem likely to be an IMF basket-case. If auditors and regulators can go to the dogs, so can judges. In fact I find it quite puzzling that the judiciary has managed to keep its act clean while the rest of the show gets increasingly obscene.

2

Pete 11.30.10 at 5:11 pm

Lots of Euroskeptics are talking about this, along with glee at the possibility of the demise of the Euro.

I think the choice is now quite clear: ever closer union requires permanent transfer payments from one European government to another, in the manner of the Barnett formula. If that’s not acceptable to the governments that would have to pay, then ever closer union cannot be achieved.

3

Moby Hick 11.30.10 at 5:16 pm

We the People of the Europe, in order to form a more perfect union, establish justice, insure domestic tranquility, and keep the Irish/Greeks/Spanish/Italians-from-below-the-boot-ankle from getting really pissed…

4

Chris Bertram 11.30.10 at 5:20 pm

I quite see the point about the Geman Constitutional Court, Henry, but if the Europe of the future is one with an impoverished and desperate periphery, it isn’t hard to imagine that yes votes could be secured by some combination of bribery and threat. Some nice cash transfers if you vote yes; some even more horrible deprivation if you vote no. True, the Irish people are angry now, but time and suffering may change that into sullen acquiescence. Timeo Germani et dona ferentes. Or something like that.

5

Joshua Holmes 11.30.10 at 5:21 pm

It’s no problem. They’ll just keep holding referendums until the correct outcome is achieved. If the Irish say no, they’ll have to say no every month. Then every week. Then probably every third day. And there will never ever be a referendum to reverse the first one, no sir.

6

Moby Hick 11.30.10 at 5:30 pm

True, the Irish people are angry now, but time and suffering may change that into sullen acquiescence.

If they are like the Irish that emigrated, they can do sullen acquiescence and anger at the same time. Speaking only for myself, I can do sullen acquiescence and anger and say the alphabet backward while standing on one foot.

7

P O'Neill 11.30.10 at 5:47 pm

As #1 indicates, if the Supreme Court wanted to take another look at Crotty, they could find the arguments fairly quickly.

Incidentally , Crotty does not require that new EU accession be put to a referendum, so there is a wheeze that was floating around during the Lisbon crisis of attaching other things to the legislation for Croatia or Iceland and seeing if it would pass constitutional muster through passage by the Dail.

Finally, the revamped Stability and Growth Pact and the future European Stability Mechanism (the 2013 successor to Ireland’s new best friend, the EFSF) envisage treaty changes, but doesn’t specify how they will be done.

8

otto 11.30.10 at 6:04 pm

I would emphasise that 1. that as mentioned above the fact that Ireland is in a dependent situation may make it easier than before to use carrots and sticks to get the referendum result the “EU” needs and that 2. national constitutional court ‘limits’ on European treaty obligations rarely impose any real constraints in practice. Sure if the Bundestag wanted to vote a budget through that was contrary to EU obligations, the Bundesverfassungsgericht would probably support the Bundestag against the ECJ, but if the Bundestag votes the money for even more transfers within the EU, the Bundesverfassungsgericht is not going to stop it.

9

ajay 11.30.10 at 6:13 pm

I think the choice is now quite clear: ever closer union requires permanent transfer payments from one European government to another, in the manner of the Barnett formula.

Pete, you know these already exist, right? Objective 1 funding and so on?

10

french derek 11.30.10 at 6:16 pm

About a week ago, Stanley W Black wrote a paper at
http://www.voxeu.org/index.php?q=node:5838

“Fixing flaws in the Eurozone”. His proposal is that the ECB should set different rates of borrowing (from the ECB) for different member countries. He notes that the US Fed did this from 1914 to 1941. He also argues that this would help countries like Ireland currently to get their economies back on the rails. Also the fact that investors burned their fingers in Ireland and elsewhere chasing high returns should prevent similar money flows from lower rate regions to the higher rated ones.

To establish such a mechanism would not require a treaty change. Worth considering?

11

DiSc 11.30.10 at 7:22 pm

“One can imagine other mechanisms of change”

German panzers crossing the Rhine, again? Will they get over the Channel this time?

12

piglet 11.30.10 at 7:27 pm

European integration (to the extent that it is driven by Treaty change) is dead for the foreseeable future.

Hasn’t it always been.

13

Chris E 11.30.10 at 9:23 pm

“Pete, you know these already exist, right? Objective 1 funding and so on?”

Convergence funding is quite a lot lower than the post unification support by West Germany of East Germany, and that didn’t work out so well.

14

theyenguy 12.01.10 at 1:18 am

A closer union … through … another mechanism will be forthcoming … very, very soon.

It is called acceptance of global governance by mandate of governing, in this case, Irish officials.

AfterQuotes relates Francois Mitterrand said: “Since each nation is undergoing a crisis, they all tend toward egotism. Each country first wants to rescue itself, whereas they will only be rescued together.”

Marketwatch reports Michael Hewson, an analyst at CMC Markets. “It is now becoming increasingly clear that the only options open for a final solution are to either adopt closer fiscal policies across all European countries, and with austerity fatigue already creeping in across European populations that looks unlikely, or for the single currency to somehow restructure itself in a manner that represents the differences between the respective stronger and weaker economies.”

I’m 60, living, in the Pacific Northwest, it’s only been recently that I’ve been interested in economics and investments, and have read some on Austrian Economics, and have benefited from insight into some of its principles such as debt deflation; but I’m not a libertarian, I am a Reformed Christian and bond-servant of Jesus Christ.

Years ago, I stumbled across the book En Route To Global Occupation by Gary H. Kah, Huntington House Publishers, Lafayette, Louisiana, 1992. And now its chapters come back to memory to fit in with the Bible’s prophetic Book of Revelation Chapter 13, to help me understand that out globalization, waves of carry trade investing, quantitative easing, and a currency union in sovereign crisis, ten regions of global governance are forming.

Bible prophecy portends that those living in the Eurozone, as well as all the world, will see a loss of national sovereignty, and live in debt servitude to the beast system of global corporatism, ruling through mankind’s seven institutions and in ten regions of global governance, as held forth in Revelation 13:1-4 where a beast, having seven heads and ten horns rises from the sea.

We are witnessing the rise of global corporatism, that is state corporate rule in the Eurozone as David Cameron, Dominique Strauss Kahn and Olli Rehn wrapped up a seigniorage aid bailout plan for Ireland, surrounding what the International Monetary Fund chief described as sovereign crisis, as Philip Aldrick, Economics Editor of The Telegraph wrote in November 19, 2010 article, IMF Chief Dominique Strauss-Kahn Urges Leaders To Cede More Sovereignty To EU.

Sovereign crisis arose November 5, 2010 as bond vigilantes sustained the interest rate on the US 30 Year Government Bond, $TYX, above 4%, as the US Federal Reserve’s Quantative Easing 2, constitutes monetization of debt; and as Econogirl related on November 10, 2010, that the German government has stepped up its insistence that bond holders must take on some of the costs for any new bailout of sovereign debt; and with Germany’s Merkel call for a sovereign default mechanism at the meeting of the European Task Force On Economic Governance on October 28, and October 29, 2010.

As a result the currency traders sold the world’s major currencies, DBV, and emerging currencies, CEW, causing the US Dollar, $USD, to rise. This caused World Government Bonds, BWX, and International Corporate Bonds, PICB, to sell off. And commenced an Elliott Wave 3 Down to start in the Euro, FXE, world stocks, ACMI, as well as in the S&P, SPY.

Now, a Core of Europe is emerging in the midst of a sovereign crisis. Rompuy, Merkel and Sarkozy on November 28, 2010, negotiated and announced, a Leaders’ Framework Agreement to establish a permanent crisis mechanism, that will replace that European Financial Stability Fund, EFSF, that expires in mid-2013. This sovereign debt default mechanism is called the European Stability Mechanism, ESM.

We see that today, Germany is one of the power forces, in attempting to find a way out of Europe’s sovereign crisis. Ambrose Evans Pritchard commented, on May 2, 2010, in the Telegraph.co.uk, in words reminiscent of Margaret Thatcher: “If the aim of Helmut Kohl and Francois Mitterrand at Maastricht was to tie down a ‘European Germany’ with the silken chords of emu, they failed. Monetary union has delivered a ‘German Europe’ after all. And he continues, We now know the answer to Henry Kissinger’s question: “Who do I call if I want to call Europe?” Only one person matters. The Chancellor of Germany.

Evidence abounds that Portugal, Italy, Ireland, Greece and Spain no longer have sovereign debt seigniorage, and are not viably obtaining and will not be viably obtaining revenue from sovereign debt sales; any upcoming bond sales are being done by banks, which submit debt or have submitted debt to the ECB for funding of new debt issues. Such means of obtaining money is simply a Ponzi financing, it is monetization of debt, and cannot be sustained much longer.

Theyenguy believes the sovereign crisis will intensify, and that out of Götterdämmerung, that is an investment flameout, according to Bible Prophecy, a Sovereign, Revelation 13:5-10, and a Seignior Revelation 13:11-18, an Old English term for top dog banker who takes a cut, will emerge to establish fiscal sovereignty and credit seigniorage for both Europe’s financial institutions and residents as well all the world.

Jean-Claude Trichet in address Global Governance Today, made before the Council on Foreign Relations, CFR, on April 26, 2010, called for this new financial state-of-being where he said: “For the good and appropriate functioning of global finance it is extremely important that we, in this new ownership of global governance, have — particularly on both sides of the Atlantic — the implementation of the same rules in the same fashion.”

Soon there will come unified regulation of banking globally, as referred to in the James Politi and Gillian Tett Financial Times article NY Fed Chief In Push For Global Bank Framework, where The Seignior will oversee all matters of debt and credit, most likely through the Bank for International Settlements, and will eventually implement a global currency system. Carroll Quigley, in his book Tragedy and Hope, relates that the BIS will “create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole.”

Francois Mitterrand, was a great prophet in saying “they will only be rescued together” — their deliverance if it be called that, will be the rule of fiscal sovereignty and monetary seigniorage coming from Europe’s Core, that is Brussels, Frankfurt and Basel where a common EU Treasury will provide credit and funding. Won’t that be a shocker to all anarcho capitalists. Such was God’s Plan from Eternity Past.

15

James Conran 12.01.10 at 2:58 am

As Ajay points out there are already a lot of fiscal transfer mechanisms in the EU – the CAP, the structural funds, the (rather small) Globalisation Adjustment Fund.

To be sure they may not amount to much at the moment but is the German court really going to rule it unconstitutional if, say, the German government decides to contribute to a radically increased funding of one or all of the above?

16

James Conran 12.01.10 at 3:03 am

Info on the EGF here: http://ec.europa.eu/social/main.jsp?catId=326&langId=en

“The European Globalisation Adjustment Fund (EGF) exists to support workers who lose their jobs as a result of changing global trade patterns so that they can find another job as quickly as possible….A maximum amount of €500 million per year is available to the EGF to finance such interventions.”

Do workers who lose their jobs because they’re in countries locked into a currency union with Germany count?

17

hix 12.01.10 at 5:01 am

Makes no sense. Ireland should be ever more willing for further integration now since their status quo profits are diminished. Before the regulation dumping showed its downsides, Ireland could have only lost from further integration. Now things look different. The only thing that would push away Ireland now is the usual blame the foreigners for local made problems xenophobic rage. That will pass, as far as its even real. Looks more like fake irrationality to get a better negotiation position.

18

dsquared 12.01.10 at 7:40 am

the post unification support by West Germany of East Germany, and that didn’t work out so well

???? How well did you want it to work? Some people, moon on a stick for tuppence a week, etc.

19

ajay 12.01.10 at 9:57 am

Well, there’s still a substantial economic difference between the former BRD and the former DDR. So if “working” = “ending economic differences”, then, no, it hasn’t worked. But if “working” meant “combining the Germanies into a single functional state that won’t cause economic or indeed military problems for its neighbours” then it has worked a treat.

Note that permanent transfer payments exist in most political unions and they haven’t led to disaster – it’s a natural consequence of having some bits of the country richer than others. The richer bits of Britain pay money to the poorer bits. (Or at least they do now. There was a long period in the 80s and 90s when the poorer bits were subsidising the richer bits.) The richer bits of the USA pay money to the poorer bits (also known as Real America). And so on. I’d bet there’s even some degree to which NATO includes transfer payments in terms of training aid etc.

20

Z 12.01.10 at 10:38 am

New Treaties – if they are to be passed, not only require unanimity, but have to pass through two veto points.

Well, I don’t think the situation is so different from the current one. Back in 2003, I am on the record saying that the Constitutional treaty (now Lisbonne treaty) had zero chance of gaining unanimity because one of the planned referenda (Spain, France, the Netherlands, Luxemburg, Ireland) was bound to produce a No and because the United Kingdom and/or Poland would reject through the parliamentary way. Seven years later, and with 3 no out of 5 and Poland rejecting it through the parliamentary way, Lisbonne treaty is in. Just make people revote where necessary and modify national constitutions by the parliamentary route elsewhere.

So (abstract) further European integration is not more unlikely as before, I would say. I think, on the other had, that the following slightly modified thesis is completely right: progressive European integration (complete with a welfare system and fiscal power) is sadly as remote a possibility as ever.

21

Chris E 12.01.10 at 12:22 pm

“???? How well did you want it to work? Some people, moon on a stick for tuppence a week, etc.”

Well, barring a (very) few bright spots the majority of East German towns and cities seem to be on a trajectory whose end point looks a little like Detroit. Of course that’s partly because there’s an economy nearby which is growing (slowly) and speaks a common language available to the most mobile. Though it’s not obvious to me that things would be better if this escape route wasn’t present.

“Note that permanent transfer payments exist in most political unions and they haven’t led to disaster – it’s a natural consequence of having some bits of the country richer than others. The richer bits of Britain pay money to the poorer bits.”

I don’t think things would be improved radically if you built a wall around the poorer bits, I think they’d get a whole lot worse. Permanent inequalities, permanent subsidies plus no pressure release mechanism seems designed to lead to a very unstable “them” vs “us” situation – you can already see it in some of the rhetoric adopted in the european press.

22

Colin Reid 12.01.10 at 2:18 pm

I think this map tells its own story about ‘core Europe’ vs ‘peripheral Europe':

http://upload.wikimedia.org/wikipedia/commons/5/54/European_union_erdf_map_en.png

I seem to recall though that for a long time (until some time in the early 2000s) Ireland was the biggest per capita net recipient of EU funds, ahead of arguably much more under-developed countries like Greece and Portugal.

23

Tim Worstall 12.01.10 at 4:44 pm

There are transfers now, yes, but the entire EU budget is what, 1%, 1.5% of GDP?

It’ll need a great deal more than that to make full fiscal union work. I’d love to know what people think would be the right amount. 5%? 10%?

Following on from that how sure is anyone that the richer countries are willing (or the citizenry of them perhaps) to tax themselves that much. Is it even possible to raise another 5 or 10% of Swedish GDP in taxation for example?

24

Daragh McDowell 12.01.10 at 5:30 pm

At the moment there seems to be a general acceptance that our current difficulties are largely of our own making and appropriate rage is being directed at Fianna Fail who, god willing, are about to get the most unbelievable electoral kicking in the history of the state. After that who knows where the blame will go.

My instinct is if a real reform treaty comes out with strong fiscal management, or there is some division of the Eurozone into a ‘free-trade zone’ and ‘Ever-Closer Union zone’ Ireland will vote for it/plump for the latter. Put it another way, as angry as I am at these interest rates, I’m a hell of a lot more angry with the two Brians for putting us in this position.

25

Lemuel Pitkin 12.01.10 at 7:44 pm

This seems like a onhe-sided analysis. Yes, the obstacles to further integration are greater than before the crisis. But the pressure *toward* further integration are also greater than before. It’s much clearer than it was a few years ago, that monetary union is not viable without (some form of) fiscal union. The issues you point to are real. but one doesn’t have to be a Marxist to recognize that when legal-institutional arrangements get too far out of line with social and economic reality, the laws and institutions often give way, though extra-constitutional means if need be.

The real problem is, as it always been, that integration is an elite project. The biggest obstacle to further integration isn’t the laws — which can always be changed — but the lack of any proper European demos.

26

Moby Hick 12.01.10 at 8:03 pm

…but the lack of any proper European demos.

Maybe a mix tape would do?

27

Ciarán 12.02.10 at 10:24 am

French derek @ 10. The point of the Irish situation is that investors did not burn their fingers in Ireland. Rather, the government is holding taxpayers’ hands to the fire to the tune of 1/3 of the accumulating debt so as to ensure that investors maintain their nice warm profity glow.

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