Torn Ireland considers referendum on euro membership

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Following Britain's veto of last week's treaty deal for fiscal union, Irish leaders have had to walk an increasingly narrow line between Brussels and London. Finance Minister Michael Noonan has mentioned the possibility of a referendum on the euro, EURACTIV France reports.

European integration has often been seen as a major source of growth for Ireland, in giving the country access to the single market and providing significant aid in the form of structural funds.

"We have blossomed within the European Union," said Irish Minister for European Affairs Lucinda Creighton during a visit to Paris on 14 December.

However, the government is finding it difficult to imagine further integration without its British partner. Though the country has been able to diversify its export-driven growth model (the UK represents 15% of exports as against 40% for the rest of the EU), Ireland has reason to fear the loss of its British partner in negotiations.

The two countries are united by longstanding political and economic ties and a commonality of interests, notably on issues of taxation and their reliance on big financial sectors.

'Absolute preference for 27'

Speaking to journalists assembled at the Irish Embassy in Paris, Creighton said there was "very deep concern" within her government that the new treaty would be taken up by only 26 states. "We have an absolute preference for a treaty at 27," she said.

Creighton added that she regretted the British decision to remain apart but hoped to maintain close cooperation with London on EU matters. The minister said that the Irish authorities will attempt make sure Britain finds a place at the negotiating table.

"We have an obligation to find a way to bring back the UK into the discussion. We will try to pursue that and hope it will be a shared goal," Creighton said.

Referendum on the euro

Britain's isolation appears to have provoked unease in Ireland, with Noonan going as far as suggesting the possibility of holding a referendum, not on the treaty decided on 9 December, but on his country's membership of the eurozone.

If the new text, which will be finalised in March 2012, means any constitutional change, Ireland may have to consult its citizens directly. According to the Irish Times, Noonan said "it comes down to a very simple issue – if we want to continue in the euro or not."

"When faced with that question I think the Irish people will pass such a referendum," the finance minister added.

Noonan made the comments during a visit to London to meet his British counterpart, George Osborne. The day before, Irish Prime Minister Enda Kenny had also spoken with British Prime Minister David Cameron by telephone.

The leader of the centre-right republican party Fianna Fáil, Micheál Martin, said he backed such a referendum and expressed surprise that the Irish government had not committed to it.

Karl Whelan, a professor of economics at University College Dublin, said it would be difficult to argue that the as-yet undefined treaty would not require constitutional change, given that it would provide for new powers for the European Commission in budgetary matters and for the establishment of a common economic policy.

Eurozone FTT 'will be a problem'

Moving ahead with greater economic integration with only 26 countries would have economic consequences for Ireland given its close ties with the United Kingdom.

Shane Fitzgerald, a researcher at the Irish Institute of International and European Affairs, said: "It will depend on the definition that is given to a 'common economic policy' … but given that our financial sector is very much linked to that of the UK, it is clear that an FTT at the eurozone level only will be a problem for us".

The two countries also have similar positions regarding taxation. "If the idea is to go towards fiscal harmonisation, then [Ireland] would want to include the United Kingdom in the discussions," Fitzgerald said.

Dublin has rejected any change to the corporate tax rate for companies on its soil, which at 12.5% is among the lowest in Europe. The Irish government says, however, that it is open to discussing the creation of a common consolidated corporate tax base (CCCTB) at the European level.

An agreement to tighten fiscal discipline in the wider EU-27 proved impossible at the 8-9 December EU summit, after UK Prime Minister David Cameron made "unacceptable demands" to exempt London's financial district from financial market regulations.

Faced with a UK veto, EU leaders agreed that a new intergovernmental treaty should tighten fiscal discipline in the eurozone and address the bloc's debt problems. The treaty will be drafted by March 2012 and opened to ratification by nations outside the 17-member eurozone.

Ireland, as a member of the eurozone, has agreed to the new treaty but may be forced to a hold a referendum to approve it if it requires any change to the country's constitution.

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