Reply to Dr Gavin Barrett's article on the Fiscal Treaty referendum in last Friday's Irish Times

national | eu | opinion/analysis Monday May 07, 2012 01:23 by O.O'C. - National Platform EU Research & Information Centre 24 Crawford Avenue Dublin 9 01-8305792

By Anthony Coughlan, Director, The National Platform EU Research and Information Centre

“The Member States whose currency is the euro may establish a stability mechanism to be activated if indispensable to safeguard the stability of the euro area as a whole. The granting of any required financial assistance under the mechanism will be made subject to strict conditionality.”
- Proposed amendment to Article 136 TFEU of the EU Treaties by which the 27 EU Member States authorize the 17 Member States of the euro currency area to establish a Stability Mechanism

INTRODUCTION

This amendment to the EU Treaties has still to be approved by Ireland in accordance with its constitutional requirements under the “simplified” EU treaty amendment procedure of Article 48.6 TEU. The European Council decision to insert the Article 136 TFEU amendment into the EU Treaties comes into force on 1 January 2013 if by that time it has been approved by all 27 Member States in accordance with their constitutional requirements. The ESM Institution which the 17 Eurozone States seek to establish and which Ireland would become a Member of is set out in the ESM Treaty. This treaty cross-refers to the Fiscal/Stability Treaty on which we vote on 31 May. The ESM Treaty states that it is “complementary” to the Fiscal/Stability Treaty. The Government has promised the other 16 Eurozone Governments that it will have the ESM Treaty ratified by July, but without the necessary constitutional referendum being held on the Treaty and the Art. 136 amendment which authorizes it.

Q. Where will we get the money if we vote No on 31 May?

A. Where will the Government get the money to pay the €11 billion the ESM Treaty will require from us, with an open-ended treaty commitment to pay further sums thereafter without limit?

Q. But where will we still get the money ?
A. We will get it by holding a referendum on the Article 136 TFEU amendment and the ESM Treaty, as that is constitutionally necessary in order to authorize these proposals as they stand. The 16 other Eurozone States will have to persuade us to vote Yes in such a referendum if they are to establish the kind of Stability Mechanism which the ESM Treaty envisages. They can do this by agreeing to forgive the private bank debt they have insisted should be imposed on Irish taxpayers, plus the Anglo-Irish promissory notes etc. A referendum can also be used to press the Eurozone authorities to agree a growth strategy for the Eurozone instead of the present failed austerity policies.

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Sunday 6 May 2012

DEAR DR BARRETT,

It is quite wrong of you to state in your Irish Times op-ed article of last Friday that No-side advocates in the current referendum are “threatening to veto an institution as vital as the ESM”. Yet you make no mention of the €11 billion which the ESM Treaty requires Ireland to contribute in different forms of capital to the Stability Mechanism the ESM Treaty proposes – with €1.6 billion up front “irrevocably and unconditionally” (ESM Treaty Art.8) and a blank cheque in the treaty to paying in further sums without limit in future as required.

WHY IRELAND HAS A VETO ON THE ARTICLE 136 TFEU AMENDMENT TO THE EU TREATIES, AND THE ESM TREATY WHICH THIS AMENDMENT AUTHORISES

Those on the No-side who know what they are talking about are saying that the ESM Treaty and the Article 136 TFEU amendment to the EU Treaties which authorises a “Stability Mechanism” should be put to referendum in Ireland before we can either ratify the ESM Treaty or approve this Article 136 TFEU amendment in accordance with the provisions of EU law and the terms of our Constitution.

This is

(a) because a permanent commitment to the ESM as a new Eurozone Institution of which Ireland becomes a “Member”, together with its accompanying rules and its extraordinary legal and taxation immunities for its Board of Governors and personnel, entail a drastic surrender of most of what is left of Irish State sovereignty; and

(b) because if the amendment to Article 136 TFEU quoted above is lawfully to permit a Stability Mechanism for the Eurozone of the kind set out in the ESM Treaty - a Mechanism which would effectively contravene a number of existing EU Treaty articles - then a different method of amendment of the EU Treaties needs to be adopted than the method being employed in the present instance.

It is therefore the No-side people who are seeking to defend EU law and the integrity of the EU Treaties by pointing this out and calling for the Article 136 TFEU authorisation and the ESM Treaty which it purports to authorise to be ratified in the only manner that is lawful under the EU Treaties and constitutional in Ireland – namely, by way of referendum of the people. It is a pity that your article fails to acknowledge this.

WHY UNANIMITY AMONG THE 17 EUROZONE STATES IS REQUIRED TO APPROVE OR RATIFY ANY STABILITY MECHANISM FOR THE EURO AREA COUNTRIES

I am surprised that you do not acknowledge that the express terms of the Article 136 TFEU authorisation quoted above require unanimity amongst the 17 Euro area States for the establishment of any Stability Mechanism the latter may decide to set up.

If you look at the words of the proposed Article 136 TFEU authorisation, you will see that it does not say that “Member States”, meaning some of them, may set up a Stability Mechanism, but “THE Member States”, meaning all of them (In French it is “LES membres” as against “DES membres”). The ESM Treaty as it stands provides that it can come into force when Eurozone States contributing 90% of the capital have ratified it. The eight biggest of the 17 Eurozone States can do this, thereby bringing the Stability Mechanism into being, even though they would be a minority of the countries of the euro area. How then can the Stability Mechanism for the 17 that is envisaged in the ESM Treaty be for “the euro area as a whole”, as required by the Article 136 authorisation by the 27 EU Member States quoted above?

There are other, legally weightier, reasons for unanimity being required for ratification of an ESM Treaty of the kind the Government will be asking the Oireachtas to ratify in June, immediately our referendum on 31 May is over, but this point will do for now.

THE ESM TREATY IS THE WAY TO THE “FEDERATION FOR THE EUROZONE, A CONFEDERATION FOR THE REST OF THE EU” WHICH NICOLAS SARKOZY CALLED FOR LAST NOVEMBER

The ESM proposed in the ESM Treaty would radically restructure the rules of the Economic and Monetary Union which Ireland joined under the Maastricht and Lisbon Treaties. Having failed to obey the 3% and 60% of GDP “excessive deficit rules” set out in those treaties, Germany and France are now proposing to put the EMU on an entirely different basis than hitherto by means of this new EU Institution, the ESM. They thereby want to override the “no bailout” rule of Article 125 TFEU which forbids EU loans to Governments so that the proposed ESM can do this, something that is forbidden under the current EU treaties.

Germany and France, are seeking in this way to by-pass the rules of the current EMU and carve out a legal path to what French President Nicolas Sarkozy has called for, “A Federation for the Eurozone and a Confederation for the rest of the EU”. The ESM Treaty envisages this new ESM Institution with its giant €700 billion associated fund as becoming in effect a new Bank-cum-Finance Ministry for this Eurozone Federation of the future.

WHY THE WRONG TREATY REVISION METHOD IS BEING USED TO INSERT ARTICLE 136 TFEU INTO THE EU TREATIES IF THIS AMENDMENT IS TO VALIDATE THE ESM TREATY AS IT STANDS

The 27 EU Member States are of course legally entitled to amend the EU Treaties in order to permit the establishment of a Stability Mechanism for the 17 Eurozone States of the radical kind proposed in the ESM Treaty - as long as they do that by the legally proper method governing the revision or amendment of the Treaties as set out in Article 48 TEU.

It looks very probable that if Article 136 TFEU is lawfully to permit an ESM of the radical character envisaged by the proposed ESM Treaty, then the EU Treaties need to be amended by the procedure set out in Article 48.2 of the Treaty on European Union(TEU), the so-called “ordinary treaty revision procedure”, rather than by “simplified treaty revision procedure” of Article 48.6 TEU which is currently being used. As you know, this “simplified” treaty revision procedure was inserted into the EU Treaties by the Treaty of Lisbon. It allows the European Council of EU Prime Ministers and Presidents to amend the treaties by a “Decision” among themselves to do that – such a Decision being subject to subsequent constitutional approval by their respective Member States.

See a copy of the European Council Decision enclosed, taken from the EU Official Journal. The Prime Ministers and Presidents on the European Council did not sign anything when they took this Decision on 25 March 2011. They took that Decision collectively amongst themselves, but it must still be constitutionally approved by their National Parliaments or by referendum of their peoples. The constitutional process of approving that Decision is analogous to, but not the same, as the process of ratification of a treaty following its signature. The Decision may well not be constitutionally approved, just as a Treaty may not be ratified.

This EU “simplified treaty amendment procedure” is a form of legal short-cut which is meant to deal with minor technical amendments that do not require a full intergovernmental conference to amend the EU Treaties, followed by a lengthy treaty ratification process. This “simplified treaty amendment procedure” was however never meant to provide for such a radical scheme as the fundamental restructuring of the Economic and Monetary Union which the ESM Treaty as it stands proposes. This ESM Treaty is tantamount to an attempt to organize a legal-political coup to override the EU Treaty provisions on which the existing EMU is based. Hence the proposed Article 136 TFEU amendment is almost certainly being “approved” in the wrong way under EU law if it is taken as authorizing the ESM Treaty that Messrs Kenny and Gilmore want to ratify by July 2012.

I am informed that this is a central issue in the constitutional challenge to the amendment to Article 136 TFEU and the ESM Treaty which has been launched in the High Court by Donegal Independent TD Thomas Pringle. Thomas Pringle is seeking to defend EU law, the integrity of the EU Treaties and the Irish Constitution by his legal action. He deserves the support of every democrat and patriotic Irish person. It would be helpful if you would consider in some future Irish Times article the important legal and constitutional issues which Thomas Pringle’s brave challenge raises.

DR GAVIN BARRETT’S CONTENTION THAT THE ARTICLE 136 EU TREATY AMENDMENT IS “UNNECESSARY” FOR THE ESM TREATY’S STABILITY MECHANISM TO BE ESTABLISHED?

I am truly surprised to see such a distinguished exponent of European law as yourself write in your article that, “It is far from clear that the Article 136 TFEU amendment is really necessary in order to set up the ESM”.

If that is so, why do all 27 EU Member States think it necessary to insert the Article 136 TFEU amendment quoted above into the Treaties? The EU is a Union governed by law, The Member States do not amend the EU Treaties without cause. Why are all 27 EU countries currently going through their constitutional processes for approving the European Council Decision to amend the EU Treaties to permit the establishment of a Stability Mechanism for the Eurozone if, as you say in your article, ”it is far from clear” that this is necessary? Are you really suggesting that the legal advisers of 27 EU Governments are all wrong?

You mention in last Friday’s article that the ESM’s temporary predecessor, the three-year EFSF loan fund set up for Greece in 2010 and from which Ireland and Portugal later got their bailouts, was ”successfully set up” under another treaty article - Art.122 TFEU to be precise – but you are well aware doubtless that this article was never meant for such a purpose.

That EU Treaty Article deals with mutual aid between EU Member States in the event of natural disasters. It was clearly not meant to cover sovereign bailouts for Eurozone countries which had got into a financial mess because they failed to obey the 3% and 60% “excessive deficit rules” of the existing EMU. That is why an entirely new legal provision has to be inserted into the EU Treaties – namely, the proposed amended Article 136 TFEU – in order to provide a proper legal base for the proposed permanent ESM loan fund of €700 billion for the Eurozone, together with all the other radical things this new ESM Institution would do, of which the 17 Eurozone States would become “Members”. How does one become a member of a “Mechanism” by the way?

MONETARY POLICY FOR THE EURO AREA IS AN “EXCLUSIVE EU COMPETENCE” AND NOT SOMETHING AN EU SUB-GROUP OF 17 EUROZONE STATES CAN ARROGATE TO THEMSELVES

It is regrettable that your uncritical political commitment to further Eurozone integration should lead you to try to sidestep such a basic principle of EU law as Article 3 TFEU, which provides that anything to do with monetary policy for the euro area is an “exclusive competence” of the supranational EU as a whole. This competence cannot be arrogated to themselves by the 17 Eurozone States, just because that is what Germany wants, with France going along.

It is an ABC principle of the EU Treaties that the Eurozone States must abide by the existing provisions of EU law as regards anything they might desire or propose which would affect monetary policy for the euro area, because that is an “exclusive EU competence”. The establishment of an entity such as the proposed ESM with its associated €700 billion permanent fund for lending directly to sovereign governments would certainly affect that. Germany, France and the other Eurozone Members cannot lawfully do whatever they like with the EMU – although that essentially seems to be what they are seeking to do by means of this ESM Treaty.

THE ECJ DECIDES ON EXISTING EU TREATY LAW, NOT ON PROPOSALS FOR FUTURE LAW

The statement in your article that “The European Court of Justice has never said” that setting up a €700 billion Stability Mechanism for the Eurozone requires an EU Treaty amendment such as Article 136 TFEU is surprising. How could the ECJ possibly have made any judgement of this kind when Article 136 TFEU is a proposed amendment to the Treaties and not an actual Treaty Article? Article 136 is not yet part of the EU Treaties and will not have legal force until next January, if by then it is approved by all 27 EU Member States. The ECJ has therefore no jurisdiction with regard to it. It is a matter for the Irish Supreme Court to rule on if the Supreme Court choses to exercise its constitutional powers – which of course includes protecting the integrity of the EU treaties that now form part of Irish law.

I put it to you that the above considerations make it clear why we need to have a constitutional referendum in Ireland on the ESM Treaty and on the Article 136 TFEU on which the ESM Treaty as it stands is legally dependent.

USING IRELAND’S VETO THROUGH A REFERENDUM WOULD PUT US IN A POWERFUL BARGAINING POSITION VIS-À-VIS THE EUROZONE AS NOTHING ELSE CAN POSSIBLY DO

Those who want an ESM like that proposed in the ESM Treaty wish for that to be done in the legally and constitutionally right way, for it would profoundly affect our Constitution and it requires a referendum here.

It is quite incidental to the legalities of the issue that such a referendum would put Ireland in a powerful bargaining position vis-a-vis the Eurozone if the other Eurozone Governments press ahead with the kind of radical ESM Institution which is envisaged in the ESM Treaty as that stands at present.

A referendum on Article 136 TFEU and the ESM Treaty would nonetheless be an opportunity for Ireland. It would be a real chance for us to get radical relief on our State debts.

Standing by the Irish Constitution in face of German-led pressure and exercising Ireland’s veto in defence of EU law and the EU Treaties would of course require some gumption from Messrs Kenny, Gilmore and their fellow Ministers. Holding a referendum on the ESM would put Ireland in a powerful bargaining position by which we could rid ourselves of the enormous private banking debt and all that that entails.

May I therefore invite you to join me and my colleagues in calling for such a development.

Let us exercise the Veto that we have on Article 136 TFEU and the ESM Treaty and make our politicians stand up for Ireland and the Irish people who elected them, while at the same time defending EU law and the EU Treaties against Germany’s and France’s takeover-bid for the Eurozone.

With best regards,
Yours sincerely

ANTHONY COUGHLAN
Director
(Associate Professor Emeritus in Social Policy, TCD)