Despite the intense debate which surrounded the Fiscal
Treaty, and ultimately its passing by the Irish people two weeks ago, its
overall impact on the Euro crisis discourse has proven to be minimal. The speculation had immediately turned to
the details of a Spanish bailout, a prospect that would have been ridiculed
only three years ago. No matter what
pans out in the Euro zone, the only certainty is that nothing has proven to be
outside the realms of possibility.
While there was bound to be
apprehension within Brussels and Frankfurt at the prospect of a lack of a
democratic mandate for the controversial terms, the conservative nature of the
Irish electorate was predictable.
Despite the fact that the main political parties are deemed to be
untrustworthy by vast swathes of the population due to the undelivered promises
of the last election, the fact that the vast majority of the political and
academic establishment was behind the Treaty – however grudgingly – was a major
reason behind the overwhelming yes vote.
The requirement of years of austerity was seen as a lesser evil than the
unpredictable consequences of Ireland leaving the Eurozone, an outcome that
probably would have been brought about by a negative vote. Another decisive factor was the reassurance
provided by the facility of the ESM if, as expected, we need a second
bailout. Of course, the viability of
the ESM is still questionable, given its inadequate size and the threat of
contagion sparked by the Spanish banking crisis.
In relation to Spain, the necessity
of even a partial bailout has not exactly been a secret. The scale of the property crash over there
has been comparable to Ireland, and the requirement for extra capital on the
scale of Ireland’s was always going to be an eventuality. While the leaders of Spain and the EU are
trying to keep a clear divide between the Spanish banking problem and the
sovereign, no matter what happens the cost will have to be borne by Spanish
taxpayers, or through the ESFS.
