Hamish McRae: The Irish people won't give the wrong answer – will they?

Trust the people! Unlike Greece and Italy, Ireland has an elected Prime Minister with a mandate to push through the austerity programme. He and this cabinet clearly deemed it safer to take the legally solid route and go for a referendum on the new EU fiscal compact. Since the present coalition and the principal opposition support the policy it would be odd if the people were to throw it out.

Ireland has been the star performer from a political perspective among the fringe EU countries, pushing through huge cuts in public spending and wages while accepting large tax increases. But austerity is not working.

Ireland has got its borrowing costs down and exports have continued to climb. But the domestic economy remains dreadful. House prices are down another 17 per cent last year and the hopes of some growth this year are receding. The IMF forecasts growth of only 0.5 per cent. Citigroup thinks the economy will shrink between 0.5 and 1 per cent. The referendum is about future fiscal governance in Europe, but it could become about austerity, in which case the outcome would be less certain.