The Irish government in Dublin has taken a big risk. In calling a referendum on the latest EU treaty it runs the risk that currently faces most European governments – nearly all parties implementing "austerity" policies are being rejected by the electorate. An EU treaty that promises permanent reductions in government spending may not fare much better.

It is hardly surprising that "austerity" is unpopular. It is nothing other than a transfer of incomes from labour and the poor to capital and the rich. One of the greatest fallacies of the current crisis is that "there is no money left". This is wholly untrue. Companies are sitting on cash mountains all across Europe. And the profit share of national income has risen. This is why stock markets are rising – corporate incomes (profits) are rising.

In some cases, such as Ireland, the total level of profits is rising, even while household incomes are declining and the slump in business investment actually exceeds the total contraction in GDP.

But the Dublin government is not full of reckless gamblers. The coalition government initially resisted all calls for a referendum on the treaty. But it has had to succumb to popular pressure for a vote on another far-reaching treaty. Continued refusal of a referendum would probably have led to a legal challenge. Michael Higgins, the new Irish president, himself a product of the leftward shift in Irish politics, added to the pressure.

All recent history suggests that Irish voters will come under intense pressure to vote yes. They will be accused of wrecking the euro if they vote no, and that all sorts of calamities will follow.

But those wrecking the European economy and potentially the euro are the politicians who allow capital to flow freely within the eurozone when it is allocated by bondholders, and refuse to allow the state to reallocate capital on the basis of what is economically rational. The federal system in the US, or Germany, or even to some extent in Britain, means that if, say, Rhode Island is going bust, there is no danger to the US dollar currency union unravelling. Greece has little more weight in the eurozone than Rhode Island has in the US. The difference is that the majority of taxes and spending are collected and spent by the US federal government. It is the EU refusal to allow the fiscal transfers that match a currency union that is the cause of the structural crisis in the eurozone.

Instead, in return for bailing out Greece's creditors, the troika of EU, ECB and IMF insist only on more austerity, that is, more transfer of incomes from labour to capital. The treaty provides a clampdown on "structural deficits" whose nebulous existence allows unelected technocrats to impose any cuts they can get away with. Of course this will apply to all countries adopting the treaty. In this way, "austerity" will become the norm in the core as well as the periphery.

Yet these policies clearly aren't working and now the talk is of setting Greece loose, having imposed a policy of reparations that harks back to Versailles.

If Irish voters do reject the treaty, they will be performing a great service to the population of Europe. It could mark a turning point in the EU and beyond, pulling the brake on the austerity express before it hits the buffers.

At the other end of Europe, in Greece there has been a sustained opposition to the policies of the troika. Despite claims that protest doesn't work, Greece has had a debt write-off and the interest rate it must pay has been slashed.

In Ireland, political circumstances mean there is a possibility of a real political blow against the disastrous and undemocratic policies that have been pursued since the crisis began. A yes vote means the continuation of the nightmare. A no vote would be a blow in favour of all the victims of austerity and for all democrats across Europe.

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