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06 March 2012

Bloomberg: Ireland must accept and approve the EU fiscal deal


When Irish Prime Minister, Enda Kenny, announced last week that the new fiscal agreement with the European Union would be put to a popular vote, he said it was a chance to reaffirm the nation's commitment to the euro.

Irish voters may see it differently. After several years of great economic pain, their infatuation with the euro has, let’s say, cooled. They are in no mood for affirmation, and the vote is a chance for them to say, enough is enough.

This week, Europe’s financial markets are focused on efforts to get private holders of Greek bonds to accept the terms of the proposed restructuring. If that goes well, attention will turn again to Ireland. The Irish honour the principle that constitutional changes should be put to referendum, and the budget rules just negotiated by EU governments as part of the union’s bailout plans would seem to qualify.

Irish voters face a quandary. They have good reason to shun the agreement -- but if they do, it will be another big setback for them and for the EU’s efforts to revive the European economy.

Ireland’s desire to ground constitutional commitments to Europe in popular consent is admirable. It’s a shame that so few other European countries have taken the same trouble -- and as a result may yet see this economic calamity spiral into a crisis of political legitimacy. In addition, the fiscal rules that Ireland will be voting on happen to be badly designed. Governments are promising to keep so-called structural budget deficits below 0.5 per cent of gross domestic product. That target is far too tight and inflexible.

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