IRISH VOTERS WOULD be playing a dangerous game with the country’s economic future if they choose to reject the European Union fiscal treaty in a referendum this month, Finance Minister Michael Noonan warned today.
Noonan told the Bloomberg Economic Summit in Dublin that although the Government expects to win the May 31 vote but will campaign hard – mindful of past voter rejections of EU treaties in 2001 and 2008.
Noonan warned that if Ireland was denied access to future European bailout funds, he would have no choice but to deepen the nation’s 4-year-old austerity program, increasing both cuts and taxes to keep the 2013 and 2014 deficits to a minimum. Given this, he described any treaty rejection as amounting to “a dangerous leap in the dark.”
He argued Ireland should be able to avoid a second bailout and return to borrowing normally on bond markets so long as the country can point to its continued ability to tap European loans if needed. Ireland’s 2010 rescue-loan package from the EU and International Monetary Fund is due to run dry by the end of 2013.
“We’ll get back into the markets in the second half of next year. But having access to cheap European money would be the kind of backstop which would encourage the markets to lend to us,” Noonan said, describing access to future European bailouts loans as “a kind of insurance policy.”
Opposition lawmakers also campaigning for a “yes” vote made even starker warnings, arguing that Ireland could face a Greek-style crisis of confidence if voters reject the treaty.
“Ireland could next year be facing the type of grave uncertainty being experienced by ordinary Greek people at the moment,” said Michael McGrath, finance spokesman for the main opposition Fianna Fail party, which supports the government’s pro-treaty campaign.
“If Ireland rejects the fiscal treaty, we will be reliant on market access to fund the country,” he said, noting that Ireland is expected to need to borrow around €36 billion in 2014 and 2015. “The irony is that rejecting the referendum will almost certainly increase the likelihood of Ireland needing a second bailout by virtue of the inevitable spike in borrowing costs that rejecting the treaty would unleash.”
Noonan added that he doubts that Greece will leave the euro, arguing there’s no external desire for the country to abandon the common currency. He said Greece simply needs to elect a stable government committed to the existing terms of its bailout.
“There’s no pressure on them to leave,” he said. “If Greece sorts itself out democratically, there’s no question whatsoever of Greece leaving the euro,” he said.
To embed this post, copy the code below on your site
have your say