In a higher than normal turnout for a referendum, 53.1%, the Lisbon Treaty (the renamed EU Constitution) was clearly rejected by 53.4% to 46.6%. As the no side trailed in every opinion poll until one poll in the last week, this is a major shock for the political and business establishment in Ireland.
The government, with its new Taoiseach Brian Cowen, the opposition, including Labour, the bosses' and farmers’ organisations, most of the leadership of the trade union movement, the churches, the media and every other part of the establishment, who all combined together and used their vast resources have been stunned by this defeat.
This is also an important setback for the big business interests and the political elite who control the EU. "With all respect for the Irish vote, we cannot allow the huge majority of Europe to be duped by a minority of a minority of a minority", so said Axel Schafer SPD leader in the Bundestag committee on EU affairs. While some are saying that a country with less than 1% of the EU population cannot be allowed to hold up the whole of Europe, the reality is if the EU was democratic, Lisbon would have been rejected by working class people in many countries.
The Socialist Party was an important part of the no campaign. We combined our own independent activities with participation in the broader, loose campaign - the Campaign Against the EU Constitution (CAEUC), which involved thirteen other parties, groups and activists putting forward a progressive and left position. Sinn Fein, which was the only party with parliamentary representatives that opposed the Treaty, was prominent particularly in the media, but its central demand that the Treaty could and should be renegotiated was weak and in part perhaps a preparation for possibly supporting such Treaties when they enter a future government.
Socialist Party impact
It is not an exaggeration to say that Socialist Party representative, Joe Higgins, played an absolutely critical role in the course of the campaign in being the most capable representative of the no side. He took and exposed the arguments of the senior political and business representatives of the establishment. This is generally recognised. In the Evening Herald media analyst and consultant Terry Prone cited her 10 reasons why Lisbon was defeated and one of them was Joe Higgins: "They failed to realise the impact mavericks like Joe Higgins have. Joe Higgins is an institution. He is more than a curiosity. People who haven't a left wing bone in their body identify with him because they find him straight and passionate and witty. If he said healthcare was going to be privatised, it rankled with them."
In the campaign the yes side argued that Lisbon was mainly about modernising the EU and changing the structures so the bigger EU could work more efficiently. They tried to diminish the important political, economic and military aspects contained in this long and practically unreadable document.
While the Socialist Party dealt comprehensively with the militarism in the Treaty, we concentrated on how the Treaty facilitated the privatisation of vital public services like health and education and attacks on the wages, conditions and rights of workers.
The Treaty was purposely written, including protocols etc, to make it more difficult to pin down its neo-liberal and anti-working class content. It included a so-called Charter of Fundamental Rights, which added no new legal rights for workers but was used by the Labour and trade unions leaders as a justification for the campaign for a yes vote.
Unlike the last Treaty where they were able to say vote yes, don't deny the ten countries in eastern Europe the right to join the EU, this time they couldn't manufacture strong arguments to frame their campaign around. They wanted to avoid the actual detail of the Treaty and instead leaned on the idea that Europe has been good for Ireland, which didn't take account of the changing economic and social conditions people are experiencing.
Article 188c of the Treaty, by removing the ability of states to veto trade deals involving health and education, would open up the prospect of financial speculators having a right to intervene and cherry pick the most profitable aspects of health and education, thereby imposing new charges and fundamentally undermining vital public services.
Profit and exploitation
Lisbon continued with the policy of putting the right to trade and do business, in other words the right to profit and exploit, at the centre of the EU and above the rights of workers to decent pay and conditions. It further facilitated the European Court of Justice to continue to make more vital rulings that favour big business over workers like in the Laval and Ruffert judgements.
These issues of privatisation and workers’ rights were major points of contention throughout the campaign. The Socialist Party really helped to push these issues on to the agenda by Joe Higgins’ interventions but also by our large posters which were put up in key cities. We produced two posters which said "No privatisation of health and education - No to Lisbon" and "Defend workers’ wages and conditions - No to Lisbon". In comparison to practically all the other posters, which had bland meaningless slogans, ours made simple statements on issues and had a real impact.
In a radio debate, Mary Harney, Minister of Health bitterly complained that Joe Higgins and the Socialist Party had put up posters all over the country saying health was going to be privatised. In an email sent to the Socialist Party, a women showed the impact that our posters had, "I have to say I was really in 2 minds until I saw your poster. When I saw SF [Sinn Fein] were the only party advocating a NO vote I was going to vote YES as I am not a SF fan but as a long time fan of yours and all your opinions your poster advocating a NO is what swayed my decision."
Day in and day out the yes side, including the leaders of Labour and the trade unions, bluntly said that we and the no side were scaremongering and that services and rights would actually be safeguarded. In this context it is very significant that the Treaty was explicitly rejected by the key sections of the working class.
In the campaign, the media facilitated the yes side in trying to undermine the arguments against. For some it would have seemed like a stalemate, with every claim being counter claimed. So an important question that emerged is, do you trust what the political and business establishment is saying about this Treaty? Clearly the instincts of key sections of the working class was that they didn't.
In Ireland 15 years of boom, the lack of a political alternative and struggle in society has affected not only people’s mood and confidence, but also attitudes. However, this rejection of Lisbon was a definite statement by the working class. It was openly accepted that the vote showed that the working class had turned out to out vote the more middle class and more affluent areas, who generally supported the Treaty.
There were some reactionary elements on the no side. Libertas was a front set up by neo-liberal Irish billionaire, Declan Ganley. Coir was an umbrella that brought together fringe elements of religious and anti-abortion reactionaries. They were given undue prominence, particularly in the last week of the campaign in an attempt to frighten people into voting yes, However the issues they raised, the threat of higher rates of corporate taxation and abortion etc did not get a significant resonance during the campaign.
In the aftermath, the media and the government will try to distort the reasons why people voted no. But as one woman said to the Party in an email, "I am furious at our political representatives. I felt they dismissed and belittled the no campaign and the intelligence of the Irish voter. You however very articulately expressed my own views on Europe, globalisation, privatisation and the erosion of democracy, concerns I know are shared by many. Using abortion and conscription to explain the no vote is just a scapegoat for the government to take themselves off the hook, and as they do, this affirms the fact that they are removed from the reality of life for the majority of Irish workers."
Is the Treaty finished?
What happens now? This vote does not mean that the Lisbon Treaty is gone. The truth is probably that the EU establishment doesn't know exactly what to do but is intent on moving on. For them, preparing the EU for an intensification of competition with the US and China and the scramble for markets, resources and influence is vital. If following this vote, the ratification of the Treaty continues by the respective governments, it is likely they will try to find the way to proceed and possibly use that to pressurise Ireland to vote again or be left behind!
While some of the opposition parties who supported the Treaty have said they would oppose a re run, and clearly a re run would pose serious dangers for the political establishment here, the government has quite consciously not ruled that out. We'll have to see how things develop.
What is clear is that the best follow up to this victory would be an active response where people get active in the workplaces, the communities, the schools and universities in order to build an opposition to capitalist neo-liberal policies where that are being imposed. The Socialist Party will do all in its power to help build such campaigns and movements. Crucially, the vote exposes the gulf between ordinary people and the establishment including the leaders of Labour and the trade unions and poses the vital need for the building of a new mass party for working people.
The Socialist Party ran a very vibrant campaign which included intervening into the media, mass postering, distributing tens of thousands of leaflets, stalls in many city centres, door to door work and a series of public meetings and debates. Our campaign made a definite mark and further developed the national profile of the party.
The debates with leading figures from the yes campaign that we were able to organise in Cork, Limerick and Dublin were the biggest public debates on the issue in those cities and had an important impact. The turnouts were 170, 100 and 200 people respectively.
Cowen faces major economic decline
The deterioration in the southern economy is having a real impact on people’s lives and attitudes. The comments of most experts that very low growth this year will become a recovery in 2009 are more like wishful thinking than accurate analysis.
The impact of the growing crisis is reflected in many ways. It is reflected in the 140 people who attended a public meeting about organising against cuts at the Mercy hospital in Cork, organised by members of the Socialist Party and other activists.
It is reflected in the strong support of BATU members for the staff and organisers currently on strike against the rotten leadership in that union as their patience with a leadership that has proved incapable of defending construction workers and is now sacking and attacking its own staff is gone!
Finally, the change is reflected in the defeat of the Lisbon Treaty. Unlike the General Election last year, with Lisbon the attempts to strike fear into people about the effect a no vote would have on the economy didn’t work. People stood against the arguments of the whole political establishment.
Economic conditions are declining significantly. Unemployment jumped by over 7,000 in May. The latest figures for consumer spending – April – show a drop of 3% on the same month last year. Spending has declined for the last three months. The two figures are connected and show that the problems are now hitting the broader economy. Job losses have also spread beyond construction and into the general economy including services.
Forecasts for growth are being cut for the Irish economy for 2008. The Ulster Bank is now says it will only grow by 0.5%, an extremely dramatic collapse from over 5% last year! The main cause of this change has been the impact of the collapse in the domestic property market. But the crisis in property will get significantly worse.
Global markets have continued to grow, albeit slowing, and therefore exports from Ireland, crucial to the economy and jobs, have so far been maintained. However the decline in the domestic economy is likely to combine with recession in the US and that will cause a serious crisis in investment here and in Irish exports. The hopeful statements that the Irish economy will recover next year fundamentally underestimate the significance of the crisis in the capitalist economy within Ireland and globally.
It is nearly a year and a half since the peak in property prices. Since then, official figures indicate that house prices have fallen by on average 7.3%. However, the collapse in prices has been much more dramatic in many areas. The recent Fitch Rating Report indicates that they expect prices to fall be another 15% up to the end of 2009. When inflation is factored in, that would represent nearly a 40% drop in average house prices.
In part the decline in prices is due to the over supply of houses compared to the real market over the last years. It is estimated that there are close to 250,000 new houses currently lying vacant. Despite this surplus, some builders have been forced to continue building housing units as they are over leveraged in terms of credit and need money so they can pay back their mounting debts. In some instances, this has forced builders to slash prices dramatically.
While overall there has been a significant diminishing in construction output, down 17.7% this year compared to last, the full impact of the property crisis on output and unemployment has not yet been felt. The estimates for job losses in construction at 13.8%, mirror the decline in productivity. However, when house construction declines by more than 50% from the peak, which most economists expect, construction employment can be severely hit.
A leaked report from FAS, says there will be up to 65,000 jobs lost in construction alone by the end of 2009 – nearly a quarter of all jobs in the sector! Such jobs losses would be a very significant blow to spending and the overall economy.
Credit squeeze, belt tightening
Just as the extension of credit facilitated an explosion of house building, now the inevitable indebtedness and credit crunch are doing the opposite. While house prices are falling significantly, the cost of mortgages is going up and with the banks facing serious problems they are less and less willing to lend people money. As a result, many people who desperately need a home still cannot buy.
The cost of paying back mortgages has increased by 16.9% in the last year and this has put many families under real financial pressure. Now the European Central Bank is indicating that it will further increase interest rates in July.
Those who bought their homes in recent years are being hit by a double whammy. Not only are they facing bigger mortgages costs, but also their houses are now worth less than what they paid for them. Tens of thousands will experience such negative equity over the next years.
Conditions in such households can become desperately tight. Credit, which gave many people flexibility in budgeting over the last years, is now not an option. In such households, people can be forced to live a hand to mouth existence. In these circumstances, a family member losing their job can also mean losing their home.
In place of the false momentum created by the bubble, we can face a downward spiral where the property crisis hits jobs and job losses in turn hit property again. We are still in the early phases of the property crisis.
Again the idea that, with limited damage, construction will switch from housing to commercial property and infrastructure via the National Development Plan (NDP) is wishful thinking. While there have been some indications from the government that some of the NDP may be put off, they will come under a lot of pressure to continue with the capital investment in the NDP.
Notwithstanding the very serious financial indebtedness facing the government, they will probably have the capacity to borrow to fund such projects. Undoubtedly, they will cut back on vital public services but they may try to maintain the key elements of the NDP and that could be a certain boost to construction while not compensating for the losses in housing.
However, projects in the NDP which are being organised on the basis of Public Private Partnerships (PPPs), could well experience real problems with the private sector component, as indicated by the collapse of the PPP with McNamara Construction for the regeneration of the five inner city parts of Dublin.
The hope that consumer spending would remain immune to the changes in construction and the economy, was linked to the notion that commercial property was the way to go for the building industry. However, commercial property rather than taking up the slack from house building is likely to go the same way. Davy Stockbrokers estimates that the price of commercial property will decline by 20% over the next two years and so will not be a profitable option for builders or developers even if they had the capital to fund such projects.
Banks downgraded
Reflecting how deep the real crisis in property is, investment bank Citigroup, which assesses the strengths or weaknesses in the banking sector, changed the rating of key Irish banks deeply immersed in the property sector in Britain and Ireland. In early June, Citigroup recommended that people sell their shares in both Bank of Ireland and Anglo Irish Bank and their share price has plunged as a result.
Perhaps not immediately, but at some point these and other banks in Ireland can face crisis or even collapse as the mess in the property market unfolds. 71% of Bank of Ireland’s loan book is secured against property in Britain and Ireland. The figure for Anglo Irish is 80%. This means that they are extremely vulnerable to the emergence of bad debts like in the sub prime crisis in the US and a decline in the economy. In the similar way, developers and speculators who over borrowed in the good times, are now over leveraged with debts and face serious problems.
It’s not possible to say exactly what will happen in the Irish economy or when. What is clear is that ordinary people will pay a heavy price for the profiteering of the capitalist establishment in the form of financial crises, unemployment and attacks on vital public services. Sometimes it can seem that the more things change the more they remain the same, in the sense that conditions get worse but it doesn’t provoke an active response or struggle by working class people.
But conditions in the South are changing qualitatively. Unemployment has reached its highest level for many years. In the last years, the numbers unemployed has shot up by 48,000, the biggest increase in the history of the state. If the average of 7,000 jobs lost per month so far this year continues, within a year we will face an unemployment crisis.
Brian Cowen’s government is entering a “tough” period. During the years of the boom, Fianna Fail led governments were able to cut income tax (whilst introducing stealth taxes) and increase spending in some areas, in particular, pensions, social welfare payments as well as major capital projects. This is a different economic environment which will be characterised by cutbacks and significant reductions in public expenditure. In the aftermath of the Lisbon defeat, Brian Cowen’s "honeymoon" period as new leader may be very brief as this winter’s budget will take place, potentially with a C5 to C6 billion shortfall in government funding.
The period where workers were able to achieve improvements in their living standards is over. Economic crisis will create the basis for a social and political crisis. The Lisbon defeat shows how weak the authority of the capitalist establishment is. A fundamental change in attitudes, confidence and fighting spirit is being prepared, now is the time for activists and socialists to get organised and prepare for a new and more significant version of the anti-capitalist movement, based amongst the working class and youth.
