30th May 2012
Tomorrow Irish voters go to the polls to decide whether they should vote yes or no to the European Union’s Fiscal Compact Treaty. There is of course an element of fantasy to this as the vast majority of the 25 countries that signed this treaty currently have a snowballs chance in hell of actually achieving “a balanced budget”! From the Treaty itself:
"the budgetary position of the general government of a Contracting Party shall be balanced or in surplus."
According to Eurostat Ireland actually had a fiscal deficit of 13.1% of its economic output as measured by Gross Domestic Product in 2011. Indeed in the previous three years she had gone -7.3% ,-14% and -31% for this measure.
For national debt as a proportion of GDP The Fiscal Compact Treaty repeats the past target of the Stability and Growth Pact which everybody including France and Germany ignored! This is particularly apposite as this treaty was pushed by the Merkozy amalgam of those two countries leaders. It required a national debt of 60% of GDP.
Ireland had a national debt of 108.2% of her GDP at the end of 2011 and in the previous three years it had gone 44.2%,65.1% and 92.5%.
You may already suspect that there is an element of farce about Ireland having a vote on a treaty it cannot possibly comply with in the foreseeable future. Indeed I am reminded of my post on the March Hatters Tea Party! And there is another issue to consider. You see Ireland did follow the Stability and Growth Pact and if we look back did comply with the new terms of the Fiscal Compact Treaty. So her decline poses a serious question for the point of the treaty itself. Ireland had been maintaining the size of her national debt throughout the Euro era up to 2006 meaning that it had fallen substantially when compared to her GDP and was at 24.7% in 2006.
So we are left with the problem that Ireland still had a housing and banking boom and bust inspite of following the new rules! It is an incredible irony that she votes on a policy which did not prevent her economic collapse.
How is the Irish Economy doing?
As it is her housing market whose boom and bust led to Ireland being brought to her knees let us examine its position. From her Central Statistics Office:
"In the year to April, residential property prices at a national level, fell by 16.4%. This compares with an annual rate of decline of 16.3% in March and a decline of 12.2% recorded in the twelve months to April 2011.