Ceann Comhairle,
I appreciate this opportunity to address the House on the Thirtieth Amendment of the Constitution (Treaty on Stability, Coordination and Governance in the Economic and Monetary Union) Bill 2012.
This is an extremely important piece of legislation as it will facilitate the holding of a referendum on the Stability Treaty on Thursday, 31 May.
It is, of course, only right and proper that the national debate on this Treaty begins here in the Oireachtas. I greatly look forward to engaging fully as it broadens out beyond these Houses over the weeks ahead. I will be working hard to secure the support of the people for the Treaty on 31 May.
Sub-committee
I want to commend the on-going work of the Sub-committee of the Joint Committee on European Union Affairs, under the Chairmanship of Deputy Dominic Hannigan. The Sub-committee has already heard from a broad range of voices from across Irish society, as well as contributions from a variety of our EU partners. The interventions being heard by the sub-committee are contributing to an informed, balanced and considered national debate on an issue of pressing national interest. As the referendum date at the end of next month draws nearer, we can but hope that that considered and tempered approach persists.
Information
The public who will go to the polls on 31 May will need the full facts of what is in this Treaty and what the implications of ratification are for Ireland.
To respond to this genuine need for information, the Government will shortly be circulating to every household in the State a copy of the Stability Treaty. This has not been done in the case of recent referendums, but the Government’s view is that the need for first hand information is so pressing as to justify this innovative step.
I appreciate that some of those who oppose this Treaty have welcomed this move by the Government and I welcome the fact that all sides in this debate can at least agree that our public needs the information on the proposition before them in order to make an informed decision.
The full text of the Treaty will be accompanied by short explanatory material, intended to highlight the main elements of and related to the Treaty. The Government will also launch a dedicated website concerning the Treaty later this week. This will not only provide access to the text of the Stability Treaty, but also to a range of explanatory material.
It is the Government’s sincere hope that this information material, which as I have said will be distributed to every household in the State in the coming weeks, will make an important contribution to providing voters with the information they need to make an informed decision on 31 May.
In addition, the Referendum Commission, under the chairmanship of Mr. Justice Kevin Feeney will be fulfilling its mandate to explain, independently of Government, the subject matter of referendum proposal, to promote public awareness of the referendum and to encourage the electorate to vote at the poll.
Context
Before getting into the detail of particular provisions of the Treaty, Ceann Comhairle, I would like to provide some context for it.
We all know that we have experienced a profound crisis in the euro in recent years, and we are not out of the woods yet. Our currency – the very money in our pockets – has had its very stability and credibility called into question.
Why should this be of concern to the Irish people?
Instability in the euro area has, first and foremost, impacted negatively on the interest rate at which euro area countries – including Ireland – can borrow money in the international financial markets. This massive disruption to the functioning of the financial markets led to Greece and subsequently, Ireland and Portugal having to withdraw from open market funding and rely on mechanisms put in place by the EU and IMF, to secure ongoing access to funds with which to fund our schools, our hospitals, our Gardaí and all the other public services and social payments which are relied upon every day of the week.
Similarly, a lack of stability introduces added uncertainties to investment decisions being made by multinational corporations – who are highly mobile in terms of the destinations for their investments – but also the investment decisions being made by our indigenous companies and particularly Small and Medium-sized Enterprises (SMEs), which crave stability and a maximum degree of certainty. In the absence of both, they are likely to hold off of job-creating investments, or in the case of multinationals, to find an investment location with less volatility.
Restoring stability to the euro is a critical step in extracting ourselves from our current predicament. The Treaty will play an important part in that effort. It is not, of course, sufficient on its own.
It is for that reason that Europe’s response to the current crisis has been multi-faceted. In addition to reaching agreement on the new Stability Treaty – to which I will return – we have also established the European Financial Stability Facility (EFSF), from which Ireland currently draws funding; its permanent successor, the European Stability Mechanism (ESM) has now been put in place and is due to enter into force a year ahead of schedule in July of this year.
At the same time we have put in place the European Semester which is over-seeing the implementation of structural reforms set out in National Reform Programmes provided by each Member State.
In addition, Europe has also been conscious of the need to put in place robust and convincing firewalls, in order to prevent negative spill-over effects from one Member State to another. During the course of this crisis, we have seen all too vividly the extremely pronounced level of inter-connectedness which exists between members of a currency union. What happens in one Member State can have very serious repercussions on all the others.
I am glad to note that the review of the adequacy of the overall ceiling of the EFSF and ESM, recently conducted by Eurogroup Finance Ministers, has resulted in the agreement to expand the level of support funding to €700 billion. The Government has been consistent in advocating that firewalls in the euro area must be as strong and credible as at all possible. The recent agreement among Finance Ministers constitutes a strong and credible response and is to be welcomed.
A further element of the jigsaw that is Europe’s response to the crisis has been the explicit appreciation of the need for fiscal consolidation to be complemented and supported by vigorous action to generate growth and job creation. The Government have long been saying this – without growth, the burden of getting back on track would be much greater.
I am glad now that this is a widely held view among our European partners, who now appreciate the need for a balanced response to the challenges we face in the euro area.
This is certainly not an either/or situation, as some who are opposed to the Stability Treaty would have us believe. One complements and reinforces the other. Growth built on further excessive borrowing, is not a sustainable solution – in fact it makes the problem worse for us now and for the generations that follow us.
Ceann Comhairle,
Contents of the Stability Treaty
That brings me to the contents and implications of the Stability Treaty itself. I think it would be useful to recall for the House the key elements contained in the new Treaty. Some of these provisions have already been the subject of misrepresentation in this House and beyond and thus it may be helpful to set the record straight. The main elements are:
The introduction of a “deficit brake” at national level. This will require Member States to have an automatic correction mechanism in their national laws which ensures they keep within the rules – for countries with abide by the requirement for countries with debt in excess of 60% of GDP, this means keeping budgets in balance or in surplus;
The restatement of a pre-existing obligation in EU law to have a “debt brake”. This requires countries with debt in excess of 60% of GDP to reduce it at an average rate of 1/20th per year;
A requirement for countries in the ‘Excessive Deficit Procedure’, as set out in the EU Treaties, to have a “budgetary and economic partnership programme” – the content and format of which is to be defined in EU law;
An agreement to support Commission recommendations in relation to a country’s deficit under the EU Excessive Deficit Procedure, unless a qualified majority is opposed, making it easier to take action against a country not playing by the rules;
The possibility for a signatory of the new Treaty to be brought to the European Court of Justice if its national law is regarded as not complying with the requirements of the new Treaty concerning the establishment of a national “deficit brake”. There is also an ability for the Court to impose fines if a signatory ignores its judgement in this regard;
New arrangements are set out for the governance of the eurozone, including provision for at least two Euro Summit meetings per year, at the level of Head of State or Government, at which
the Taoiseach will represent Ireland;
With particular relevance to the Houses of the Oireachtas, the Stability Treaty provides for a conference of representatives of the relevant committees of the European Parliament and the national parliaments of countries participating in this Treaty, to discuss budgetary policies and other issues covered by the Treaty;
Arrangements for the Treaty to enter into force on 1 January 2013, once twelve euro area signatories have ratified it according to their national requirements. Countries then have a year to transpose measures into national law;
The new Treaty concludes with a provision that within five years at most, following entry into force, the necessary steps will be taken with the aim of incorporating the substance of this Treaty into the EU’s legal framework.
Very significantly for Ireland, and other countries currently in stabilisation programmes, it is made clear in the preamble of the new Treaty, that none of its provisions is to be interpreted as altering in any way the requirements of a stabilisation programme, such as Ireland’s EU/IMF programme.
The preamble also contains a statement that access to the European Stability Mechanism (ESM) is linked to ratification and implementation of the Treaty’s provisions. This is done on the logical and reasonable basis that that a country receiving the support of its partners under the ESM should be prepared to run sensible budgetary policies.
The Treaty and Ireland
None of the provisions of the Stability Treaty, whether they are new or pre-existing, should cause any concern for a country like Ireland. The requirements placed on us by our EU/IMF Programme go considerably further than what is envisaged in this Treaty. What this Treaty will do is to level the playing field, so that all Member States – whether large or small, or from North or South – will in future be held to account, just like everyone else.
Such a development is good news for Ireland. That is why the Government has signed up to this Treaty and it is the reason why we are actively advocating for the ratification by our people in the referendum on 31 May.
Ireland is already delivering on our commitments – on time and in full – and that it now widely acknowledged internationally. What is good for Ireland is an arrangement whereby all Member States play by a set of transparent rules and are seen to do so. Such an approach will bring credibility and confidence to the euro and stability to the financial markets.
Ceann Comhairle,
We are a small, open trading economy. We need to pay our way in the world. It is a simple reality that, over the medium term, your income must cover your spending. This is the rule that lies at the heart of this Treaty.
Any other approach would regrettably generate a crippling debt spiral, through the addition of ever-increasing volumes of debt. It is our responsibility to face this issue head-on.
That is what this Government is doing – failing to do so would be unfair to future generations and would be counter-productive in terms of instilling confidence and stability in our economy.
This Government is tackling Ireland’s problems. Unlike others, we realise what needs to be done and are not hiding our heads in the sand. As I said that the outset of my intervention, wishing away our unsustainable financial position, will not make it go away. It is only through determined action now that we will get back on track.
This is just as true in Europe as it is in Ireland. That is what the Stability Treaty is about. That is why it is a necessary step in the process of restoring confidence and stability.
That is why it is important that Ireland is in a position to ratify it.