Treaty on Stability, Coordination and Governance in the Economic and Monetary Union: Statements

Treaty on Stability, Coordination and Governance in the Economic and Monetary Union: Statements

Wednesday, 14 March 2012

Senator Ivana Bacik: I welcome the opportunity to participate in this debate and debate the treaty in a different environment, namely, in the absence of a Minister, as happened in the debate on job creation, given that the comments we make will be brought to the attention of the relevant Minister. I am grateful for the presence of a rapporteur who will feed back a summary of the ideas raised. I know that the Minister for Enterprise, Jobs and Innovation, Deputy Richard Bruton, indicated to the Leader, Senator Maurice Cummins, that he had found the summary of the ideas raised in the debate on job creation very useful.

It is important that we are debating the treaty in advance of a date for the referendum being set. This gives us an opportunity which I very much welcome to explore in some detail its content. Critically, in the lead in to a referendum campaign, particularly this one, we need to ensure the people are fully informed, that information on the content of the treaty is made available, that the information provided is clear and objective, that copies of the treaty are accessible, that the context for the treaty is explained and that the background to it is explained. The treaty is relatively short. It is certainly much less complex than previous EU treaties. It is not, in fact, an EU treaty, a point to which I will return. Reading it in isolation may not be the best approach, as having some context is necessary.

It is important to highlight a few key messages. Senator Mary White summed up accurately what the treaty was about in terms of setting a goal of having balanced budgets and a corrective mechanism where particular financial disciplinary measures were not reached. If one looks at the treaty in some detail, one can see that, first, there are difficulties with its title which is lengthy. It is commonly referred to as the fiscal compact treaty or the fiscal stability pact. It has been suggested we might most concisely refer to it as the stability treaty. That is a good idea - that we all have a clear title for it from the start. It is important also to note that the recitals in the first eight pages are not part of the meat of the treaty, but they set the context for it and refer to some previous measures adopted at EU level.

It is important to examine the articles of the treaty. Title I, Article 1 deals with the purpose and scope of the treaty. It clearly sets out the three goals or purposes of the treaty, namely, to foster budgetary discipline, to strengthen the co-ordination of economic policies and to improve the governance of the eurozone. Previous speakers described each of these critical goals.

As previous speakers said, this is not an EU treaty, as not all member states have signed up to it. The United Kingdom and the Czech Republic remain outside. It is not an EU treaty because all EU treaties require agreement by all 27 member states, rather its status is that of an intergovernmental treaty which will come into force on 1 January 2013 or an earlier date if and when 12 member states in the eurozone ratify it. This is particularly significant for Ireland because it means we do not have a veto on its adoption. It will be adopted, regardless of whether the referendum is passed in May or June this year.

On Title II which deals with consistency and the relationship with EU law, it is important to note that EU law has primacy over the treaty. Although it is not an EU treaty, clearly, it is very closely linked with EU law. The treaty builds on measures already agreed at EU level, in particular through the six-pack reforms agreed to in late 2011 by EU Ministers to reinforce the Stability and Growth Pact and the continued existence of the euro. At the very helpful Library and Research Service's briefing on the treaty last week it was pointed out that about 90% of what was contained in the stability treaty had already been agreed and was already part of the agreed reforms to the Stability and Growth Pact. There is not a great deal that is new in the treaty because it builds on so much of what has already been agreed. It builds on existing commitments by which Ireland is already bound.

Title III of the treaty sets out the key rules which have been referred to as the three targets, namely, that the government deficit must not exceed 3% of GDP, that the structural deficit must not exceed 0.5% and that the ratio of debt to GDP must not exceed 60%. There is also the small print which covers, for example, how a temporary deviation is permitted in exceptional circumstances and the automatic correction mechanism is triggered, about which we have spoken, which includes the obligation of contracting parties to correct the deviations over a defined period.

While Article 3(2) sets out that the rules must be included in national law within one year after the entry into force of the treaty through provisions of binding force and permanent character and preferably constitutional law - probably the best known phrase in the treaty - Articles 3 and 4 will not have automatic or imminent application in Ireland. As we know, the debt brake, set out in Article 4 with the goal of reducing excessive deficits, will not be applied to Ireland because our programme with the troika takes precedence over the provisions of the treaty. The measures set out in the treaty will not apply to us until after 2015 by which date, as we know, we must reduce our deficit to less than 3%. We will then have a three year grace period to 2018 before the full measures contained in the treaty will kick in. That is a critical point to be made in arguing in favour of the adoption of the treaty.

There is plenty more to say about the treaty which I hope we will discuss again in the weeks and months in the lead-up to the referendum. It is critical to point out that this is a treaty aimed at ensuring greater stability in the eurozone and that we will not again face the crisis we have experienced to date. There is nothing particularly new in it. Even Article 8 which others have mentioned and which enables other member states to take a member state in default to the European Court of Justice is not a new procedure. There is already a mechanism under EU law whereby a member state can take another member state to the European Court of Justice for alleged breaches.

There is much in the treaty that must be teased out. It is hugely important to ratify it in the interests of Ireland and the eurozone. I very much hope there will be a very robust debate on it and that the referendum will be passed with a substantial majority. I believe people will recognise the huge advantages for us and the eurozone generally contained in it. The critical point, that it is first and foremost about stability, must be made and at the forefront of the referendum debate.