Monday, 28 May 2012

Interview by Dermot Murnaghan for Sky News

DERMOT MURNAGHAN: Now then, on Thursday the people of Ireland will be offered a choice to accept or reject stricter European plans for stricter budget disciplines. According to the latest polls the yes campaign is in the lead but opponents say the plans have no social or economic merit. Well joining me now from just outside Dublin is the former Prime Minister of Ireland, John Bruton, a very good morning to you Mr Bruton. Does Ireland feel the weight of European responsibility lying on its shoulders? If it should vote no, the implications for the euro could be dire.
JOHN BRUTON: Not really. In this case it will be enough for 12 of the 17 countries of the eurozone to vote yes to the Fiscal Compact for it to come in to effect so unless previous EU treaties, Ireland is not essential. On the other hand I think it is in Ireland’s interests to vote yes because that would give us the possibility of applying for funds from the European Civility Mechanism if we need them. It would also incorporate into our own domestic rules, better balanced budget controls on the government, to prevent governments – particularly in boom times – spending money that they ought not to spend and borrowing money that they ought not to borrow. The controls contained in this document are mainly to do with internal controls in Ireland rather than EU controls which exist anyway and they will I think be particularly applicable in boom times rather than in times of difficulty when you have to cut back anyway because you can’t borrow the money.
DM: The poll I referred to also tells us something interesting about Irish political life in that it seems on this issue to be dividing more than it has done in the past along class lines in that those more tending to vote no are those suffering most from austerity and recession, those at the bottom of the economic pile.
JB: I think that’s true, the polls seem to suggest that that is the case although in the last week, I think among people of the less well-off socio-economic group there has been an increase in the yes support in that camp because I think they realise that if we have to go for a second bail out, that would be a lot of it to support social welfare and healthcare schemes that benefit the less well-off people more than they benefit other people and obviously if we were cut off from funds, the people who would be first to suffer would be the least well-off. I think that message is beginning to percolate right across the community at this point.
DM: Does that tell us that those people minded, and I see on third of the electorate is still undecided, those people minded to vote no are stick of this tag that has been hung round Ireland’s neck of the poster boy for austerity, they may be beginning to feel that the Greeks are right and say let’s not take it any more, it doesn’t have to be this way?
JB: Well I think the truth of the matter is Ireland is doing well not because of austerity but in spite of austerity. We are doing well because we have a very big foreign direct investment base in this country, we are the leading attractor of foreign investment in the world, certainly in Europe, and that’s keeping our economy healthy. I think that that is something that depends very much on us being part of the European project, people invest here from America, from China, from other countries like that, because we are a fully subscribed member of the European Union. If we were to cast in doubt our commitment to the disciplines of the European Union and the euro, that would have an adverse effect on foreign direct investment which would have an immediate adverse effect on interest rates and on job creation here in this country
DM: Well leaving aside the referendum there, if Greece should exit the euro or be forced out of the euro, it’s said that this could spark a domino effect. Do you think that Ireland could be ejected from the euro or is it irrevocable, its membership?
JB: Well, legally it is not possible to eject a country from the euro. A country might decide that it had to leave but I don't think it’s likely that Greece will leave in the end because the effects on Greece would be so enormous, there would be an immediate four percentage point drop in the Greek gross domestic product, on top of all the drops that have occurred already, in the immediate effect of their leaving. If that were to lead to a break-up of the eurozone, you could have up to a twelve percent drop in income right across the eurozone, with the biggest sufferers actually not even being Greece but being Germany and France and, of course, Ireland. So I think keeping the eurozone together is a very, very high priority but clearly you have got to do that on a basis that you’re not simply giving money that is being poured down a black hole which never will come up again, you’ve got to have some controls or guarantees both in European law and in domestic law and what the fiscal compact treaty does is insist that we put it into our domestic law as well as relying on European controls which are there already under existing treaties.
DM: Just briefly, do you have any sympathy with people, maybe just to cause mischief, who have been saying in Ireland maybe you would have been better staying linked to sterling as you were forty years or so ago?
JB: Well at that time we had a situation where interest rate policy was determined in London without any Irish input and we went up and down with the fortunes of whatever suited the British economy as decided by people in Britain over which we had no say. In the eurozone we are one of 17 countries therefore we don’t determine the policy but we do have a say, we have representation in the European Central Bank, representation in the European Commission, in the European Parliament so we have more control, not complete control but more control of our economic future as a member of the eurozone than we would have if we were simply to unilaterally link ourselves to sterling and accept whatever was decided in London.
DM: Okay, Mr Bruton, thank you very much indeed for your time. John Bruton there with his thoughts on the referendum.


The latest national opinion polls show Mitt Romney running neck and neck with President Obama in the election to take place next November.  On the face of it, that should put him in with a very good chance.
But the election is not won in a single, one person one vote, national election, but on a state by state basis, by accumulating electors in the Electoral College.  Not all States allocate Electoral College votes in the same way. Some do it on a “winner takes all” basis, and some do it proportionately to the number of votes the contenders got in the state.   
The Real Clear Politics website attempts to predict how the Electoral College votes will break down. 

Their analysis can be found at -

According to their analysis, Barrack Obama starts with   227 Electoral College votes in states that are most likely to give him a majority, and he needs to get to 270 to win.
Mitt Romney starts with only 170 Electoral College votes in states most likely to give him the majority. So he has to win more of the states that could go either way, which are
  • Arizona (11 electoral college votes),
  • Colorado (9 votes),
  • Florida (29),
  • Iowa (6),
  • Michigan (16),
  • Missouri (10),
  • New Hampshire (4),
  • North Carolina (15),
  • Ohio (18),
  • Virginia (13), and
  • Wisconsin (10).

These are the eleven states where the big money will be spent, and where television viewers will be bombarded with advertisements for and against the two candidates.

Of these eleven swing states, John McCain only won only two in 2008, namely Arizona and Missouri.  So he lost the election.

In contrast, George Bush won those two, but also won Colorado, Florida, Iowa, Virginia and North Carolina, and that was enough to give him victory in the Electoral College over John Kerry.

The really big prize on this list is Florida, with 29 votes.  Mitt Romney will be tempted strongly to pick  someone from Florida as his running mate. Senator Marco Rubio, a man of Cuban American heritage, is a strong contender.  As an Hispanic, he may also have a wider appeal, but the anti immigrant rhetoric of many Republican spokespeople will mitigate this.
 Ohio has 18 votes, and Senator Rob Portman, if chosen as vice Presidential nominee, would probably bring Ohio in behind Romney, and he has more governmental experience than Senator Rubio .

Mitt Romney himself is a native of Michigan, which should help him there.
Virginia has traditionally been a safe Republican state, in common with almost all states of the Old Confederacy.  But, like North Carolina, it has been recently trending Democratic.
As in all elections, turnout will be vital. The huge turnout of African Americans, and young people, for Obama in 2008 will be hard to repeat.  On the other hand, Mitt Romney lacks some of the deep patriotic, and non partisan appeal of John Mc Cain.

The economy will be the crucial campaign issue. The US economy seems to be improving, but that recovery may not be evenly spread. Mitt Romney will probably focus most effort in the swing states  where the economy is doing less well. 
At the end of the day, it will all come down to where those 11 states, and how their 141 Electoral College votes, go.

Other things being equal, if Mitt Romney can win Florida, Ohio, Colorado, Arizona,  Missouri, North Carolina and Michigan, he will be President. Winning both Florida and Ohio at the same time will be his biggest task. Michigan  will also be very difficult.

Tuesday, 22 May 2012


Nobody loves austerity.
But if the alternative to austerity is adding to your debt , all you are doing is asking your children to undergo the austerity on your behalf. And asking them to undergo much  greater austerity , because they will have to pay  back interest as well. 

Young people, who are being targeted by the NO campaign should reflect on that.
The No campaigner actually want to saddle Irish  young people with a lifetime of paying off their parents debts, or of  leaving the country to avoid doing so.
That is the logical outcome of the crowd pleasing, truth avoiding, message of the No campaign.  
The Stability Treaty adds little to measures already in force under the authority of Treaties already ratified by the Irish people. 
It simply requires us to do what the Government is doing anyway, putting in place a debt brake  and independent Fiscal Advisory Council  to prevent phoney budgeting by Irish Governments in the future. 
Austerity has come to Europe because  lenders are suddenly wary of lending to Governments.  For everybody’s  sake, we have  got to  make lenders confident in lending to Governments again. 

Ireland’s ratification of the Stability Treaty would be a small ,but important, step in that process.  

Sunday, 13 May 2012


The result of the French Presidential election was no great surprise in a way.

In fact, when one considers that  most of his first round competitors had  endorsed Hollande,  outgoing  President Sarkozy did  well to get  48%,  as against the mere  27% he had  got in  the first round.

The  Centrist Bayrou, and the Left Front candidate Melenchon, had both explicitly endorsed Hollande, and  the National Front  candidate  Marine  le Pen, most of  whose  supporters were otherwise trending in Sarkozy’s favour,    said she was  going to  vote for nobody  .

The breakdown of the vote is interesting .

Sarkozy did best in a Northern  block of territory  from Normandy over to  the German  border in Strasbourg, and  Hollande did best in Paris, and in the  rest of France, apart from the  Riviera.

Unlike the US, where women  are more for Obama, and men more for Romney, the two candidates in France got more or less the same level of  support from men as from women.

Those with higher educational qualifications voted more for Sarkozy ( 54%/46%). So also  did those who were financially better off.

Employees were  54/46 in favour of Hollande, whereas  business and self employed were  58/42 for Sarkozy.


The age distribution of support was most marked.

Those under  24 were  59/41 for Hollande.   
The 25 to 34  and the 50 to 59 age groups were  for Hollande.

But the 35 to 49 age group, and the over 60s, favoured Sarkozy.


The most remarkable cleavage of all was on the index of religious practice.

Practising Catholics were 73/27 for Sarkozy.

Protestants were 61/39 for Sarkozy.

But those who said they had no religion were 66/34 for Hollande.

Muslims supported Hollande by a margin of  93 to 7!   Sarkozy’s anti immigrant  rhetoric and his talk  about strengthening borders may have  won him  support from elderly voters, but it  may make it difficult for his party to win Muslim votes in future elections and they are a very important  voting bloc in France.


Some may think that the election of Hollande will mean an end to so called austerity policies in France.  In fact ,he  gave that impression himself during the campaign. Outside France, some people  have seized on Hollande’s campaign rhetoric as a sign that   borrowing does not have to be reduced, and  budgets do not have to be balanced. They are mistaken.

In fact, if those who voted for him read his programme closely they would see that he is committed   to getting the French budget deficit down to  3% of GDP by  2013, and to eliminating it altogether by  2017.  That simply  cannot be done without austerity, at least  in France itself.

Of course a little less austerity  IN GERMANY  might help achieve that goal, if it meant that more Germans bought French goods, or took their holidays in France.  But even that is not guaranteed.

France’s big problem is a poor export performance. Whereas Spanish manufactured  exports are at 108% of the level they were at in  1999, French  exports are now   at only 72% of their  1999 level.  This is not, it seems , because French wages are too high, but rather that French companies have not innovated enough.

Meanwhile the French national debt is at its highest level ever, apart from the peaks it reached after the two world wars.

Hollande is committed to increasing the corporation tax on big companies to 35%, and reducing the tax on small companies to 15%. This would create and incentive to companies to stay small, which may not help the French export effort much.

He is also committed to employing more teachers. This will be difficult to reconcile with his plans to eliminate the budget deficit.


The immediate task facing President Hollande is that of winning a majority in the National Assembly. This may mean that he will avoid facing really difficult choices until June, when the Assembly elections are due, and  stay in campaign mode until then.

His difficulty is that the financial markets may not give him the  space in which to do that.  If the markets feel that, in the medium term, the French budget  deficit is going to rise faster than that of Germany, interest rates on French bonds will rise faster than those on German bonds . That could create problems for the euro, something to which President Hollande is committed.   


The Greek election result poses an even more immediate problem.

Greeks favour staying in the euro, but do not favour the conditions on which they  can access funds provided by the taxpayers of  other euro area  countries.

These conditions involve reforming wage agreements, cutting pensions ,improving tax collection, and  cutting the cost of  pharmaceuticals used in the health service. There is also a difficulty that Greece has  not done all the things it  promised, like eliminating supplementary pensions and getting rid of off budget funds.

The trouble is that things are now so bad in Greece, that many Greek voters convinced themselves that they cannot not get worse, and thus  voted for parties that want to reject the conditions on which money is  currently being lent to Greece to  keep its  government functioning.

Unfortunately, things can get much worse in Greece, even than they are now, if taxpayers in other countries decline to provide more funds.   A collapse in the banking system, and a disorderly exit from the euro, would be worse than anything Greece has experienced  so far.

President Hollande, as a new leader, with a democratic mandate, has a capacity to persuade  the Greek people to see sense, to a degree that may not be open to other European leaders, including Chancellor Merkel. President Hollande can  be persuasive in Greece because

France favoured Greek entry to the euro.

France never occupied Greece.

French banks have lent to Greece in the past.

Francois Hollande is a man of the left.

All these  things give him an authority  to speak to the Greek people,  at a critical moment  for them, and for Europe.

Monday, 7 May 2012

European Stability Treaty

The net question in the referendum is whether Irish permanent law should be amended to  constrain  Governments running up debts in future.
In a way, this should not be a controversial issue.
If Governments run up debts, these debts have to be serviced or repaid by citizens.  Prudent citizens should, I believe, be in favour of using the law to prevent Governments piling up unnecessary or wasteful liabilities for future generations. It is very difficult for an individual voter to follow what a  Government is doing with the finances on a day to day basis. So having limits and independent controls should be seen as helping people ensure that their   money is managed prudently by their Government.
Opposition parties, in particular, should favour placing limits on borrowing by current Governments because, if they ever find themselves in office, they will be the ones  who will have to put money aside to pay interest on the previous Government’s   debts, before they can spend any money at all on day to day services or investment  for the future.
If the Stability Treaty is ratified by people on 31 May, the Dail and the people will be much better informed than in the past on what the Government is doing with the people’s money.
An independent Fiscal Advisory Council will keep  the Dail ,and the  people, informed about trends in Government finances. If mistakes are being made in estimating future revenue or spending, the  Dail and the people will have a new means of keeping the Governments finances honest, so to speak.
This searching analysis of Government finances by the Fiscal Advisory Council, and also that by the European Commission, will greatly enhance Dail Eireann’s ability to carry out its  duties under Article 17 of the Irish Constitution. This Article requires the Dail to approve Government spending and taxation. If the Stability Treaty is approved, the Dail will have much better quality information for making these important decisions. Governments will not be able to produce phoney estimates, something of which I had direct experience myself as incoming Minister for Finance in 1981
And, under article 13 of the Stability Treaty, government and opposition parties the Dail will have a new means of observing, and influencing, the economic policies of other EU countries. There will be a new conference of parliamentarians drawn from economic affairs committees from all member states of the euro. As an export economy, we need to have an input into the policies of our neighbours, and this provision the Stability Treaty will help give us that.
Some people are describing the Treaty as an “austerity treaty”, because it places limits on Government borrowing.

But borrowing is not a cure for austerity.

Borrowing is often just a means of postponing austerity.
It is a means of getting the next generation to pay this generation’s bills, without consulting them. And if the interest rate is high, the austerity in the future, will be much greater than anything that would happen if problems were faced up to now.
The idea of placing limits on Government borrowing and debt is not new.
Back in 1992, the Irish people in a referendum approved our joining a Euro currency, and agreed to rules to defend the value of that currency by limiting Government Debts to 60% of GDP, and Government Deficits to 3% of GDP.
Put another way, we agreed that our overall Governments debt would not be more than just below two thirds of everything everyone earned in Ireland in a year, and that that the Government would not borrow additionally, in any one year, more than 3 cents for every euro earned by the country as a whole in a year.
These rules were put in the form of an EU Treaty, known as the Maastricht Treaty, approved by the Irish electorate on 18 June 1992.
Some might ask why we needed a rule like that, about Government borrowing, in a Treaty primarily about setting up a new common currency?
The answer is that, if you want to prevent a shared currency becoming worthless through inflation, you have got to control the amount of money in circulation. One of the ways that money is put into circulation is by Governments borrowing money, and spending it.
Unfortunately we have not been able to keep our word to ourselves.  All over Europe, Governments have got themselves into trouble because they have breached the 60% and 3% limits.

Of course, this was not the only problem, nor the only cause of the economic crisis.

Private businesses and individuals also borrowed and spent excessively. There was too much credit given out, and things were bought, with that credit, for more than they were worth.  The European Central Bank, and the Central Banks of most European states, did not put a stop to this. The same thing happened outside the euro area, in Britain and the United States, so it was not a problem of the euro as such.
 To use an analogy, it was a problem of people, and businesses, acting like sheep, following one another, rather than thinking where they were going.  Meanwhile the fences had been allowed to get into disrepair, parts of the field had no fences at all, and the shepherd had gone to sleep.  
Now we have to put these things right.

The Stability Treaty is only a small part of the solution.

Ireland, and the rest of Europe, needs to reform its banking system.  A functioning economy needs banks. But Banks never again must be allowed grow to be too big to fail. 
Genuine economic growth needs to be promoted, based on developing new products and services that the rest of the world will want to buy. 
The consequences of the ageing of our societies must be addressed honestly.
Confidence must be restored, so that people will feel free to spend what they have. But confidence is only sustainable, if it is based on truth, the truth about what owe, and truth about what we are spending. The Stability Treaty will help us tell ourselves the truth about our own economy, more fully than we did in the past, and in that way it will help restore confidence.

A Yes vote in Ireland to the Stability Treaty will not bring complete certainty. Uncertainties will remain in the European and global economies.   

The EU is a political organisation. It is democratic. All EU Governments have public opinions to consider, not just the Irish Government. The road to a stable, sustainable, and productive economy in Europe will be a long one, probably with some  detours. But the EU has made a start,
    on banking,
    on regulation,
    on monitoring systemic risks and
    on  monitoring economic as well as fiscal imbalances.

There is more to do
    on promoting investment, 
    opening up markets to competition, and
    freeing people to work in other EU countries by  recognising their  qualifications.

But, having served as an Ambassador in the United States, and observed the United States legislative process at close quarters, I can say that the European Union is much further along the road towards dealing with its (admittedly more severe) long term structural and budgetary problems, than the United States is.
The EU system is not deadlocked. It is working, slowly, sometimes incompletely, but it is working. Passing the Stability Treaty is a part of that work. 

Speech by John Bruton, former Taoiseach and current vice President of Fine Gael, at a meeting to launch the Meath Fine Gael  campaign on the European Stability Treaty in the Ardboyne Hotel, Navan, at 8pm on Friday May 4th.