UCL European Institute


EU reforms call for new approach to referendums

22 December 2012

OPINION: The Greek election result appears to have reduced the immediate threat to the euro somewhat but is far from solving the euro zone’s problems. The euro crisis has come to resemble a Hollywood action movie where a plane faces a ticking bomb, terrorists in control of the plane and the death of both pilots. The Greek election may have defused the bomb, but there are significant further threats before a safe landing can be guaranteed.

Ronan McCrea

The most pressing threat remains that which has been clear from the outset. A monetary union cannot survive in the long term without integration of banking and fiscal policies. In short, saving the euro is going to need a banking and fiscal union of some sort to go alongside a monetary union.

Though the fiscal treaty was arguably not constitutionally significant enough to merit a referendum, the kind of changes necessary to save the euro will involve the pooling of very significant amounts of sovereignty. The cumulative impact of the changes necessary to establish a fiscal and banking union will be constitutionally revolutionary and should be put to a vote of the people.

The problem is that there will not be one single point at which the people can be invited to give their assent.

Angela Merkel has made it clear that there will be no “big bang” solution to the crisis and that measures such as eurobonds will only come about at the end of a process of many smaller confidence-building measures.

Germany benefits immensely from membership of the euro, which has prevented its huge trade surplus from making its goods uncompetitive. However, it is also fearful that by agreeing to stand behind the debts of other euro members or to subsidise peripheral economies, it will end up subsidising the kind of wasteful and profligate spending that characterised Greek budgetary policy up to 2009.

Germany will therefore only be willing to put its money on the table after mechanisms have been put in place to ensure significant European oversight of national tax and spending policies.

The process, as Merkel has consistently stressed, will be gradual. The introduction of each measure of fiscal and banking co-ordination will establish the necessary trust and confidence to move to the next stage.

There will be no single summit that establishes a fiscal and banking union. It is more likely that, given Germany’s concerns, over the next couple of years a series of measures will be proposed. Each measure will build on the previous one, leading eventually to the degree of mutual co-ordination and supervision that gives Germany the confidence to place its financial resources on the table as a guarantee for its euro partners.

Such a model presents a particular difficulty for Ireland. In the view of the current Attorney General, it seems that a referendum is required for each and every European treaty change. 

In any event, the cumulative impact of the series of measures will be constitutionally significant enough to warrant a referendum. We therefore face the prospect of an endless series of referendums as voters are called to the polls time and again to ratify each and every separate change to the European treaties.

A never-ending series of referendum campaigns would risk paralysing political life in this country.

Furthermore, the more frequently referendums are held, the lower the turnout tends to be. There is a very significant risk that, in the context of low turnouts, referendums will be decided by crankish and extremist elements whose supporters tend to be more motivated about going to the polls.

To avoid this scenario, the Government will have to adopt a different approach from that followed in all European votes to date. Up to now, constitutional amendments on European matters have been phrased to bring the Constitution in line with a particular treaty that has already been signed.

If we are to avoid an endless series of referendums in the coming years, we will have to give the Government a degree of authority to agree to treaty changes that have not yet been agreed.

This would require a more general amendment to the Constitution, giving the State the right to participate in a fiscal and banking union. Such an approach would allow the State to sign up to the numerous amendments that are likely in the coming years if the euro is to be saved.

Given the seriousness of the implications of fiscal union for our political system, it would be desirable that there would be a further referendum at the end of the process. Once a fiscal and banking union is fully in place, then voters could decide by referendum whether they would like to be in or out of such an arrangement.

This approach involves a degree of medium-term trust in our elected leaders. They have not always shown themselves to be worthy of such trust. However, the alternative scenario of numerous, frequent and politically paralysing referendum campaigns for years on end is surely one that should be avoided.

Ronan McCrea is an Irish barrister who lectures in EU and constitutional law at University College London. The article was first published in the Irish Times on 22 June 2012.