Bloomberg
May 30, 2012
The eyes of the world are on elections in Greece next month that could determine whether it defaults and triggers contagion throughout the euro area. By contrast, Ireland’s referendum tomorrow on whether to ratify Europe’s new fiscal treaty is passing almost unnoticed.
That’s odd, because although Ireland can’t veto the pact -- its full name is the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union -- the government is warning voters that the very same thing could happen here as in Greece.
As in Greece, austerity in Ireland has been imposed by a coalition government of established centrist parties, Fine Gael and Labour. And as in Greece, the government is warning that unless voters cast their ballots the right way, the country could be cut off from access to funding provided by the European Stability Mechanism. That would certainly trigger an Irish default.
Why, supporters of a “Yes” vote ask, would the rest of the euro area go on bailing out a member that has rejected the rules of the currency union? And if, as most economists believe, Ireland will need a second bailout, the fiscal treaty’s preamble is explicit: It states that “the granting of assistance in the framework of new programs under the European Stability Mechanism will be conditional, as of 1 March, 2013, on the ratification of this Treaty.”
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