Irish Treaty Rejection Risks Funding Difficulty, Minister Says

Irish Deputy Prime Minister Eamon Gilmore said the nation may face future funding difficulties should voters reject the European fiscal compact in an upcoming referendum, as opposition political leaders split over the vote.

While Ireland’s 67.5 billion-euro ($89.9 billion) international bailout in 2010 means the state is fully funded through 2013, a rejection of the treaty may deprive the Dublin- based government of future aid once a permanent rescue fund goes into operation.

“We are confident of coming out of the program and not requiring access to the European Stability Mechanism,” Gilmore, who is also foreign minister, said in a telephone interview yesterday. “If a set of circumstances developed where we didn’t, where we weren’t seen to have access to the ESM if we were to need it, that could create difficulties for us.”

Irish voters are almost evenly divided on the treaty, according to the most recent opinion poll. The campaign claimed its first victim yesterday, as Eamon O’Cuiv stepped down as deputy leader of the country’s biggest opposition party yesterday because the organization is backing the treaty without the government winning bank debt concessions from Europe.

“This is the unique opportunity that we get on this issue to put our case to Brussels,” O’Cuiv said in an interview with Dublin-based radio station Today FM yesterday.

Before Prime Minister Enda Kenny announced the referendum on Feb. 28, the yield on Ireland’s 2020 bond, its benchmark, had dropped to about 6.81 percent from a euro-era high of 13.8 percent on July 18. The yield has since risen to 7.01 percent.

Some 53 percent of those who expressed a preference said they would back the treaty, according to a poll by research company Red C. The poll of 1,008 adults was carried out for the Sunday Business Post newspaper between Jan. 23 and Jan. 25.

Control

The compact requires nations to virtually eliminate structural deficits, creates an “automatic correction mechanism” and enshrines the new measures in national law.

The treaty also provides for tighter control of tax and spending by governments that overstep the bloc’s deficit limit of 3 percent of gross domestic product.

While the vote has no direct implications for the nation’s membership of the euro-region, some government ministers say the campaign is an opportunity for Ireland to reaffirm its determination to back the euro.

“Irish people understand the importance of the euro,” Gilmore said. “Irish people understand that as a small very open economy dependent on trade and foreign direct investment, the issue of confidence in the country and confidence in the currency that we hold is hugely important.”

The government hasn’t yet set a date for the vote. The timing of the referendum may be known within a “couple of weeks,” Gilmore said.

To contact the editor responsible for this story: Finbarr Flynn in Dublin at fflynn3@bloomberg.net;

To contact the editor responsible for this story: Colin Keatinge at ckeatinge@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.