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Dublin: 16 °C Tuesday 2 September, 2014

Column: Nick Leeson – My heart says ‘No’, but my head says ‘Yes’

TheJournal.ie columnist nails his colours to the mast and says that a ‘Yes’ vote is the only message to send out if we want access to funds at the keenest rates possible.

Nick Leeson

WHILE SIT HAS been suggested that Ireland should hold off on a vote on the fiscal treaty until European leaders flesh out new policies to promote economic growth, Enda Kenny remains adamant that the vote will go ahead on 31 May.

Buoyed by his recent election success French President-elect Francois Hollande has pledged to add pro-growth initiatives to the fiscal treaty, and he has support for that goal in the German parliament. On Wednesday of last week the German government indicated that it would seek to delay parliament’s vote on the treaty in the wake of Hollande’s victory.

In light of these developments, many would say that it would be right for Ireland to delay its vote to attempt ratification of the treaty. I really think that it doesn’t matter. I believe that any amendments will be passed on and France and Germany sit at a completely different negotiating table than Ireland. They remain the real policy drivers and policy makers whilst Ireland and the other delinquent nations remain at the ‘bold-boy’ table.

Admittedly Ireland is now the far better behaved nation of Greece, Portugal, Italy and Spain but the rehabilitation is not yet complete. Keeping their head down may be the best option.

Delaying the vote would serve no real purpose. What would worry me much more is that the wrong result is the one communicated back to Brussels. Everyone needs to be very sure about how they cast their vote, not 50:50 or 60:40 in their belief but at least 95 per cent sure that they are making the right decision. Any other ratio suggests that you are not convinced. Unfortunately I think most people find themselves in that position.

“This is one vote where idealistic views on who the world should work have no place”

The only vote is Yes. This is one vote where political sensitivities need to be put to one side, idealistic views on how the world should look also have no place and what is needed is a sensible appraisal of the reality that the country faces. If people can do that then the only option is a Yes  vote. Forget about the stupid posters adorning the lampposts as you go around the country. Forget your party’s choice of slogan – most of them are so cheesy that they smell as you pass. Make the right choice for the right reasons.

Were I being idealistic about the vote, I would vote No. I hate being told what to do and when to do it and having more controls heaped upon me. But a realistic look at the situation tells me that the only way to vote is in the positive. Ireland will be a net borrower of money for my lifetime and anyone reading this article. To make that proposition as pain free as possible it will need access to the most primary source of funding that it can find. It will also need access to those funds at the keenest rates possible.

At the moment that comes through the troika. Later on it will come from an orderly return to the money markets, but the markets and it’s participants have a long memory and a lot of what happens now will be exceptionally relevant.

“I do genuinely fear that a No vote will consign Ireland to a secondary tier of funding”

A No vote may or may not see an immediate retraction in the level of funding but I do genuinely fear that it will consign Ireland to a secondary tier of funding, sub-prime if you like. A cursory glance at recent history should convince you that that is not a place where you want to be. Sovereign debt is not what it was, over-exposure to the sovereign debt of a number of European countries led to the collapse of MF Global.

When credit conditions contract as they undoubtedly will at some time in the future, you are in a far better position if you have access to the primary source of funds. Don’t forget the onset of the financial crisis: many companies had borrowed short to lend long. That is perfectly acceptable when you have access to funds in the primary market at a reasonable rate but when that market starts to contract, and starts to become concerned at the risks associated with lending to the less secure organisations or governments, then you are lost and the ultimate result is the type of implosion that we all witnessed in 2008 and of which still suffer the reverberations.

We’ve all seen these ‘payday’ loan adverts on the television. Were the country to deliver a No vote to the fiscal treaty, I immediately think of images of Enda Kenny or the next Taoiseach sitting in front of a group of old ladies explaining to him how easy it is to get a ‘payday’ loan arranged, 2,500 per cent per annum and the only way that we can keep the country going. Let’s not make that image a reality. There will be many occasions to vent your anger at politicians – none in my opinion are doing a particularly good job – but this is not that occasion.

Let’s stick with what we’ve got and keep our heads down. It may not be ideal but there is no point in winning a battle to lose the war. There are other battles that will become even more important to win.

Read previous columns by Nick Leeson>

Terrence McDonough on a No vote: The treaty is risky and dangerously experimental>

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