Fiscal Compact Referendum Opening Salvos

This evening I attended a packed event organised by Marc Coleman of the National Forum with the following speakers presenting: Declan Ganley, Brian Hayes, Eamon O Cuiv and Michael McDowell.

Guess who said what:

The effect of the Compact is to give the Oireachtas powers to legislate for the tougher fiscal rules which we have already signed up for (in the Maastricht Treaty) and those in the pipeline (the Six Pack)

Referendums give answers to questions that were not asked

A No vote will put Ireland in an even weaker position and a place of risky investment

Quicker austerity will result – a fatal toxic shock – if the referendum is not passed

The Treaty is not necessary at all as the Six Pack contains the details

The Keynesian option is dead with German orthodoxy the rule

A strategic view of Ireland’s relationship with Europe is needed but glib demands about a move to full political integration is not achievable; the construct of a United States of Europe is not in the interests of small member states: Ireland does not want to become a canton of this State

But we need to know about the end game (are we moving to a federal Europe) and debate the nature of federalism as this will provide a context for our decision on which way to vote.

Europe must remain largely intergovernmental as this suits our strategic interests: a view shared by our nearest neighbour

Euro realism is where the debate should be going

The small print consequences need to be spelt out as they are more important than the big EU picture; the referendum is also about the Stability Pact Treaty and European Stabilisation Fund Treaty

The referendum is not about membership of the EU or the eurozone

The Treaty is an impossible straight jacket, for example the constitutional requirement to reduce the GDP ratio every year will cripple the economy

The following issues need to be addressed to Ireland’s satisfaction before the Treaty is ratified: the regulation of the banks at EU level, the right of initiative remaining with the Commission and not the Franco-German alliance, an employment and growth strategy, a corporation tax guarantee, the ECB be reformed to allow it to lend to sovereigns, European banks that lent to Ireland should accept their share of the cost.

The Government and the Fiscal Council should produce a ten-year budget forecast based on the Treaty discipline so that the electorate can see what they are voting for

Public sector pay rose 20% in Germany in past decade and by 100% in Ireland

FG argued for a balanced budget pre-election and that domestic law should so legislate

The European ship is heading towards an iceberg; it is stifling innovation and competition

The Treaty is designed to placate the readers of Bilt

The Germans should be told we bailed out their German

If we vote No there will be another vote

No realm ever survived the collapse of its coin

We need to get the country to a better place

We have no right to hand a 120% debt/ GDP ratio to our children; the bankers should bear their responsibilities

‘No’ means ‘maybe’ until there is clarity about a restructuring of Ireland’s bank debt
……….

A few reflections

The panel of speakers all talked about the consequences of a vote on the Treaty but not one explained all it’s core provisions

Voting on 31st May is totally daft given the mood of the nation; we should be asked to vote once the Treaty had been approved by the majority of the eurozone countries

The Fiscal Council should provide a series of scenarios that explain the practical effects of the fiscal disciplines enshrined in the Treaties

Efforts to get a debate going on a Federal Europe is a complete diversion that will, given its nature, confuse the voters and as a consequence drive more to the No camp

Thankfully religion, conscription, neutrality, abortion etc. are unlikely to have an impact on the debate

The Compact is something we should do anyway BUT AND PROVIDED we get a long term solution to our sovereign (bank related) debt

2012 Action Plan for Jobs

A good plan….but….

Which are the high impact priority actions? Do we really need 270 measures many of which have nothing to do with the creation of conditions to promote risk taking, innovation and entrepreneurship?

How much will the plan cost? Most of the measures have no budget indicated.

Should entrepreneurs as well as state agencies have a role in monitoring the effective implementation of the plan? The Government should appoint a Jobs Champion from the private sector to give the plan a degree of credibility.

On specifics, nothing new is said about practical steps to promote the green economy. The current green economy action plan is being reviewed. It would have been much better if the current plan’s 50+ measures were actually implemented. The poor priority attached to this sector is a serious disappointment. In contrast, the green economy and the development of low carbon technologies are top of the political and business agenda in competitor economies

Bolder action should have been taken to assist SMEs exploit their successes in winning public contracts. EI should be mandated to approve modest grant aid, say €4,000, to help companies produce top quality tender submissions targeted at export opportunities. EI also should have been asked to set up a significant training and mentoring programme targeted at UK tenders which are valued at some €240 billion.

Green Public Procurement

The long awaited Government Action Plan on Green Public Procurement (GPP) has been published.

GPP will cover tenders in the following sectors: construction, energy, transport, food and catering, cleaning products and services, paper, uniforms and other textiles and ICT equipment. The Action Plan  seeks to make sure that existing legislative requirements, for example in relation to waste and energy efficiency are factored into future tender competitions.

Suppliers in these priority sectors would be well advised to read the GPP Action Plan carefully as selection and evaluation marks will in future depend on how you ‘green’ your tender bid responses. For example, buyers may require that for the tenders covered by GPP suppliers should have certification in environment management systems (EMAS).

This is voluntary approach as a Statutory Instrument has not been enacted to give effect to GPP in Ireland.

On the other hand, while details are as yet sketchy, Government has made it clear that a life cycle costs approach should be considered by buyers when evaluating tender costs.

Detailed guidelines will have to be issued to public buyers before the GPP goes ‘live’. For example, there are as yet no assessment criteria for the use of construction products. On the other hand, the GPP Action Plan requires, for instance, that food and catering companies must have ISO 14001 certification (or equivalent) and that all ICT equipment meets Energy Star or equivalent criteria. There is no reference (quite a surprise let it be said) to carbon foot-printing i.e. the identification of the carbon component of the goods to be supplied.

It is envisaged that before full roll-out a detailed implementation plan for each of the eight sectors will need to be prepared in consultation with industry stakeholders. The Marketing Development Programme (or rx3 as it is now called) will work to define the most appropriate methodology for each sector. First and foremost, the public servants who have been asked to implement GPP will have to be trained. Funds for such training are limited so the introduction of GPP will be gradual, but soon enough it will be embedded in national procurement policy.

GPP will work provided the National Procurement Service engages with suppliers in a pro-active manner. The fact that the NPP is moving cautiously is to be welcomed given the limited experience which Irish suppliers have in this space.

Treaty on Stability, Coordination and Governance in the EMU: an OTT response?

Having reviewed the latest version of the draft Treaty I have an ‘Emperor Has No Clothes’ question; the self-evident question that nobody wants to raise in public: could an EU Council Regulation not be enacted to give effect to what is in the Treaty? In other words, taking account of what is already in the Lisbon Treaty, why is an inter-governmental agreement seeking to set down ‘new’ powers over economic policy as many such powers and Union competences in this area already exist.

The draft Treaty speaks about the coordination of economic policies; so does Lisbon in the form of the Stability and Growth Pact. The draft Treaty sets out rules about a Member States’ budgetary positions which are as clear as the Lisbon Treaty’s provisions about the requirement to have sound public finances. The draft Treaty envisages a degree of flexibility as indeed do the economic surveillance rules under Lisbon. A final point for the EU constitutional lawyers: can an EU Treaty (as this may be one day) change secondary legislation (specifically Regulation 1177/2011) as is proposed by way of Treaty amendment? Surely an amendment to the Regulation can set detailed rules about benchmark average rates of reference values (whatever that means).

It is worth recalling that in the Lisbon Treaty we voted for the following:

1. The adoption of an economic policy based on close coordination of Member State’s economic policies based on the principles of stable prices, sound public finances and a sustainable balance of payments (Article 119).
2. Economic policies are a matter of common concern to the Union and the European Council has power to recommend broad guidelines of the economic policies of the Member States and of the Union. The Council has power to monitor economic developments and where there is a risk of jeopardising EMU make a recommendation to that Member State (Article 121).
3. There is a clear Treaty requirement for Member States to ‘avoid excessive government deficits’ and the Commission is obliged to identify ‘gross errors’ with regard to set reference values. The Council must act in the event of an excessive deficit ‘with a view to bringing the situation to an end within a given period’ and has power to impose fines on the Member State in question (Article 126).

To my mind it is arguable that to a very large extent the purpose and scope of the draft Treaty could be enacted by way of secondary legislation (i.e. not requiring a referendum).

If that is in fact the case, what is the net contribution of the proposed Treaty to the vires of the Union?

Ten schillings (new currency) for anyone who proves me wrong!

Ryanair’s Climate Change Stealth Tax

Let’s get a few facts straight.

Ryanair in common with all airlines using EU airports has to pay for only 15% the greenhouse gases it emits.

In that respect the company is no different from the 10,000 other heavy energy users in the EU who have a legal obligation to reduce their emissions.

Ryanair told everyone last October that the compliance cost of meeting their emissions trading obligations was €16 million a year; this figure was based on buying carbon allowances at €10.75 a tonne.

Today, the price of these allowances has fallen by a third to €7.22 so surely the company’s compliance costs must have fallen? Eh no!

By my calculation Ryanair may have to buy 1.2 million tones of carbon allowance (85% of the 8 million tonnes emitted) in 2012 and multiplied by €7.22 their compliance cost equals €8.7 million: way short of what the company claimed just a few weeks ago.

Now here comes the rub.

Ryanair carried some 76.4 million passengers in 2011 and assuming a similar number fly next year then the per capita cost of compliance being passed onto passengers should be just 11 cent.

Great that Ryanair is creating awareness about climate change.

Pity the airline is too greedy.

No doubt the Commission for Aviation Regulation will have something to say about this blatant over-charging.

In the interest of customer service perhaps Ryanair might provide the basis for calculating its climate change stealth tax.

Government’s Legislative Programme

 The Government has just published its legislative programme for 2012 and a list of all draft legislation currently before the Oireachtas; see enclosed links

·         SECTION A – Lists 26 Bills which the Government expect to publish from the start of the Dáil session up to the beginning of the next session

·         SECTION B – Lists 25 Bills in respect of which Heads of Bills have been approved by Government and of which texts are being prepared

·         SECTION C – Lists 73 Bills in respect of which heads have yet to be approved by Government

·         SECTION D – Lists 26 Bills which are currently before the Dáil or Seanad

·         SECTION E – Lists 35 Bills which were enacted since the Government came to office on 9th March, 2011

·         SECTION F – Lists 46 Bill which was published since the Government came to office on 9th March, 2011

·         SECTION G – Lists 9 Bills which lists heads of bills for referral to Committee for consideration pre-publication

The present state of play of Bills before the Oireachtas is as follows:

TITLE OF BILL	STAGE OF BILL
Protection of Employees (Temporary Agency Work) Bill 2011	Order for Second Stage
European Arrest Warrant (Application to Third Countries and Amendment) and Extradition (Amendment) Bill 2011	Order for Second Stage
Appropriation Bill 2011	Order for Second Stage
Jurisdiction of Courts and Enforcement of Judgements (Amendment) Bill 2011 [Seanad]	Second Stage
Legal Services Regulation Bill 2011	Second Stage (Resumed)
Dormant Accounts (Amendment) Bill 2011 [Seanad]	Second Stage (Resumed)
Construction Contracts Bill 2010 [Seanad]	Second Stage
Mental Health (Amendment) Bill 2008 [Seanad]	Second Stage
Bretton Woods Agreement (Amendment) (No.2) Biill 2011	Committee Stage
Water Services (Amendment) Bill 2011	Committee Stage
Central Bank (Supervisions and Enforcement) Bill 2011	Committee Stage
Public Service Pensions(Single Scheme) and Remuneration Bill 2011	Committee Stage
Criminal Justice (Female Genital Mutilation) Bill 2011 [Seanad]	Committee Stage
Immigration Residence and Protection Bill 2010	Committee Stage
Competition (Amendment) Bill 2011	Order for Report
Energy (Miscellaneous Provisions) Bill 2011	Order for Report
Veterinary Practice (Amendment) Bill 2011	Order for Report
Patents (Amendment)Bill 2011	Order for Report
Tribunal of Inquiry Bill 2005	Order for Report
Health (Provisions of General Practitioner Services) Bill 2011	Order for Report

Bills on Seanad Order Paper

TITLE OF BILL	STAGE OF BILL
Privacy Bill 2006 [Seanad]	Order for Second Stage
Electoral (Amendment) (Political Funding) Bill 2011 [Seanad]	Order for Second Stage
Ombudsman (Amendment) Bill 2008	Second Stage
Coroners Bill 2007 [Seanad]	Committee Stage
Qualification and Quality Assurance (Education and Training) Bill 2011 [Seanad]	Committee Stage

 Contact me if you need more information about any of the Bills.

Irish Water – Business Opportunities

We think of water as free, falling from the sky in abundance. We all enjoy clean water at the turn of a tap and watch it drain away without a thought.

A barrel of oil (Brent crude) is €88. We are all conscious of the price of oil and energy and significant investment is spent producing oil and indeed in energy efficiency measures. But what is the price of a barrel of potable water (a litre of branded drinking water purchased in your local supermarket)? The answer is €88!  Yet consumers’ and indeed investors’ attitude to both products is diametrically opposite.

While approaches to water service provision and regulation differ across the world, all customers want an efficiently run service that seeks to minimise price increases and provide good levels of customer service.  The scale of the sector and its ownership is also an issue. For example, the water industry inEngland andWales consists of 23 fully privatised companies, with ten providing both water and sewerage services and 13 providing water only. In contrast, the water industry in Northern Ireland is not privatised but is managed by one agency, NI Water. Outside theUK, ownership and operation is normally organised in the form of a public utility, either as part of a municipal organisation or a publicly owned company.  

On average across the developed world, water companies supply between 142,000 and 420,000 properties.  However, inEnglandandWalesthe figure is much higher with medium sized companies servicing up to 1.7m properties.  In Ireland in contrast, 34 local authorities are responsible for water and waste water treatment.

An independent assessment has been completed of the existing organisational arrangements in the water sector and a new national entity Irish Water will be set up. In addition, the sector will be regulated in the same manner as other utilities and strategically important services.

Are Irish companies equipped to take advantage of the $300 billion global market in water products and services?

This is a short extract from a research paper I have completed on business opportunities in water services.

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Catherine Day

The Commission’s Secretary General addressed the Institute of European Affairs today and made quite a sombre and realistic speech on the theme ‘the EU in 2012 - a Commission Perspective’.

Her key messages were as follows.

Emerging economic governance: While the Commission is seen as an economic organisation very few people realise the practical implications of what has been agreed e.g automatic and systematic oversight by the Commission of national budgets based on independent data and peer review by all Member States. More thorough monitoring of national budget proposals will also be the case. Other new Commission powers include the imposition of fines and requiring external assistance should a Member State not meet the new economic and fiscal rules in place and under negotiation. This will involve a shift from a more academic assessment of national economies to a more fundamental enquiry into all Member States and this implies the Commission having a greater in-country presence. For the present the Commission is not geared up for such a significant change to its remit. A change of mindset will be needed as Member States will have to share information and not shelter it as has been the case in the past. Political skill and sensitivity will be a requirement if the Commission is to do it’s job properly. Big, quick and major decisions are being taken in a hurry without reference to national parliaments and this too will have to change. Even sensitive information will have to be shared.

Future shape of EU and debate about community method: the euro will be core of the future EU but not all countries will be part of this arrangement with enhanced cooperation becoming the norm. A new European architecture is being fashioned.  The debate has intensified as to whether intergovernmental structures should be used. The Commission does not agree with this but will work on the new treaty with Member States. Political leadership, in particular the Franco-German alliance, is important and has been dominant in the absence of policy direction from the Commission.The Commission did not have the capacity to respond hence the intergovernmental nature of many recent proposals. As a consequence, the Commission has tried hard particularily since last summer to secure wider support for it’s proposals. In addition, the European Parliament is out of the game where the Community method is not used. There is a real risk of a two circle EU emerging with the UK’s decision of especial importance, but if they opt out in a crossroads moment this will has important implications for European integration. Such a choice needs to be debated and will be in the near term.

Financial Perspective: It is a tough time for the Commission to be bringing forward it’s budget proposals through to 2020. Two blocks are emerging: the spend less club and the cohesion group. Neither is looking at the connection between implementing the EU’s policy and setting spending priorities. As before, a difficult negotiation can be expected but on this occasion matters will be complicated by the ongoing response to the euro crisis.

This is the EU’s worst crisis since it’s foundation. That said major changes have been agreed in the past two years. A more economically intrusive EU will emerge. A debate about these fundamental changes will be needed with the main battle being played out between the choice of an intergovernmental or a more integrated EU. These fundamental decisions will be made over the coming months.

 

Euro Summit – fudge or confusion or indeed both?

The first thing one should do when a European Summit is over is to read the conclusions and ignore the spin of the participants.

In that context the conclusions of the meeting held on 9 December are a bit of a puzzle. There is a commitment by all Member States (apart from the UK) to a Fiscal Rule which envisages tougher sanctions should a Member State breach current Treaty provisions about excessive deficits. However, the actual content of this Rule is quite ambiguous and much of the language is a mere repetition of what already exists in the Lisbon Treaty. In addition, such a Rule will not apply to at least six eurozone members until 2015 at the very earliest. We need to remind ourselves that fiscal discipline and fiscal union are two quite different concepts; the Summit addressed the former only. There are commitments to examine Commission proposals about non-compliance with National Stability and Growth Pacts but nothing concrete was agreed. All of this is to be included in what is called an intergovernmental Fiscal Compact Treaty.

So what is new? Not a lot is the short answer. The intention is that the (revised) Treaty on the European Stability Mechanism (with an enhanced budget of €500m) will be fast-tracked to become operational in July 2012; by the way this is a separate Treaty to the mooted Fiscal Discipline Treaty. The requirement to involve private bondholders in sharing the burden of any future rescues has been dropped. The text of the ESM Treaty will be finalised in the coming days. The EU will also provide the IMF with some €200 billion as part of a multilateral endeavour to increase its resources. Otherwise the conclusions are a rehash of much of what has been said before.

What is more important are the decisions taken by the ECB on 8 December to support bank lending and money market activity. Europe has an acute bank liquidity problem and the ECB’s decisions to increase collateral availability (by way of accepting lower-quality collateral for example), will go some way to calm nerves as over €1.6 trillion in sovereign and bank debt needs to be repaid in the first months of next year. Mario Draghi is quite prepared that the ECB continue to be the lender of last resort to the EU’s banks but not to play the same role for stressed eurozone governments as the Bank is not allowed to do so under the Lisbon Treaty. The acid test of the market’s reaction to this bold move will be the S&P rating of eurozone countries in the coming days. If a start is made to resolving the bank liquidity crisis one would imagine that the separate sovereign debt crisis will also begin to stabilise as the two are so closely interwoven.

David Cameron’s ‘veto’ of the Fiscal Pact may well back-fire. Being isolated is one thing but blocking a deal supported by everyone else (and for spurious reasons) will have a wider impact. His tactics were described as ‘clumsy’ and the FT quoted a French diplomat as saying ‘he was like a man attending a wife-swapping party without a wife.’ The PM needs to be reminded that the City is regulated by EU internal market rules determined by qualified majority voting. At those negotiations affecting the UK’s vital national interests they can expect little sympathy for special pleading. Will Europe’s big banks in the City move their operations where regulatory certainty prevails? How will sterling fare on the markets if the UK persists with what many consider to be an ill-conceived and botched attempt at securing opt outs for some of the UK’s on-going grievances that have nothing to do with the eurozone crisis?

Is a referendum required in Ireland? Nobody can tell definitely until the text of a proposed Fiscal Discipline Treaty is drawn up. If the Commission gets new competencies to enforce fiscal discipline over and beyond what is envisaged in the Lisbon Treaty then probably, but on the other hand an inter-governmental Treaty outside the EU Treaty framework may not be covered by the Supreme Court’s Crotty judgement. On calm reflection, Member States may conclude that much of what is in the Fiscal Discipline Treaty could be adopted by secondary legislation as Article 136 of the Lisbon Treaty allows eurozone members to adopt legislation to strengthen the coordination and surveillance of their budgetary discipline and to set out economic policy guidelines. As the European Parliament is opposed to Treaty change, as there is rising opposition to an intergovernmental Treaty that cannot use the EU’s Institutions, and as the convening of a formal Inter-Governmental Conference/Convention which is a requirement for all Treaty change has not apparently happened, do not be surprised if some of the Summit conclusion’s language never makes into in a Treaty. That said the Government will need to clarify if a referendum is needed to ratify the ESM Treaty. It goes without saying that if a referendum is needed Ireland should be the last to put such a proposition to the people. Let the French, Dutch, Greeks and Danes vote before we do!!

Last July, Ireland was promised lower interest rates on the borrowings used to recapitalise the banks, longer maturities and a grace payment period of ten years i.e. the same generous conditions which were approved for Greece. Six months later all the government has done is to write a letter ‘to begin a conversation’. As the taxpayer is over-paying to the tune of billions of euros, would it not be better to stop the polite conversations and start active and tough negotiations to reduce our bail-out costs to more manageable proportions. For example, all of the recent social welfare cuts could be reversed if the interest servicing costs associated with the banks’ bail-out were reduced.

The Summit displayed all the features of an ill-prepared meeting where the result – talk of a Treaty but with no text on the table – will only serve to confuse matters further. Treaty change at some point in the future is no substitute for clear political decisions that address market and investor confidence. History shows the EU never takes a decision until it has to. This suggests the Rubicon has not yet been reached. Only when a major pan-European bank does a Lehman due to its liquidity problems will the EU Heads of State and Government take the decisions the markets expect of them.

European Council December 2012 – Whatever happened to decisions already adopted?

Last June and July Europe’s leaders adopted some quite clear and fundamental decisions.

On the eve of the latest Summit in Brussels it is worth recapping some of the more explicit commitments.

Euro Commitments	Ireland’s Response
The following EFSF lending rates and maturities ‘will be applied to Ireland’: -          Lengthen loans (from 7.5 years at present) to up to 30 years -          Grace period of ten years -          Reduce lending rates to 3.5% (equivalent to those of the Balance of Payments facility)	No mention of such generous terms in Budget 2012 arithmetic. Whatever happened to this promise (made at the 21 July 2011 meeting of the European Council)?
‘We reaffirm our commitment to the euro and to do whatever is needed to ensure the financial stability of the euro as a whole and its Member States’.	…………but
Member States (i.e. Ireland) should strive to make their future commitments as specific and measurable as possible. Giving details on how and when commitments will be met, in order to render measurable over time and facilitate benchmarking with other Member States as well as Europe’s strategic partners.	Eh. Sure we only benchmark (some) public sector salaries and when we do it’s only against prevailing (lower) private sector salaries. None of your international benchmarking stuff please.
The euro area Heads of State or Government call (as they did in June 2011) on Finance Ministers to complete work on outstanding elements to allow the necessary decisions to’ be taken by early July’.	But which July? 2012? 2013?
We note Ireland’s willingness to participate constructively in the discussions on the Common Consolidated Corporate Tax Base draft Directive ‘and in the structured discussions on tax policy issues in the framework of the Euro+ Pact framework’.	Watch carefully for the equivalent paragraph in the December 2012 Council conclusions.