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Bailed-out Ireland announced Tuesday it will stage a referendum on the European fiscal treaty on May 31, a vote whose outcome could help boost international confidence in the country -- or block it from accessing further aid.
The campaign will pit a government that describes the treaty as a path to renewed prosperity against socialist opponents who forecast it will doom Ireland's 4.5 million people to perpetual austerity.
Foreign Minister Eamon Gilmore said the government was confident of winning majority public support for the pact, which proposes tighter spending and deficit rules for the 17-nation eurozone. Rejection would block Ireland's access to future European bailout funds once its current credit line runs out next year.
Gilmore, speaking after a Cabinet meeting that determined the referendum date, said the treaty was designed to promote "long-term stability, recovery, growth and jobs" and would encourage investors to lend again to Ireland at acceptable rates.
He said a yes vote on May 31 would boost "the influence we've been rebuilding with investors, job creators and with our European partners."
Prime Minister Enda Kenny, in China on a mission to build trade links, said foreign investors needed to know that Ireland would never again find itself "in a position in the future where a government runs riot with people's finances."
But hard-left lawmakers leading the anti-referendum campaign accused the government of colluding with a European establishment to try to force several more years of spending cuts, tax hikes and banking losses on taxpayers.
Socialist Party leader Joe Higgins said the treaty would trap Ireland in a state of "permanent austerity." He said the treaty's tighter deficit requirements would make Ireland impose (EURO)5.7 billion ($7.4 billion) more in cuts and tax hikes after 2015. Ireland has already absorbed five austerity budgets since 2008.
Higgins said the government should demand renegotiation of the treaty clause permitting future EU bailout funds to be provided only to those members who ratify it. He said this "blackmail clause" was being wielded by the pro-treaty side as "a weapon to try and force the public to vote yes."
Ireland, with its neutrality-focused constitution, is the only euro member subjecting the fiscal treaty to a national vote.
Euroskeptical Irish voters have complicated the passage of the European Union's two previous treaties by rejecting them in 2001 and 2008. The government overturned both results in replayed referendums a year later.
This time, anticipating a further Irish rebuff to EU plans, the fiscal treaty's designers decided the new rules will become binding for ratifying countries in early 2013 even if as few as 12 eurozone members approve the pact. Previous treaties required unanimous approval.
Two nations outside the eurozone, the United Kingdom and the Czech Republic, declined to support the fiscal treaty at its Brussels signing ceremony March 2. Kenny did sign it, but cautioned that voters would have the final say.
Should a majority of Irish voters reject the treaty, cutting Ireland off from new bailout packages it may need, the country would likely find itself boxed into a fiscal corner.
The government currently relies on a (EURO)67.5 billion ($90 billion) European-International Monetary Fund credit line due to run out in 2013, and may require a second bailout agreement next year if it cannot resume borrowing on bond markets at affordable rates.
"We're determined to return to the financial markets next year to raise money on our own again like we did before," Gilmore said.
That's easier said than done. While the EU-IMF loans average 3.3 percent interest, the bond markets today would be likely to charge Ireland around double that for medium-term loans.
While the anti-treaty side has already blanketed Dublin with placards, Gilmore said the government campaign wouldn't start in earnest until late April.
The treaty would bind ratifying members to deliver annual budgets with deficits of no more than 0.5 percent of gross domestic product. The current much-violated eurozone rule is 3 percent of GDP. Ireland has overspent that limit every year since 2007 as GDP and tax takes have plummeted.
The fiscal treaty does permit greater flexibility for those countries with national debts below 60 percent of GDP. They can run deficits as high as 1 percent. But Ireland's debt-to-GDP ratio is currently at 107 percent and forecast to keep rising.
The treaty creates new powers for the EU's executive branch, the European Commission, to sue deficit-breaching members in the European Court of Justice. Those found guilty could suffer a maximum fine equivalent to 0.1 percent of their GDP, adding to their deficit.
But the treaty provides many loopholes to avoid or delay punishment for exceeding deficit targets. Those countries already dependent on European-IMF funding -- Ireland, Greece and Portugal -- have their own deficit-reduction targets in place.
In Ireland's case, the EU and IMF expect its deficit to fall back below 3 percent of GDP only by 2016. Ireland's own government still hopes to hit that target a year sooner. Its 2011 deficit was 10 percent and its 2012 target is 8.6 percent.