The Sovereign Debt Crisis and the New Boundaries of the State
John O'Dowd recently delivered a report on the changing boundaries of the Irish state to a conference entitled "The Sovereign Debt Crisis and the New Boundaries of the State." The conference was organised by the European Public Law Organisation, on the initiative of Professor Giulio Napolitano (Roma Tre University) and hosted in The Palace, Valletta, by the Speaker of the Parliament of Malta, the Hon Michael Frendo MP. The conference examined the implications for the organisation and functions of the state in the light of the current European sovereign debt crisis and, in particular, the adjustments demanded of Greece, Ireland and Portugal under their agreements with the International Monetary Fund, the European Commission and the European Central Bank.
http://www.parlament.mt/eplojuly2011
The Palace, Valletta
In the same session of the conference, presided over by the Speaker, Professor Jorge Bacelar Gouveia of the New University of Lisbon gave a presentation on the impact of these developments on Portuguese constitutional law.
John O'Dowd, The Hon Michael Frendo MP, Prof Jorge Bacelar Gouveia
Mr O'Dowd began his presentation by drawing attention to implications of the current crisis for the centre of the Irish state for the centre of the Irish state as much as for its boundaries and the far-reaching examination of political, administrative and economic systems which has been required in the light of how the property bubble was allowed to develop and then to collapse so spectacularly.
He reviewed the performance of Irish governments from 1997 to 2007 in exercising budgetary discipline (or failing to do so) as a means of preventing the development of an asset price bubble. A series of substantial budget surpluses (in the range of 5-8% of GDP) ought probably to have been run during the peak of the boom. Amongst the reasons often given why the Irish political system failed this test during this period are the preponderant role of the Minister for Finance in the budgetary process and the electoral system - proportional representation by the single transferable vote - and the adverse effects that this has on the calibre of members of parliaments and in a concentration on a clientalist distribution of benefits. However, it has to be borne in mind that Irish governments successfully addressed severe deficit and public debt problems in previous periods, such as in the 1950s and between 1987 and 1993.
The crisis has also called in question the capacity of the Irish civil service and public service more generally to regulate the economy and, in particular, the banking system; the performance of the Financial Regulator and the Central Bank has come under special scrutiny in this regard. The generalist, rather than specialist, nature of the Irish civil service may be one explanation for this. This lack of a relevant skills-set in the civil service may have been aggravated by the creation of many specialised, special-purpose agencies-the adverse effect which the creation of the National Treasury Management Agency on the ability of the Department of Finance to make policy on banking is a prime example.
The proliferation of public service agencies was another feature of the 1997 to 2007 period. Mr O'Dowd referred to the outputs of the Irish State Administration Database and the evidence it provided of the rapid increase in the number of agencies during that period, in the delivery of public services as much as the regulatory field. This contributed to a rapid increase in the numbers employed in the public service as a whole, by allowing controls on public service numbers to be circumvented, particularly in the health and education sector. There was also, as a result, an increase dispersal and fragmentation of expertise, control and responsibility for public services. The creation of the Health Service Executive was one example of this kind of reorganisation and it is significant that the new government, elected in February 2011, is committed to abolishing the HSE and simplifying public service structures more generally.
This proliferation of agencies was connected with the model of social partnership which prevailed from 1987 to 2009, praised by the former Taoiseach Mr Bertie Ahern in May 2008 "flexibility, informality and dependence on personal relationships." A basically tripartite form of social dialogue (government, employers and trade unions) was extended to include other social actors (farmers, the community and voluntary sector and, lastly the environmental pillar) and its scope grew from national wage bargaining to a very wide range of social policy issues. At the heart of the bargain, was wage restraint in return for reductions in personal income taxation, particularly for the lower paid. This adjustment was sustainable, however, only as long as the property boom generated such revenue as to produce regular budget surpluses. In this way, important economic and social decision-making was substantially removed from the national parliament and transferred to a negotiation between a very small number of politicians, civil servants, employers' representatives and trade union leaders. To some extent, social partnership fed off the prestige of the peace process in Ireland during the same period. Social partnership accentuated the dominance of the executive over the legislature and of the Department of An Taoiseach in relation to other departments, even the Department of Finance.
It is noteworthy that the previous Fianna Fáil/Green Party coalition was willing to pursue a fiscal and budgetary correction which it well knew was electoral suicide, as was made plain in the February 2011 general election results. This left the incoming Fine Gael/Labour coalition with an unprecedented mandate for changing the way the Irish state does its business. To a large extent, this agreement on the need for significant institutional changes cuts across disagreements over the austerity measures which have been agreed with the troika. Possible constitutional changes over the next few years, depending on the people's decisions at referendums include: abolition of the second house of parliament, the Seanad; a substantial reduction in the number of deputies in the lower house and a change in the electoral system for the lower house. The latter issue is likely to be considered by a constitutional convention in which randomly-selected citizen volunteers will examine changes to the country's political institutions and to the fundamental rights provisions of the constitution. Independently of such amendments to the constitution, the new government has committed itself to increasing the effectiveness of the committee system and to making the budget process much more transparent and open to expert evaluation. This will include the creation of a fiscal council, to make rigorous, independent assessment of fiscal policy.
There are likely to be significant changes in the way in which the Irish state functions, from the centre outwards. The Fianna Fáil proposal to remove ministers from parliament is one example of some of the radical thinking been offered in that regard.
Professor Bacelar Gouveia and Mr O'Dowd's presentations were followed by a lively question and answer session. A number of common themes were developed such as, for example, the external requirement placed on Greece and Portugal and, to a lesser extent, on Ireland, that they rationalise their local government systems.
An audio recording of Mr O'Dowd's presentation and the ensuing discussion is available here: http://www.parlament.mt/filebank/audio/EPLO_09-07-2011.mp3
(Recording starts at 19m 30s and Mr O'Dowd's contribution at 44m 20s).
