Irish voters approve EU deficit-fighting treaty

By Shawn Pogatchnik

Associated Press

Published: Friday, June 1 2012 6:33 a.m. MDT

"I'm hopeful for a strong 'yes' vote. The early trends would indicate a strong run in favor of the 'yes' vote," said Kenny, who rose to power on a platform promising to pull Ireland out of recession, minimize the cost of bank rescues, and get the country borrowing normally again on bond markets by next year. During his pro-treaty campaign he warned that rejection would mean even worse austerity, because Ireland would suffer more credit downgrades and lose its key EU source of funding.

The treaty, signed in February by leaders of 25 countries including Ireland, proposes that all members who ratify it should reduce their annual deficits to no more than 0.5 percent of gross domestic product. The current eurozone limit is 3 percent of GDP. Ireland is committed to cutting its way back to that level by 2015.

Opponents of the treaty argued that the new 0.5 percent deficit limit would force Ireland to keep cutting until perhaps 2020, when greater state investment to stimulate the economy was required. The government countered that much would depend on whether Ireland could keep growing its economy against the tide of austerity.

Ireland has recorded a faint pulse of growth over the past year thanks to strong exports by nearly 1,000 foreign high-tech companies based in Ireland. But the domestic economy, with unemployment stuck on 14.3 percent and hundreds of thousands of households mired in negative-equity mortgages, has shrunk for four straight years.

Ireland has posted the EU's worst deficits since 2009, including an EU-record 32.4 percent in 2010 and 13.1 percent last year. Both figures were greatly inflated by the exceptional costs of Ireland's decision to nationalize five of its six banks rather than see any collapse — a debt burden that pushed Ireland itself into the bailout zone in 2010. Repayments to international bondholders, central banks and interest on decades-long loans are expected to cost Ireland's taxpayers €68 billion ($85 billion), equivalent to €19,000 ($23,500) for every man, woman and child.

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