Irish voters set to approve EU fiscal pact in referendum

(DUBLIN) - Ireland voted Thursday in a referendum on a key EU pact designed to strengthen the crisis-hit euro, amid signs that the "yes" camp was set for victory.

Ireland is the only country holding a national referendum on the fiscal pact, which all 27 EU members have signed except Britain and the Czech Republic, and the result will be closely watched around the continent.

Rejecting the pact -- a German-backed measure which would penalise countries if they fail to keep their deficits in check -- could give momentum to a growing European backlash against austerity measures.

But opinion polls suggest a clear majority of Irish voters will back the treaty.

The message from the "yes" campaign appears to have got through -- that a victory for the "no" camp would exclude Ireland from emergency EU funds when its current bailout package expires in 2013.

"It's very much 'damned if you do, damned if you don't'," said Nick Daly, an academic who voted "yes" in a polling station in Dublin.

"We don't need more austerity, we do need access to that ESM fund. It's a tough call."

The Irish government has warned it may well need to seek financial help from the European Stability Mechanism (ESM), the new permanent bailout fund which comes into force in July and to which the fiscal pact grants guaranteed access.

Although a "no" result could have severe consequences for Ireland, it would not scupper the treaty, as it needs to be ratified by just 12 countries to come into force.

Denmark ratified the pact on Thursday, becoming the fifth country to do so after Romania, Portugal, Greece and Slovenia.

Voting was slow across Ireland as heavy rain appeared to discourage people from turning out, with the main broadcaster RTE reporting turnout of 30 percent on average by 7:00 pm (1800 GMT).

But polling stations were expecting a jump in traffic towards the close of voting at 10:00 pm, as people vote on their way home from work.

A result is not expected until Friday.

Eighteen months ago Ireland was forced to accept an 85-billion-euro ($106 billion) bailout from the EU and International Monetary Fund after its economy came close to collapse.

The government has warned that it may need fresh funds from the ESM and says a "no" vote could hit Ireland's credit rating, making it harder to borrow.

Finbar McDonnell, who works in the property sector, said after voting "yes" in the Ballsbridge area of Dublin: "I think the treaty is sensible in itself because it's going to limit our deficits in the future.

"I also think a strong 'yes' vote would send a signal to Europe that Ireland wants to be part of the core of Europe and moving ahead into deeper integration -- not like our neighbours in the UK, who are opting out of the treaty."

Prime Minister Enda Kenny urged people to back the fiscal pact.

"I ask you to make a further contribution by coming out to vote 'Yes' on Thursday," he said in a pre-referendum TV address.

"Yes to stability. Yes to investment. Yes to recovery. Yes to a working Ireland."

Critics of the pact have labelled it an "austerity treaty" as it ultimately empowers the EU to fine countries that overspend, and have sought to harness public anger against the spending cuts and tax rises attached to the bailout.

"We know that austerity doesn't work, and that's increasingly what people are saying in mainland Europe," Gerry Adams, leader of Sinn Fein, the main party opposing the pact, said Wednesday.

With a third of the electorate undecided ahead of polling day, there is still a possibility that Ireland could deliver a shock "no" vote.

But Michael Marsh, politics professor at Trinity College Dublin, said he expected the treaty to get the green light.

"There's some trust in what the government's saying, that you'd just be silly not to vote 'yes'," he said.

An Irish rejection of the treaty would not plunge the EU into crisis, as Ireland did in voting against two previous EU treaties.

But it could fuel a growing campaign led by France's new President Francois Hollande for Europe to focus on growth rather than belt-tightening as the cure for its economic crisis.