* Ireland strongly back treaty by margin of three to two
* "Yes" side had warned future funding at risk if rejected
* Opponents say austerity will still face resistance
By Conor Humphries and Stephen Mangan
DUBLIN, June 1 Irish voters backed the European
Union's new fiscal treaty in a referendum on Friday, saving
Europe a major headache but leaving the government little time
to celebrate as problems across the euro zone continue to weigh
The government had campaigned for voters to back the treaty,
arguing that a rejection would hurt Ireland's chances of
attracting the investment it needs to recover and raise serious
concerns about the country's funding prospects.
Dublin's attention can now return to a months-long campaign
to refinance much of its bank debt and Prime Minister Enda Kenny
said that debt must form part of the comprehensive solution that
was needed to fix Europe's banking sector.
"The Irish people have sent a powerful message around the
world that this is a country that is serious about overcoming
its economic challenges," Kenny told a news conference, adding
that a banking resolution across the euro zone would help
Ireland emerge from its EU/IMF bailout.
Final results showed only five constituencies out of 43
voted "No" to the German-led plan for stricter budget rules,
with 60 percent of the electorate coming out in favour.
Two government sources had told Reuters after the polls
closed late on Thursday that the treaty was likely to pass by a
margin of more than three to two, citing polling data. Turnout,
at 50 percent, was about average for a referendum.
Ireland has been held up by its European partners as the
poster child for austerity, implementing an 85-billion euro
($106 billion) EU/IMF bailout to the letter as others, notably
Greece, remained the centre of euro zone debt concerns.
Yet Ireland desperately needs Europe's woes to ease if it is
to rack up the kind of export-led growth required to pay down
its debt - set to peak at a dangerously high 120 percent of
gross domestic product (GDP) next year - and ease unemployment.
Ireland is the only country that will put the fiscal treaty
to a referendum. The treaty needs the approval of only 12 of the
17 euro zone countries to be ratified, but an Irish rejection
would have undermined one of Europe's key initiatives just as
problems mount in Spain and Greece.
Analysts said the '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.
"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. Policymakers won't have long to
celebrate because there are wider issues in the euro area that
they now must move their attention onto."
Irish two-year bond yields fell almost 50 basis points to
7.12 percent from a near five-month high in early trading,
meaning short-term borrowing costs dropped back below those on
longer-term bonds having inverted earlier in the week.
"HELP TO BUSINESS"
In a sign of the modicum of stability that has returned to
Ireland's economy, data showed on Thursday that deposits held by
Ireland's domestic banks rose to a 14-month high in April.
That was in sharp contrast to Spain where depositors worried
about their banks moved money abroad at the fastest rate since
records began, recalling the tens of billions of euros that flew
out of Ireland ahead of its bailout.
A survey on Friday also showed that growth in Irish
manufacturing accelerated in May with the NCB Purchasing
Managers' Index climbing to 51.2 from 50.1 in April to boost
employment growth in the sector.
The modest growth meant Ireland remained the only country in
the euro zone showing growth in the amount of goods and services
companies are purchasing, putting it way of ahead of Germany's
45.2 and the euro zone average of 45.1.
"I think this (referendum result) now just gives that bit
more certainty as to where the economy is heading," said Fergal
O'Brien, chief economist at the Irish Business and Employers
"But it doesn't in any way paper over the problems we have
in the domestic economy, the high unemployment, the lack of
growth in many sectors of the economy."
The referendum debate was 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 had
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.
The "No" camp, which had insisted Europe would not dare cut
Ireland off, warned the government that a sharp class divide
seen in the polls indicated that it could face more resistance
with at least three more years of harsh austerity ahead.
"The problems that were facing people yesterday will be
facing people today," Sinn Fein leader Gerry Adams said.