The Cedar Lounge Revolution

The fiscal compact: Last chance saloon for the left December 15, 2011

While the final text of the new intergovernmental treaty intended to ‘save’ the euro won’t be ready until March, last week’s statement from the eurozone Heads of State give us a fairly good idea of what it’s going to involve.  And it’s not good news.

Stephen Collins likes it (although, admittedly, he liked it before he knew what was in it).  According to Collins, the treaty will require that “we should run our economy in a sensible manner and do the kind of things like bringing in a property tax and a water tax that our own politicians were too cowardly to do”.

On the other hand, Owen Jones, writing in the New Statesman, argues that “(t)he proposed EU treaty is perhaps the biggest catastrophe to befall the European left since the Second World War’.

Who is correct?  Well, Jones, obviously, and his statement is hardly exaggerated.  Central to the treaty will be the requirement, to be enshrined in national law, to maintain a budget surplus or, at worst, and annual structural deficit of 0.5% of nominal GDP.  To put that in context, the Stability and Growth Pact which we’re already committed to (and which is hardly an open invitation to fiscal extravagance) sets an annual deficit ceiling of 3% of GDP.  That’s 6 times the level allowable under the new compact (although SGP limits also include debt repayments) and the penalties for non-compliance with the new limits will be far more stringent.

This is, without a doubt, a recipe for permanent austerity.  Jones is right: signing up to this treaty will effectively outlaw any kind of expansionary fiscal policy, under any circumstances.  Forget about this being the end of left-wing governments; this would mean the end of even the possibility of centrism.

What’s more, it’s not even necessary.  0.5% isn’t some magic formula which will save the euro.  The ‘markets’ – apparently some impersonal, irrational force which cannot be resisted – don’t care about detail or legalities of the eurozone deal.  All they’re interested in is whether whether the ECB and the rich Member States will stump up the necessary resources to back the loans of the states with critical levels of deficit.  0.5% is a completely arbitrary figure, a political target rather than an economic necessity.

It’s the last gasp of neoliberal politics, which recognizes an opportunity to seize victory from the jaws of defeat (including the failure of austerity measures to stimulate growth or economic recovery) and to enshrine a blinkered and irrational economic ideology into European law, forever.

While it’s important not to personalize these kinds of issues – arguments about the personalities of Merkel or Sarkozy tend to be red herrings and not very useful – this could also be seen as an opportunity to permanently embed their legacy into the heart of the EU, as both face severe electoral challenges in the coming couple of years.

But despite the significance of the measures proposed, there’s little substantial discussion of the consequences of acceptance.  Most of the coverage has focussed on the actions of the UK during the negotiations and the implications of that (allowing Collins et al to portray this as a choice between staying with the euro or aligning with sterling, a very disingenuous position, even for him).  Fintan O’Toole’s piece on the agreement focussed on the strategic opportunity the negotiations provide to secure a reduction in accumulated debt, a case of failing to see the wood for the trees.  Sinn Fein appear to have grasped the threat that the Treaty represents and it can be expected that they, along with the ULA and parties of the left, will argue against it on those grounds.

And they would be right.  If this treaty is accepted, we may as well all pack up and go home.  The deal, as it stands, must be opposed.  I write this as someone who, unlike many who will campaign against this treaty, argued in favor of a Yes vote to the Lisbon Treaty, and would stand over the arguments in favor I made at the time.

So what happens now?  It’s not yet certain that there will be a referendum.  That decision will only be taken after the treaty itself is signed, presumably in March.  But as the government has thrown itself into the campaign, it would be irresponsible to do anything other than to act as if a referendum was happening, and to launch a campaign of opposition now.  Remember, one of the key factors which contributed to the defeat of the first Lisbon referendum was the fact that the No side campaigned for six months, as opposed to a six week campaign on the Yes side.  There is no time to lose.

It will, of course, be extremely difficult to defeat this treaty, particularly if framed, as it will be, as an ‘in or out of the euro’ proposal.  But there are some reasons to be hopeful.

Firstly, unlike previous EU referendums, the issues involved are relatively straightforward.  The consequences of a 0.5% deficit limit are more concrete and less theoretical than, say, the impact of EU membership on Irish neutrality.  And they can be translated into bread and butter examples of spending cuts.  Similarly, the debate will be narrow enough to exclude the lunatic fringe dragging perennial irrelevancies such as abortion into the discussion, the kind of behavior which discredits the wider No campaign as much as it attracts any votes.

Given the draconian nature of the proposal, there’s also the potential to build a much broader oppositional coalition of the left than previously, including the labour movement.  While ICTU endorsed the Lisbon Treaty, it was by no means enthusiastic.  This time, even the trade union leadership should realize what’s at stake.  This treaty would mean no return to partnership, which is what many of them crave above all, an area where they’re most comfortable, as there would be nothing available to buy off industrial peace, as there was in the past.

Finally, and I know I’ll win few friends by saying this, there’s the Labour Party.  The Labour front bench will support the treaty; that’s a given.  But the broader Labour members, from branch level up to TDs, are not stupid, and they’re not evil.  At the moment, they’re supporting the programme of austerity as a temporary measure.  They’re not holding out for common ownership of the means of production, distribution and exchange, of course, but they are hoping (naively, in my view, but genuinely) that after a few years hardship, it will be possible to dish out the goodies again.  The deficit targets in this treaty, though, mean that there will be no goodies for anyone, ever.  This leaves two options for Labour in the future: to continue in government presiding over austerity budgets without even the consolation of ‘pain now, reward later’ or, outside government, opposition to austerity budgets the broad framework of which they’ve already signed up to.  This should be enough to give even the most hardened unthinking Rabbitte-ite pause for thought.

The fight against this treaty must begin now.  Opposition groups much work together, and get across a very simple message about what this proposal means: austerity forever.  The government, and right-wing voices in the media must not be allowed to frame this as a choice between retaining or abandoning the euro.  Trade unions and civil society organizations must also be involved.  The message must be driven home to Labour that in signing this treaty, they’ll be signing their own death warrant (a little like another Treaty 90 years ago).

There is a very nasty campaign ahead, but the stakes could not be higher.  This is the greatest challenge faced by the left in Ireland, indeed, across Europe, in generations.  But if you want a picture of the future if this treaty passes, imagine Leo Varadkar’s boot stamping on a human face – forever.