Tánaiste Eamon Gilmore TD
THE FISCAL STABILITY TREATY A Guide WHAT IS THE STABILITY TREATY? The Treaty on Stability, Coordination and Governance in the Economic and Monetary Union was agreed in January 2012. It will enshrine fiscal rules in Irish law to create confidence and stability in the euro. WHAT ARE THE GOALS OF THE STABILITY TREATY? (SEE PREAMBLE AND ARTICLE 1) It is intended to foster budgetary discipline (balanced budgets), strengthen coordination of economic policies, improve governance of the euro and support the achievement of the EU’s objectives for sustainable growth, employment, competitiveness and social cohesion. HOW MANY STATES HAVE SO FAR SUPPORTED IT? 25 EU States, including Ireland, supported the Treaty. Only the Czech Republic and UK opposed it; neither have the euro as their currency. Ireland is the only State to have a referendum.
WHAT TARGETS DOES THE STABILITY TREATY SET? (SEE ARTICLE 3) ■ General government deficit must not exceed 3% of GDP at market prices ■ Structural government deficit must not exceed 0.5% of GDP
EFICIT? RUCTURAL D in WHAT IS A ST fic e of the de it This is the shar s, on iti nd ic co normal econom rmal ups and no e th t ou ng strippi e off onomy and on downs of an ec measures.
■ Ratio of debt to GDP should be 60% or lower
WHAT
IS A BU DEFICIT DGET ? This m eas betwee ures the gap n gover income nm a n d gover ent spendin nment g. It m throug ust be bridge h borro d wing.
DOES THE STABILITY TREATY CONTROL IRELAND’S FISCAL AND ECONOMIC POLICY? No. A Member State is free to reach balanced budgets by their own policies, provided the targets are reached. Coordination of economic policies is encouraged, but not harmonisation. Budgetary and economic programmes, including a detailed description of structural reforms, will be agreed with a Member State that is required to make corrections. WHAT ABOUT THE STABILITY AND GROWTH PACT 2011? IS THIS NOT THE SAME THING? The Treaty targets are effectively the same as those in the revised Stability and Growth Pact 2011. Member States must follow the Pact targets, even if the Treaty is not ratified. There are three key differences: 1. Access to funding under the European Stability Mechanism (ESM Treaty) is now linked with ratification, 2. The structural deficit target is subject to enforcement, 3. The targets must be incorporated into national legislation. WHO MONITORS PROGRESS? ■ On an ongoing basis the European Commission and Council will monitor a State’s progress and a Member State can submit its observations on the Commission’s report. The Commission may then recommend to the Council that action must be taken.
CONTACT EAMON:
80 St Stephen’s Green, Dublin 2 Phone: 01 408 2018/408 2019 Fax: 01 408 2690
Email: eamon.gilmore@oir.ie Web: www.labour.ie
WHAT HAPPENS IF THE TARGETS ARE NOT MET? (SEE ARTICLE 3-8) An ‘automatic correction mechanism’ or ‘debt brake’ will be triggered (see Article 3.1) ■ States in breach must take corrective action to meet the targets within an agreed time. ■ States in breach of the 60% debt to GDP ratio must reduce it at an average rate of one twentieth per year as a benchmark to facilitate correction. ■ Both the Commission and Council will monitor correction. Budgetary and economic partnership programmes, including a detailed description of structural reforms, must be agreed and implemented to facilitate correction. WHAT IS THE ROLE OF THE EUROPEAN COURT OF JUSTICE? ■ The role of the European Court of Justice is limited. It can impose a fine if the targets and the 'debt brake' have not been put into national law. CAN A DECISION AGAINST A STATE BE OVERTURNED? (SEE ARTICLE 7) ■ To reverse a decision against a State, a qualified majority would be needed in the Council. A qualified majority is 55% of Member States who have the euro, representing 65% of the EU population. WHAT HAPPENS IF THERE ARE ‘EXCEPTIONAL CIRCUMSTANCES’? COULD IRELAND EXCEED TARGETS? (SEE ARTICLE 3) Enforcement is made easier since this was the problem before. However: ■ Under Article 3.3 if there are ‘exceptional circumstances’ such as a severe economic downturn or an unusual event beyond the control of the contracting State happens, then a ‘temporary deviation’ from the terms of the Treaty is allowed, provided this does not endanger the stability of the Eurozone. ■ Medium Term Objectives, which are country specific and include a timeframe, may be deviated from in ‘exceptional circumstances’.
WHAT ARE MEDIUM-T ERM BUDG ETARY OBJECTIVES (M TOS)? These object
ives are diffe rent in each country allo wing for leve l of debt lin with ageing ked populations. It provides a margin in re safe spect of the 3% deficit lim and allows ro it om for budge manoeuvre. tary Ireland has an M of 0.5% surp TO objective lus.
WILL THERE BE TRANSPARENCY? (SEE ARTICLE 12) ■ Eurosummit meetings will bring together the Heads of State and Government whose currency is the euro, together with the Commission President. These meetings will take place when necessary and at least twice a year and will elect a President. ■ Member States which do not have the euro will attend at least once a year. ■ The Presidents of the European Central Bank and the European Parliament will attend. National parliaments will continue to monitor national budgets. WHEN WILL THE TREATY ENTER INTO FORCE? The Treaty is due to enter into force on 1 January 2013, provided that 12 Member States whose currency is the euro have ratified the Treaty. In practical terms it will not affect Ireland before 2015, as we are already subject to the Troika rules.
You can read the Stability Treaty at: http://labr.ie/TheStabilityTreaty
EAMON GILMORE TD 80 St Stephen’s Green, Dublin 2 Phone: 01 408 2018 / 408 2019 Fax: 01 408 2690 Email: eamon.gilmore@oir.ie Web: www.labour.ie facebook.com/thelabourparty 0612
@labour