May 31: the make-or-break date for the Eurozone

The first national referendum on the proposed European Fiscal Treaty takes place in Ireland on May 31. My hunch is that it will be rejected. Elain Byrne had an interesting article in the Guardian about the background.

Ireland has rejected two of the four European referendums put to voters over the course of the last decade. The Fine Gael-Labour coalition, now a year in office, has already lost a referendum – the public rejected a political reform poll last October. A hint of government complacency and a public overwhelmed by personal debt, rising unemployment and budget cuts could scupper the yes vote’s chances.

The Irish Central Bank published a study on Thursday which showed that Irish households have suffered the most severe wealth destruction in Europe. Dan O’Brien in the Irish Times reported on Friday that the net worth of Irish households has fallen by 35% since 2007, the 17th consecutive quarter of decline. And yet Ireland does not do protest. Greek-style demonstrations do not suit an Irish mindset weary of decades of Northern Ireland violence. We are essentially a very conservative people. Nonetheless, there is a steady upswell of dissent building among the middle classes.

It is articulated through something very close to the Irish psychic–land. As part of the European Central Bank, European Commission and IMF programme, the government is obliged to introduce a household charge. This is an attempt to broaden the tax base as one means of addressing the yawning €18bn gap between income and expenditure. Ireland is virtually unique among its European neighbours in not having any property-based charges.

The deadline for the €100 charge was last Friday. To date just 886,000 householders had voluntarily registered of the 1,570,814 properties affected…

People in Ireland are very pissed off. They’ve had their love affair with Europe, and it’s over, just like their love affair with Fianna Fail and the political establishment it spawned is over.

Later: When asked in a Guardian interview whether the Euro was a disaster, Stephanie Flanders, the BBC’s Economics Editor replied:

“It’s more than a disaster, I think it’s a tragedy. It was quite an ambitious project, which had pros and cons, but it was basically mis-sold to everybody. So the Germans were sold it as a way of spreading a German approach to economics, and German stability, across the eurozone; but they were told that it would come without any obligations on them, there would be no bailouts. At the same time, the others were told this was a quick ticket to German stability, and they would get low interest rates and low inflation, and they weren’t told: there’s one catch – you have to be as competitive as Germany for ever. And if you do have any problems, all the usual tools you’d use to get out of them won’t be available to you. For many of these countries, the implication is years more austerity, which has a big sign on it saying, ‘Brought to you by the euro.'”

Spot on.