Double-talk on the Irish referendum

by on May 4, 2012 at 2:44 am in Economics, Political Science | Permalink

And yet I think they are wise:

Take the the following quote from Karl Whelan, professor of economics at UCD. It is a prime example. The fragment used by Sinn Féin is in italics.

“All that said, although I think the economics of this treaty are pretty terrible, on balance, the arguments favour Ireland’s signing up to it.”

Similarly Colm McCarthy, also of UCD and one of the most influential of the economic rock stars, was quoted by Sinn Féin as saying the following: “As an exercise in addressing the euro zone’s twin banking and sovereign debt crisis, the fiscal compact makes no worthwhile contribution”. But in the same article – and overlooked by Sinn Féin – he states: “If there has to be a referendum, the electorate would be well advised to swallow hard and vote Yes, notwithstanding the inadequacies of the proposed treaty.”

The story is here.

Why wise?  Under one reading, Ireland needs to stake out its alliance with the European Union at all costs, and let other nations be the ones to strike down bad treaties and silly ideas.  Under another reading, Ireland should to some extent defect, but they will get the best “defection deal” if they wait until Greece, Italy, and Spain are to some extent settled.  Both mean voting “yes” on the treaty referendum, even though the arguments for the treaty are weak.

1 Adrian Ratnapala May 4, 2012 at 3:00 am

…and let other nations be the ones to strike down bad treaties and silly ideas. But who is going to do that? It seems far more likely that a “yes” vote is a vote for genuine cooperaton.

It is a pity that the article doesn’t talk about *why* the economists say what they do (since that is not really what the article is about). However from others I have read elsewhere one argument is “Cooperate because our big neighbours have us over a barrel anyway, so we had better relax”. That argument might well be correct, but it is really not going to appeal to Sinn Féin voters.

2 Latest Updates on cars May 4, 2012 at 5:45 am

It’s quite interesting post.

3 PatrickA May 4, 2012 at 7:39 am

I think that the Professor is ignoring the way that the economy in the Euro area seems to be going downhill fast. Take a look at this analysis of today’s purchasing managers data which covers the whole Eurozone. From the blog of the economist Shaun Richards

“What does this actually mean?

Whilst there is not a perfect relationship between this report and economic growth there is a fairly good one if you examine the data. Accordingly we need to take this seriously.

The survey suggests that the economy was contracting at a quarterly rate of around 0.5% in April

And in a message that may make its way to the ECB towers in Frankfurt (where they will be returning after yesterday’s trip to Barcelona).

suggesting that stimulus measures implemented by the European Central Bank have not had a lasting impact on the real economy.”

If the Euro area contracts at that rate for any length of time it is bound to affect Ireland badly.

4 Woj May 4, 2012 at 8:37 am

“Under another reading, Ireland should to some extent defect, but they will get the best “defection deal” if they wait until Greece, Italy, and Spain are to some extent settled.”

This appears to assume that Greece, Italy, and Spain WILL “to some extent [become] settled.” What if those countries continue to deteriorate and begin considering defections? Wouldn’t the best deal be given to the first country willing to defect? If Greece were to actually leave, it doesn’t seem clear that Ireland would then be better off by having waited.

5 Rick P May 4, 2012 at 9:08 am

Better explanation for the “swallow hard, but vote yes” view: The treaty goes into effect if 12 of the 17 eurozone countries approve. That is almost certainly going to happen. So the “benefit” of an Irish no vote is purely expressive or symbolic. But there are significant possible fiscal costs to a no vote: if bond markets perceive the no vote to cast doubt on Ireland’s commitment to sound fiscal management, interest rates on new Irish bonds would increase, and Ireland might lose access to emergency funding available through the EU stability mechanisms.

6 Bill May 4, 2012 at 10:54 am

We have been taking PIGS tours in the last two years. Am currently in Ireland, looking at all the posters supporting the Yes vote on the grounds that it will make Ireland “Stable”

That’s the best they can say.

In other news, the real estate developer who sank a bank is being chased for money that he sent abroad to avoid creditors, claiming, I am not a crook.

Good prices here for real estate, like it was two years ago when we visited Spain and Portugal.

Real estate sinks banks, governments protect banks and engage in austerity to pay for it.

Looks like some bad karma wheel in some Indian mythology.

7 Adrian Ratnapala May 4, 2012 at 2:11 pm

Or maybe Economics is a morality play.

8 Pat MacAuley May 4, 2012 at 2:49 pm

I loved the article, especially the satire of talk-show economists.
However, I think that economists such as Karl Whelan are looking at more fundamental issues than the current Irish depression. They feel that in the long run the Irish economy will do best by hitching its star to the EU core, especially Germany, rather than trying to go it alone in the world. Looking back 30 years, the EU seems to have been good for the Irish economy. They are hoping that the 1975-2005 trend will resume after a few more years, even though the proposed fiscal compact might not stand on its own merits.

9 dearieme May 4, 2012 at 7:13 pm

Pushovers don’t get good terms.

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