Frequently Asked Questions
Here are some of the most frequently asked questions about the Stability Treaty
01. What does the Stability Treaty do? What is its purpose?
Its purpose is to strengthen the rules that govern the euro, our currency. The aim is to improve stability for the euro and provide for better coordination between the countries participating and agreeing on shared ways of managing our economies (governance).
Article 1 of the Treaty states:
"By this Treaty, the Contracting Parties agree, as Member States of the European Union, to strengthen the economic pillar of the economic and monetary union by adopting a set of rules intended to foster budgetary discipline through a fiscal compact, to strengthen the coordination of their economic policies and to improve the governance of the euro area, thereby supporting the achievement of the European Union's objectives for sustainable growth, employment, competitiveness and social cohesion."
02. Why is the Stability Treaty relevant to Ireland?
The Stability Treaty is an international agreement between 25 European countries, including those, like Ireland, which use the Euro. It will come into force when 12 eurozone countries ratify it. It is part of a wider series of economic governance measures aimed at ensuring countries keep their debts under control and balance their budgets. Other measures at European level also include steps to promote growth and job creation and to provide stricter regulation of the banking sector.
Ireland is currently receiving financial assistance from the temporary European Financial Stability Fund (EFSF) which will be replaced by the permanent European Stability Mechanism (ESM). Only those countries which ratify the Stability Treaty will have access to the ESM fund.
03. What impact will the Stability Treaty have on Irish budgets?
The Treaty’s main provisions are about balancing our budgets and achieving sustainable deficit and debt levels. As of now, Ireland still runs a significant deficit, i.e. we still spend a lot more than we raise in taxes. Narrowing that gap and reducing debt over time is at the heart of the Treaty. The ways to achieve this are set out in Title 111 of the Treaty, otherwise known as the Fiscal Compact.
04. What is new about the Stability Treaty?
A great deal in the Treaty is already provided for in the existing EU Treaties, agreements and laws. These include the Stability and Growth Pact and the six pieces of legislation (the “six pack”) on European economic governance adopted in 2011. But there are some differences.
Firstly, legally the provisions in the Treaty regarding debt will be enshrined in national laws. The European Court of Justice will have a role in ensuring that national rules are fully fit for purpose.
Secondly, automaticity: the rules of the EU Stability and Growth Pact have been in place since the 1991 Maastricht Treaty and have been breached on a significant number of occasions – including by the largest member states. Now, the difference is that each and every Member State will have the same mechanism that is triggered automatically in the event of "significant observed deviations".
Thirdly, more and more effective monitoring. Countries in the euro area that are in Excessive Deficit Procedure will now have to enter a 'partnership programme' with the EU Council (governments) and the European Commission to ensure they undertake the structural reforms necessary to get back on track in a sustainable way.
05. Will Ireland’s role in setting its own taxes be preserved under the agreement?
Yes. Our government and Oireachtas will continue to have the same role in setting taxes. The Stability Treaty does not bring any change to how countries make decisions on what exactly is taxed and spent.
06. What part of the Constitution are we proposing to amend and what is the wording of the amendment?
The amendment will provide for the State to ratify the Stability Treaty and to enact any laws necessitated by the Treaty. This will be done by simply adding a new subsection 10 to article 29.4 of the Constitution.
It will state:
"The State may ratify the Treaty on Stability, Co-ordination and Governance in the Economic and Monetary Union done at Brussels on the 2nd day of March 2012. No provision of this Constitution invalidates laws enacted, acts done or measures adopted by the State that are necessitated by the obligations of the State under that Treaty or prevents laws enacted, acts done or measures adopted by bodies competent under that Treaty from having the force of law in the State."
The amendment will not include details of the rules agreed under the Treaty. If this amendment is approved by referendum, the details will be dealt with in laws made by the Oireachtas.
07. How many countries have signed up to the Treaty?
Twenty five countries have signed up to the Treaty. All seventeen countries that use the euro, like Ireland, have agreed to it. A further eight countries decided it was in their countries’ interest to be part of it too.