ref00377 booklet information online english

8/2/2019 REF00377 Booklet Information Online English

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IntroductionOn May 31st you can vote in a referendum on whetherIreland should ratify the Treaty on Stability, Co-ordinationand Governance in the Economic and Monetary Union.

The short name of the Treaty is the Fiscal Stability Treaty.

The Fiscal Stability Treaty was signed in March 2012 by25 of the 27 EU member states as part of their response

to the economic crisis, especially the crisis in the euro area.

The Treaty is about strengthening the rules designed to make governmentskeep a balance between their income and their spending. There are alreadyEU rules about this which apply to Ireland. The Treaty aims to strengthenthese rules and requires countries to put some of them into national law.It is not necessary for all EU member states to ratify the Treaty for it to comeinto effect. If it is ratied by at least 12 euro area countries and if Ireland

raties it, it will apply in full to Ireland as part of the euro area.

This guide gives a general explanation of what you are being asked to voteon. It is published by the Referendum Commission, an independent body,whose job is to explain the referendum as clearly as possible. This guide doesnot argue for a yes or a no vote; it gives factual information in order to helpyou to decide.

More detailed information is available on our website www.referendum2012.ieor by calling 1890 270 970.

The Commission strongly encourages you to vote.

Kevin FeeneyChairpersonReferendum Commission

The Referendum CommissionThe Referendum Commission is an independent body set up by theReferendum Act 1998. The Chairperson of the current Commission isMr Justice Kevin Feeney. The other members are: Mr Kieran Coughlan,Clerk of Dil ireann; Ms Deirdre Lane, Clerk of Seanad ireann;

Ms Emily OReilly, Ombudsman and Mr Gerard Smyth, Secretaryand Director of Audit of the Ofce of the Comptroller and

Auditor General.

The Referendum Commission

18 Lower Leeson Street, Dublin 2, Ireland.

Telephone: 01 639 5695LoCall: 1890 270 970Email: [email protected]: www.referendum2012.ie

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This publication is available inBraille, on CD and in large textformat through NCBI. It is also

available in Irish Sign Languageon the websites of the Irish DeafSociety (www.irishdeafsociety.ie)and DeafHear.ie.

Printed in Ireland on paper sourced froma sustainably managed forest. Referendum2012.ie


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SummaryThis section gives a brief description of thecontents of the Treaty. More detailed information follows.

The Treaty is concerned with the rules limiting the size of governmentdecits. There are two ways of measuring a government decit:

If a country spends more than it gets in income in any one year, ithas a general government decit.

A structural decit is what the general government decit wouldbe if economic conditions were normal and if one-off spending orincome were not taken into account.

The Treaty proposes to add to the current EU rules on governmentdecits. Current rules say that countries should keep annual

general government decits below 3% of Gross Domestic

Product (that is, the decit should not be more than 3% of the

value of all the goods and services produced in the economy)and keep overall government debt below 60% of GDP. There

are EU procedures in place to try to ensure that they do this.

The main changes that this Treaty would make are:

The maximum structural decit that a countrycould plan to have would be 0.5% of GDP. Each

country would have a specic target for this

agreed with the EU, which the country wouldhave to work towards.

The rules on structural decits must be put intonational law. The Treaty provides that there bean independent body at national level to monitortheir implementation.

The national law would have to include a procedure, to be triggeredautomatically, for ensuring that action would be taken if thestructural decit was greater than the target set.

A failure to introduce this national law could result in the Court ofJustice of the EU imposing a ne.

Ireland is already involved in the EU procedures for bringing its general

government decit down to 3% and has a target date of 2015 fordoing this.

Other parts of the Treaty include EU rules that are already in placein relation to overall government debt, co-ordination of

economic policies and information sharing among thegovernments of the countries that ratify it. The Treatyalso formalises the current informal arrangements forgoverning the euro area.

The introduction to the Treaty states that countries thatwant to get funding from the EUs new permanent

bailout fund the European Stability Mechanism(ESM) will only have access to that fund if theyratify this Treaty.

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What the Fiscal Stab ility Treaty is about


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The government decit rulesIn the referendum on the Maastricht Treaty in 1992, Ireland agreed to abideby the rule that the general government decit must not be more than 3%

of GDP in one year. There are detailed EU procedures setting out whathappens if a country is not keeping this rule. Ireland must meet the3% target by the end of 2015.

The Fiscal Stability Treaty restates these existing EU rules and adds somenew elements.

The structural decit rule

This Treaty proposes to add to the EU rules by requiring that the structuralor underlying government decit must not be greater than 0.5% of GDP.

(In certain cases the structural decit may be up to 1% of GDP).

If the structural decit is more than is allowed, the country must work

towards reducing it within a time limit to be identied by the European

Commission. A country may deviate from this time limit only inexceptional circumstances.

The Treaty provides that these rules on the structural decit are met

if the decit is at the specic objective which is set for each country

by the government with the agreement of the EU (this is known as

the country specic medium term objective). The objective can bechanged from time to time to take account of economic changes.

If a country is missing its medium term objective by a signicant

amount, or if it is not moving towards this objective quickly enough,the Treaty requires that an automatic correction mechanism comesinto operation. This will oblige the country to correct the decit, for

example, by raising taxes or cutting spending.

Useful Facts

What you are being asked in the referendum

On May 31st you will be asked to vote yes or no to adding a newsubsection to Article 29.4 of the Constitution of Ireland.

The wording of the proposed new subsection is:

The State may ratify the Treaty on Stability, Co-ordinationand Governance in the Economic and Monetary Union doneat Brussels on the 2nd day of March 2012. No provisionof this Constitution invalidates laws enacted, acts done ormeasures adopted by the State that are necessitated bythe obligations of the State under that Treaty or preventslaws enacted, acts done or measures adopted by bodiescompetent under that Treaty from having the force of lawin the State.

If a majority of the people vote yes, then this new subsectionwill be added to the Constitution and Ireland will ratify the

Treaty. The Treaty will come into effect if it is ratied by at

least 12 of the 17 countries which use the euroso unanimity is not required. If it comes into

effect and Ireland has ratied it, the national

legislation which the Treaty requires wouldhave to be introduced within a year.

If a majority of the people vote no, thisnew subsection will not be added to

the Constitution and the Governmentwill not ratify the Treaty. The Treaty willcome into effect if at least 12 euro areacountries ratify it. Those countries whichhave ratied it will then be bound by

its provisions.

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InformationThis section gives more detailed information.


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National law

The countries which ratify this Treaty will be obliged to put the structuraldecit rules into national law. This means that, if Ireland raties this Treaty,

the rules must be set out in Irish law which must also contain details of theproposed correction mechanism and how it would operate.

Role of Court of Justice

If a country which has ratied this Treaty fails to put the structural

decit rules fully into national law, the issue may be referred

to the Court of Justice of the EU. If a country fails to abideby the Courts binding ruling, the Court may then imposenes of up to 0.1% of the countrys GDP.

The general government decitThe Treaty requires that the countrieswhich ratify it support the EuropeanCommission when it makesrecommendations on how countriesshould reduce their general governmentdecits. However, they do not have to

support these proposals if a qualied

majority of the euro area countriesopposes the Commissionsrecommendation.(A qualied majority is a system

where each countrys vote takesaccount of its population but isnot directly proportionate to it.)

The government debt rulesUnder the current rules, all countries must keep their general government debtbelow 60% of GDP. Ireland agreed to this rule in the 1992 Maastricht referendum.

Under existing EU rules excess debt must be reduced by one twentieth a year onaverage until the target is met. This Treaty restates these requirements.

Co-ordination ofeconomic policiesThe existing EU treaties provide for various economic co-ordination proceduresand mechanisms. The Fiscal Stability Treaty restates the commitment of thecountries involved to take the steps required to ensure the euro area operates well.

The countries ratifying the Treaty also agree to discuss planned economicpolicy reforms among themselves before they are implemented and, whereappropriate, co-ordinate such reforms.

Useful Facts

Relationship of Treaty to EU law

The Fiscal Stability Treaty is a treaty agreed by 25 of the 27 member statesof the EU and they are now considering whether to ratify it that is, tomake it binding on them. The Czech Republic and the UK have not signed

it. It is not an EU treaty and so does not change the treaties which governthe EU. However, the Treaty states that it is to be interpreted and appliedin accordance with EU law (including the EU treaties), with EU law takingprecedence if there is a conict, and its implementation involves using some

of the EUs institutions. The Treaty states that the countries which ratify it willaim to bring its substance into the EU treaties as soon as possible and withinve years at the latest (this is called the repatriation clause).

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Governing the euro areaThe Treaty formalises the present practice whereby the leaders of theeuro area countries hold meetings. It requires that the Heads of State orGovernment of the euro area countries that ratify the Treaty must meetinformally in Euro Summit meetings twice a year.

Terms you may hear during the debate

Fiscal: Fiscal means relating to government nances includinggovernment spending, government income, government decits

and government debt.

General Government Decit: The general government decitin any one year is the amount by which government spendingexceeds government income.

Structural Decit: The structural or underlying decit is thegeneral government decit for the year cyclically adjusted that

means adjusted for the effects of faster or slower than normaleconomic growth and with one-off or temporary revenue orspending measures removed from the calculation.

Government Debt: Government debt is the total amount that

the Government owes.

Gross Domestic Product (GDP): GDP is the total value of allgoods and services produced in the economy.

Fiscal Compact: This is the term that is often used to describethe decit and debt rules in this Treaty.

Stability and Growth Pact (SGP): This is the term used todescribe the current EU rules on government debts and decits.

These rules are contained in the treaties governing the EU and in aseries of EU regulations and directives. New regulations came into

effect in December 2011 and these are sometimes referred to asthe Six Pack.

Medium Term Objective (MTO): This is the objective which isset for each country by the government with the agreement of theEU in the context of meeting the structural decit rules.

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Useful Facts

Effect of Treaty on nancial assistance/bail-out mechanisms

The Treaty starts with recitals, which are statements about the aims andintentions of the parties to a treaty. In one of its recitals, the Fiscal StabilityTreaty states that it is not to be interpreted as changing the conditions underwhich nancial assistance (bail-out) has been given to countries which have

major economic problems. So it does not seek to affect Irelands current bail-

out programme agreed with the International Monetary Fund, the EuropeanCommission and the European Central Bank (generally known as the Troika).However another recital states that, from March 1st 2013, any future bail-outinvolving the use of funds from the European Stability Mechanism (ESM), willbe given only to countries which have ratied and implemented this Treaty.

(The ESM is the permanent EU bail-out mechanism which is expected to beestablished by July 2012.) So, any future bail-out could not involve access tothis particular source of funding.

There is a separate treaty which establishes the European StabilityMechanism. The ESM Treaty has been signed by the 17 euro area memberstates. It is NOT the subject of the referendum in Ireland.

The ESM Treaty states in a recital that it and the Fiscal Stability Treaty arecomplementary in fostering scal responsibility. This recital also states

that the parties to the ESM Treaty acknowledge and agree that bail-outsunder the ESM will be available only to those countries which haveratied the Fiscal Stability Treaty.


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Its your decision. Vote Yes or No.

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