Irish Referendum Set to Say Yes to EU Fiscal Compact Treaty

Irish voters look likely to accept the strict EU fiscal compact signed by their government and the rest of the eurozone states in March - in the only popular vote on the treaty.

For the treaty to pass, just 12 of the 17 eurozone states must ratify it in their own legislatures. Ireland is the one state formally consulting its population with a referendum - its fourth on the EU in four years.

Opinion polls in Ireland show that around two-thirds of those voting will support the government's push for a yes vote on the fiscal compact, which includes legally binding deficit and debt-to-GDP targets.

"What is at stake is the future of the country," Maire Geoghegan-Quinn, a European commissioner and Ireland's most senior official at the executive, told Reuters.

"It is probably the single most important referendum that we have ever had in the country. It is about ensuring that for industry there is a landscape which has certainty.

"'Yes' equals certainty. 'No' equals no-man's-land."

A rejection by Irish voters would not be likely to have an impact on the final decision to ratify the treaty in the eurozone, given the support shown by other member states, but it would represent an important change of direction for the country that has so far quietly accepted painful EU measures to tackle the single currency area's financial crisis.

It would further add to the doubts over struggling eurozone states' commitment to austerity, including Greece and Spain, and send another shiver down the bond market's spine.

"I ask you to make a further contribution by coming out to vote 'yes'. Yes to stability, yes to investment, yes to recovery, yes to a working Ireland," Enda Kenny, the Irish prime minister, urged voters in a television address ahead of the vote.

So far Greece, Portugal, and Slovenia are the only eurozone states to have had their parliaments ratify the fiscal compact.

Other states will hold votes in due course.

Across the EU 25 of the 27 member states signed up to the fiscal compact, excluding the UK and the Czech Republic, who could not agree with the treaty's terms and so used their vetoes to avoid having to support it.

Under the compact debt-laden member states agree to run an annual structural deficit of no more than 0.5 percent of GDP, else risk a court prosecution and fine.

Ireland and bailouts

After Ireland's economy nearly went bust in the financial crisis, when its bond yields soared past the unsustainable 7 percent mark, it was bailed out to the tune of €85bn by the EU and IMF, as well as loans from the UK, Denmark, and Sweden.

The terms of the bailout required painful austerity from the government in order to control its debt and deficit levels.

Austerity has seen unemployment in Ireland rocket, currently at 14 percent, and led to the country plunging back into its second recession in four years.

Now the country faces the prospect of needing a second bailout as it struggles to grow its economy.

"I think the probability is that one will be needed. If we look at the direction the markets are taking now, I don't see any strong signal of any kind of easing in the markets between now and 2014," Alan Dukes, chairman of the state-owned Irish Bank Resolution Corporation, said speaking on Bloomberg TV.

"So I think the prudent thing is to assume that there will be a need for the continuation of the bailout programme, which in itself would necessarily include conditions that would not be dissimilar to those that are in this fiscal treaty."