Following the last EU summit when the European Stability Mechanism Treaty was agreed by the participants, the People’s Movement called a press conference and pamphlet launch which was almost completely ignored by the media. Our subsequent picket outside the Dáil took place in a prolonged downpour!
The European Council Conclusions calls on Member States to ‘take all steps required to ensure the ratification of the ESM Treaty by the end of 2012’ This might not be so important had tánaiste Éamon Gilmore not stated in the Dáil on 13 April 2011 that Ireland will be required to pay approximately €9.87 billion towards the fund.
From June 2013 a ‘European Stability Mechanism’ (ESM) will provide loans to eurozone members in difficulties – strictly conditional on the implementation of a range of ‘adjustment measures’. Described by the German Chancellor, Angela Merkel, as a ‘solidarity’ measure, the ESM will not have retrospective effect so will not be of any help to this country in its predicament.
Euro-zone member states will only actually disburse €80 billion, in five annual instalments, starting in 2013. A remaining €620 billion of the subscribed capital will be made available by way of ‘callable capital’ and guarantees.
But here is the crux for Ireland: Germany and France whose sovereign bonds have a triple A rating would not need to put up actual money to cover any shortfall of paid-in capital. A guarantee would do. But countries with lower ratings such Ireland and Greece would have to pay cash. So we will find ourselves in a perverse situation. Countries with easy access to capital can provide cheap guarantees, while the weaker countries will have to put forward cash.
This implies increased borrowing by Ireland and of course increased interest payments such as would easily wipe out the benefit of any decrease in interest payments that might be achieved by the government and which was the subject of much comment in the Irish media during the Council meeting. We should hope that we are never asked to stump up real cash by way of callable capital because this will be added directly to our burgeoning debt. In the meantime, please add your voice to those who have joined us in calling for a referendum on this treaty.The People’s Movement has launched a new pamphlet entitled The European Stability Mechanism and the case for an Irish Referendum (click on the title to access).