Time to play hardball with the Irish

By: Wolfgang Münchau

What is going to happen now after the Irish No vote? I would expect the European Union to find a way to implement the Lisbon treaty, leaving Ireland potentially isolated within the EU. I would also expect another Irish referendum at some point, probably in the first half of next year.

I personally found last week’s Irish No vote shocking, not in terms of what it means for the EU, but what it says about Ireland. Ireland is one of the EU’s great success stories. Dublin has become one of the great European cities. Both Ireland and the EU should have celebrated their relationship. The No vote leaves the country with exactly two alternatives. One is a humiliating U-turn, consisting of a Yes vote in a second referendum without a material change of circumstances. The other is that Ireland could lose its full EU membership if the second referendum produces another No victory. Ireland’s citizens would send the country back to the economic Dark Ages, from whence it emerged only a few decades ago.

Why am I so confident that the Lisbon treaty is going to be implemented? Because, contrary to widespread protestations, Europe’s leaders actually have a plan B. It is not a pretty plan. Just listen to what senior French and German politicians had to say over the weekend. Frank-Walter Steinmeier, the German foreign minister, suggested on Saturday that one way to implement the treaty was for Ireland to withdraw temporarily from the process of European integration. This is a fairly exotic comment for an otherwise non-exotic minister. I had no idea that that you could temporarily withdraw from the EU and rejoin it later, as though you were buying a forward contract with an option attached. What he is saying in effect is that Ireland should quit the EU.

Jean-Pierre Jouyet, the French European minister, said something similar. He talked about a “legal arrangement” with the Irish. It seems to me that France and Germany have put some thought into how to drive the Irish out of the EU if they fail to reverse their No vote.

The most important prerequisite of plan B is a 26-to-1 situation in terms of countries that have actually ratified the treaty. This outcome is far from assured and explains why Brussels, Berlin and Paris are so adamant that the ratification show must continue. So far 18 countries have ratified, with eight to go plus Ireland. Once 26 countries have ratified, EU countries accounting for more than 99 per cent of the EU’s population will have approved the Lisbon treaty. The pressure on Ireland would then become unbearable.

This situation would be completely different if the ratification process were interrupted. In that case, the treaty could probably not be resuscitated. A ratification strike is what sank the constitutional treaty. But so far there is no sign of the same happening again. Even the UK said it would proceed with ratification. The eurosceptic Czech government may be tempted to follow the Irish. It would also be a mistake to take Swedish ratification for granted. But on balance I would still expect a 26-to-1 ratification score at the end of the year.

What then? Ireland could then hold a second referendum. One possibility would be to ask the same question again, but it is difficult to see what should produce a different result. Ireland has already opted out of everything it wanted to opt out of. It is difficult to formulate any specific concessions, since nobody knows what the Irish electorate wants. This suggests that the Irish problem may not be fixable through a simple declaration by the other member states. A renegotiation of the treaty is out of the question.

An alternative would be a referendum with a differently worded question, such as: “Do you want to remain in the EU on the basis of the Lisbon treaty?” Of course, this bundles two questions many people would like to answer separately. Yes, stay in the EU, No to Lisbon. But folding the two into a single question is politically more honest because it is Ireland’s only real-world choice.

What if the Irish government refused to hold a second referendum? In that case I would suspect a frantic discussion about enforcing the Lisbon treaty without the Irish. I honestly have no idea of how this could work. I know this appears to be in contravention of European law. But then again, European law may not be quite as predictable as you may think. It is not enforced by pundits, but by an often unpredictable court. My hunch is that if the 26 member states really wanted to do this, they would find a legal way.

So the treaty of Lisbon will be implemented one way or the other, but only if the other 26 countries continue to ratify. Otherwise, all bets are off. The biggest losers from this fiasco will be the Irish themselves. They brought the country to the brink in its relations with the EU at a time when the economy is facing the most severe crisis in living memory. I shudder to think how foreign investors are going to react, given how much Ireland relies on them for its prosperity.

Faced with this situation, the strategy most likely to be successful from the perspective of the rest of the EU is to play hardball. This is plan B.

© The Financial Times Limited 2008

---