Fianna Fáil Leader Micheál Martin TD has today written to An Taoiseach Enda Kenny TD following the conclusion of negotiations on the new EU Fiscal Treaty (The Treaty on Stability, Coordination and Governance in the Economic and Monetary Union).

Deputy Martin has sought clarity from the Taoiseach on six different issues:

 

 1.    Date of application of the debt brake / deficit rules to Ireland

Given that Ireland will remain in a Programme of Assistance with the EU and IMF until the end of 2013, the preamble makes it clear that the provisions of the Treaty will not apply to Ireland while it remains in the Programme.

Will the provisions of the Treaty apply to Ireland as soon as it leaves the Programme on 1 January 2014 or will the Treaty apply to Ireland on 1 January 2016?

 

 2.    Structural deficit limit of 0.5% of GDP

According to the Government’s Medium-Term Fiscal Statement 2012-2015 (published in November 2011), Ireland will have a structural deficit of 3.7% or €6.6 billion in nominal terms in 2015. This compares to a projected headline deficit of 2.9%. Under the Treaty, we are obliged to reduce the structural deficit to 0.5% of GDP. Therefore, under static conditions, the structural deficit must be reduced to €900m – a reduction of €5.7 billion – which is above and beyond the €8.6bn the Government has already committed to 2015 under the Programme.

Over what period of time will we have to bring about the reduction in the structural deficit to 0.5% of GDP? Article 3(1)(b) requires countries to ‘ensure rapid convergence’ towards the target. The Treaty states that the European Commission will propose the time frame for the achievement of the 0.5% deficit target. What will be the role of the Irish Government in agreeing this timeframe? Has the Department of Finance modelled a schedule to demonstrate how Ireland will reach this limit and over what timeframe?

 

 3.    Continued funding for countries exiting a Programme

The two-page communiqué issued alongside the Treaty by euro area Member States reiterates the commitment made in the 21 July 2011 communiqué to continue to provide funding for countries exiting a Programme but who are unable to return to the markets.

Is this commitment to continued funding now also conditional on ratifying the Treaty, as is the case with access to ESM funds?

 

 4.    Application of the debt brake rule

The Treaty requires Ireland to reduce the amount by which its debt to GDP ratio exceeds 60% by one twentieth each year.

Under current growth assumptions, the Government’s Medium-Term Fiscal Statement 2012-2015 estimates that the debt to GDP ratio will peak at 118% in 2013. The requirement to reduce the excess by one twentieth per annum would necessitate a reduction of c3% in the debt to GDP ratio on an annual basis. Clearly, the easiest way of achieving this is to grow the economy.

Has the Department of Finance carried out an assessment of the impact on Ireland of the application of this debt brake rule?

Can the Department make available its model showing how this target can be achieved for Ireland, including the assumptions for growth, deficit and general government debt levels, over the 20 year period?

 

 5.    The “Permanent” Provision

What is the government’s understanding of a “permanent” provision relating to the debt break in the context of the requirement that no law may be put beyond amendment?  As part of this, what does the government view as the legal implications of the fact that this is an inter-governmental treaty as opposed to an EU treaty and, therefore, does not have the protection of Article 29?

 

 6.    Protecting Ireland’s Protocols

Outline what the Government has done to ensure that the previous protocol attached to the Lisbon treaty safeguarding Ireland’s Corporation Tax Rate etc. will be attached to this treaty also.