Irish govt sees EU treaty ’Yes’ vote ahead of count

June 01, 2012, Friday/ 10:30:00/ REUTERS

Ireland's referendum on the European Union's new fiscal treaty is likely to pass by a margin of more than three to two, saving Europe a major headache, two government sources told Reuters ahead of the counting of votes on Friday.   

While the German-led plan for stricter budget rules needs the approval of only 12 of the 17 euro zone countries to be ratified, an Irish rejection would undermine one of Europe's key initiatives just as problems mount in Spain and Greece.       

"It's safe to say it's a 'Yes' by more than a 60/40 margin," one of the sources said after ballot boxes closed late on Thursday, citing polling data. Counting begins at 0800 GMT, with the result due later in the day.     

Similar informal tallies conducted ahead of a vote on the EU's Lisbon reform treaty in 2009 called the result correctly and even proved conservative when the vote was carried with the support of two-thirds of the electorate.      

The treaty referendum, Ireland's third on EU legislation in four years, put Dublin back in the spotlight after its dutiful implementation of an 85-billion euro ($106 billion) EU/IMF bailout had left others, notably Greece, the focus of euro zone debt concerns.     

Every opinion poll since the vote was called in February has indicated a comfortable ratification that would ease concerns about future Irish funding, though a turnout as low as 50 percent, according to national broadcaster RTE, had raised concerns among officials that apathy might favour a "No" vote.     

Analysts said that a 'Yes' vote would give Ireland a better chance of getting back to bond markets as planned next year and hand Europe a rare piece of good news, though one it will have little time to bask in with more to worry about elsewhere.     

"I don't think there will be much market reaction this morning, simply because it's in line with expectations that were built up because of the polls," said Dermot O'Leary, chief economist at Goodbody Stockbrokers.     

"It is a message of support from Ireland to Europe, I think that's very simply what it is. Policy makers won't have long to celebrate because there are wider issues in the euro area that policy makers now must move their attention onto."     

Irish two-year bond yields rose a touch in early trading to a near five-month high of 7.62 percent, meaning short-term borrowing costs still remained above those on longer-term bonds, a sign that investors are pricing in the possibility that Dublin will need a second bailout.      

Ireland has been held up by Europe as the poster child for austerity, the only country among a bailed out trio including Greece and Portugal that managed to deliver mild economic growth last year while hiking taxes and cutting spending.     

A survey on Friday showed that growth in Ireland's manufacturing sector accelerated in May after stalling in April, boosting employment growth in the sector to its fastest pace for 13 months.      

In another sign of the modicum of stability that has returned to the economy, data showed on Thursday that deposits held by Ireland's domestic banks rose to a 14-month high in April.      

In Spain, separate figures on Thursday showed that depositors alarmed by the dire state of their banks were moving money abroad at the fastest rate since records began, recalling the tens of billions of euros in deposits that flew out of Ireland ahead of its bailout.      

The Irish debate has been squarely framed around a clause in the treaty stating that only those states that sign up can access future European bailout money. The finance minister has warned that a "No" vote would be a "jump into the unknown".     

Ireland hopes to exit its programme at the end of 2013 by re-entering bond markets, but the government has argued that access to Europe's new bailout fund, the European Stability Mechanism (ESM), is an essential backstop should the mood of uncertainty across Europe scupper its plans.     

While the "No" camp, spearheaded by the rising Sinn Fein party and some trade unions, argues that Europe would not dare cut Ireland off, business leaders have warned that a rejection would put inward investment at risk.     

"If you're an investor and you're asking how committed is Ireland to staying as a full member of the European Union, a 'yes' vote is consistent with Europe membership," said Philip Lane, economics professor at Trinity College Dublin. 

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