John Bruton

Opinions & Ideas

Category: Fine Gael

PETER BARRY

peter barryThe loss of Peter Barry will be felt deeply throughout Ireland, but particularly in the city of Cork to which he devoted a life of public service.

Peter represented all that is best in Cork, its culture, its pride and its intimacy as a city. He knew, and was loved and respected, by his neighbours in Blackrock.

Just as I never heard Peter Barry say a bad word about another person, I never heard anyone ever say a bad word about him. This was perhaps the key to his success  as international diplomat on behalf of Ireland. He won respect without ever needing to command it. The inherent dignity of his personality sufficed to ensure that he always got a fair hearing for his views.

He was a crucial figure in the history of Fine Gael. At a time when Jack Lynch was dominant in Munster politics, Peter Barry’s election to the Dail in 1969 reminded the people of his province that there was an alternative, ready to govern.

That alternative government came to office in  March 1973, under the leadership of Liam Cosgrave, and Peter Barry was among its senior cabinet members. Serving in the portfolios of Transport and Power and in Education, he held his own in a government of many talents.

Among the practical matters he promoted as Minister for Transport and Power, was the completion of rural electrification. Even then, there were places in Ireland, like the Black Valley in Kerry and Ballycroy in Mayo that, because of their remoteness, did not have a supply. In 1976 put through the legislation to ensure that those remote areas at last got that requisite of a modern life, an electricity supply.

He was briefly Minister for Education, and in that capacity, I was his parliamentary Secretary (Minister of State).

In Education,he continued the implementation of the important reforms of his predecessor Dick Burke, establishing management boards for schools and the Transition Year.

He was deeply committed to the Irish Language and to all aspects of Irish culture.

But he also had an interest in the development of the European Union. He supported the late professor Jim Dooge, who chaired the committee at EU level that lead to Single European Act, which was the reform of the EU treaties that created a genuine single EU market for goods and services.

As has been pointed out by others in the last two days, his central achievement as Foreign Minister was the negotiation of the Anglo Irish agreement.

This agreement ended the international isolation of the nationalist minority in Northern Ireland. It created an institution, the Anglo Irish Conference, that ensured the governments in London and Dublin were required to work on ongoing basis to ensure fair treatment of both communities.

The very existence of the Conference, created by the Agreement, provided a safety valve for the discussion of differences that inevitably arose, from time to time, between the two governments. Rather than these differences becoming the subject of megaphone diplomacy, discussion of them could  be referred to the next meeting of the Conference. This allowed time for things to cool down. In a sense, this typified Peter Barry’s approach to politics. He combined conciliation with firmness and his calm demeanour lowered the temperature and allowed others to take the time to find a more constructive way forward.

Looking back over his early contributions in the Dail debates. I am struck by the number of occasions of which he raised the issue of unemployment, particularly the level of unemployment in Cork.

During our time together in cabinet in the 1980s, there were a number of major setbacks to employment in Cork, notably the closure of Dunlops and Fords. As the Minister responsible for employment at the time, I remember well the persistence of Peter Barry’s representations to preserve employment in Cork. It was partly as a result of his efforts that an Employment Task Force for Cork was set up at that time, and I believe some of the initiatives taken by that Task Force laid the foundation the tremendous industrial renaissance that took place in Cork and around Cork Harbour.

Peter Barry was immensely loyal to his friends. He was loyal, in every possible way, to each of the Fine Gael leaders under whom he served. I have particular reason to remember that deep appreciation.

 I believe that the loss of his wife, Margaret, was felt very deeply by Peter. They were an exemplary couple in every way, and Margaret’s support of Peter in his political life was vital to him. They inculcated in their children a deep sense of public service.

Peter Barry was a credit to Ireland and to Cork.

DICK BURKE R.I.P.

Dburke

Dick Burke pic by Tom Burke

Dick Burke was a successful European Commissioner on two occasions. He was responsible, after the 1982 Greek Elections, in the negotiation with the new Greek government, of terms whereby Greece remained a member of the European Union.

He also was involved in the exceptionally complex negotiations whereby Greenland, although remaining part of Denmark, was allowed to leave the EU, while Denmark proper remained within. His courtesy and ability to listen were key factors in his success as a Commissioner.

Dick Burke was also a very successful, reforming, Minister for Education, with concrete achievements to his name.

 He introduced the Transition Year and School Management Boards.

To have persuaded the various “establishments”, that dominated education in Ireland at the time, to accept, and  to successfully operate, these major reforms was a big negotiating achievement.

He was able to do this because he won the trust of existing institutional interests. While he wanted change, he was able to make it happen because he also showed respect for what the existing institutions had achieved for the children of Ireland in times when resources were more scarce  .

He relaxed the “compulsory Irish” system in  education, and introduced Irish Studies, as a way of promoting a more inclusive understanding of what it is to be Irish. His thinking on this was ahead of his time.

He was a pleasure to work for. He delegated responsibility, but was always accessible for advice. He was supportive without being intrusive. I can never recollect him being angry, although he would have had reason to be sometimes!

We were elected to the Dail on the same day in 1969.My first political responsibility was to act (with Dr Hugh Byrne) as one of his two Assistant Whips, when Dick was appointed to be Chief Whip of the Fine Gael Party by Liam Cosgrave.

 I was subsequently his Parliamentary Secretary when he was appointed as Minister for Education in 1973.

In ideological terms, Dick Burke was proud to be a Christian Democrat. As a student of Christian and Catholic Social teaching, he fully understood this political tradition. When Ireland joined the European Common Market, he was particularly happy to have been one of those who persuaded the Fine Gael party to associate itself with the European Christian Democratic movement, now the European Peoples Party.  This was a far seeing decision that continues to enhance Ireland’s influence in Europe to this day.

After the first of his terms as a European Commissioner, he was able to return to  win a Dail seat for Fine Gael,  in a  completely different constituency to the one he had first represented. This was a remarkable and almost unique political achievement.

To the end of his life, he continued to take a deep interest in the Fine Gael party and attended party events to show support for current leaders of the party. I extend to Mary, and his entire family, to whom he was deeply devoted, my heartfelt sympathy.

PARTY RHETORIC, AND MANIFESTO SPECIFICS, TOLD VERY DIFFERENT STORIES………

irish-flagLITTLE REAL DIFFERENCE ON SPENDING AND TAX

The economist Jim O’Leary has circulated a postscript on the Irish General Election.
It is very good, says something new, and I am republishing it here so it gets a wider readership.
It shows that the description of the relative economic and fiscal policy positions of the two main parties, as set out in their manifestos, is completely different from the characterization of their policy stances during the campaign by the media and by one another.
It would appear that neither the media, nor the politicians themselves read, and added up the cost of, their own, and opposing party, manifestoes!
Here is what Jim wrote:
………………………………………………………………………………………………………………………..
“I’ve just been doing a bit of digging into the election manifestoes of our two largest political parties in order to get a handle on how difficult it might be to bridge the ideological chasm between them. After all, Fine Gael is a party that sits firmly on the right of the spectrum and wants to slash taxes even if it means compromising standards of public service provision, while Fianna Fail has reinvented itself as a social democratic party with a more measured approach to reducing taxes and a much stronger commitment to the public sector. Or, at least, that’s how the narrative of the last few weeks would have it.

Well, the thrust of that narrative receives some slender support from the respective parties’ plans for government current spending.

FF proposed to devote €4.8bn to raising current spending over the next five years; the corresponding FG figure is €4.2bn. The difference between them hardly amounts to a whole hill of beans however, equating as it does to just about 1% of the current expenditure base. (Indeed, by this standard, the Sinn Fein plan to raise current spending by €6bn by 2021 doesn’t look dramatically out of kilter.)

On the other hand, FG is the more ambitious party in relation to investment spending having proposed an extra €4bn for the capital budget for the 2017-21 period, compared with FF’s €2.7bn.

So, if we just add current and capital together (and ignore their differential impact on the dreaded ‘fiscal space’), FG’s plans would result in higher public spending than FF’s. A slightly surprising conclusion when set against the prevailing narrative.
Much more surprising (indeed ‘surprising’ is an understatement of how it struck me when I discovered it a few days ago) is the comparison of the cost of the two parties’ proposals in relation to taxation.

The cost of the FF proposals? Just over €2.9bn.

And FG’s? A bit less than €2.5bn.

In other words, FF was proposing to devote almost €0.5bn more to tax cuts over the next five years than FG. If you don’t believe me, check the two sets of numbers in their respective manifestoes.

So much for FG being the ‘tax slashers’. The cost of their commitment to abolish USC, at  almost €3.5bn over the 2017-21 period, was to be offset by a net €1bn of increases elsewhere, including a 5% levy on incomes over €100k, a range of base-broadening measures for high earners, a steep hike in cigarette duties and a new tax on sugar-sweetened drinks. In contrast, FF’s more modest plans in respect of USC, costing €2.6bn, were to be accompanied by a net €300m of tax reductions in other areas.

It seems to me that FG’s proposal in relation to a single tax, the USC, was adopted as shorthand for its overall position on taxation (and was taken as emblematic of its attitude towards public service provision), and the rest of its tax platform was pretty well ignored.

Lazy analysis perhaps, but what else would one expect from hard-pressed(!) political commentators (not to mention political opponents).

What is bewildering is that FG made no serious attempt during the election campaign to counter what proved to be a damaging narrative.

Not once did a FG spokesperson say; ‘Hold on folks, Fianna Fail are actually proposing to cut taxes by more than we are!’ Or am I missing something?  “

CAMPAIGNING IN THE IRISH GENERAL ELECTION

Screen Shot 2016-02-20 at 20.31.20I have been doing quite a bit of door to door canvassing in the Irish General Election, mostly for my brother , Richard, in Dublin Bay North, but also for the 4 outgoing Fine Gael TDs in Meath, Damien English, Ray Butler, Regina Doherty and Helen Mc Entee.

Tonight I am speaking at a rally in Carrick on Shannon in support of Gerry Reynolds and his running mates, John Perry and Tony McLaughlin.

There is widespread committed support for all the five candidates I have canvassed for. They are well known for their consistent local work rate…..not just at election time.

There is also a high level of recognition of the fact that, in the past five years, 135,000 people have been added to the number at work, and that the growth rate of the Irish economy is now the highest in Europe. On the other hand, there is not enough recognition of the fact that keeping high economic and employment growth rates requires that we maintain competitiveness.

Some voters question whether the extra 135,000 jobs are well paid enough, and my answer is that many of them are well paid, and that the taxation contributed by all these extra workers is essential if there is to be an improvement in health and education services. Without that extra tax revenue, planned service improvements would be impossible.

Other voters complain that services in hospitals and schools are not good enough and mention particular cuts that have taken place. But these restrictions were the logical and necessary consequence of gradually getting the government’s budget back into some sort of balance. This was essential, if the country was not to follow the path of Greece.

Even as things stand, this year the government is still spending slightly MORE than it is collecting in taxes.

To reduce the debt to the sustainable level of 60% of GDP, we need to reach a point where revenue is growing faster than spending. Unless we do this, we are simply financing today’s services at the expense of tomorrow’s taxpayers.

A government that did that on an ongoing basis would eventually get into trouble.

WHY A MAJORITY GOVERNMENT IS NEEDED

The risk of political instability is not an abstract concept. If the government formed in the new Dail does not have a secure majority, that brings the possibility that annual budgets would not be passed, or could only be passed if all sorts of vested local interests, associated with “independent” TD’s, were bought off.

Lenders would worry about lending to a government that was in that situation.

Eventually that would lead to higher interest rates.

That would in turn feed through into mortgage and over draft rates, which are already too high for some borrowers.

Political instability, and uncertainty about budgetary policy of the Portuguese government, has already led to an 100 basis point increase in Portuguese bond rates.

Interest rates are currently being kept very low by the ECB……artificially so.

That policy is helping us, as a borrower nation, but it is also making it difficult for pension and insurance funds to invest profitably enough, to protect the interests of their policy holders and future pensioners.

We cannot count on that lax ECB policy lasting forever, so we should try to get our debts down to manageable levels, while the going is still good.

That is why it is right that the two government parties are emphasising fiscal prudence, and why a Dail full of independent TDs, pursuing sectional rather than national policies, could be a dangerous luxury for the country.

IRISH GENERAL ELECTION

Ray ButlerLAUNCH OF RAY BUTLER CAMPAIGN
I would like to set out why I believe it is important that both Ray Butler and Minister Damien English are re elected to the Dail.

Both have worked hard as members for this locality and are deserving of support on that basis alone.

But, more importantly, their re election would enhance the possibility that the country will have a stable government from next month on.

Fine Gael is the party with the best chance of being able to form, alone or with stable partners, a majority government. That is important to everybody.

The lack of a stable government could drive up interest rates and derail the economic recovery, whose signs are visible everywhere.

As I know from personal experience in 1981/2, governments, without a majority, can have good ideas and clear plans, but, without a majority in the Dail, they cannot be sure they can put them into effect.

In particular they cannot be sure they can pass a budget, and without a budget , the affairs of the nation cannot be managed.

If government budgets cannot be guaranteed, interest rates are liable to soar, as they did in the early 1980’s, because that would make would make lenders nervous.

Thanks to errors of the 2002 to 2008 period, Ireland’s level of government and private debt is such that we must avoid that.

The global economy is not stable at the moment.

Global debts are greater that they were before the 2008 crash.

The European banking union is incomplete without mutual deposit insurance.

Investment in energy is being cut back, and energy companies are in trouble, which raises the possibility of oil prices being highly volatile, upwards as well as downwards.

The ageing of society in most of the western world, and in China, is going to put a dampener on growth prospects for countries, like Ireland, that export to those markets.  Slow growth would make debts that were sustainable unsustainable.

Ageing is also going to require us to spend progressively (and unfortunately incalculably) more on health.

In short, the economic future is uncertain.

In uncertain times, a country needs a government that is capable, in the interests of the people, of making quick decisions, and of implementing them, speedily. That means a government that knows it can pass laws and budgets, without needless haggling with special interests.

That is why is why we need a majority government, and why it is in the national interest, that Ray and Damien are both re elected to the Dail.

Speech by John Bruton, former Taoiseach, at the launch of the Fine Gael  General Election Campaign in South Meath by Ray Butler in Trim Castle Hotel at 10.30 am on Thursday 4 February

COALITION EXPERIENCE IN IRELAND…………WHAT WORKS?

In this article I would like, on the basis of my personal experience of working in coalition governments in Ireland, to put forward some ideas that may be useful in other countries.

But first it is necessary, for international readers, to say a word about the party political landscape in Ireland during the period of my political career, 1969 to 2004.

During  this time, there were five major parties in Irish politics, all of whom had some involvement in coalition governments at different times. 

These were, in declining order of size
  • Fianna Fail (a traditional nationalist party, which until 1989 had  refused to take part in coalitions on principle), 
  • Fine Gael (a centrist party in the European Christian Democrat tradition),
  • the Labour Party (social democrat party with trade union links),
  • the Democratic Left (a socialist party since merged with the Labour party) and
  • the Progressive Democrat party( a party that espoused liberal economics which has since been wound up).


I served in four different coalition governments, 1973-1977, 1981-2, 1983-87, and 1994-1997.

In addition to the coalitions in which I served during this period, there also have been a Fianna Fail/Labour coalition(1992/94), and a Fianna Fail/Progressive Democrat coalitions (1989/92 and 1987/2002).

Fine Gael and Labour had also participated together in coalitions in the 1940’s and 1950’s.

I was a junior Minister in  the 1973/77 coalition governments involving Fine Gael and Labour, a full Cabinet Minister in the second and third(1981/2), and Taoiseach (Prime Minister) in the fourth one(1994/7).

All the coalitions in which I served involved my party, Fine Gael, as the largest party, and the Irish Labour party the second largest. There was also a third party, Democratic Left, in the 1994-1997 Government. 

I will headline below the lessons I have derived from my experience.

HAVING A PARLIAMENTARY MAJORITY IS A BIG HELP !

The parties in the 1981-2 Government did not make up a majority in the Dail (parliament), hence the government’s short life.

While it did obtain a majority vote for an emergency budget shortly after taking office in 1981, it could not persuade a majority to vote for its more comprehensive budgetary proposals in 1982. The result was a General Election, which the parties lost. They were succeeded by a minority Fianna Fail Government, which introduced a budget almost identical to the one they had voted against in order to bring down the previous coalition.

The reason having a majority is particularly important to coalition governments is that internal negations between the coalition parties themselves will tend to be difficult enough, without the added complication of negotiating with individual deputies, or parties outside the government, to ensure a majority to pass individual measures one by one

All the other coalitions, apart from the 1981/82 one, had a working majorities for all business on which the parties could agree, but the 1983-87 coalition broke up because the parties could not agree between themselves on policy for the 1987 budget.


A THIRD PARTY IN GOVERNMENT CAN MITIGATE TENSIONS.

The 1994-1997 coalition of three parties, which I led as Taoiseach, was the only three party Government in Irish history, and the only one to be formed in the middle of a parliamentary term, without a General Election.

A realignment of parties to form that new government without a General Election was made possible by bye election victories for parties in opposition earlier in the parliamentary term. It was also necessitated by a breakdown in trust between the Labour Party and Fianna Fail, with whom Labour had formed a coalition after the 1992 General Election. 

My personal opinion is that the dynamic of a three party coalition is easier to manage than that of a two party coalition. This is because, if there is a difference between two of the parties, the third one can often be the catalyst for compromise. The presence of three party  in the coalition can avoids  binary conflicts on a given issue, where one or other of only two  parties has to lose face.

THE DYNAMIC OF COALITIONS WILL VARY, DEPENDING ON HOW THEY CAME ABOUT ………….

The parties in the 1973-77 and 1994-7 governments remained united and faced the General Elections of 1977 and 1997 respectively, seeking re election on a joint programme. This is a testament to good relations between the coalition parties, In the other cases, the outgoing coalition parties contested the elections separately. To date, however, no coalition government of the same parties has been re elected.
The internal dynamic of each of the four coalitions in which I was involved was different. The personalities involved were different, and personality traits are very important in politics. 
But the circumstances of their election, and the relativity in size of the parties and economic conditions also made a big difference.

A coalition that had already agreed a joint programme before the election from which it emerged, as was the case with the1973/77 coalition, probably has a better chance of staying together for it full term, and seeking subsequent re election on a joint programme, than has a coalition that is not negotiated and formed until after the election from which it emerged.

This is so for the following reason. If parties have fought an election on different and competing programmes, and subsequently have to negotiate a joint programme involving the inevitable sacrifice of points on which they had fought the election, this will make the subsequent life of the government more difficult. Such parties are more likely to be accused of “broken promises”. But agreeing a joint programme before an election, in which coalition parties will still be competing for votes with one another, is not easy either.

…………………………..ON THE RELATIVE SIZE OF PARTIES’ REPRESENTATION

The 1973-1977 Fine Gael/ Labour Government was first elected in 1973 on the basis of an agreed platform, which encouraged electoral cooperation between them and maximised their seats. The leaders of the two parties had experienced the frustration of opposition, having served in parliament for a long time, mostly out of power, and this made them personally determined to hold the government together, notwithstanding the substantial differences in interest between their support bases. Labour had a strong influence on the taxation policies of this government, which reflected the number of seats they had.
In the parliaments of the 1981/2 and 1983/7 periods, the Fine Gael party was numerically stronger relative to Labour, than it had been in the 1973/77 period, and this had to be reflected in the content of the government’s economic policy. Economic conditions were difficult because of international circumstances, and framing fiscal policy was thus a hard task .Labour influence was exercised to resist reductions in public spending, which inevitably increased the overall tax burden.

……………………………ON ECONOMIC CIRCUMSTANCES

The three party coalition of the 1994/97 period served in more benign economic times. 
Economic growth accelerated rapidly during the term of office of the government, which made the framing of fiscal policy easier than it had been in the 1980’s.

While Fine Gael was the bigger party, Labour had more parliamentary strength than it had  had in the parliaments of the 1980’s, and this additional strength was reflected in the fact that Labour, although still the smaller party, held the Finance Ministry, a post that the bigger party had always held in  previous coalitions. This ensured that there was a better sharing of responsibility for fiscal policy between the parties than may have been the case before. This reduced tension. The Democratic Left also played a key role in facilitating compromise as indicated earlier.

……………………………ON SYSTEMS FOR MANAGING INEVITABLE DIFFERENCES

The 1994/1997 government also benefitted from having a more structured system for resolving policy differences between parties and ministries than had been the case in earlier coalitions.

Ministers from all three parties each had two advisors who were political appointees. 
One was a “Programme Manager”, whose job it was to work with his/her own Minister and the other Programme Managers, to ensure that the agreed programme of the three parties was implemented across Government. 
The other appointee was a conventional political advisor who looked after his/her Minister’s political interests, relations with his party etc.

In my view, the Programme Manager system was particularly effective in ironing out technical disputes on politically sensitive issues that had absorbed too much time and emotional energy at cabinet meetings of previous coalitions.

As a general rule, as Taoiseach, I did not take an issue to cabinet unless differences had first been ironed out, or simplified, by the Programme Managers, or in discussion between the three party leaders.

……………………..AND ON UNDERSTANDING A SMALLER PARTY’S DIFFICULT ROLE.

The relationship between a bigger and a smaller party in a coalition is a sensitive one because experience in Ireland has been that the smaller party tends to get more of the blame, and the bigger party more of the credit, for what the coalition does in government. Thus the smaller party runs the risk of doing relatively less well in the subsequent election.

Dealing with this problem is a primary responsibility of the leader of the bigger party, the Taoiseach of the day. To this end in the 1994/7, I minimised, to some extent, my own media appearances to allow attention to be taken by other Ministers, including Labour Ministers.

I also arranged for regular separate meetings of Fine Gael Ministers where we discussed issues that might be coming up well ahead of time, with a view to identifying ways to manage any of them that might otherwise cause friction between the parties at the cabinet table. 

Argument at cabinet should be a last resort!

THE FISCAL COMPACT TREATY—THE CHOICE THE IRISH PEOPLE HAVE TO MAKE

BASIC PRINCIPLE BEHIND COMPACT WAS ACCEPTED BY IRISH PEOPLE TWENTY YEARS AGO

Most of the   commitments in the Fiscal Compact Treaty (formally known as the Treaty on Stability, Coordination, and Governance i the Economic and Monetary Union) are ones to which the Irish people have already agreed in principle in previous EU related referenda.
Irish people voted on 18 June 1992 to ratify the Maastricht Treaty. In so doing we democratically committed ourselves to a single currency, stable prices, sound public finances and a sustainable balance of payments. As we have learned, we have failed to adhere to the last two of these, sound public finances and a sustainable balance of payments.
We also committed ourselves in that referendum to treat economic policies here as a “matter of common concern”, which we would “coordinate” with our partners in the European Union. In particular, we committed ourselves to keep our Debt/GDP ratio below 60%, and our budget deficit below 3% of GDP.
 It was natural that we should have agreed to this, once we agreed to a common currency in the first place.
 If one country in the euro was free to “print” as many euros as it liked, by running uncontrolled Government deficits, that would automatically debase the value of the currency, and rob other countries in the euro of the value of their savings.
I make these points simply to reiterate that the Fiscal Compact Treaty does not involve some new principle or some novel incursion into national prerogatives. We accepted EU involvement in our budgetary policies twenty years ago, and we did so by the most inclusive method possible, by a referendum in which every voter had a say.
WHAT IS NEW ABOUT THE FISCAL COMPACT TREATY
In essence what the Treaty does which is new is to require us to incorporate into our
 “national legal systems through binding and permanent provisions, preferably constitutional” 
a ” balanced budget rule”.
A   balanced budget   is something we have accepted as a goal when we accepted the Maastricht Treaty , in the Stability and Growth Pact agreed in Dublin in 1996, and in detailed rules that were brought into force late last  year, under existing EU Treaties, as part of the so called “six pack” of measures to confront  the  financial crisis.
The novelty in the Fiscal Compact Treaty is that it defines a balanced budget more precisely, and requires that each country write a requirement to have a balanced budget into its permanent law.
What is new therefore is that we will no longer just rely on EU level rules to ensure that we move steadily towards balanced budgets. If we accept the Fiscal Compact Treaty, we will incorporate that requirement into our own domestic permanent legislation as well.
The Fiscal Compact Treaty defines a balanced budget in a very specific way. It says that a country will have a balanced budget if
“the structural  balance of the general government  is at its country specific medium term  objective as defined in the  revised  Stability  and Growth Pact with a lower limit of 0.5% of  its GDP at  market prices”
A rule along these lines has to be written into the country’s own  permanent law.
A “structural “  balance  is different from an ordinary budget deficit or surplus. It is an estimate of what the deficit or surplus would have been if economic conditions were normal.
In other words, if the economy is in the middle of a temporary recession or depression, it might have  a budget deficit, which would become a surplus of its own accord, without any  change of tax policies or spending commitments, once conditions returned to normal.
Conversely, if a country is in the middle of a temporary boom, it might have an apparent budget surplus in ordinary money. That was the position Ireland was in from 2002 until 2006. But once conditions returned to normal, if tax policies and spending commitments remained the same, the surplus would turn into a deficit. This is what happened in Ireland after 2008.
There are obvious difficulties in defining what “normal “conditions are.  If the concept of the economic  cycle is used to determine what is “normal”, there will be debate as to when the cycle began and when it will end.  But the definition would have to be exact, if it is to be legally enforceable as a means of forcing a country to change its budget.
This is where the words in the Treaty about a “country specific medium term objective as defined in the Stability and Growth Pact” come into play. This “medium term objective” will have to be negotiated between the country and the European Commission. So also would the time frame for reaching that objective. So the definition of what would be the permitted actual level of deficit or surplus, to comply with the 0.5% structural rule, would be negotiated in advance, and the budget would then have to comply with what had been agreed.
This detailed formulation of this will be incorporated in a Fiscal Responsibility Act to be passed into law by the Dail and Senate. It is important that we use the maximum scope in this legislation to define the term “structural deficit” in a way that takes Irish conditions into account.  For example Ireland is   dependent of foreign investment, which does not move in the same “cycle” as consumer spending does. Some argue that the Irish economy is so open , that it does not have an economic cycle in the normal sense at all.

AN IRISH RULE, ADMINISTERED IN IRELAND, TO KEEP IRISH POLITICIANS IN LINE
 But the bottom line is that, where previously we might have relied on external EU disciplines to keep spendthrift politicians in line, we will, if we accept the Treaty, commit ourselves to introduce permanent Irish laws to do so as well, to reinforce the rules we have made at EU level.
 In general this is a better approach.
 It is much better, in the first place, to have an Irish Fiscal Council, composed of  people most of whom  live here in Ireland , forcing an Irish Government to recast its budget, to  bring it into line with an balanced budget rule, as negotiated with the European Commission .This is preferable to relying solely  on Commissioners in Brussels to  do that job of keeping  our finances honest. That is the basic change that the Fiscal Treaty will bring about.
When is the risk of dishonest, or unbalanced, budgets most likely to arise?
The biggest dangers will be in the year before a General Election, and when the economy is booming.
Part of our problem today is that we had unduly expansionary budgets in 2002, and 2007, just before the Elections in those years. The 2007 budget, in particular, contributed a lot to today’s problems.  That temptation will arise again.
When the economy is booming, revenues will be flowing in, the temptation, to agree to permanent spending commitments that one ultimately cannot afford, will be greatest .
 That is what happened in Ireland during the time when there was an artificial and temporary housing boom, revenues from house sales were flowing in, and the Government agreed to permanent   increases in pay, welfare and pension levels, on the strength of revenues flows that could not last.
 A strong balanced budget rule, written permanently into Irish law, administered by Irish people, would ensure we do not repeat those mistakes ever again. Of course, that Irish rule will be reinforced by EU vigilance.  And the terms of the rule will have to conform to  the Treaty,  and be subject to  appeal to the European Court of Justice on that point.
 But the first line of defence against another outbreak of pre election budget irresponsibility will in future  be in Dublin, not in Brussels.
Rules like this have had a good effect elsewhere.
 In Chile, Government revenues are  dependent on royalties from copper of which the country is a major producer. A balanced budget rule in its constitution has forced the Chilean Government to run big surpluses when copper prices were high. As a result, when copper prices fell, Chile had the savings to maintain its social programmes without big cuts.
 Without a balanced budget rule in its constitution, the Chilean Government  would have had  great difficulty  persuading its people  that it should run a 10% budget surplus during the copper boom.
But if it had not done so, it would have had difficulty maintaining spending during the downturn in copper prices.
In Sweden, a balanced budget rule forced the Government to run surplus budgets during the   boom, and ,as a result, Sweden has come through the recent  crisis in much better shape than almost any  other  EU country.
EVEN WITHOUT THE TREATY, IRELAND WILL HAVE TO HAVE ‘STRUCTURAL’ BUDGET SURPLUSES ANYWAY
In the short and medium term, the balanced budget rule , which will require  every country  in the euro to have a “structural “ budget deficit no greater than 0.5% of it GDP, will have little effect here.
This is because Ireland is already obliged anyway, under new rules made last December pursuant to the Maastricht Treaty, to systematically reduce our Debt/ GDP ratio to  60% . Our Debt/GDP ratio   will peak at around 120% in 2015, so for the following twenty years, Ireland will have to run substantial budget surpluses to enable us to reduce the debt/GDP ratio, either by a repayment of debt , an increase in the GDP, or a bit of both combined.  It will only be when the Debt has been substantially reduced, that the 0.5% rule will take over as a discipline. And, as I have said earlier, this rule really only makes a difference in boom times. When times are bad, the markets force a country to  try to reduce its deficit anyway, because otherwise it will have difficulty borrowing.
The Fiscal Compact will not prevent countries running budget deficits during recessions. The 0.5% limit takes account of normal up and down cycles in the economy. That is what the word “structural” before deficit means. That is why even non euro countries like Sweden, with generous welfare systems, have signed up to the Compact. The idea that the Fiscal Compact outlaws Keynesian counter cyclical policies, put forward by commentators like Fintan O Toole, is wrong.
There are a number of other things in the Treaty, which simply reiterate and entrench rules that have been already adopted. There are also new provisions for Euro area Heads of Government to meet more often , and  for  the Dail’s budget committee to work more  closely with committees in other  Euro area parliaments.
To summarize, the Treaty will bring greater credibility to the finances of all EU countries. It complements controls at EU level with new controls at national level. For these reasons, I  urge people to vote  Yes in the referendum.
It is important now to turn to what might happen if people were to vote No. Some will argue that we should consider that as a tactic, a sort of bargaining approach.  That worked in the past, they might say. Why not try it this time? This time the rules are different, and the potential downsides are much bigger.


THIS DECISION, THIS TIME, IS NOT THE SAME AS THE ONES ON LISBON AND NICE

If Ireland votes No to the Fiscal Compact Treaty, and as a result the Irish Government is prevented from ratifying the Treaty it has already signed, the Treaty will probably come into effect anyway for the countries that have ratified it.
This is because the Treaty itself provides that, once 70% of euro area states have ratified it, it comes into force.  So if 12 of the 17 states ratify, we have the Treaty in effect for those 12 countries. No matter what the other 5 do.
 This means that the  scenario whereby Ireland was able to vote No to the Nice and Lisbon Treaties and, because Ireland’s ratification was essential for everybody else, it could negotiate for further clarifications or protocols to meet popular concerns  in Ireland, does not apply in this case.
 This sort of threshold provision is not unusual in international treaties.  Few international Treaties require ratification by 100% of signatories to come into effect.

DENYING OURSELVES ELIGIBILITY TO APPLY FOR EUROPEAN STABILITY MECHANISM
But a decision not to ratify would have a consequence for Ireland. The Treaty says
“the granting of assistance in the framework of new programmes under the European Stability Mechanism(ESM) will be conditional, as of  1 March 2013, on the ratification of the  Treaty by the  Contracting Party”
Ireland was a Contracting party, and if it does not ratify, it will not be eligible for assistance from the ESM.
We all hope Ireland will not need assistance from the ESM, and that once our present  EU/IMF programme expires  , we will be able to borrow, at  low interest  from commercial markets, all we need to cover   the ongoing shortfall between our tax revenue and our spending . But there is no guarantee of that.  We could find, when the EU/IMF programme expires, that commercial bond markets are still a bit nervous about Ireland, and  ask us to pay higher interest rates than we had  got used to paying to  our EU partners, and to the IMF.
Ratifying the fiscal compact Treaty is really like buying ourselves an insurance policy.
 We hope we will not need to make a claim on the ESM, but it is nice for us, and for those who might lend to us,   at least to know  that we are at least eligible to do so.

VOTING NO WOULD BE REJECTING AN INSURANCE POLICY………………… 

By voting No, Irish people would be saying that they do not need any insurance policy for our public finances after the current EU/IMF programme expires.
In that sense, I would argue that those who will be advocating a No vote to the Treaty, will, in practice, be advocating more, and faster, austerity in the immediate future.
To be able to survive without the possibility of turning to the ESM after the present EU/IMF programme expires, Ireland would have to convince commercial bond market lenders that we had everything fully and permanently under control, as far as tax revenue and spending was concerned. Only then would we be able to be sure they would lend to us at reasonable rates of interest.
 And we are not there yet, by any means. Even if we paid no interest at all on our debts this year, we would still need to borrow 10 billion euros to cover the gap between our spending on salaries, pensions, welfare etc and our revenue from taxes.
AND OPTING FOR FASTER AUSTERITY………………NOT A CLEVER MOVE 
In other words, we have what economists call a “primary deficit ’’ of 10 billion euros.
A primary deficit is the deficit we would have if we had no debts and had to pay no interest on debt. Most countries have debts. So most of them should run a primary surplus, so they have room to keep spending going, and also pay the interest they owe.
Ireland is not in that fortunate position.
 Our primary deficit will be about 4% of GDP this year and about 2% next year. This puts us in a vulnerable position because, even if all our debts were abolished (which is not going to happen) we still have to borrow new money just to keep going.  Those who think we can play hardball with bondholders or bond buyers, should keep the primary deficit in the forefront of their minds. 
We cannot tell them to get lost because we need  them to lend us some of the money  to pay salaries  etc, because  we are not raising enough tax ourselves yet, to cover  all of our  outgoings, even without interest on debt .
That is about to change. The Government is budgeting to have a tiny primary budget surplus in 2014, and a slightly larger one in 2015. 
In other words, if things go according to plan, we will still be borrowing in 2014 and 2015, but then  we will “ONLY” be borrowing to pay interest on, or roll over, past debts!
That is if a number of further, some yet unannounced, revenue raising and expenditure cutting  measures, are successfully implemented by then.
Suppose the Irish people reject the Fiscal Compact Treaty.
Then, to be sure we would be able to borrow without the possibility of turning to the ESM, I believe we would have to introduce a budget for 2013 that had no primary deficit at all.
This would mean  about 5 billion euros more spending  cuts  and tax increases than are now planned by the Government in agreement  with the EU and the IMF.
 I have no doubt that the advocates of a No vote do not want that. But that is the logic of their rejection of the Fiscal Compact Treaty and its consequent removal of Ireland’s   eligibility to apply, as a fall back, for funds from the ESM, if we need them.
Of course, they will try to change the subject, rather than answer that key question. They will get into the blame game. But blame does not pay bills.
Some have suggested that linking eligibility to apply for the ESM with ratification of the Fiscal Compact is some sort of “blackmail”. If it is, then any condition imposed by any lender to ensure they have a good chance of getting their money back could be called blackmail.  It is not blackmail. No one, with any sense, lends money with some conditions to secure repayment.

IT IS NOT ALL ABOUT BANKS, IT IS ABOUT DAY TO DAY SPENDING TOO

Advocates of a No vote might say Europe owes us the money anyway, because, they will say, we indirectly bailed out Europe’s banks, when we bailed out our own banks.
There is some truth in that,  as I pointed out to President Barroso of the European Commission myself  when he made some one sided remarks about Ireland in the European Parliament, but it is beside the point as far as the decision we have  to make now is concerned.
Of Ireland’s present national debt, only 21 to 27%, or 37 and 46 euros billion of it,  is attributable  bank rescue.
The rest is due to
1.) servicing other debts we have run up which have nothing to do with our banking problems and
2.) funding   the gap between day to day Government spending and revenue, a gap that is still very wide,
We have to find this money  by  borrowing…….from someone,   among  lenders who has plenty of  other  options for the use of their money apart from lending it to us.  
CONCLUSION
The next few years will not be particularly easy.
We have made progress. We have a balance of payments surplus. People are accumulating savings. Foreign investment here is at an all time high. But consumer confidence is low, and unemployment high.  The oil price rise is a threat, but the increased demand for food is an opportunity. Confidence in politics has been shaken by the Tribunal findings, but the Irish political system is fundamentally stable and capable of making decisions.
Ratification of the Fiscal Compact Treaty would reinforce the sense that Ireland is getting its act together. Failure to ratify would not derail the euro, which can go ahead without us, but it would, unfortunately, derail Ireland. 
Speech by John Bruton, former Taoiseach, and current vice President of Fine Gael, at meeting on the Fiscal compact organised by Malahide branch of Fine Gael in the Grand Hotel, Malahide, at 8pm on Monday  26th March 2012

 

MYLES STAUNTON RIP

It is hard to comprehend the fact that Myles Staunton is dead. He was always so endlessly enthusiastic, and so youthful, both in appearance and in frame of mind.
Myles Staunton, who died suddenly in the last twenty four hours at his home in Westport, played a critical role in 1973, in bringing to office the first Coalition Government   after 16 uninterrupted  years of  Fianna Fail rule.  By winning an additional Dail seat for Fine Gael along with the late Henry Kenny in a hotly contested 3 seat constituency in Mayo, he tipped the balance in favour of a change of Government, and brought Liam Cosgrave and Brendan Corish to office, in what was to prove to be one of the great Governments of the twentieth century.
Myles made an immediate impact in Leinster House.
 He was a convinced and convincing advocate of viable, commercial, and  privately run,  economic development in the West of Ireland.
 He was convincing because, unusually for a politician, he was one of those who, by deed not just word,   put his own  money at risk to help  “shout stop”, as fellow Mayo man John Healy put it, to the seemingly inexorable decline of his native province.
 He invested personally to develop the seaweed industry along the Atlantic shoreline , providing vital supplementary income to coastal smallholders.   
He went on to develop, on a similar basis, a project for local farmers collecting turf on the raised bogs of North Mayo to supply an innovative fuel product that had enormous potential, especially in the era of high oil prices.
 He was absolutely tireless, right up to the very end of his life in looking out for employment possibilities based on the natural resources of Mayo.
He was a strong supporter, in the Senate, of Knock Airport and held his own in every argument with those who questioned this vital  link for all of Connacht.
In everything he attempted, Myles was relentless in pursuing his goals and was never discouraged by the setbacks sometimes  inflicted upon him by  myopic bureaucracy. 
From the outset of his career, Myles recognised that his native county could only prosper if it developed links with, and understanding of, the problems of other parts of the world. He recognised the possibilities of globalisation almost before the word was invented.
 He was one of the pioneers, in the  1970s, of the Euro Arab dialogue. He led a visit by Irish TDs and Senators to Lebanon and Syria in 1974, in which it was my privilege to be part. He recognised the crucial role that that part of the world would play in all our lives.
 He was a founding member of the Trilateral Commission, which brings together elected politicians, academics, businesspeople and civil servants from Asia, Europe and North America. He continued to involve himself in promoting this work up to and beyond the most recent  successful meeting of that  body in Dublin last  year.
I will miss Myles greatly. Through my wife, Finola, I am his first cousin by marriage,   and I have so many happy memories of time spent with him. He was exceptionally kind and attentive to needs of all his family and extended family. He never missed an important family event, and was kind to all in their times of trouble. Finola and I extend heartfelt sympathy to his wife Marianne and to Ruth, Elizabeth, Hugh, Myles and Aoife at this time of  grief.   
Tribute to the late Myles Staunton by John Bruton, Former Taoiseach and current vice President of Fine Gael. 

THE IRISH GENERAL ELECTION, February 25 2011

I have been doing quite a bit of work in the Irish General Election on behalf of the party of which I have been a member since I was 18 years of age, Fine Gael.
As I see it, the election is about how best Ireland can regain its national economic freedom of action. Under the EU/IMF programme, without which our state could not now function, all decisions ,that have a significant economic cost or which depart from the programme agreed with EU/IMF, will have to have the consent of those bodies.
Ireland finds itself in this position because of foolish decisions of Irish banks, of some of their customers , and of those(mostly foreign banks) who lent to them. I believe the responsibility is widely shared, as I outlined in my recent letter to President Barroso of the European Commission, which is published elsewhere on this site. There is a valid argument that the Irish taxpayer is bearing a disproportionate share of what is, in effect , a necessary programme to rescue non Irish as well as Irish banks.
But even if the burden is more fairly distributed, there is still a huge burden that necessarily has to be borne by Irish taxpayers and by recipients of Irish Government services. One way or another, taxes will rise and services will diminish.
The two basic choices voters have to make in the election are
1. Whether to straighten out our finances quickly or slowly, in other words, whether to string the pain out over a long period, or over a shorter one,
2. Whether to elect a Government that will be able to do the job according to a single coherent plan, for which it takes full political responsibility, or whether it is to try to get the finances right on the basis of a compromise between the differing plans of a number of different parties negotiated after the election is over.
On the first point, I favour doing the job quickly rather than slowly. We need to get our economic freedom of action back as quickly as possible. It really is not good for Irish democracy to prolong the period in which we have to get EU/IMF permission to make decisions. In the future, interest rates will go up rather than down. The United States Federal Government has huge deficits which it is doing nothing about. This year it will borrow 1.3 billion dollars on behalf of it 300 million people, whereas EU Government will ONLY borrow 1 trillion dollars on behalf of their 500 million people. The cost of retiring baby boomers will be added to all these liabilities. These factors will combine to make it more expensive for Ireland to go on borrowing. Things are not going to get easier, so the sooner Ireland gets its economic independence back the better.
On the second point, in normal times, I would see little or no difficulty with electing a Dail in which a coalition of two or more parties would be the only way to form a Government. But, naturally, coalition Governments always consist of parties some of whose objectives will conflict , and who remain political rivals. When economic times are difficult, and tough decisions have to be made, that leads to problems when there is a coalition. We saw that in 1987 with the FG/Labour coalition, and again this year with the FF/Green coalition.
This is why I argue that, objectively, a single party Government would be the most effective outcome to this General Election, and the best way to put the country on a path towards regaining its economic independence quickly.
A single party Government could make decisions more quickly and minimise wasteful and expensive delays. It would operate to a single internally consistent programme, rather than on the basis of compromises negotiated under time pressure, in the short period between polling day and the first meeting of the new Dail. With a decisive mandate from the people, it would be best placed to negotiate with the EU and the IMF.
I believe these arguments will resonate with a significant share of votes who would have supported Fianna Fail in previous General Elections, but who are now looking for a change.
Fianna Fail supporters have always valued national economic independence. They have always put great store on patriotism. They have often voted Fianna Fail in the past because they wanted strong and stable, and if possible, single party Government . They did so because they were convinced that was for the good of the country.
Now , their old party, for various reasons, in not in a position to provide any of these things. But Fine Gael is.
Fine Gael is now best placed to provide what Fianna Fail voters looked for in the past.
The logical vote in this election, for people who subscribe to these traditional Fianna Fail values , is a vote for Fine Gael.

COPYRIGHT JOHN BRUTON & CONTENT

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