Irish yes vote fails to dispel euro fears

June 1, 2012 at 5:24 PM
share with facebook
share with twitter
| License Photo

DUBLIN, Ireland, June 1 (UPI) -- Irish voters gave their approval to the European Union's increasingly controversial fiscal compact, pledging support for the government's austerity program, but business analysts said continuing eurozone troubles could still force Ireland to seek a bailout of its banks.

The fiscal compact is a treaty-like commitment by EU members, except Britain and the Czech Republic, to put their finances in order and reduce state deficits within narrow limits set by the union.

Many of the targets set in the fiscal deal are already under robust challenge from EU member France and other countries that say the pact's austerity blueprint isn't working toward an achievable economic recovery or growth.

Just before the vote Thursday news media speculated that Irish anger over the budgetary cuts could prompt the citizens to throw out the compact but the approval vote indicated moderate opinion prevailed despite deep frustration over the Irish economy's direction.

Ireland's economic troubles are being dwarfed by worries over Spain's debt mountain and concerns that EU rescue funds might prove to be inadequate to save Spain from a meltdown.

The prospect of an eventual bailout in Ireland exacerbated those fears.

Irish Prime Minister Enda Kenny said the "yes" vote reinforced Ireland's message to the rest of EU members and world economy that the country would overcome its problems.

Skeptics say pressures on Irish economy are still growing but the "yes" vote was a timely reassurance to EU regulators that Ireland would continue to honor its fiscal fact commitments.

The "yes" vote brought some relief to government politicians who feared a rejection of the fiscal compact would trigger a chain reaction in Brussels and deprive Ireland of future emergency assistance.

Ireland already has been advanced more than $105 billion in a rescue package put together by the European Union and the International Monetary Fund.

The current bailout package runs out in 2013 but worries over Irish banks' parlous state have renewed worries that Ireland may need another cash injection much earlier.

Kenny is the latest EU politician to adopt a language inspired by French President Francois Hollande, whose election in May reshaped the Franco-German partnership that had turned German Chancellor Angela Merkel and former French President Nicolas Sarkozy into the European Union's de facto leadership duo.

Kenny spoke of austerity and growth in the same vein, telling Irish voters Ireland needs to work within a European framework to get rid of its bank debts.

Critics and political opponents of Kenny blame not only Irish banks but also British and German banks for "the mess we're in."

Irish voters interviewed in the media said the "yes" vote for the financial compact meant nothing beyond that it kept open the channel to EU cash if Ireland needs it in the coming months.

The fiscal compact prompts EU members to co-ordinate budget policies but also sets out penalties for members who fail to observe the rules and prune their deficits.

Critics say the compact's targets are overambitious. The compact requires all member states that ratify it to cut their budget deficits to less than 0.5 percent of their economic output.

Ireland is one of several countries that have a deficit outstripping that target figure. Last year's data indicated Ireland's deficit exceeded 13 percent of the Irish economic output.

Related UPI Stories
Latest Headlines
Trending Stories