UPDATE 2-Irish referendum risk hangs over EU deal

Fri Dec 9, 2011 10:48am EST

Related Topics

* Minister says 50/50 chance Ireland will have to hold referendum

* Legal experts say earliest referendum could be held is in six months

* Irish people's views of Europe have grown colder since bailout

* Electorate has twice rejected EU referendums

* Govt likely to seek concessions on cost of bank bailout to get electorate on side

By Carmel Crimmins and Padraic Halpin

DUBLIN, Dec 9 (Reuters) - Europe's plans for fiscal union may require a referendum in Ireland, the country's minister for European Affairs said on Friday, which could delay or even obstruct tighter budgetary rules to preserve the euro.

Ireland's government has said it would struggle to get another referendum past an electorate with a history of impeding European integration.

"I would say it's 50-50 and we will be looking at the detail over the next couple of weeks," Lucinda Creighton told Reuters by phone from Brussels where an EU leaders' summit is taking place.

Twenty-three of the 27 EU leaders agreed at the summit to pursue tighter integration with stricter budget rules for the euro zone but Britain, Ireland's closest neighbour and a key trading partner, said it could not accept proposed amendments to the EU treaty after failing to secure concessions for itself.

As a result of the UK opt-out, which creates the risk of a two-speed Europe, France and Germany plan to forge an intergovernmental treaty among the euro zone countries and any others that want to join.

"I think it's probable that we are looking at a referendum," said Gavin Barrett, a senior law lecturer at University College Dublin who specialises in European constitutional law.

Irish citizens are entitled to vote on any major transfer of powers to Brussels and Barrett said it might be six months, at the earliest, before a referendum could be held, thwarting investor hopes for a swift deal on fiscal union.

Irish voters have twice rejected European referendums before eventually passing them once concessions were offered, most recently in 2010 when in return for passing the Lisbon Treaty Dublin got assurances on its military neutrality and its ability to decide its own tax rates.

GOODIE BAG NEEDED

Ireland was traditionally an enthusiastic supporter of Europe but its relationship with Brussels has become less starry-eyed in the aftermath of its financial crisis.

Prime Minister Enda Kenny is trying to persuade European leaders to cut the cost of Ireland's bank bailout. A deal on that would be very helpful in persuading the electorate to vote yes in any new referendum.

"Before we would have said that the European leaders were great but it seems to me they don't have a clue what to do. The IMF have been more accepting of the difficult situation we are in than Europe has," said Mary O'Mahony, 58, from Co. Cork.

"My gut instinct would be to vote No. Nobody knows what they are going to put in the small print and there is a lot more distrust of Europe now."

Since the 2010 referendum, French President Nicolas Sarkozy's repeated calls for Ireland to raise its corporate tax rate have made people doubt Europe's promises and, for the first time, anti-European rhetoric was deployed in an Irish parliamentary election in February.

The leader of the centre-left Labour party Eamon Gilmore famously rubbished "Frankfurt's way" during the election campaign. He is now Ireland's minister for foreign affairs.

Kenny raised the issue of reducing the burden of bailing out defunct lender Anglo Irish with European leaders in Brussels. His government estimates it could potentially reduce its debt burden by between 15-20 billion euros if it could use the euro zone's rescue fund to recapitalise Anglo.

"It's going to be a difficult job if there isn't some sort of goodie bag that goes with it," Eoin O'Malley, lecturer in politics at Dublin City University, said of another European referendum.

"We could be probably bought off with 10 billion euros in some way. He (Kenny) just needs somethinng."

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