I was debating the proposed new EU fiscal treaty on Charlie Bird's radio show on Saturday. It was a cosy gathering of 11 contributors including me - so there was limited time to develop any of the topics raised in the discussion.
Inevitably most of the discussion was about problems rather than solutions (e.g.: the legal case for a referendum etc). But what struck me was the obvious fact that the proposed treaty fails to address the key problems now facing Europe, and so we need to starting thinking about the 'treaty after next' as inevitably there will have to be another one.
Three key issues are ignored in the treaty as currently drafted. I call them the '3Gs', namely: Greece, Germany and Growth. The first one is obvious: Greece will have to leave the eurozone in the next two years (or two weeks!) - it's just a matter of how and when. The eurozone's politicians have wasted an opportunity to work out a clear mechanism for enabling a country to leave the eurozone, whilst minimizing the impact on the departing country's citizens and those remaining in the euro. It's a horribly complex task: but nevertheless a necessary one given the horrible problems facing Greece. It would be far better for Europe's future to have a transparent, feasible, democratic process for facilitating a country's departure from the eurozone (and eventual return if mutually acceptable) than the reality-denying nonsense that is the draft fiscal treaty as it currently stands.
The second issue is Germany: Europe and the eurozone's future now appears to be tied entirely to the political priorities of Germany. Which raises the obvious question: what will happen when Germany goes into recession - as it inevitably will? Over the past two decades Ireland has experienced inappropriate interest rate policies emanating from Germany as it struggled first with unification in the 1990s (pushing rates too high for everyone else); and then recession in the 2000s (pushing rates too low for everyone else). My guess is that a deepening recession in Germany will create domestic pressures for changes to the fiscal treaty, changes that will once again require intense political negotiations and, maybe, another referendum in Ireland. Given Germany's dire demographic prospects the rest of Europe will once again be dragged in a macroeconomic direction unsuited to the wider needs of countries like Ireland.
The final issue is Growth. The word is mentioned only ten times in nearly five thousands words of the draft treaty. The treaty will do nothing to get Europe (let alone Ireland) back on a sustainable growth path in the coming years. That is tragic for our country, simply because our 'growth potential' is higher than nearly every other member of the eurozone but we will not be able to realise it because of the skewed focus in treaty on balancing budgets and borrowing constraints.
On balance, the draft fiscal treaty is irrelevant to Ireland in the short to medium term - as argued by Colm McCarthy. The Irish government would be better off focusing its attention on lobbying for the treaty after next, one that will be better suited to the wider needs of the eurozone - including Ireland - and one more realistic about the future for Greece and Germany.
One idea: the Government should publish a draft treaty of its own for debate in Ireland, Britain and other EU countries that could ultimately form the basis for one that will have a meaningful impact on our collective futures. If we wait for the Germans to start the debate then I fear it will be too late.