Irish voters would be playing a dangerous game with their country's economic future if they reject the European Union fiscal treaty in a referendum this month, Finance Minister Michael Noonan warned Wednesday.
Noonan told a Dublin conference that the Irish government expects to win the May 31 vote but will campaign hard, mindful of past voter rejections of EU treaties in 2001 and 2008.
Ireland is the only signatory to the 25-nation treaty requiring it to be ratified by a national vote. The treaty sets tough new limits on deficits, but its many critics say the agreement is flawed because it offers no hope of promoting economic growth in the countries that need it most, including Ireland.
For Ireland, the treaty's most threatening clause proposes that eurozone members failing to ratify the document won't be able to receive EU emergency loans.
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 (EURO)36 billion ($46.5 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."
However, three economists opposed to the treaty told a Dublin press conference that establishment politicians were trying to scare people with false or overblown warnings of worse austerity if they didn't vote yes.
"The `common sense' regarding the fiscal treaty retailed by the government is at direct right angles to reality. There will be no disaster in the event of the need for a second bailout," said Terrence McDonough, economics professor at the National University of Ireland at Galway.
"It is the adoption of the budget provisions of the treaty which is a risky and perilous experiment," said McDonough, speaking at a press conference organized by an anti-treaty pressure group called the Campaign Against Austerity Treaty.
All opinion polls this month have registered a significant lead for pro-treaty voters, but also a high level of uncommitted voters. The 2001 and 2008 treaty rejections came as a surprise to most pollsters, who underestimated the strength of feeling among anti-EU voters and the relative low turnout of "yes" voters. The governments of the day overturned both results with restaged referendums the following year.
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."
Pro-EU think tank's guide to referendum and treaty, http://bit.ly/JGRwWK
Irish Socialists opposed to treaty, http://www.austeritytreaty.ie/