The recent spring European Council (i.e. heads of Government in the EU) gave the final go-ahead for a comprehensive package of measures to preserve the financial stability of the eurozone and to strengthen economic governance. Both of these initiatives have implications for Ireland and raise serious questions concerning the real commitments of the European Council and the EU generally to proceed in a balanced and inclusive manner.
As part of the governance package, the summit finalised the European Stability Mechanism (ESM), a permanent fund which in 2013 will replace the temporary one to support eurozone countries in the event of major economic difficulties. The failure to include Ireland in this mechanism from 2011 highlights once again the failure of EU institutions to recognise they played a role in creating Ireland’s current mess.
The European Central Bank insisted on keeping interest rates at an extraordinary low level when Ireland’s fast growth required the opposite. The ECB took its action in support of countries such as France and Germany who had much lower growth rates at that time. The low interest rates available to Irish borrowers simply poured fuel on an already incendiary situation. It is interesting to note that the opposite is now the case. The ECB is embarked on raising interest rates which will damage Ireland’s situation even further. This is a systemic failure at the core of the Euro project that needs to be rectified if we are not to have further serious negative consequences.
It is also of major concern that decisions are being made on Economic Governance (Reform of the Stability and Growth Pact and the Pact for the Euro) without adequate public and democratic scrutiny and without a proper assessment of their social impact. There will be no economic development without parallel social development. It is not a question of securing economic recovery and then social policy issues can be address. This separation of economic and social governance is in direct contradiction of the vision agreed in the Europe 2020 Strategy. It undermines both the European Social Model and the potential for a sustainable recovery from the crisis. It also calls into question the commitment of European leaders to honour their own commitments in these areas.