Why Ireland should ratify any eurozone treaty early

EU officials are putting the final touches to the first draft of a 'fiscal stability' treaty to be ratified by eurozone countries by the end of 2012. The treaty - which commits each euro government to run balanced budgets in perpetuity -  will be one of the oddest ever signed up to by an Irish government. What many people thought was a last chance to save the euro appears – for the time being – to have been missed.

The treaty is deemed necessary in order to make the rigid politics of the eurozone crisis more malleable. It is a political message tailored to satisfy the Northern European reading of the euro crisis as a moral tale of sinning spendthrifts versus virtuous savers. The hope is that this will help satisfy two important players: electorates worried about bailing out profligate countries and the European Central Bank which worries about being visibly pressured into printing money. Sadly, the agreement will do little to solve the immediate financial panic where markets doubt the basic political deal holding the eurozone together. But a deal which promises that every eurozone country will run balanced budgets in future buys Angela Merkel the time and political cover she needs to keep fire-fighting German public opinion in a year before elections.

Oddly, this treaty is not an EU agreement in the mould of the Maastricht treaty, which created the euro. Thanks to a ill-considered British veto at an EU summit on December 9th, it will be concluded as an inter-governmental deal outside the Union instead. That casts immediate doubts on its enforceability because key EU institutions - the European Commission and Court of Justice - cannot be involved without a very creative interpretation of European law. Crudely, Ireland or the Netherlands is unlikely to take France or Germany to task if, as before in 2004, they break eurozone deficit rules. EU officials are adamant that the European institutions will find a way to police the treaty. But they have not yet revealed the legal gymnastics needed for this to happen.

Most importantly, eurozone leaders will spend most of 2012 running the gauntlet of a full-blown ratification process to get a two-page treaty passed. They should only have risked this path to rubber-stamp a new grand bargain for the eurozone that could return it to its original state of innocence when markets rated different euro countries' bonds to the same rate of risk. Debt reduction is a part of that. But so too is the issuing of joint bonds, perhaps - in parallel with the entry criteria for the euro - only covering 60 per cent of individual countries borrowings. And so too is a more activist ECB.

Instead, leaders risk splitting Europe's political mainstream  over a treaty that future historians may well regard as a dangerous bout of political navel-gazing. Demands for a renegotiation are already growing in France and some countries may choose to hold referendums if they incorrectly interpret it as the beginnings of a true fiscal union. Meanwhile the tempo of the euro crisis is likely to go up a notch as large amounts of Italian and Spanish debt starts to mature early next year. Unless governments think again or agree other inter-governmental treaties to complement the one under discussion, this generation of European political leaders will be remembered as political pygmies, the Calvin Coolidges and Andrew Mellons of their day.

So should Ireland's coalition government call a referendum on this one-sided treaty where the plucky Irish voter can vote it down and send the eurozone leaders back to school?

Absolutely not. Cameron's cack-handed negotiation in Brussels is a neat reminder why isolation equals checkmate in diplomacy. Ireland alone cannot reverse the ill-considered path to which the eurozone appears to have committed itself. As powerless as this might make the country feel, it is the reality. Our strategy next year must be avoid further malign attention from either the financial markets or our EU partners during what is going to be the final phase in the eurozone crisis. (It is also the year that the EU's budget for 2014-2021 will be negotiated.)

Should the government hold a referendum and campaign vigorously for a yes, then? Only if this is unavoidable. The brevity of the text might mean that the shenanigans of Ireland's Nice and Lisbon treaty referendums, when national paranoia ran riot, could be avoided. But even in that unlikely case, the treaty would still be a nightmare to ratify. Eurosceptic feeling is a force yearning to find mainstream political expression in Ireland, given that the ratification of the Lisbon treaty is seen as the prelude to the country's economic downfall. And the current coalition would have to sell a mini-Maastricht without the IR£8 billion in cohesion and structural funds that Albert Reynolds coaxed out of his EU partners in 1992.

In any case, the treaty under discussion is little more than a re-stated 'stability and growth pact' - the original tool intended to keep eurozone economies aligned - with the promise of more serious enforcement. A sensible legal reading of the final text, if it stays as limited as eurozone leaders currently intend, would mean the government could ratify it through the Dail with a clear conscience. Legal challenges would be inevitable and would take months to work their way through the courts. The coalition should move immediately to ratify the text as soon as it is signed to allow time for this.

Whether the political 'bargain' underlying the treaty actually becomes reality  depends far more on France's presidential election in April. This could well turn into a referendum by proxy on the new treaty and the implausible idea that French economic policy can become German economic policy overnight. In the negotiations over the treaty's scope, Nicholas Sarkozy got precious little of what he wanted: the basis for a true European economic government for the eurozone with a new bureaucracy and regular summits.

The popular perception that Sarkozy is, in effect, powerless to shape German policy is leading to rise a hardening of French public opinion that could give his socialist opponent, François Hollande, a winning edge and a mandate to renegotiate. In an ideal world, this might even give Britain the window of opportunity it needs to come back to the EU table as a trusted, if somewhat ashen-faced, partner.

In the meantime, Ireland has little choice but to move to ratify the existing treaty text in the hope that it is merely a first step in a raft of fast-track measures needed for the salvation of the single currency. If not, responsibility for what happens next cannot be placed at Ireland's door.