Prof Ray Kinsella Date: 30 September 2009

The outcome of the second Irish referendum on the EU Lisbon Treaty, which is being held on Friday, will affect the trajectory of global economics and politics. The first time, in June 2008, the treaty was rejected—notwithstanding the urgings of the mainstream political parties—by a surprisingly large majority of the people, 54% to 47%.

This time around, the Irish government is playing on the “fear factor.” Ireland’s economy is in intensive care, suffering from largely self-inflicted wounds. The economy will contract by 10% this year. A construction-led binge, facilitated by credit institutions as well as by weak regulatory oversight, has come to a juddering halt. Unemployment has escalated beyond all expectations and affects every family and every business in the country. The bogeymen conjured up by the government include the assertions and innuendo that, for example, Ireland will be ”pushed out” or “left behind” in Europe in the event of a No vote. There are vague mutterings that Ireland will lose the good will of the European political establishment.

Nothing could be further from the truth. Both France and the Netherlands voted No in a referendum on the Constitution, which was the precursor of the Lisbon Treaty. They are still very much at the heart of Europe. So, too, is Ireland, in terms of its history as well as by inclination.

Equally, there is the insidious suggestion that “recovery” and “jobs” and a Yes vote are all somehow connected. This is simplistic nonsense to assume that there is such short-term formula for “jobs” and “recovery” that is available to any European government, and that includes Ireland. The truth is, all developed economies, individually and collectively will have to do their own heavy lifting and to grow their economies—by reducing the burden of government and the scale of intervention. Ireland is a case in point: in the 10 years to 2008, the population of Ireland grew by a healthy 10%, while the size of government climbed by 30%.

The resilience of the Irish economy and its capacity to leverage its very considerable natural advantages are well proven. It has the youngest population in Europe and is currently enjoying the largest growth in its birth rate since the 1850s. Its entrepreneurs are of the grow-quick and export early school and have a proven pedigree, not least in the United States. Its location and its comparative advantages in natural renewable energy underpin a competitiveness that has been considerably enhanced by a significant fall in labor and utility costs. The Irish economy has the capacity to get back on its feet. To encourage the belief that a dependence on Europe is the key to healing its self-inflicted wounds is to make a serious economic miscalculation—and to sell its people short.

The real issue here is whether or not the Treaty of Lisbon is a good treaty, not just for Ireland, but for Europe. And, equally, whether, or not, the European establishment has the humility to respect the voices of its people. Those who support the treaty, and those who oppose it, include individuals of passion and great integrity. However, what is clearly evident is that the government—desperate not to lose for a second time, is playing on the economic fears of a country that, like many others, has been traumatized by effects of recession.

The compelling case for greater European cooperation speaks for itself. Its achievements—from the single market to the single currency—are unquestionable and important. Ireland has strongly endorsed both and rejecting a bad treaty doesn’t make one a bad European. Lisbon is not just a bad treaty because it facilitates centralization and the prospective militarization of Europe as well as eroding the core principle of subsidiary. It is baroque, incomprehensible and does nothing to make Europe itself more legible to its citizens. It has also, in its various forms, been rejected three times already, by the people of Ireland, France and the Netherlands.

The European initiative needs a vision that is worthy of its genesis. It needs to address substantive issues, not administrative reforms. In the aftermath of a global financial crisis of epic proportions, it needs to look forward at such issues as reforms to the European Central Bank to get the kind of balance between restricting inflation and promoting growth that the Fed has struck. By voting No, Ireland’s voice may prove the catalyst necessary to encourage the European establishment to develop a treaty—even a Constitution—that reflects its unique historical and spiritual values while at the same time adapting itself and its institutions to the challenges that confront not just Europe, but its global partners.

Further Development of the European Central Bank – along the lines of the Fed – should take priority over opaque institutional reforms. Promoting enterprise and job creation as opposed to facilitating a culture of state interventionism – which is all too evident in the Irish economy – as well as in many of the other older member states of the union, makes much more sense in the light of the economic realities confronting Europe than squabbles about the numbers of commissioners. An unequivocal focus on demilitarisation in all its forms would go with the grain of current global thinking rather than the covert signals in the treaty to promote militarisation. Perhaps most important of all, the genesis of Europe was the unambiguous spiritual and cultural values of its founding fathers. They have been ‘crowded out’. Europe has, as a result, lost direction, which has been hijacked by the political establishment at the expense of respect for constitutional rights of what is supposed to be a Europe of the peoples.

The Irish people have never been lacking in courage. They should not allow their historic vote to be hijacked by those who promulgate a “dependent” culture and by implication, cast doubt on Ireland’s ability to re-imagine and rebuild a strong and sustainable economy within a healthy and democratic Europe.

Mr. Kinsella is a professor at the University College Dublin Smurfit Graduate School of Business and the Management Institute of Paris. He is author of the recently published “Rebuilding Trust in Banking: Regulation, Corporate Governance and Ethics,” (Vonier Press).