Independent TD, Thomas Pringle of Donegal South West, is taking the Government to court claiming that the ESM Treaty ratification should have been via a referendum rather then just a vote in the Oireachtas.
This treaty change is linked to the Fiscal Compact which Ireland will be having a referendum on ratification on May 31st.
Deputy Pringle is concerned that the European Stability Mechanism treaty and the Stability, Coordination and Governance in the Economic and Monetary Union (Fiscal Compact) treaty raised “serious legal difficulties” both in Ireland and Europe.
“In effect [the treaty] can direct the State to raise sovereign debt, give the money so raised to it and can then decide, where, when, whether and how it is to be spent,” he said. “Therefore Ireland will not have power to control decisions regarding the use of funds raised by it.”
“What if a majority of voters in the May referendum on the fiscal compact vote in favour of imposing permanent austerity rules on the country in order to get access to a proposed permanent euro zone loan fund only to discover that the treaty to establish that fund is illegal under EU law and unconstitutional in Ireland and may never in fact come into force,” he said.
A plenary summons was lodged at the High Court last Friday and served on the chief State solicitor that day. A copy was also sent to the offices of Taoiseach Enda Kenny and Tánaiste Eamon Gilmore.
Deputy Pringle said he was forced to take this action as he had not received a reply to letters sent by his solicitors to Mr Kenny and Minister for Finance Michael Noonan raising issues with the treaties.
This will be an interesting case as this will be the first case challenging the state’s ratification of a state treaty since Raymond Crotty challenged the states ratification of the Single European Treaty. It will be interesting if the court will make any recommendations on treaty ratifications when no power is being transferred.
After last nights announcement in the Dáil by Finance Minister Michael Noonan, full statement on Karl Whelan’s blog, negotiations are under way between Central Bank Governor, Patrick Honohan, and the European Central Bank.
The Promissory Note, basically a Government IOU to the Anglo Irish Bank, is worth over €3.1 billion and is due for payment on the 31st of March, which is also the day of the Fine Gael Ard Fheis in Dublin.
The prospective plan is to swap the Promissory Note for a Government backed bond that will be due for repayment in 2025. This will give the Government some breathing space on time, but crucially will mean that the €3.1 billion can be used to help shore up the budget. That bond will also be used by the IBRC as collateral in seeking emergency loans from the Central Bank.
According to the Irish Independent the basic details of the deal are as follows as the more intricate details still need to be ironed out:
The €3.1bn debt due on March 31 will be deferred up to 2025.
The debt will technically be repaid. There will be no default.
There will be no net cost to the State.
The deal is estimatesd to save the taxpayer €80m in interest this year.
A new government bond, repayable in 2025, will be issued to cover the cost of the repayment.
While Irish Economy notes that a number of questions still need to be answered this is hopefully a good deal for Ireland. It will also hopeful spur on the Troika (EU, ECB and IMF) in renegotiating the overall debt of the bailout of Anglo Irish Bank and Irish Nationwide now known as the Irish Bank Resolution Corporation.
Tonight speaking in Dáil Eireann, Finance Minister Michael Noonan, announced that a deal had been brokered on the Anglo Promissory Note which is due to be repaid. An excerpt from his speech from politics.ie
Firstly, there is an issue that I wish to bring to the attention of the house as the Government has always committed that we would inform the Dáil about any development concerning the payment of the promissory note at the end of this month.
In more recent months, we have been involved in technical discussions on reducing the burden of debt associated with the recapitalization of the banks. In particular our focus has been on the Promissory note arrangement that was put in place to fund the Irish Bank Resolution Corporation – formerly Anglo Irish Bank and Irish Nationwide. This is an arrangement, which requires the State to make cash payments of €3.06 billion each year to IBRC. There have been some developments on this issue during the day.
The discussions with the European authorities on the general issue continue but we are now negotiating with the EU authorities, and principally with the ECB, on the basis that the €3.06 billion cash installment due from the Minister to IBRC on 31 March 2012 under the terms of the IBRC promissory note could be settled by the delivery of a long term Irish Government Bond. The details of the arrangement have still to be worked out.
Minister for Finance Michael Noonan TD today announced the rest of Budget 2012. The main points are as follows:
VAT: Raised by 2% to 23%
1.4c increase on Petrol
1.6c increase on Diesel
€17.32 increase on Fuel Oil (to rise in May)
€14.46 increase on Natural Gas (to rise in May)
No Carbon Tax on solid fuels
25c increase on pack of 20 Cigarettes
Capital Acquisitions Tax: Up from 25% to 30%
Capital Gains Tax: Up from 25% to 30%
DIRT: Up from 27% to 30%
Corporate Tax Rate: To remain at 12.5%
This side of budget seems a bit more balanced in comparison to yesterdays cuts. While the 2% rise in VAT will hit the price of everything (including Alcohol, Cigarettes and fuel) it is the only swinging tax announced.
The Household Charge being introduced ahead of a Property Tax can be paid in instalments, so that should lessen its impact. Also the rising of the threshold on the Universal Social Charge takes the low paid out of the Tax Net which is a good thing.
Some of the cuts yesterday still leave some bitter taste. But only time will tell if the right medicine is being given to Irish economy.
Euractive have a very interesting article on the talks between EU Economic Commissioner Olli Rehn and the Irish Government and Opposition.
“He asked us our view and I told him […] we had no confidence in this government, and the thing that would give more stability to the country is an election and a government in place that had a significant working majority,” said Michael Noonan, finance spokesman for the centre-right Fine Gael party
This of course means the markets are jittery about Ireland. Will Fine Gael stick to the 4 year plan to reduce the deficit if they win the election? Will Labour? This worry and the Portuguese Debt Auction has sent “the risk premium on Irish and Portuguese bonds to record highs and prompting market talk of European Central Bank (ECB) intervention.”
This is worry news indeed.
The Irish yield spread over benchmark German bunds reached a record peak near 574 basis points in late trading. The 10-year Portuguese/Bund spread also hit a euro lifetime high of 466 basis points and traders said the ECB had been buying bonds.
Credit ratings agency Fitch Solutions said the cost of insuring Irish and Portuguese sovereign debt against default had widened by 24 and 22% respectively compared to the sovereign debt market average in the last week.
Commissioner Rehn is still thinking positive though, he told RTÉ
“I believe that the markets have not yet internalised this plan and these decisions because they are still at the planning stage,” he said. “Once they have been decided by the government and passed by the parliament they will have a real effect, and then the market forces [will] believe that Ireland is able to cope.”
I personally hope that he is right. Next months Budget is going to be make or break, not just for the Government, but for the country as a whole. There is no doubt that cuts and taxes are coming, and a few holy grails will have to be given up, but can we accept that as a country? Will we protest on the street like the Greeks? Or will we grin and bear it?
The next four years are going to be tough. Can we make it? I hope so, but we need political will and not political point scoring.